Just a Correction in the Stock Market or Something Else?

With last week's stock market decline (largest in weekly drop in the Dow in 5 years), the forever bullish are claiming that this is no big deal. It is a "correction." Let's first define correction. A correction is a pause in a bull market. It is a normal decline that should create any worry.

This is the mantra of Wall Street. They made that claim through the bear market in early 2000. The problem as I outline this week in the Stock market outlook is structural. It is within the credit system. The credit system has been the foundation for this stock market bull rally that started back in 2002.

We are talking about foundation problems. If this problem worsens, there will be big problems on Wall Steet. I am not in the business of making predictions. I am looking at the data and see the problems. I just don't see how Wall Steet dodges this mess. A good proxy for this credit problem can be found in the mortgage market. The sub-prime loan crisis has been noted and written about many times. It has been a prime reason for the foreclosures.

Last week it was announced that Alt-A loans (the next level of loans up from sub-prime) are now producing more foreclosures. Then Countrywide (nation's largest lender) said last week that the PRIME loans are now starting to have problems. Prime loans are supposedly the high quality mortgages.

Be very careful and weigh the facts in the argument of correction versus the start of a bear market. For a good read on the reasoning behind the problemsm go to his link:

http://www.msnbc.msn.com/id/19935772/

Have no fears – the group who calls itself the Invincible American Assembly says that everything is under control. They are meditating calmness into the world and the stock market. I really cannot make this stuff up.