Things tend to get much worse - before it gets better

IndyMac, Freddie Mac, Fannie Mae, Bear Sterns, & Lehman Brothers. The onslaught of endless financial bad news has taken its toll on the market.

Inflation is rising (gee, you think?), the real inflationary data already confirms it but last quarter's inflation numbers were denied as not much off ordinary. Furthermore, the housing + mortgage crisis is far from over... and jobless level is at a high.

WASHINGTON (AP) -- Federal Reserve Chairman Ben Bernanke told Congress Tuesday the fragile economy is facing "numerous difficulties" despite the Fed's aggressive interest rate reductions and other fortifying steps.

At the same time, Bernanke, testifying before the Senate Banking Committee, sounded another warning that rising prices for energy and food are elevating inflation risks. This problem looms even as officials try to cope with persistent strains in financial markets, rising joblessness and housing problems.
The situation, he said, poses "significant challenges" for Fed policymakers as they try to chart the best course for keeping the economy growing, while making sure inflation doesn't dangerously flare up. All the economy's problems -- including slumping home values, which threaten to make people feel less wealthy and less inclined to spend in the months ahead -- represent "significant downside risks" to economic growth.

The two companies hold or guarantee more than $5 trillion in mortgages -- almost half of the nation's total. The Bush administration is asking Congress to temporarily increase lines of credit to Fannie and Freddie and to let the government buy their stock. The Fed has offered to let the companies draw emergency loans.

$5 trillions in mortgages and that's a few extra dollars coming out of the taxpayer's pockets.

Gold is the answer for the savvy investors.

The juniors we have been talking about are getting hammered today - with TSX Venture down 300 points. Why?

One possible explanation goes like this --> a simple individual trading account - many institutional traders have margins they can extend to purchase additional shares of a company.

On a day where market drops so much - their margin call is up and the
investor will either need to sell some securities or make additional cash
payments to cover the decreased margin.

Another explanation is due to naked short sellers who
doesn't actually own shares of the company - but profit from the vaule drop of
the company. This practise has received alot of public attention lately and in
fact SEC is stepping in to limit short selling of FMN and FRE.

http://atlanta.bizjournals.com/atlanta/stories/2008/07/14/daily35.html?ana=yfcpc

SEC is finally putting a limit to the barrage of short selling following a liquidity rumor - as it has been played out for so many FI's lately. (read: Bear Sterns - anyone?) Perhaps this will end the sad spiral of so many quality juniors.