The markets may be stuttering…with the euro suffering in overnight trading and stock indices down over a percent at today’s open…but a continued rally still seems the foregone conclusion du jour. We’re not necessarily going to question it.

Despite a few brief months of rational behavior last year, the markets are given to obeying only their own reality. Something that Cornelius Luca – Editor of The Money Trader – picked up on last week…

“The U.S. jobless data was worse than expected,” he said in reaction to last week’s unemployment news…

“The unemployment rate climbed to 8.9% in April, the highest since late 1983. That was as forecast. More importantly, if we include laid-off workers who have given up looking for new jobs or have settled for part-time work, then the unemployment rate would have been 15.8% in April! And the nonfarm payrolls were bad in April and MUCH worse

Dear Value Seeker,

Is gold back?

The precious metal suffered heavy losses in the second half of 2008. But it has soared in recent weeks, breaking through the $900-an-ounce barrier yesterday.

As 5 Min Forecast editor Addison Wiggin says, “Global investors see metal as the only currency worth holding.”

This from The 5:

Looking around the globe today, every major currency is in the crapper — and we’re not the only ones to notice. The euro is being torn apart by once-booming members Ireland and Spain. Nor is Greece helping matters much. Across the channel, the pound is getting leveled by outright fear in the London banking scene. Switzerland and its franc are rapidly losing their safe-haven status. China’s manipulating the yuan, as Tim Geithner insists. If Japan isn’t doing the same, it will soon —

High yields don’t always mean high value, says Matthew Collins. Some Real Estate Investment Trusts (REITs) now yield an attractive 16%. But commercial real estate is in a perilous position right now. And Matthew says investors should resist the temptation to go bottom fishing just yet. Later in the year, there could be some great opportunities to cash in on a recovery bounce.

This from Sovereign Society:

In a previous A-Letter, we talked about the three attributes necessary to make a portfolio successful in this kind of market. One of those attributes was yield…something that’s become easier to find as equity markets take more and more of a beating. But you have

Dear Value Seeker,

Here we go again…

Shares of Bank of America are down 20% today. So are shares Citigroup.

Citi shareholders have been dumping their holdings all week. And who can blame them? Analysts expect dismal 4Q earnings tomorrow.

But Bank of America is causing the real stir today.

Growing losses at Merrill Lynch mean BoA’s takeover of the struggling i-bank seems may have been rather rash (to say the least).

And what do banks do when in trouble these days?

After a Crash… The Rules Change…

How One Man Turned $39,000 into $100 Million in Today’s Market Conditions

Bestselling author and investor reveals his crisis profit secrets… And why even so-called ’safe’ recession investments like cash, money-market funds and Treasuries can demolish your portfolio.

Read More Here

The Wall Street Journal revealed yesterday that BoA, having already received $25 billion under the TARP, has

Dear Value Seeker,

Here we go again…

Shares of Bank of America are down 20% today. So are shares Citigroup.

Citi shareholders have been dumping their holdings all week. And who can blame them? Analysts expect dismal 4Q earnings tomorrow.

But Bank of America is causing the real stir today.

Growing losses at Merrill Lynch mean BoA’s takeover of the struggling i-bank seems may have been rather rash (to say the least).

And what do banks do when in trouble these days?

After a Crash… The Rules Change…

How One Man Turned $39,000 into $100 Million in Today’s Market Conditions

Bestselling author and investor reveals his crisis profit secrets… And why even so-called ’safe’ recession investments like cash, money-market funds and Treasuries can demolish your portfolio.

Read More Here

The Wall Street Journal revealed yesterday that BoA, having already received $25 billion under the TARP, has

Tax-free municipal bonds with historically high yields might look attractive to many investors. But Matthew Collins says the risk is still too high. Bloated and inefficient local governments are facing funding emergencies as revenues tumble and credit is squeezed. As the recession deepens in 2009, Matthew says muni bonds should be avoided.

This from Sovereign Society:

With yields as high on municipal debt as they’ve been in years and the President-elect’s office all abuzz with news of stimulus for state and municipal governments, the cunning investor is paying attention. The bailout of the financial system is already leading to some serious opportunities in commercial debt, so should you get ahead of the curve and dive into municipal debt?

In a word; no. At least not yet.

After all, big government curing our economic woes with “stimulus” projects is almost like a drug dealer curing withdrawal symptoms with more heroin…you just can’t

This year’s healing process will begin in the credit - not equity - markets, says Eric Roseman. Even if a big bear market rally emerges, uncertainty and volatility will still plague stock markets. Meanwhile, investors in high-grade corporate bonds can receive historically high dividend payments while they wait for prices to recover.

This from Sovereign Society:

In December, investment-grade corporate debt soared over 15% as credit spreads plummeted following a crash in September and October.

If you’re debating an investment in high quality bonds then it’s not too late. The Dow Jones Corporate Bond Index yields 7.04% or 460 basis points or 4.6% more than benchmark ten-year Treasury bonds. Twelve months ago that spread was barely 2%, or 200 basis points. Treasury bonds are expensive while corporate debt is cheap.

When comparing the relative risk-reward scenario of stocks versus bonds, I think high quality debt is the optimal asset allocation choice.

We hope you had a happy holiday.

We’re on our way back to our home in Buenos Aires tonight. We’re looking forward to getting back, but not to the nine-hour flight with our nine-month-old son… It’s likely to be grueling.

But at least we’re not in the retail business…

They are likely to be disappointed by the holiday season. According to the Commerce Department, consumer spending fell 0.6% in November, the fifth monthly decline in a row.

The Wall Street Journal reports that 10% to 26% of U.S. retailers are now in danger of filing for Chapter 11 in 2009 or 2010.

That’s up from 4% to 6% of retailers in trouble in the last two years.

It’s no surprise, really.

More Americans are out of work now than at any time since 1982. The number of American’s filing for unemployment for the first time leapt to 586,000

Given the implicit government guarantees, Eric Roseman says it is likely that investors will soon start to switch from low-yielding Treasury bonds to high-grade corporate debt. The Fed’s balance sheet is now polluted by the toxic debt it has taken on from banks. And demand for Treasuries will not keep pace with the deluge of supply in the coming year. Eric says this could make investment grade corporate debt the new safe haven in bonds in 2009.

This from Sovereign Society:

Several segments of the credit markets have come back to life in December after crushing losses recorded in September and October. Though it’s too early to celebrate a broad-based credit revival, the largest issuers of investment grade debt surged this month as yields plunged. Mortgage-backed bonds, or agency debt, have also rallied sharply in December on the heels of government guarantees and the Fed’s plan to spend $500

Swings in commodity prices are often exaggerated in both directions, says Eric Roseman. And that’s exactly what we have seen with crude oil prices this year. But Eric says most of the destruction in demand is now priced in. But long-term supply will still be tight. That’s why we should be near the bottom of the oil cycle, with potentially massive gains for investors that by now.

This from Sovereign Society:

The “Elastic Rubber Band” theory is a popular investment term to describe wide price swings in asset markets. Market moves are usually exaggerated on both sides of the trade and this year’s volatility in oil prices is a testament to that swing.

In a bull market, trends tend to rise far above anyone’s boldest predictions while the same is true when a major reversal lends to big price declines. Could anyone have possibly predicted crude oil would be