Are you a seller or a buyer these days?

With a market drop like yesterdays and the sickening erosion in prices we've been experiencing of late it's hard to imagine many are happy with stocks. Top it off with the hard reality that the dollars you have to invest are worth less now - by about 50% - than they were last year and it sort of makes you want to find a hole to crawl into.

The news is all bad and shows no signs of improvement. This pesky credit crunch brought on by the housing debacle continues to roil the financial industry. Prices are headed up. It costs double just to get to the grocery store and back. Floods in the midwest are sure to put even more upward pressure on food prices. To make matters worse, the dollar's value is miniscule so your savings valued in dollar terms are worth less in real terms.

Invest? Me? Now? You have to be kidding!

Plenty of interesting numbers in the news yesterday.

• Economic growth at a 0.6% annual growth rate
• Consumer spending advancing by 1%
• The Fed's interest overnight interbank lending rate is now 2%

I have to ask, how can anyone not now believe we're in a recession?

Now the question becomes a matter of how long this particular downturn will last. Anyone else think we're in for more than a year of this?

According to Congress' Joint Committee on Taxation:

...it is not practical to contemplate distributing cash rebates until the peak filing season is completed, which in past years has been the very end of May.

And that's if everything goes right. Now add 8-12 weeks' time to process rebate checks and you're looking at July-ish before the big stimulus actually happens.

Think we'll really need it by then?

One thing I really enjoy about writing my own investment blog is that I get to put my own wild ideas out there for anyone and everyone to see. I woke up with an off-the-wall idea this morning and thought for a moment this one might be too crazy. But the more I thought about it the more it seemed to make sense. Or at least it makes sense to me right now, half-way through my first coffee of the morning.

This ¾% interest rate cut the Fed made the other day has bothered me since I first heard the news. My first reaction was that it would do no good. Indeed the market's first reaction was just that. Sorry, that won't quite do it. My later reaction was that a ¾ point had to have some effect. Surely enough, the markets seemed to have the same idea. We saw a rebound.

The markets will open in a little over an hour. Futures point to what's known as a gap down day. That is, there will be a sizable gap between where market indexes, and the stocks of which they are comprised, closed on Friday and where they will open this morning. The only real question to be answered at this point is: How low will it go.

There are over 2 million mortgages out there covering homes sheltering families who are overextended. If they can barely make payments now, what happens when their payments go up as their Adjustable Rate Mortgages ratchet up to market rates?

Even if some plan is enacted which freezes their rates, many are still in trouble. A recession invariably puts people out of work. This recession looks as if it will occur in an inflationary period. Higher prices for food and clothing and transportation will certainly put a strain on homeowners already strapped trying to make mortgage payments.

We've now come to the point where everyone finally believes we're headed for, or in, an economic recession. So far so good. Now begins the process of identifying the quick fix.

We all want a quick fix to this thing: Just take this pill and go have a nap. When you wake up it will all be over and we'll live happily ever after. Trouble is, tax rebates aren't going to do much good, if any. A good portion of the rebates under discussion will simply be socked away.

And it's easy to see why the economic stimulus package under discussion is the leading quick fix candidate. This recession is fueling itself with a nasty combination of rising prices and contraction in the business cycle led by slowed spending on the part of the consumer. Handing the consumer a check to go out and spend presumably will jump start spending, providing needed cash to businesses, who can use the cash to pay suppliers, who will then in turn spend that cash with their suppliers...

If people take their tax rebate checks and stash them away - Incidentally, this is a good time to invest found money in stocks. - the cycle of spending never begins. The quick fix won't work.

Assuming you're like me and live in the United States, you're no stranger to the fact that the US investment climate hasn't been very good lately. That's a bit of an understatement, I know. Sorry, it's early in the week.

Anyone out there still trying to time the market? Buying on dips? Where are you finding additional funds to invest? Last week the NASDAQ ended a 9 day losing streak. The next day it resumed its succession of lower closes. How do you decide when you've reached the bottom of a dip?

One of these days we'll get around to making it official. It takes a committee to decide, and they have guidelines, but soon they'll say the word. Recession.

Until they do the US markets will remain ugly. They may stay that way until well after economists make the recession proclamation. Me, I'm focused on whether this recession stays at home or goes global.

Whatever happened to the leading indicator? Remember the days when leading economic indicators were the hot news topic? These days the news tells us things we already know. Things that have been developing and going on for months now.

Didn't we already know the economy was headed south? Who thought, for instance, that higher gas and grocery prices and record mortgage foreclosures probably would not take a bite out of spending somewhere? How many people have that much left over after gas, groceries and mortgage that they can shift over?

Well I guess there is always the old standby, the credit card. Ah, but wait, we can't go further into debt because we're already maxed out on our credit cards. Gotta make those minimum payments.

What happened to the leading indicator? Somewhere along the line we decided it was better that we not know. Or rather we decided that we did not want to be told.

The news out this morning is that Federal Reserve Chairman Ben Bernanke attended a dinner last evening and hinted in a prepared address that the Fed would drop rates again at their December 11th meeting. He cited higher food and gas prices, tight credit and a poorly performing stock market as "head winds" facing consumers and the economy.

I expect household income and spending to continue to grow, but the combination of higher gas prices, the weak housing market, tighter credit conditions, and declines in stock prices seem likely to create some head winds for the consumer in the months ahead

Why do I feel so uneasy about yesterday's rally in the markets? I enjoyed it tremendously. I'm sure you did too. All the same, I can't help but get the feeling it's like the bull's last meal before being led out to slaughter.

I hope I'm wrong about this, but the prospects of recession seem too good. I'm concerned the Fed's interest rate cutting may have started a little too late. I'm concerned they didn't fully understand how far ranging the housing market's problems would become.