The markets are imploding today amid fears which Citigroup says are unfounded that Fannie Mae (NYSE:FNM ) and Freddie Mac (NYSE: FRE) may not have enough capital to withstand the crisis in the housing market and continued worries about oil prices prompted by missile tests by the government of Iran. This is not just a perfect storm; it's a perfect season of calamities.

Want to know how bad it is? Apple Inc. (NASDAQ: AAPL) shares are down on the day the geeks around the world are waiting in line for the new iPhone, which has gotten rave reviews. Amazing. If people are looking for an excuse to buy Apple, this may be it.

Other stocks that seem to be doing well are Anheuser-Busch Cos. (NYSE: BUD) because InBev raised its unsolicited offer, and General Electric Co. (NYSE: GE), whose in-line quarter was greeted by cheers by Wall Street.

As each day passes, estimates for how bad Q2 earnings will be grows. According to The Wall Street Journal, "analysts estimate S&P 500 operating earnings -- income excluding one-time items -- fell 11.5% in the second quarter."

While the paper points out that earnings often come in a bit worse than expected, this quarter could be a bit different. Everyone expected the numbers to be bad in sectors including banking, brokerage, insurance, autos, and airlines. But the real question is whether business and consumer spending have been hit harder than predicted.

If spending is down, even companies which are expected to do fairly well such as Apple (NASDAQ: AAPL) and Cisco (NASDAQ: CSCO) could face rough earnings reports as big business and the little consumers defer purchases which they feel they cannot afford. That means that tech earnings, which were expected to be OK, could take a big hit.

If tech falters, what is left? Energy and commodities companies? Perhaps, but that is thin ground on which to build an earnings season.

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

In a quarterly dance routine that's becoming quite familiar -- call it the write-down, capital raising dance -- the Wall Street Journal reports that Merrill Lynch & Co. (NYSE: MER) is planning to sell a $5 billion stake in Bloomberg, the media company, and to cash out of its 49% stake, estimated at $12 billion, in Blackrock (NYSE: BLK).

Why is Merrill doing this? As we've seen over and over again in the last year, banks must maintain specific levels of capital to assets in order to meet regulatory requirements. When a bank reduces the value of its assets, as accounting rules require, the bank writes off the decline in asset values against its capital. In order to maintain a sufficiently high ratio of capital to assets, banks seek to raise capital equal to the amount of the write-down.

Merrill anticipates taking $6 billion in write-downs for the quarter. These could come from its $41 billion in Level 3 assets -- assets valued based on computer models since there is no active market that prices them. Merrill is fortunate to have these stakes available to sell because it will be able to raise capital without diluting current shareholders. Unfortunately, once it sells these stakes, Merrill shareholders will no longer get the earnings stream they generated.

Ted Allrich is the founder of The Online Investor and author of the just released book: Comfort Zone Investing: Build Wealth And Sleep Well At Night. In this weekly column, he'll offer advice to investors who are just getting started.

There will come a point when the stock market stops going down. Hard to believe as we muck through the mire of the mortgage mess, oil spikes, and housing hardships. But it will happen. At some point the last mortgage will be written off, oil will at least stabilize, and houses will sell again. Having said that, don't expect any sharp rebound when the recovery starts. In fact, don't expect the recovery to begin any time soon.

That's because the mess we're in doesn't have a quick fix. Changing the tax laws doesn't make a mortgage payment. The federal government didn't make the mortgages, and it can't fix the bad ones. It can help, but not much. Tax laws can help promote new purchases, but the mortgage crisis is huge, much larger than anyone could have imagined a year ago. There were more subprime loans made than initially estimated. But remember that it's not only subprime loans that are contributing. There are also regular loans that are defaulting as unemployment increases.

Another day, another oil record.

Oil easily pushed past $145 Thursday morning after traders calculated that the already weak dollar has further to fall after the European Central Bank increased a key interest rate by a quarter point to 4.25%.

Oil rose as much as $2.28 to $145.85 per barrel -- an all-time high -- before easing back slightly to trade at $144.40 at mid-day.

Oil tends to rise when the dollar falls as investors/traders seek to preserve purchasing power of the decreased value of dollar-denominated commodities by bidding their price up. However, it's important to note that the dollar/oil correlation is not perfect: there have been instances in which the dollar fell and oil fell.

Japan's Nikkei Index, the weighted average of 225 stocks in major companies, fell for the 10th day. That has not happened since 1965.

According to the FT, "Rising fears about the impact of inflation on slowing economies took their toll on Japanese and other Asia-Pacific markets." That sounds a bit like the current trouble in the US.

A number of other indicies have had sharp declines lately. The Shanghai Composite has fallen by more than half since late last year. Rising energy and food costs in China have not helped it. Neither have concerns that a recession in the West could cut demand for its exports.

The Nikkei news says two things. The first is that the economies in other large nations may be as troubled as that in the US. Traders often look out several quarters when they make their buying or selling decisions. But, the second, more ominous sign from the Nikkei's decline is that it says that the smart money in Japan believes that the price of oil is not likely to fall. Japan is relies more on imports of crude that the US does.

The tough run for the Nikkei is not restricted to Japan. US and EU markets are likely to set records of their own, and not the kind that traders look forward to.

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

The Wall Street Journal reports that the stock market finished the second quarter just above Bear market territory. Does that mean everything's great or that things are going to get worse from here? I think the worst is yet to come and that investors should hold onto their stocks unless they and/or the companies they've bought are going bankrupt. And they might look to buy stocks in the coal and fertilizer industries.

The Journal reports that the Dow Jones Industrial Average (DJIA) began its march downward, ending the quarter (including Monday's slim 3.50-point gain) with an overall loss of 912.88 points, or 7.4%, at 11350.01 -- and perilously slightly less than the 20% decline from a recent high that is considered the start of a bear market. It was the third straight quarterly decline and the worst second quarter since 2002.

I think the 20% decline that designates a Bear market is pretty arbitrary. People know that the market has been a disaster. And if earnings matter, it's likely to get worse. The Journal notes that analysts expect earnings at S&P 500 companies to be down 11% for the second period, led by a 60% plunge in financial-sector earnings. Estimates fell sharply as the quarter progressed. On April 1, analysts were expecting a 2% drop in S&P earnings and a 31% decline in the financial sector.

That the U.S. economy has recorded a series of rather negative statistics lately, would not be a revelation to the informed investor / trader.

That the U.S. economy is set to record a new data point of ignominious distinction, perhaps would be.

Assuming a modest 50-point close higher or lower Monday, the Dow Jones Industrial Average will have declined about 9% in June 2008, its biggest drop in June since June 1930 in the Great Depression, when the Dow fell 18%.

At mid-day Monday, the Dow was up about 45 points to 11,390.95. The Dow is down about 3,000 points since trading above the 14,200 level in October 2007.

Stock analyst C. Leonard Bauer said "the Dow reflects the underlying economic reality."

Many negative fundamentals

'We have a smorgasbord of negative fundamentals. Housing is in a deep slump. Oil and gas prices are at 20-year highs. Corporate costs are rising. Disposable income is falling. Credit requirements are way up. Inflation is rising. And job growth doesn't look too good right now," Bauer said. "Other than that, as Groucho Marx would say, everything is fine economically."

Another factor weighing on stocks, at least for the near-term: 'sell in May and go away' - - the seasonal closing out of positions, particularly winning positions, Bauer said, as key decision makers at institutional banks and investment / hedge funds head for the Hamptons (Long Island, N.Y. ), the south of France, and other destinations, for the summer.

What will it take to break the downward cycle for the U.S. stock market and its economy? Get back to our roots as a country that lives within its means.

The source of the problem is that we have gotten away from the idea of paying only for things we can afford. To close that affordability gap that results from lower income and higher prices, we have borrowed money -- $9.3 trillion in federal debt, a $410 billion federal budget deficit, and $2.5 trillion in consumer borrowing -- which has caused other countries to view the dollar as a distress currency. It's lost 72% of its value since January 2001 -- when it traded at 92 cents to the euro.

Having spent the last two weeks in Europe, that weak currency hurts -- everything seems to be about 50% more expensive there than it is here. Gasoline there is far more expensive than it is in the U.S. -- roughly $9.60 a gallon compared to $4.25 here. And the reason that our stock market is dropping while oil rises is a result of deliberate government policies designed to weaken the dollar and strengthen oil.

U.S. stock prices are likely to fall further because record energy and food prices are constraining consumer spending, suggesting a worse-than-average recession, Merrill Lynch's U.S. sector strategist said Monday, Bloomberg News reported.

Brian Belski, Merrill's U.S. sector strategist, said this is not "your average recession," and that he would "urge caution for investors attempting to call the bottom in the current environment," Bloomberg News reported.

On Monday the Dow Jones Industrial Average closed down 0.33 points to 11,842.36. The Dow has fallen about 1,400 points since trading above 13,100 in late April and again in mid-May. The Dow has also been below its 50-day moving average -- which technical analysts believe to be an indicator of short-term support or resistance -- for more than two weeks. The Dow also has been below its 200-day moving average -- a technical indicator of longer-term market support / resistance -- for about six months. Technical analysts note that a strong market and Dow would consistently remain above its 200-day moving average; a bearish market, the reverse.

Bearish on DJIA

Economist Peter Dawson echoed Belski's evaluation and said the March -- May rise in the S&P 500 and the DJIA was not rooted in strong evidence, fundamental or technical.

"Basically, for the last five months or so, the U.S. economy has been treading water, going sideways. At the same time, we had a Dow rally off the 11,800 lows in March. That suggested trouble if GDP growth did not accelerate in Q2," Dawson said. "It hasn't so far, and the Dow sold off. I agree with Belski in that there's considerable risk to the downside for the market given the trend in consumer spending and the overall risks to the economy."

Investors looking for good news today can take solace knowing that Friday the 13th is not especially unlucky.

Indeed, researchers in the Netherlands have determined that fewer accidents and reports of fire and theft occur on Friday the 13th than other Fridays. And stocks are actually trading up in early market action. Still, some people won't care. About $800 million to $900 million will be lost in business today because people will not do things they normally do.

Investors need to remember that there are many ludicrous theories about the stock market. There is the Super Bowl Indicator where people figure that if a team from the old American Football Conference (now the American Football Conference) wins, the market is headed down, while a win for the old NFL (now the National Football Conference) means good times are ahead. People believe that bad things happen in October and that May is the time to sell and go away.

Sometimes these theories "work." Other times they don't. None of them should serve as the sole basis for any investing decision. I understand their appeal because they seem to take the guesswork out of figuring out the gyrations of the market. Real life, though, does not always fit into theories.

The Dow Jones industrial average and the NASDAQ Composite Index are both down more than 8% this year. Gasoline prices have topped $4, sending many trucking companies to the brink of bankruptcy. Soaring commodity prices have squeezed profits of businesses ranging from Dow Chemical Co. (NYSE: DOW) to the local pizzeria.

If you want to invest, do your homework. Of course, people still need to avoid black cats crossing their path, stepping on sidewalk cracks and breaking mirrors.

The stock market was down without much conviction in the early going with the DJIA off 40 to 50 points. But someone must have pulled the plug somewhere as it has been dropping fast from about 2 p.m. and the Dow was down over 180 points as I pecked away at the keyboard.

What the heck changed overall market sentiment so suddenly? Some say it's oil prices drifting higher. That's always a good scapegoat and probably has something to do with it. It might also be a connected issue with the raging conflicts in the middle east and Africa.

There is always the negative sentiment about housing, employment, last night's democratic primaries in Indiana and North Carolina just muddling on. It might also be our current president just muddling on, or it might just be that all of these things just prompted some profit taking after weeks of appreciation.

Maybe it is my pal Warren's negative sentiment about the financial sector and the years of pain that may still need to be worked out of the system. Whatever it is you can be sure that after the market closes the Wall Street pundits will discuss all their presumptions as if they were facts...

UPDATE: The DJIA closed at 12,814.35 down -206.48, or -1.59%

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money.

The New York Times reports that the market was up 190 points yesterday and has risen 11% in the last few weeks. Not only that, but AP says that the jobless rate fell to 5% in April -- better than the expected 5.2% rise. So does this mean that happy days are here again? No. And you should use today's rally to take money off the table if you have any.

Why? Things are not good for the consumer who accounts for 70% of economic growth. My mailman stopped me yesterday after my run and gave me a grim look. He is very friendly and talks to many people on his delivery route and elsewhere. And he told me that with gasoline prices so high, many people are canceling their vacations so they can pay their bills.

As I posted here, gasoline prices are gobbling up a bigger and bigger piece of the median family's income. And USA Today reports that worldwide food prices have skyrocketed 45% -- sending consumers on a recession diet. Businesses are having trouble getting money from banks because the banks still have $500 billion in hard-to-value assets which requires them to hold onto every scrap of capital they can get.

Confidence in the global economy improved for the the first time in five months in April 2008, a Bloomberg News survey of news / analytics subscribers to Bloomberg on five continents indicated Wednesday.

The Bloomberg Professional Global Confidence Index, which surveys 5,905 Bloomberg subscribers, rose to 14.5 in April 2008 from 13.1 in March 2008. The measure increased to 18.5 from 17.6 in the U.S. and to 11 from 7.5 in Asia. It declined in Western Europe. A reading below 50 indicates negative sentiment.

Economist Peter Dawson, who was not a part of the survey, told BloggingStocks Wednesday the April 2008 uptick is welcome news, but investors/traders should not become prematurely optimistic.

"Overall sentiment remains cautious and downbeat," Dawson said. "We are close to a recession in the U.S., with little signs of life in the housing sector or from the consumer to inspire confidence that recovery is just ahead, so you've got to place the higher April data in the proper context."

As investors await today's start of earnings season, they should remember that Wall Street's equity analysts blew it in the fourth quarter, overestimating profit by 33.5 percentage points, the biggest miss ever, according to Bloomberg News.

"Merrill Lynch & Co.(NYSE: MER), Bank of America Corp. (NYSE: BAC) and the rest of the securities industry aren't losing credibility because of anything sinister," the story says. "The problem is they didn't get their math right after credit markets froze nine months ago."

I am not terribly optimistic that analysts have improved much in the first quarter. Earnings estimates are probably still way too high. Many, many companies are going to miss their earnings estimates. This will erode Wall Street's credibility even further.

Richard Weiss of City National Bank told Bloomberg that first quarter results will be a "big wake-up" call for some analysts. Some may lose their six- and seven-figure jobs because of it.

The lesson here is for investors to do their own homework. Anyone who doesn't have the time or motivation to do it should either hire an adviser or buy index funds.

These days, you can't take Wall Street's word for anything.