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 The major U.S. indexes fell another 1.5% on Friday, bringing the Dow, Nasdaq and S&P 500 down just short of 5% for the week. It was the worst week for the Dow since March 2003 and the worst for the S&P 500 since September 2002.
 To sell or not to sell? At times like these, that is the question.
“Investors who emotionally dump their stocks this week may come to regret their decision a year from now,” wrote Chris Mayer this morning, trying to calm the nerves of Capital & Crisis readers. “It depends on what you own, of course. Many stocks are expensive and overpriced. There are always pockets of danger everywhere. But also, even in bad times, there are always tomorrow's winners. We just need to find them and hang on.
“It's like in battle. Survival sometimes depends on holding your ground.
“The winners during days like yesterday are the investors-in-waiting. Those who have waited on the sidelines now have the opportunity to pick up some favorites at lower prices. The other winners are those steely-eyed investors with the guts to hold what they know or add to their long-term positions in the face of a stiff decline in market prices.”
 Something peculiar happened just before the sell-off. “On Monday of last week,” writes Jim Stack in Forbes magazine, “the DJIA hit a record high while declining stocks overwhelmed advancing stocks by a 2-1 margin. That ominous divergence has never occurred in the past 75 years of market history.
“Divergences are also appearing in major indexes,” Stack continued, “as the headline-grabbing DJIA has risen over 1,000 points in the past five months -- but the small-cap Russell 2000 Index has slipped lower. If that isn't a flight to quality, we don't know what is!”
 The so-called “flight to quality” might get a serious challenge this week. General Motors, Verizon and Procter & Gamble -- all major Dow components -- release earnings.
 We’ll also be getting a bead on consumer spending tomorrow. The Commerce Department will release personal consumption expenditures (PCE) -- one of the Fed’s key inflation gauges. The PCE is expected to come in at 2%... higher than Bernanke and crew are comfortable with.
The jobs report comes out this Friday, too.
If these key earnings, consumption or jobs numbers look bad… you can expect the sell-off to continue, even intensify.
On the other hand, the slightest whiff of good news on any of these fronts may offer solace badly needed. Traders will be looking for silver linings under all kinds of rocks and slimy things this week… anything to offset the tightening of credit screws in the wake of subprime meltdown. We’ll keep our hearts peeled on the sentiment as these reports are released…
 Even if the short-term trend looks better this week, a crack in investor confidence has hit at least 230 companies hard. They were all scheduled for IPOs in 2007… and will require a total of $38 billion dollars to launch. Recent bond issuance suggests that many will be forced to cancel or postpone going public. Corporate bonds issued in the U.S. dropped to $2.53 billion in July -- the lowest level since October 2002.
Companies that managed to float this year aren’t helping to build a positive image… God’s gift to private equity, Blackstone, for example, is down 21% since its June 21 IPO. Its rival, KKR, is rumored by several media outlets to be reconsidering its recent decision to go public as well.
 And on that note, this little piece of irony: U.S. securities firms now employ a record number of full-time employees. Firms added 10,000 employees in June, bringing the grand total to at least 848,300 souls hitching their wagon to this bubble of bubbles.
The investment industry cut 100,000 employees in the three years following the dot.com bust. But between 2005-2007, they’ve all been hired back and then some. We expect the Street will be littered with far more bodies after the subprime bust -- and make the melodrama even more shrill than in 2001.
 On Friday, light sweet crude oil surged to $77.02 -- a mere penny away from an all-time high reached after Hurricane Katrina. In the absence of any major crisis, this price move is pure demand.
 Over the weekend, we learned the Bush administration announced a plan to seek congressional approval for a $30 billion “military aid package” for Israel and a $20 billion arms deal with Saudi Arabia, Bahrain, Kuwait, Qatar, Oman and the United Arab Emirates.
“This blows my mind,” exclaimed our Christopher Hancock at the time. “How do you think Iran and Russia will react to the U.S. granting the Israelis a qualitative advantage over Arab nations?”
Well, maybe like this…
 This morning, according to The Jerusalem Post, the Israeli government “is looking into reports that Russia plans to sell 250 advanced long-range Sukhoi-30 fighter jets to Iran in an unprecedented billion-dollar deal. 
The Sukhoi-30 fighter… this one belongs to India
“In addition to the fighter jets,” The Post continues, “Tehran also plans to purchase a number of aerial fuel tankers that are compatible with the Sukhoi and capable of extending its range by thousands of kilometers. Defense officials said the Sukhoi sale would grant Iran long-range offensive capabilities.”
Russia also recently gave Iran some antiaircraft systems to protect Tehran's nuclear installations. At the time, the Russians said they reserve the right to sell Iran weapons, such as the anti-aircraft system, that are of a defensive nature.
Didn’t we report recently in The 5 that Chavez was helping the Iranians build a natural gas facility? Seems like Putin’s comment last month that we’re returning to the Cold War may not be too far off…
Our word of warning: Watch your wallet.
 Gold continued to sell off in lock step with the broader securities markets over the weekend. The move was puzzling to many attendees and speakers at our event last week in Vancouver.
“I don’t know a cheaper place to put your money right now,” Doug Casey commented. “I’m a very eclectic investor… I look all over the world, in every market, and I’ll buy anything if the price is right. Gold is the best bargain in the world right now.
“It’s not just going to go through the roof, it’s going to the moon. There’s going to be a gold buying panic in the next few years that will just knock your socks off. The bull market for gold has not really even gotten started yet.”
 Meanwhile on the other edge of the Rim of Fire, the Shanghai index soared over 2%, to yet a new high of 4,440.
 Global sovereign wealth funds -- like the Chinese one that recently purchased the largest external stake in Blackstone -- now have over $2.5 trillion in purchasing power. Or so say the latest estimates from Morgan Stanley.
For a bit of perspective, let’s do a back-of-the-envelope calculation. Let’s say you’ve been alive since the first day of our Christian calendar: 0 A.D. On that first day of that first year -- and every day until today -- you’ve placed a million dollars in a zero interest inflation-proof account. Today, in 2007, you have… hmmmn… let’s see… 2,007 x 365 = X… times 1,000,000…. that would be…
$732 billion…. not even close to $1 trillion.
But that’s just the beginning. Morgan Stanley estimates the sovereign wealth funds will increase to $12 trillion by 2015. Not only is that an unbelievable rate of growth, but a staggering indicator as to how huge a role these funds could play in the global marketplace in the very near future.
Regards,
Addison Wiggin,
The 5 Min. Forecast
P.S. The deadline is tonight. We're over 75% full. The remaining spots will go fast. If you want in on Gunner's Bulletin Board Elite, we recommend you order right now >
P.P.S. On Friday morning, I ran into the Oxford Club’s Alex Green in front of the elevators at the Fairmont in Vancouver. “Hey, Alex, did you go to our Whiskey bar last night?” I asked, referring to a debate we hosted among the editors of Whiskey & Gunpowder.
“To watch the libertarians debate the anarchists?” he replied. “Why would anyone want to do that?” Yet nearly 500 people showed, a testament, as Whiskey editor Jim Amrhein suggested, to “the power of free food and an open bar”: Because of a few technical snafus on our end, you can still get the conference rate for the Rim of Fire audio CDs until Thursday. Details here >>
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Recent guerilla attacks in western Mexico have authorities on both sides of the Mexican border scrambling to protect billions worth natural gas pipelines. Companies such as Hershey’s, Honda, and Kellogg’s are losing up to $7 million a day as local rebels bomb energy sites left and right. Meanwhile, several little known organizations are well positioned to profit from a sudden energy grab... or… worse yet, a full blown U.S. / Mexico Border War. 
