Remember the havoc in the financial markets when the residential bubble burst last year? Are we in for a rerun this year or next year?

You are probably thinking that such an event could not occur. Well think again. There is a report that says that we may be in for another crisis.

The report was initiated by Federal Reserve analyst, K.C. Conway. Conway is a senior real estate analyst at the Federal Reserve Bank of Atlanta. The Federal Reserve has acknowledged the report but said that it is not part of its formal opinion. What does the report say?

The banks led the markets down, and then led it back up. And when they announce earnings in October, they are almost positively going to include comments about 2010 that will help send the market back down.

The banks still have trillions of dollars in toxic assets and increasing credit losses, and they are facing new accounting and regulatory rules that are pressuring them to raise capital and dilute shareholders.

And the market is not likely to react well to this news.

Next: Sign #4: No positive catalysts on the horizon

There's a new day dawning out there. Some analysts are proposing that bankers should be paid in toxic assets. Among the chief proponents of this idea are Vince Farrell of Soleil Securities and Jim Rodgers of Rodgers Holdings.

Now this seems to be a fine idea. The bankers, with their greed and excess speculation, took down our financial system. The U.S. Treasury and the Federal Reserve had to pledge $12.2 trillion of your money to bail out these ... (you finish the sentence as you see fit). Can you imagine what $12.2 trillion is like? Do you have any idea what this money could have done for our country?

When the financial crisis really got into full swing, a lot of banks ended up taking TARP money. Some banks needed it, and some banks were forced by Treasury Secretary Henry Paulson to take it.

Wells Fargo & Co. (NYSE: WFC) was one of those banks that was forced to take TARP money, and now it is making plans to pay the TARP money back.

Here's the interesting thing though. While many of the larger banks have paid the TARP money back, Wells Fargo says it is going to pay the money back without having to go out and raise additional funds for the bank -- something other large banks, like Goldman Sachs Group (NYSE: GS), didn't do.

Do you know where another $30 billion of your tax dollars are going? You guessed it. The Federal Reserve and the Federal Deposit Insurance Corporation announced that they will spend $30 billion dollars to buy toxic assets.

To do this they have chosen nine firms out of 100 that applied for the program. The guts of the program are that the government will partner with private companies to buy toxic assets.The Treasury supposedly did background checks to be sure that none of the firms chosen had any "conflicts of interest."

What is the real condition of our banks? Well depends on which glass you are looking at. Is it half full or half empty? Let's look at the good news first:

• Profits for the bans are up.
• Bank stocks are surging.
• The U.S. government gave 10 banks permission to pay back $70 billion of TARP monies.
• Since January, banks have raised $200 billion and sold $75 billion in debt.
• Stress tests showed that 19 of the biggest banks needed only $75 billion to withstand a tougher than expected recession.
• In a press conference, U.S. Treasury Geithner said, "these are early signs of repair and improvement."

Just when I think I have heard it all, they come up with something even more eye-poppingly incredible. That's right folks. First they sucked you into the dot-com boom; then wiped out your tech stocks. Next they urged you to buy houses with money you couldn't pay back -- and those houses plunged in value while the global stock markets lost half their value -- further decimating your net worth.

Now they want to give you the once in a lifetime opportunity to buy the very toxic waste that is sinking the entire global financial system. And if you have a job in state government, your pension fund may be enticed into this financial sludge as well.

A Congressional panel headed by Harvard Law School professor Elizabeth Warren is suggesting it's time to fire bank CEOs and liquidate the banks they ran. As Jon Stewart would say, "Me likey."

The panel is not suggesting that the firing and liquidation happen en masse. Rather, it simply argues that the Treasury's approach denies the reality of just how bad the banks' financial condition is and leaves those sick banks in control of the very people who got them into the toxic-waste business. The panel suggests that CEOs of sick banks have a too-rosy view of their institutions' prospects.

By caving into pressure from Wall Street, the Financial Accounting Standards Board (FASB) just single-handedly added at least 20% to the value of major banks burdened with formerly toxic waste. What just happened is that FASB passed an accounting ruling that allows the banks to decide the value of its toxic waste rather than letting the market set a price.

Many people are wondering when this recession/depression will end. Well the waiting is over.

Tomorrow a group of accountants will vote on a new accounting rule that will end the financial crisis. This rule, called FAS 157-e, permits banks to make up the value of assets they carry on their books that nobody wants to buy. By letting banks put whatever value they choose on these assets, they will no longer need to tell investors just how badly those assets have deteriorated.

This is obviously fantastic news for the global economy. We can now get back the $12.8 trillion we've spent bailing out the bad bets of banks and insurance companies. That's because the toxic waste that has so far caused them to take $3 trillion in write-offs is no longer toxic. In fact, the banks can mark those assets just as high as they want -- taking a profit by valuing them at, say, $1.20 instead of the 60 cents at which they're currently priced on their books. This increase in value will instantaneously give the banks as much capital as they want.

Today saw a monster rally brought on by Tim Geithner's Treasury plan to rid banks of toxic assets. Then a much "less bad" bit on the existing home sales showed a gain of more than 5% because so many are distressed house sales. And now there is a new issue to consider: The bears have to be worried as key upside technical resistance levels were taken out in the last hour of trading.

Here are the unofficial closing bell levels:

Dow 7,775.86 +497.48 (6.84%)
S&P 500 822.92 +54.38 (7.08%)
Nasdaq 1,555.77 +98.50 (6.76%)

Top Analyst Upgrades and Downgrades

Investor Jim Rogers, noted for his expertise in commodities, is someone Wall Street professionals, business executives, and economists alike pay close attention to, as he's frequently been ahead-of-the-curve regarding market and investment trends.

Still, that's not to say that Rogers sometimes can't overdo it a bit and/or does not get it wrong.

A recent chat Rogers had with Bloomberg News is an example of the latter, as the talk yielded more rhetoric, half-truths, and flat out absurd statements and not a whole not of illumination.

In his column last week, New York Times (NYSE: NYT) columnist and Nobel Prize-winning economist Paul Krugman laid waste to those who argue that he's not critically assessing Obama administration programs. He offered a cogent critique of the U.S. Treasury's tardiness regarding the banking system fix.

Either temporarily nationalize those banks that are clogging the system, buy the toxic assets at unsubsidized prices, or announce some other market-valued removal plan to unclog the system, but let's put this train in motion, Krugman said, in so many words, to get to the root of the matter: We need to get credit flowing freely to facilitate commerce.

Lately, it has been as if every lesson from a first-year graduate seminar in public policy is being played out on the national stage.

Let's underscore one point: the nation appears to be nearing a policy to deal with the financial crisis. Investors should try to keep that at the forefront. Or maybe paste it on to their computer screens at work or in their home offices, so that they can maintain a sense of perspective. Yes, it's about a year late, but there was another U.S. president in charge then: the new guy's just arrived. Moreover, if calm prevails, the nation is going to get through this difficult period, this aftermath of the decade of policy errors, the decade of descent.

You might say that a key investor, one of the exemplars, is no longer bullish on the pure bulls. Or on the unregulated bulls. Or on the totally free market bulls.

Billionaire investor George Soros told Bloomberg News that the current global financial crisis originated during the deregulation of the 1980s, and signals the end of the free market model that has dominated capitalist countries, and indeed much of the developed world, since the the end of the Cold War with the break-up of the Soviet Union in 1991.