Friday morning the talking heads were pointing for a capitulation at the opening and for awhile it looked like they may have been right as Friday proved to be one of the craziest days I have ever seen.

After opening down nearly 700 points the day proceeded to swing all over the place until finish down “only” 128 as the last hour saw a powerful rally fueled by late day short covering in front of th G7 meeting this week end in Washington DC.

That said nothing concrete came out of the meetings and this will leave investors in a continued state of confusion and won’t do anything to clear up the funk the financial world experiencing.

When will the craziness end? As the uncertainties continue to cloud the economic landscape and investors tire of mediocre results from hedge funds and are asking for their cash back. And retail investors, sensing the crisis might deepen and without the real estate markets to bail him out he continues to head for the exits preparing for year end expenses even though he’ll most likely lose real monies in the process.

No easy answers here as we are experiencing a total lack of confidence and leadership in the world markets.

One thing I have learned from spending all my adult life on a trading desk is that markets have a mind of their own and when they want to make a bottom they will. It will not be determined my what somebody on TV or any other so called expert. There are no experts in BEAR MARKETS.

Looking for some positives to hold on to? World banks slashed rates 1/2% last week, Dow down 18% last week and 40% over last 12 months, Dow down 8 days in a row and  fear continues to build and there are huge amounts of cash on the sidelines.

Monday, being a holiday that will find the banks and credit markets closed and faced with a day of light volume I would look for an attempt at a strong open based on G7 action to secure money market accounts, the American  govt’s plan to invest in US banks  and the oversold condition that exists in world markets.   . 

“The only thing left after the ambulances go is Cinderella sweeping up on Desolation Row”

–Bob Dylan

How do we follow last week, when the US stock market had the most volatile week since the ‘87 crash? Leave it to Washington, as the House of Representatives shot down the bailout plan thatseemed to be done over the weekend. The Dow finished today down 777–that’s 7% if you are counting. What bothers me is not that the bill didn’t pass but the actions of the parties involves. Unfortunately, the bailout has become a one big political game with politicians from both sides maneuvering to see how much face time they can get on the boob tube. They all talk about protecting the small guy who lost his mortgage but they hesitate to mention the number of people who are experiencing hugh loses in the pensions, much less the number of jobs that are going to be lost. If we aren’t careful we will soon be facing a nightmare on Main Street, the likes of which this generation has never seen.

The empty suits in DC don’t have any idea of what they are dealing with; Barney Frank and his merry men wouldn’t know a TED spread from a bed spread. What’s more is they don’t understand the consequences ahead if we don’t get these issues stymied quickly. The US equity markets are but a sideshow for a much bigger issue, namely our credit markets. As of now banks aren’t talking to each other. Corporations are having difficulty buying Treasury bonds and small businesses could soon have difficulty making payrolls. At the same time we are starting to lose creditability in the overseas markets. Dangerous times, my friend. There’s been suggestions that PIMCO’s superstar Bill Gross might be getting involved in the process. Let’s hope so, as the guys pushing the buttons are lost. Their behavior is shameful.

Tomorrow we’ll see housing prices, consumer confidence and Chicago PMI numbers. It’s also a Jewish holiday, so Barney won’t be working. Strap in as it will be a wild session.

TO DO LIST FOR TOMOROW

1. Call, email and /or write your Congressperson and complain about the despicable actions of both the Democrats and Republicans who are attempting to solve the credit crisis of 2008.

2. Try and move some cash into long-term Treasuries if you can find them. Or look at one of Bill Gross’s favorites, Treasury Inflation Protected Securities(TIPS).

3. Call your broker/advisor.

And swing it will as the markets digest earnings news from Lehman and Adobe. Key Lehman execs met over the weekend, and there were more rumors being tossed around than in a daytime soap opera.

Today Federal Reserve Board Chairman Ben Bernanke will appear in front of the Senate’s health reform finance committee and the markets will be interested to hear what he has to say there. Also, PPI numbers are out tomorrow morning and I’d look for traders square positions before the close.

International markets trended higher last night and this morning and oil is again moving higher in early trading even though Saudi Arabia is set to boost production and OPEC is showing concerns that higher prices at the pumps are finally cutting the global appetite for oil. Watch oil prices as the markets are likely to play off any decline and move higher..

BIG EXPIRATION WEEK!! LOT’S OF VOLUME,VOLATILITY AND A HIGHER WEEK..

Since January I have felt that 2008 wouldn’t be an easy year for investors to make money. Sadly, so far I’ve been proven right. As uncertainty in the financial markets continues, capital preservation is paramount, especially if you are looking at retirement sooner than later.

Now would be a perfect time to get to know your financial adviser better. Take him to lunch and listen to what he has to say about the markets and your current investment strategy. Why lunch? For one thing, it’s too easy to pay lip service over the phone or during a stop over at his office where you face the possibility that he’ll tell his secretary to bail him out after 10 minutes due to an emergency meeting. It’s best to get him out of his element so you’ll be able to spend an uninterrupted hour to refine your strategy.

Be ready with questions. The most important one is this one: Is it time to reevaluate my plan? This question is based on only ones you can answer. Those are: Have my goals changed? How much time until I face retirement? And be prepared to be patient.  Unless you are a very large client/investor he’ll need some time to get the information together as you most likely won’t be on his radar screen. Don’t take it personally. Most brokers and planners maintain an account list of 300-plus individuals.

When you hear from him be wary if he wants you to move to something new or to a strategy that makes you feel uncomfortable or you don’t understand. Take time  to review his thoughts and suggestions then talk to your accountant and lawyer and get their thoughts. It’s time to start building your investment team!

But don’t just rely of the advice of others. There’s no better time for you to become more involved with your investment life as you define you investment strategy. Become a student of the financial markets. Start a journal and read the financial pages. I read the”Wall Sreet Journal”, the”New York Post” and WSJ.COM every morning. I also check out a number of blogs and web site’s during the day. And don’t forget to watch Cramers TV show, “MAD MONEY”, which is on 2 3 times a day. He usually has his pulse on the what’s happening in the the markets and he’s entertaining as well. You need to be more comfortable and better understand the financial world while taking some accountability for you investments.

Remember: In difficult times as we are facing now, and with all the uncertainty in the world–gas nearing 5 bucks a gallon, the continuing decline of the US dollar, the on-going collapse of the real estate market and serious problems facing the banking industries–CAPITAL PRESERVATION should be  key. If you are  a baby boomer you can’t afford an underpreforming investment portfolio, as you may  not have the time to make up the loses. My suggestion is to err on the conservative side and make sure you are diversified, at least until we get through the current financial mess the world is in.

Economists want us to believe that we are either in a slowdown, midway through a recession, not really in a recession at all or that we won’t be in one. Last week I heard a legendary Baltimore fund manager remark he hasn’t seen things this bad since–the depression! And you thought Yogi Berra didn’t make sense.

My view is that we are in a recession and we aren’t out of the woods yet because the current economic downturn is based on bigger and more complex issues than we have ever encountered.

First: The financial world is in a mess. With the downfall of Bear Sterns the market most likely hit bottom but it’s going to be a long climb up from here from there.

Second: Much of the wealth accumulated in the last 15 years came from real estate, which was a very easy game for awhile. Everyone, it seemed, became a speculator. People bought houses and sold them for a tidy profit, sometimes before they were even built.  Because of low borrowing rates and easy money, young married couples were able to trade up houses within a few years  of buying homes. Today the picture is very different. It is much more difficult for the average person or couple to buy a home. Banks, faced with failing subprime loans and falling stock prices, don’t want to lend money, which will keep an meaningful rally in home prices at bay. And subprime mortages can’t be blamed for all the trouble. Last week it was reported that we were starting to see foreclosures on traditional mortage loans as well. I live in a a suburban area in Maryland and for years there was never a home for sale. Now I see ” For Sale” signs growing like spring flowers and no one is picking them. There are too many houses and too few buyers. Experts are forecasting  there is 1 1/2 years  of inventory  to be worked through., but I wonder. With mortgages tough to get and gas prices heading  to 5 bucks a gallon, I see little incentive for potential buyers to drive around shopping for a new home.

Third: Retail sales are turning down. At the end of April I walked through a large, high-end  department store in New York and saw most of the spring/summer clothing was already marked down 40%. As a rule clothing at that store doesn’t go on sale until just before Memorial Day and then the discounts were never that high. CONSUMERS ARE PUTTING ON THE BRAKES!! Add to that weak job number’s and the price of oil hitting new highs–well, you are starting to see the picture, and it isn’t a pretty one. In the past I might suggested heading abroad til everything blows over. Unfortunately, the dollar is taking such a pounding it costs a bundle to travel overseas. My daughter Liza, who’s spending her spring semester in Australia called last week to request I send here a pair of sunglasses that cost $90 here. The same pair would cost her $250 across the pond.

So what can you do?

The markets have had a couple of nice rallies sine the subprime problems came to light. Give your portfolio a good looking over. If any stock or fund you are holding didn’t more with those rallies ask why and make sure you get the right answer from your planner or broker. Remember : A cheap stock can get cheaper. Just as my Mother. In the 60’s she had bought Litton Industries and had a huge profit when the stock moved to over $100. Still, when the price started to turn down she would sell because her broker told her the stock would go higher. He said the same thing when the stock price wa $75, $50 and $25. She finally sold the stock at $15. There are many reasons why the price of a stock goes down and many times it isn’t a falling stock market. Nontheless, hope isn’t an investment strategy. It won’t push a bad stock higher. Neither will prayer.(I have tried. It doesn’t work.)  The past reminds us to hold only your highest confidence investments in questionable market’s.

Even if you see your investments decline, don’t panic. Meet with you broker and discuss a strategy. If he or she doesn’t have time or puts you off, fire him or her. This is not  the time to be dealing with a prima donna, especially if you are a boomer nearing  retirement  or you are already retired.

There is still a lot of uncertainty  as we work through the economic issues, deal with a lame duck president and face a new administration this fall. Plus less not forget there is an on-going war. As a rule, markets don’t like “what if”s” or uncertain times. So for the near term I will play it safe. What about you??

Here’s my pick  for trade of the of the week: Send Eli Manning to Washington! Bring in the younger brother to work his magic on the markets, just as he did against the boys from New England. Sit him down next to Ben Bernanke, who by now probably wishes he was in Baghdad and putting together a fiscal plan for 2050. I bet ol’ Archie’s boy  could give him a lesson in operating under fire and coming out a winner.

And while we’re talking about winners: this afternoon I watched the talking heads on TV discussing the markets. One savvy expert after another was dragged out to give America his or her 2 cents on the economy and the stock markets. The truth is that as far as where we are going, at least in  the  short term, it’s anybody’s guess. Still , you can have some fun amid the gloom. Write down comments from each of Wall Street’s favorite market seers and put them away until summer. Then open them and have a good laugh. You won’t be alone.

One of my humbling experience came 10 or so years agoat a business dinner when I found myself sitting next to Allen “Ace” Greenberg, who was then CEO and trader extraordinaire at Bear Stearns . As the evening grew late  and peoplke were starting to head for the door, I found myself alone with the great man. Attempting to make some kind of intelligent comment, I blurted out something brilliant like, “Hey Ace, what do you think the market is going to do this week?”

With the coolness of a riverboat gambler he replied, “Hell kid, I don’t know. Nobody knows. I just buy them and sell them.”

This was a good lesson I’ve never forgotten . Right now, there is one thing for sure: the equity markets  are going nowhere fast  until some of the uncertainties  about the economy are cleared up.

January was nonstop volatility in the nation’s equity markets, where we saw both the best and the worst in five years, before finally finishing off 5% for the month. February isn’t going to give us a chance to catch our breath, either. After a feeble attempt at a rally,  the markets have headed lower once again in the early part of this week.

Murphy’s Money says:

–When investors are faced with the uncertainties that are crippling the economy, it is key that you work through your portfolios and weed out all but hte highest-confidence stocks you own.

–Take a look at how your portfolio reacted to the rally during the last week of January and ended last week. Meet with your broker/planner NOW and put a strategy in place for the next 12 months.

–If you are invested in mutual funds, especially if you are a Baby Boomer and facing retirement, do the same exercise with your fund investments. Too many investors tend to throw away their mutual-fund statements and aren’t aware of what is happening at the fund regarding management changes, performance in strategies, etc.

Now is a good time to get your financial world in order, as there will be opportunities to make back some of the money you’ve lost. But, you have to be prepared when the time comes. I am not suggesting that you start trading in the current market with your 401(k) dollars.

This is a good time to readjust and clean up your portfolio, as you most likely will be able to buy some of your core long-term investments  at very attractive prices.

Murphy’s Money has reviewed and recommends the following links for readers interested in taking an active role in their financial planning.

Social Security (SSA) Quick Calculator:
Estimate your Social Security Benefits by entering your date of birth, earnings in the current year and future retirement date
http://www.socialsecurity.gov/OACT/quickcalc/index.html

U.S. Office of Personnel Management Retirement Information & Services:
USOPM offers several tools, pamphlets, form and FAQs about retirement planning
http://www.opm.gov/retire/

The Pension Research Council:
PRC, affiliated with the Wharton School of Business (UPenn), is committed to generating debate on policy issues affecting pensions and other employee benefits.
http://www.pensionresearchcouncil.org/

Check back after the New Year when we officially launch Murphy’s Money.