It’s getting ugly out there.

The CEO of Ma Bell (AT&T) spooked the markets yesterday with talk of customers not paying their bills. KB Home, a leading home builder, reported losses more than nine times larger than expected. And Countrywide Financial, the nation’s mortgage lender, dropped more than 28% on rumors of a bankruptcy filing. 

(Bank of America bought a $2 billion chunk of Countrywide last August at $18 per share. As of this writing, CFC is trading below $6. Ouch.)

In the tech department, the Nasdaq composite has managed to close on a down note for eight days in a row. If it closes down again today (Wednesday), it will be the comp’s longest red streak since 1984. Nimble traders are probably looking for a bounce; savvy investors are watching for bargains, too. The good gets thrown out with the bad in times like these.

Given the mood out there, it’s little wonder Washington is on the stimulus track. President Bush is expected to highlight a tax rebate plan in his final State of the Union address near the end of this month. That comes just two days before the next Federal Reserve announcement. Should be an interesting couple days for Wall Street. 

Gold Shines Anew in Shanghai

But not everything is awash in red. (2008 is the year of extremes, remember?) Gold and platinum are breaking out to new all-time records. Corn is at an all-time high. Even Malaysian palm oil is tearing up the charts.

Gold futures also just made a glittering debut in China. Bloomberg reports that Chinese gold futures contracts increased as much as 10% on their first day of trading this week.

John Reade, a UBS analyst, says the launch of Shanghai trading is “the biggest event in the gold market since the launch of gold exchange-traded funds over the past few years.”

Hmm…. $2,000 an ounce, here we come! Maybe Chinese investors will help it get there.

Crude Still Biding Its Time

On the energy front, crude oil continues to bounce around between $95 and $100. The triple-digit level is still acting like a ceiling, but more and more it feels like a temporary one.

Some pundits believe the price of oil is going to drop as America heads for recession. The basic idea is that economic slowdown will lead to reduced demand for oil at the margins.

The flaw in this theory, though, goes back to the printing press. The more slowdown we see, the more emergency stimulus we get from Washington and the Fed. That means printing dollars, which keeps the price of oil strong in dollar terms.

There is also the matter of OPEC, the Organization for Petroleum Exporting Countries. When OPEC opened the taps in the mid-’90s, their cooperative attitude led to a price collapse. They were badly burned by that mistake and don’t intend to make it again.

Add geopolitics into the mix -- flammable situations with Iran, Nigeria, Russia, Venezuela and the like -- and less expensive oil still looks like a pipe dream.

Speaking of which, Sara Nunnally has some interesting thoughts on energy use in Asia -- and how you can profit.Read more about that here.

Warm Regards,

JL