In the first half of 2008, the S&P 500 fell 12%. June's stock market was the worst since 1930. So are stocks now a screaming buy or are they poised to plunge further? Nobody knows. But my guess is that stocks will move based on how well they perform compared with expectations. And the risk of negative surprises in most industries exceeds the chance of positive ones. So stocks will probably keep falling.

Here's a quick review of six negatives:

• Oil prices. With oil at $142, up 492% since January 2001, consumers are paying about $4.10 a gallon for gas and companies that use oil are getting squeezed while trying to raise prices. An attack on Iran, a big oil supplier, looms on the horizon. This and other geopolitical uncertainties could put further pressure on oil.
• Housing. Three million people are expected to face foreclosure on their homes. And prices have dropped 15%. Since people were using home equity to finance their purchasing, their negative equity is sucking the wind out of the economy.

Minyanville's wise professor, Mark Bloudek, dares to share the kind of keen insight and actionable information you won't find in any prospectus. For more original thought, visit www.minyanville.com.

I've been doing precious little in this market, but one stock I've been tracking closely is Wachovia Corp. (NYSE: WB). Why would I pay more mind to Wachovia than to other banks? Because it bought Golden West Financial in May of 2006 for $25 billion. And where did Golden West have most of its exposure? That's right, California.

Last night I was looking through the median home price data in the Multiple Listing Service (MLS) in various California cities and noticed some shocking price drops. The median home price offers in San Francisco dropped $10,000 in one week. Ditto for Orange County. In Los Angeles, the figure was a startling $13,000. I went back to check when the market topped in these areas and found that every one of them peaked in -- drum roll, please -- May of 2006.

If you are like me, you are probably getting pretty tired of reading bad housing news day after day, so today it is nice to bring you some good news on the housing market, as mortgage applications rose last week for the first time in three weeks.

According to the Mortgage Bankers Association, the week ended May 2 saw a 15.6% jump in the association's index of mortgage applications. The index takes into account both new purchase as well as refinance loans.

It is a good sign for the housing market, which is entering into its peak buying season. Perhaps this is the moment we have been waiting for, when buyers are finally ready to come back into the market and sweep up some heavily discounted houses. Home prices have been steadily falling for the past year, but signs are starting to point to a possible stabilizing early in 2009.

Countrywide (NYSE:CFC) got called before Congress. All of the elected officials and their staff members wanted to know how the mortgage firm screwed up by lending people without the resources money to buy homes. Was there fraud involved? Did brokers inflate buyers' salaries? Did they take down any pertinent information at all?

As would be expected, Countrywide said it had not done anything illegal. All that happened was that its people made a few mistakes. All that has been fixed and everything is fine.

According to The Wall Street Journal, Countrywide "told a U.S. Senate Judiciary subcommittee Tuesday that the company is taking steps to address concerns that misconduct in bankruptcy proceedings by mortgage companies is exacerbating the nation's foreclosure crisis." In other words, the company gave out loans which people could not pay and then beat them up with fees which they could hardly afford when they got behind on payments.

The FBI and a number of other agencies looking into Countrywide's practices. They obviously are not willing to settle for the company's comments before Congress. These investigators think that the mortgage operation knew a great deal about what it was doing and was doing it on purpose to make more money.

Countrywide can testify all it wants. There is no poll of home buyers, federal investigators. or Congressmen that will show anything other than the belief that the company is not telling the truth. Not even close.

Douglas A. McIntyre is an editor at 247wallst.com and author of the Ten Stocks Under $10 letter.

AP reports that Countrywide Financial Corp (NYSE: CFC) lost $893 million in the first quarter. That $1.60 a share loss was not exactly what analysts had forecast -- they were looking for a profit of two cents a share.

Meanwhile the LA Times reports that Countrywide CEO Angelo Mozilo took in $10.8 million and cashed out $121.5 million in stock gains as his company got hammered by losses on sub-prime loans in 2007. Mozilo also enjoyed perks worth $176,513, including $44,454 in rides on the company's jet; $23,755 in automobile use; $8,581 in country club dues; and $31,238 in company-paid tax and investment advice. Mozilo faces an informal U.S. inquiry into his stock sales.

And Countrywide's financial condition is deteriorating fast. It set aside a $1.5 billion reserve to cover loan up 62% from $925 million in the fourth quarter of 2007. Moreover charge-offs totaled $606 million during the first quarter. Fortunately, Countrywide has an exit strategy. In January, Countrywide agreed to sell itself to Bank of America (NYSE: BAC) for about $4 billion in stock. The question is whether Bank of America will pull out of the deal now that it sees the rising costs it will incur if it moves forward. Since Countrywide trades 15% below that takeout price, the market has its doubts.

Investors don't seem happy with today's announcement -- the stock was down 5% in premarket trading.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.

The International Monetary Fund now estimates the fallout from the mortgage crisis could total $945 billion. If so, banks and brokerage companies should prepare for another huge round of layoffs. According to the FT : "Banks would suffer slightly more than half the total losses, with the rest falling on insurance companies, pension funds, hedge funds and other investors."

If the report is right, a number of institutions could suffer great losses. The first and foremost among these are pension funds, the cornerstone of retirement payments for many Americans. Heavy losses at these operations could undermine plans for ten of thousands of workers by eroding the value of money meant to carry them after they have ended their working careers.

The IMF is also issuing an important caution. If central banks and governments cannot get control of the present problems, they will get much worse.

The new report probably puts the extent of possible damage at a level higher than many other estimates have. But, the fact of the matter is that banks do continue to find more reasons for write-offs and that process does not seem to be ending. Economists looking for the bottom of the housing and foreclosure crisis are not finding it.

The bottom could be a long way off.

Douglas A. McIntyre is an editor at 247wallst.com.

Washington Mutual (NYSE: WM) may be rescued from the situation that its low capital base threatens the company's future. According to The Wall Street Journal, "private-equity firm TPG and other investors are close to a deal to invest $5 billion."

Washington Mutual may have to take the money, but it is awful news for the value of the company's shares. There had been rumors that JP Morgan (NYSE: JPM) might buy the company, but those will now end.

Since the bank's current market cap is only $9 billion, the investment represents huge potential dilution. The company's shares now trade at just over $10. On a straight dollar-for-dollar basis, the new capital would take the share price below $7, a 52-week low. Even if some of the money comes in as convertible preferred, the company's shareholders are facing a capital table which will push shares down.

The news is another example of investors losing three quarters of their money in a financial company due to the subprime crisis and then losing more when a private equity company or sovereign fund offers new capital. It is better than Chapter 11 though.

Douglas A. McIntyre is an editor at 247wallst.com.

Econobrowser suggests that housing prices could drop 50% from their peak. While it was initially skeptical about such a huge drop which was suggested by a commenter, its re-examination of this based on recent developments, and what the economists surveyed by the Wall Street Journal say led it to conclude that such a summit plummet was plausible.

Sunday, I posted on the possibility that it could take 10 years for housing prices to recover based on an interview with the Warren Group and comparing the current housing tumble to the one in the 1990s. Combining this with the Econobrowser's pessimistic scenario suggests that we could be in the longest and deepest housing price decline in American history.

I do not understand the details of the analysis presented here but if my reading of the post is correct, it concludes that the Case-Shiller index of housing prices, one which seems to have more credibility than the one produced by the government's OFHEO (Office of Federal Housing Enterprise Oversight) House Price Index (HPI), is that prices could fall 50%. Econobrower notes "that only a slightly more pessimistic than average forecast implies a 50% decline in house prices as measured by Case-Shiller, relative to peak."

So if you bought a house for $300,000 in 2006, it could be worth $150,000 when the housing market hits bottom and take until 2016 to recover to its original price. How about that for an ownership society?

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.

We have all heard of bus tours showcasing the homes of the rich and famous ... but the recent credit crunch that has spread across America has led to another sort of bus tour: the Foreclosure Bus Tour. That's right, potential home buyers looking to grab up a piece of Orlando, Florida real estate can now take a six-hour bus tour featuring various homes that have been foreclosed in the area.

It's no secret that foreclosures have been on the rise over the past year to alarming levels, but the Foreclosure Bus Tour is a symbol of just how bad things have become. The cost of the tour was $45 per person ($65 per couple) and included a continental breakfast and lunch at Applebee's. In addition to the food, the potential buyers were also given information on the homes, as well as some important teaching lessons that any potential home buyer could benefit from.

All in all, it seems like a decent way to go out and look at a whole bunch of properties all at once (the tour featured seven different available properties). At each stop the potential buyers got first hand access to a home inspector who walked them through the house, and between stops they were able to chat with a mortgage broker. The tour also had lawyers on hand to discuss any legal questions that came up during the trip. Not too bad for $45.

Existing home prices rose for the first time in seven months in February, proving that homes in some regions have gotten too cheap to ignore.

In fact, as Bloomberg News notes, prices have fallen by the biggest amount in 40 years. Of course, that means that many people now live in homes with mortgages larger than their values. Supply far outstrips demand in many markets, and at least some experts don't believe that the market has hit bottom.

"It looks like this may be a temporary pause,'' Nigel Gault, chief U.S. economist at Global Insight Inc., told Bloomberg, "The price declines have helped.''

"We're not expecting a notable gain in existing-home sales until the second half of this year, but the improvement is another sign that the market is stabilizing," National Association of Realtors economist Lawrence Yun told The Wall Street Journal.

While the 2.9% gain over January's figures was better than what economists had expected, the figures were down 24% compared with the same period a year earlier. It will be a buyers' market for quite some time.

--Freelance writer Jonathan Berr edits the blog Ketchup and Eggs.

AFXNews reports that Thornburg Mortgage Inc. (NYSE: TMA) has defaulted on a credit agreement with one of its banks. That's because it could not come up with $28 million it owed JPMorgan Chase & Co. (NYSE: JPM). Specifically, Thornburg needed to pay JPMorgan -- to whom it owes $320 million -- the $28 million for a margin call.

According to The Associated Press, the notice of default from JPMorgan triggered cross-defaults "under all of the company's other reverse repurchase agreements and its secured loan agreements." According to MarketWatch, Thornburg has been facing margin calls due to a 15% drop in the value of mortgage-related securities in early February.

Margin calls are a common response from investors when securities purchased with loans rapidly lose value. If they fall too far too fast, they may hit triggers that require the issuing company to either shore up their position or sell off additional assets.

In the latest sign that the U.S. economy has hit a rough patch, the number of Americans filing for bankruptcy zoomed higher last month. According to Automated Access to Court Electronic Records, a bankruptcy and data management firm, an average of 3,960 bankruptcy petitions were filed on each day in February. That represents an 18% jump from January's numbers and 28% above February 2007.

In fact, according to The New York Times, February was the busiest month for new bankruptcy filings since Congress changed the bankruptcy laws in 2005, making the act of filing more complicated and costly. Professor Jack Williams, scholar in residence at the American Bankruptcy Institute, told the Times that "This number of bankruptcies may be under-representative of the true financial distress consumers are feeling because of the steps Congress has taken."

Reuters reports that U.S. home prices fell a record 8.9% in 2007. The last time home prices fell anywhere near as much as in 1991 when they lost 2.8% of their value. That was when the current president's father was in office. And he presided over a $200 billion government bailout of the savings and loan industry.

This is an impressive accomplishment for junior. But it does not appear to be the end -- although it may mark the beginning of the end. That's because, as you may have read by now, two million homeowners are expected to foreclose on their homes by the end of 2009. The reason is that variable rate mortgages are resetting to rates higher than many borrowers can afford.

It's too early to tell how much the current president's housing market problems will cost the economy. Although, so far, he is doing a good job of keeping the government from formally bailing out the housing market. That is unless you take into account the skyrocketing stagflation resulting from the Fed's interest rate cuts and the credit crunch.

Maybe the U.S. needs a break from Bushes in power.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.

"Among the panel of 49 National Association for Business Economics economists surveyed between January 25 and February 13, about 45 percent said they believe a recession will have occurred by the end of this year," according to Reuters. Since many of these economists failed to foresee a slowing of growth, their forecast may be little different from flipping a coin. Being right half of the time is the likely outcome.

Economists appear to actually be optimists in disguise. It is hard to believe that the odds of a recession are less than 50%. The economy is producing no job growth. Home foreclosures and housing price erosion probably have forced large states like California, Michigan, and Florida into recession.The falling tax base will make it more difficult for cities and states to raise money.

Rising commodity prices are making food and oil more expensive. This, in turn, is hurting the alternative energy, automotive, retail, and airline sectors. Fast food and other restaurant operations are likely to be set back by the increasing cost of items like bread and milk. Banks are tight with money for businesses and private customers because their balance sheets are so poor. The lending market is beginning to lock up.

Most economists make a lot of money. They may not see what is going on around them with ordinary people. When a tough economy costs some of them their jobs, they may come around to a more realistic view.

Douglas A. McIntyre is an editor at 247wallstreet.com.

With media outlets and politicians heaping sympathy on subprime borrowers on the brink of losing everything, it's important to keep in mind the real victims on this mess: that's right, the mortgage brokers who got us into it.

As if plummeting earnings from the decline in subprime lending weren't bad enough, subprime write down poster child Countrywide Financial (NYSE: CFC) canceled its annual ski party at the Rittz-Carlton Bachelor Gulch in Avon, Colorado, where the company puts up 30 of its most valued correspondent lenders (at $725+ per night) and treats them to skiing and $140 caviar and Kurobuta pork osso bucco at Wolfgang Puck's restaurant.

It looks like this year the closest they'll be getting to Spago is the Wolfgang Puck canned dumpling soup available for $31.20 per 12-pack on Amazon.com. Even that might be a stretch in this market. But there's always Chef Boyardee.