Good afternoon,

Precious metals prices added to yesterday's gains as difficulties by Clear Channel Communications to complete its LBO due to reluctance among banks brought credit issues back to the forefront in the markets. Investors also exhibited familiar behavior patterns in the wake of the US durable goods orders numbers and the new home sales figures that were released today. Both yardsticks show continuing woes

in the US economy.

The US dollar thus headed back down, breaching 72 on the index, while oil and metals started to receive familiar speculative inflows. In a knee-jerk reaction, Indian gold demand slackened once again overnight, as the locals' willingness to purchase the yellow metal dipped when gold was once again bid away by hedge funds plays.

Gold ran into resistance at $950/952 per ounce, but chances of the test of $960/$965 still appear quite reasonable as no one really expected positive surprises on the economic front. The expectations of more of the same extend into upcoming productivity, jobless claims, and earnings reports due in the near future. Q1 will not only feel like a recession, it may well look like one on the statistical ledgers as well. The Dow headed down 110 points on the souring mood.

New York spot gold trading was last quoted at $949.00 bid, showing a $10.00 gain, as participants pushed to erase perhaps half of last week's losses. Silver rose 39 cents and was trading at $18.30, while the noble metals added value as well, with platinum rising $18 to $2006 and palladium gaining $5 to $456 per ounce respectively. Crude oil was up a very substantial $4.61 climbing to $105.83 per barrel amid reports that fuel supplies dropped in the US. This, as (ironically) refineries shut down or scale back as a result of lower demand for (expensive) fuel. Send thank you notes to your favorite hedge fund.

In the interim, a mirror-image kind of attitude/deed play is unfolding between the words and actions of Mr. Bernanke and the ECB's Mr. Trichet. The former (and his colleagues) continue to jawbone about the desirability of a strong dollar while cutting rates at every meeting they have, while the latter speaks of the dangers of an overly strong euro, but keeps rates at practically twice those of the dollar at the same time. Mr.Trichet's latest words? Reuters has them:

In the present current circumstances we are concerned about excessive exchange rate moves, Trichet told a hearing of the European Parliament's Economic and Monetary Affairs Committee. Excessive volatility and disorderly movements in exchanges rate are undesirable for economic growth, he added.

Reuters also bring us the latest in Armageddon countdown news. Namely, that they are overblown:

Maybe, just maybe, the financial world is not about to implode. Such is the level of disaster mongering surrounding the latest phase of the eight-month-old credit crisis that you could be forgiven for thinking we will all soon be hoarding food and reverting to a barter economy. At the very least, some market pricing and financial commentary has invoked a systemic collapse akin to 1929's stock market crash and the Great Depression that followed.

So what could be the [possible] circuit breaker?

First, bankers and investors need to be able to see some timescale for the crisis. Otherwise they will continue to hunker down in safe havens of cash and gold and perpetuate the cycle. One important development this month -- drowned out by panic surrounding the Bear Stearns rescue -- was that credit rating firm Standard & Poors said the end was in sight for writedowns of the subprime mortgage assets that sparked the crisis.

A long-time reader asked us to define what it means to be a bear. Well, for one, they are not prophets of doom. Without getting into the finer nuances of what a bear on one or another specific asset looks/sounds like, let's look at a couple of eloquent descriptions of bubbles, bulls, and bears, as offered by Edward Chancellor, a true maniac of manias, bubble trouble expert, and noted Financial Times writer:

Bubbles occur when speculators drive asset prices far above their intrinsic value. The collapse of a bubble is frequently accompanied by an economic crisis. Who gets the blame for this crisis? Not the bulls, who were responsible for the bubble and the various frauds and manipulations perpetrated to keep shares high, while cashing in their profits.

No, it is invariably the bears who are blamed for the post-bubble crises and are the main objects of anti-

speculative legislation. Yet during the bubble periods it is the bears who are generally the lone voice of

reason, warning people of the folly of investing in overpriced markets. In the aftermath of a bubble, they

continue their forensic work of exposing unsound securities and bringing prices back in line with intrinsic values, a point which must be reached before the recovery can start.

Bulls always have been more popular in this [the US] country because optimism is so strong a part of our heritage. Still, over-optimism is capable of doing more damage than pessimism since caution tends to be thrown aside. To enjoy the advantages of a free market, one must have both buyers and sellers, both bulls and bears. A market without bears would be like a nation without a free press. There would be no one to criticize and restrain the false optimism that always leads to disaster.

In the meantime, more nervousness is the order of the day. Even if you might not be ready for a replay of 1929 just yet. Whether you are a bull or a bear.

Happy Trading.