- Italy may be the next country to ‘rescue’ its economy with taxpayers’ money. According the The Times the Italian government was working on plans over the weekend to pump as much as $26 billion into its biggest banks.

- Uncle Sam is about to bailout AIG from its bailout. Apparently, the original handout was too tough on poor old AIG. So now its going to get a sweeter deal. This from the WSJ:

The U.S. government reached a deal Sunday night to scrap its original $123 billion bailout of American International Group Inc. and replace it with a new $150 billion package, according to people familiar with the matter.

While the arrangement stands to considerably ease terms on the faltering insurer, it gives the government an unprecedented role as an actor in financial markets. It could also spark a political backlash, especially from congressional Democrats, because the Treasury, while adding to its AIG obligations, has thus far refused to extend a hand to the struggling Big Three auto makers.

- According to Infectious Greed blogger Paul Kedrosky, AIG “is serving as a kind of orifice via which the global credit default swap system pushes out its collateral calls, and it is forcing the U.S. government (read: you and me) into levering up on the other side. As long as asset prices keep falling, increasing the amount of collateral required in AIG’s ‘policies,’ these calls will keep coming, making AIG’s liabilities – and therefore ours – frighteningly open-ended.”

As Milton Friedman once put it, ” Nothing is so permanent as a temporary government program.”

- Of course, the story of AIG’s demise and its now near “zombie” status – it now relies on taxpayers’ money to stay afloat – is replete with ironies. AIG’s immediate problem is that it is neck deep in credit default swaps (CDSs), which it now must cover. As George Soros points out in the December issue of the New York Review of Books, the same administration that let the $50 trillion market for CDSs go “entirely unregulated” is now essentially left on the hook for these instruments.

Take for example credit default swaps … instruments intended to insure against the possibility of bonds and other forms of debt going into default, and whose price captures the perceived risk of such a possibility occurring. These instruments grew like Topsy because they required much less capital than owning or shorting the underlying bonds. Eventually they grew to more than $50 trillion in nominal size, which is a many-fold multiple of the underlying bonds and five times the entire US national debt. Yet the market in credit default swaps has remained entirely unregulated. AIG, the insurance company, lost a fortune selling credit default swaps as a form of insurance and had to be bailed out, costing the Treasury $126 billion so far. Although the CDS market may be eventually saved from the meltdown that has occurred in many other markets, the sheer existence of an unregulated market of this size has been a major factor in increasing risk throughout the entire financial system.

- Turns out Hank Paulson gave his bank pals and even sweeter deal than was oringinally reported under the terms of the $700 billion bailout bill. This from The Washington Post:

The sweeping change to two decades of tax policy escaped the notice of lawmakers for several days, as they remained consumed with the controversial bailout bill. When they found out, some legislators were furious. Some congressional staff members have privately concluded that the notice was illegal. But they have worried that saying so publicly could unravel several recent bank mergers made possible by the change and send the economy into an even deeper tailspin.

“Did the Treasury Department have the authority to do this? I think almost every tax expert would agree that the answer is no,” said George K. Yin, the former chief of staff of the Joint Committee on Taxation, the nonpartisan congressional authority on taxes. “They basically repealed a 22-year-old law that Congress passed as a backdoor way of providing aid to banks.”

The story of the obscure provision underscores what critics in Congress, academia and the legal profession warn are the dangers of the broad authority being exercised by Treasury Secretary Henry M. Paulson Jr. in addressing the financial crisis. Lawmakers are now looking at whether the new notice was introduced to benefit specific banks, as well as whether it inappropriately accelerated bank takeovers.

It sure does pay to have friends in high places…

- All of this is small potatoes next to the Fed’s spiraling loan portfolio. Accoridng to Addison Wiggan and Ian Mathias at The 5 Min Forecast:

Ben Bernanke’s balance sheet expanded to a record $2 trillion this week — $2.058 trillion, if those billions even matter any more. That’s more than twice its size at this time last year.

The Fed’s loan portfolio is so bloated, we hardly know where to begin: Average DAILY bank borrowing from the Fed exceeded $359 billion last week… the Fed’s Commercial Paper Funding Facility has nearly doubled, and now holds $243 billion in “no one else will buy it” cooperate debt… primary dealers and brokers are running a $71 billion tab… AIG still owes $81 billion… it just keeps going and going. Over a third of the balance sheet is made up of some sort of bank loan or toxic asset.

Who’s paying for it? The U.S. Treasury has set up a supplementary funding account with the Fed, which is fueled by T-bill sales. That fund now exceeds $558 billion.

– Greenspan said it was a “mistake” to believe that banks operating in their self-interest would be enough to protect their shareholders and themselves. He also called the current crisis “once in a century credit tsunami” that he and other policy makers didn’t see coming.

– Isn’t that the problem with policy makers in the first place? They never see things coming. That Greenspan claims not to understand the cause and effect relationship between artificially low interest rates over protracted periods of time and asset bubbles simply isn’t believable.

– The results of Greenspan’s shortsightedness are easy to spot. Yesterday, Bloomberg reported that “U.S. foreclosure filings increased 71% in the third quarter from a year earlier, the highest on record.”No that’s not a typo. In just three months, a total of 765,558 Americans got a default notice, were warned of a pending auction or were foreclosed.

– Addison Wiggan and Ian Mathias put it bestin The 5 Min. Forecast, one of the best sources of market insight on the internet, “All things correct in due time, we’ve noted on occasion — even the reputations of men.”

– The full force of the meltdown in mortgages is now hitting jobs hard. “In September,” reports The Washington Post, “there were more mass layoffs than in any month since September 2001 … And nearly half a million Americans have filed new claims for unemployment benefits in each of the past four weeks, the highest rate of such claims since just after the terrorist attacks seven years ago.”

– “Disturning trends” are showing up in the banking system, says MarketWatch’s David Weidnera. He’s dug up a study by IBM of the thinking of financial pros over time. The preliminary results don’t exactly inspire confidence.

The No. 1 issue that keeps bankers and financial professionals awake at night is a lack of strategy – or, as Duncan put it, a “business model identity crisis” — according to nearly 80% of board and C-level executives. “They don’t know what they want to be when they grow up,” Duncan said.

The other 20% are just worried about surviving.

Financial executives are disturbingly out of touch with their clients. That could be institutions, “average Joes,” as Duncan called them, or trading partners — really anyone who pays money to a bank or financial firm.

– This monring, Dow futures are looking really ugly. The Wall Street Journal is calling it a “precipitoius drop.”

U.S. stock futures pointed to another precipitous drop Friday, as a wave of profit warnings sent stocks plunging in Asia and Europe.

December futures in the Dow Jones Industrial Average and S&P 500 both fell by the maximum amount allowed, a further sign of extreme market stress.

More than two hours before the start of trading, S&P futures remained locked at 855.2, a fall of 60 points. DJIA futures, earlier at limit down at 8224, a 550-point fall, were seeing intermittent trade a few points above this level.

– The broader Standard & Poor’s 500 index did even worse. The S&P 500 was the worst performer among the major indexes. It shed a whopping 6.1% and hit its lowest level since April 2003. The fear and loathing on the Street is palpable.

– Today, U.S. stock futures slipped thanks to what normally chirpy MarketWatch calls “the brutal economy that companies are navigating.” S&P 500 futures edged 2 points lower to 900.80 and Nasdaq 100 futures fell 7.25 points to 1,240.70. Dow industrial futures rose 5 points.

– Agora Financial’s Chris Mayer, one of the smartest contrarian investors we know, is quoted on Addison Wiggan’s 5 Min. Forecast blog as saying: “What we are going through now is a history-making crash. There is a reason it caught so many people by surprise — it hasn’t happened before, not quite in this way.”

– Addison also quotes Bill Bonner. Bill has been calling this crash for years in The Daily Reckoning. His “trade of the decade” — sells stocks, buy gold outlook — now looks like a very wise move. Bill says we about to be hit with a protracted bear market combined and a deep recession.

“When Mr. Market goes into a sulk, he takes a long time to come out of it. Real bear markets last 10… 15… 20 years. Judging by the meltdown in the financial sector and the rapid losses we’ve seen over the last three weeks… we have a real bear market on our hands…

“With no more easy credit available to them, consumers are doing what they have to do — they’re cutting back. How much? For how long? No one knows the answers to those questions, but our guess is this: more and longer than you thought.”

– We didn’t expect permabear Nouriel Roubini to be calling a bottom. But we didn’t expect such a bleak prognosis either. Roubini spoke yesterday morning on CNBC. Henry Blodget on Clusterstock summarizes Roubini’s breakdown of the coming financial Armageddon:

# The worst is yet to come.
# The next few weeks and months are going to have lots of negative surprises on the economy
# The flow of market news is going to be much worse than expected–just like last week when every piece of news was awful
# Earnings are going to surprise on the downside. There’s going to be a sharp fall in earnings, not just financial sector, but everywhere.
# Even in financial system, where we avoided a systemic global financial meltdown by an epsilon, there will be significant risk downward. Emerging markets going into a crisis. Having a blow up of the CDS market. Having hundreds of hedge funds closing down.
# So I significant downside risk for the financial markets and economy. I think the worst is yet to come.

– Blodget says yesterday’s wipeout in the stock market was a good thing, because it means the market is behaving rationally.

Trading down on profit warnings is a pretty rational and even normal response to economic news. The reason that’s good news is that it means we’re not just experiencing mysterious problems in credit markets or some new financial innovation no one ever heard of exploding all over the markets.

– Argentina, where the ContrarianProfits offices are based, is royally screwed by the looks of things. The hugely unpopular president President Cristina Fernandez de Kirchner has announced she will seize pension funds. Cristina, ever the populist, claims the move is to “protect” people’s money. The reality is she plans to use the funds’ $29 billion to meet the country’s spiraling financing needs. The Argentine stock exchange, the Merval, plunged as much as 18% on the news.

– Addison Wiggan’s take on it in The 5 is dead on.

Beset with debt and overcome by its bond obligations, the Argentine government nationalized $30 billion in private pension funds yesterday.

Fifty-five percent of those pensions are government debt holdings… and now that Argentine leaders have seized them, they can essentially write them off. The rest of the holdings they’ll use to finance debt payments and keep the government running.

Argentina is the second largest economy in South America. It is one of the world’s top five exporters of beef, soy, corn and wheat. It still can’t afford to keep the lights on. Argentine citizens are being asked to suspend reality and trust the government is good for the money when they’re ready to retire.

Hmmmn… puts us in mind of that ’70s-era Rainbow rock ‘n’ roll tune “Can’t happen here, can’t happen here. All that you fear, they’re telling you, can’t happen here.”

The losses among banks, insurers and money managers may spark the next round of writedowns on CDOs after $660 billion in subprime-related losses. They may force lenders to post more reserves against losses after governments worldwide announced $3 trillion in financial-industry rescue packages since last month, according to Barclays Capital.

– Meanwhile, Reuters reports that U.S. banks will need more $700 billion in government cash injections to stay afloat because “banks cannot predict how many of their loans will sour because they do not know how much the economy will shrink, and forecasts of their future losses would only spook investors.”

– The numbers are certainly worrying:

By the numbers, the outlook for banks is troubling. U.S. commercial banks had about $1 trillion of capital as of the end of the second quarter.

That may sound like a lot, but Alpert estimates that banks globally could have a total of $1.25 trillion to $1.5 trillion of writedowns and losses from mortgages, of which perhaps $600 billion have already been recorded.

– Earnings season is upon us. Investors are reacting to the prospect of corporate losses. This from MarketWatch:

U.S. stock futures pointed to a second straight drop on Wednesday on concerns for earnings in a rocky economy, though Apple looked set to buck the trend after the consumer electronics giant was able to sell far more iPhones than expected.

S&P 500 futures fell 20.1 points to 939.20 and Dow industrial futures tumbled 166 points. Futures on the tech-concentrated Nasdaq 100 fell a more modest 15.5 points to 1,277.00.

– Global stock indexes also fell. This from Bloomberg:

The MSCI World Index lost 2.9 percent to 944.07 at 12:02 p.m. in London. The index has lost 40 percent this year and oil has tumbled more than 50 percent from its peak in July as concern deepened government bailouts to save the global banking system won’t avert a recession.

– In the currency markets, the British pound hit a five-year low against the dollar. The euro plumbed a 20-month low against the buck.

– Crude oil prices fell below $70 a barrel on growing fears of a global economic slowdown. OPEC’s scheduled meeting on Friday to discuss output cuts has so far failed to stem oil’s slide.

– A lot of investors are calling a bottom — at least a tentative bottom — in stocks.

– Addison Wiggan and Ian Mathias in The 5 Min. Forecast note that Jeremy Grantham, self-proclaimed “perma-bear” is turning bullish.

Grantham says the time has come for “hesitant and careful buying” of equities. Grantham, who also correctly called a global bubble among all asset classes last year, told his $120 billion worth of clients that this is the quarter to start buying.

“On Oct. 10, we can say that, with the S&P at 900, stocks are cheap in the U.S. and cheaper still overseas. We will, therefore, be steady buyers at these prices. Not necessarily rapid buyers — in fact, probably not — but steady buyers…

“History warns, though, that new lows are more likely than not.

“Fixed income has wide areas of very attractive, aberrant pricing. The dollar and the yen look OK for now, but the pound does not. Don’t worry at all about inflation. We can all save up our worries there for a couple of years from now and then really worry!

“Commodities may have big rallies, but the fundamentals of the next 18 months should wear them down to new two-year lows. As for us in asset allocation, we have made our choice: hesitant and careful buying at these prices and lower.”

– The auto industry could be about to trigger a “doomsday scenario” for the US economy, according to AP auto writer Tom Krisher. This happens when General Motors (NYSE:GM) buys out Chrysler LLC , guts its workforce, keeps Jeep and the minivans and “vaporizes” the rest of the company.

– The Financial Times says the US is heading for its worst recession since 1982.

Senior officials at the Treasury and Federal Reserve are confident that the rescue plan for US banks will succeed in preventing a financial system meltdown and ensure there will not be a repeat of the Great Depression. But they know that a sharp economic downturn is already baked in the cake. They do not, however, know how deep or protracted it will be.

– Doug Diamond and Anyl Kashap over at the Freakonomics blog are calling this the “most remarkable period of government intervention into the financial system since the Great Depression.” This is one of the most bearish indicators we can think of.

– “Now that the big five investment banks of America have been shut down,” reports The New York Times, “there is one big risk-taking banker left: the federal government.” It is taking a $250 billion bet on America’s banks by defacto nationalizing them. And there is no way of knowing for how much longer the government plans to stay the prime mover in the markets.

– Meanwhile, Bloomberg reports that “the cost of protecting European corporate bonds from default rose to a record amid investor concern bankruptcies will soar as Deutsche Bank AG analysts forecast the worst economic slump since the Great Depression.”

– This doesn’t seem to be worrying Mr. Market this morning. Traders are “optimistic,” says MarketWatch. “S&P 500 futures rose 28.4 points to 961.90 and Nasdaq 100 futures rose 41.25 points to 1,352.25. Dow industrial futures rose 224 points.” We wonder how long the bright mood will last.

– On Friday, the CBOE Volatility Index, or VIX, was up past 70. It’s the highest the index has been. Ever.

– According to Addison Wiggan and Ian Mathias at The 5 Min. Forecast:

While that does provide some look into the fear and uncertainty in the S&P 500, it’s really a testament to how wild the options market has become. The VIX is literally options traders’ anticipated movement of the S&P 500 over the next 30 days, annualized. So when the VIX hit 81, options are pricing an up or down annualized change of 81% over the next 30 days.

Simply put, it’s the Wild West in the options market. For that reason, we just finalized the best deal we’ve ever offered for our high-end options trading service, Options Hotline. Click here for the details.

– It’s wild. But Lynn Carpenter says the lessons from history show that doing nothing or selling everything are the worst things an investor can do in times like these. She says the brave — and ultimately the winners — will be putting new money in the market right now…

U.S. Treasury Secretary Henry Paulson has been shopping around a proposal to congressional lawmakers that would create an entity to deal with the bad debt, similar to what was done in the savings and loan crisis, a congressional aide said.

S&P financial stocks were up 9.5 percent.

The Dow Jones industrial average was up 353.77 points, or 3.33 percent, at 10,963.43. The Standard & Poor’s 500 Index was up 41.07 points, or 3.55 percent, at 1,197.46. The Nasdaq Composite Index was up 74.84 points, or 3.57 percent, at 2,173.69.

Here’s the lowdown on Uncle Sam’s purchases from Addison Wiggan’s and Ian Mathias’s 5. Min Forecast…

• Fed will offer up to an $85 billion 2-year loan to AIG

• In exchange, the Fed assumes 80% ownership of the firm

• All money borrowed is to be repaid at 3-month Libor, plus 850 bps… about 11% interest rate

• AIG will conduct an “orderly” sale of its assets until the loan is repaid.

As Addison and Ian say, “Velcom to Amerika!”

– According to Bloomberg: “The Fed increased the amount of dollars that the European Central Bank, the Bank of Japan and other counterparts can offer from $67 billion ‘to address the continued elevated pressures in U.S. dollar short-term funding markets.’ The Bank of England, the Bank of Canada and the Swiss National Bank also participated.”

– This flood of cash seems to have cheered Wall Street. “US stock futures pointed to a stronger start. S&P 500 futures rose 16 points to 1,178.90 and Nasdaq 100 futures improved 21.25 points to 1,668.25. Dow industrial futures rose 96 points,” reports MarketWatch.

–New York Mayor Michael Bloomberg, however, sent shivers up the spine of investors. He warned that a “next wave” of the crisis could come as foreign investors stop buying US debt.”It’s not clear who’s going to be buying our debt,” he said. “It may very well be that the next wave is going to come back and bite us.”

– Two financial giants are on the block. Morgan Stanley (NYSE:MS) is in merger talks with Wachovia (NYSE:WB), the troubled regional lender. Morgan Stanly is also “exploring other potential deals in an effort to avoid becoming the next victim of the credit crunch [...] and is in close contact with a leading shareholder, China Investment Corporation, which owns a 9.9 per cent stake,” according to the FT. WaMu (NYSE:WM), the country’s largest savings and load bank, which saw its credit rating slashed to junk by Standard and Poor’s, is also looking to sell itself and has hired Goldman to run an auction, according to the paper.

– No end in sight, says the WSJ:

Lingering hopes that the damage could be contained to a handful of financial institutions that made bad bets on mortgages have evaporated. New fault lines are emerging beyond the original problem — troubled subprime mortgages — in areas like credit-default swaps, the credit insurance contracts sold by American International Group Inc. and others. There’s also a growing sense of wariness about the health of trading partners.

– Gold prices exploded yesterday as investors sought safety from the mayhem on Wall Street. The metal posted the biggest one-day gain ever in dollar terms. This from AP:

Gold for December delivery rose as much as $90.40, or 11.6 percent, to $870.90 an ounce in after-hours trading on the New York Mercantile Exchange after jumping $70 to settle at $850.50 in the regular session. That was the biggest one-day price jump ever; gold’s previous single-day record was a $64 gain on Jan. 29, 1980. In percentage terms, it was gold’s largest one-day advance since 1999.

– As gold soared, white-knuckled panic has gripped the global credit markets. Yesterday saw “a flight to safety of the kind not seen since the second world war,” reports the FT. According to the paper, lending between banks “in effect, stopped.”   While yields on short-term US Treasuries “hit their lowest level since the London Blitz.”

– This is how The Big Picture blogger Barry Ritholz explained the difference between AIG, Lehman Brothers and Bear Stearns to researches on The Daily Show:

Lehman Brothers was like the little kid pulling the tail of a dog. You know the kid is going to get hurt eventually, and so no one is surprised when the dog turns around and bites the kid. But the kid only hurts himself, so no one really cares that much.

Bear Stearns is the little pyro — the kid who was always playing with matches. He could harm not only himself, but burns his own house down, and indeed, he could have burnt down the entire neighborhood. The Fed stepped in not to protect him, but the rest of the block.

AIG is the kid who accidentally stumbled into a bio-tech warfare lab . . . finds all these unlabeled vials, and heads out to the playground with a handful of them jammed into his pockets.

– Dan Denning, editor of The Daily Reckoning Australia, has another view on the matter. Here’s Dan on why the Fed bailed out AIG and not Lehman Brothers, as quoted in Addison Wiggan’s and Ian Mathias’s 5 Min Forecast:

One answer is that most of AIG’s customers are overseas. Not only would a bankruptcy trigger chaos is the CDS market, but many foreign customers insured by AIG would be in doubt about the value of their normal insurance policies. Just like with Fannie and Freddie, foreign creditors may have again forced the hand of the Treasury to use American taxpayer dollars to guarantee the value of their financial investments in the U.S.

The Bear Stearns bailout was supposed to prevent the crisis from rippling through Wall Street. Obviously it hasn’t done that. It’s merely thrown the crisis into slow motion and prolonged the agony.

– Addison Wiggan and Ian Mathias in The 5 Min. Forecast have a different view: The government is not willing to bailout another bank…

Long story short, Lehman is as close to going out of business as ever. The firm is still gripped by credit- and mortgage-related losses. Its merger with a government-owned bank in Korea is now rumored to have fallen through. S&P has threatened to cut ratings, again. And the market is terrified that the U.S. government is not willing (or even able) to bail out ANOTHER “too big to fail” financial.

– Selling hits Lehman’s stock.

– Lehman is “ripe for a hostile takeover,” says Jennifer Yousfi in Money Morning. But the clock is ticking. According to Jennifer, “As the list of potential saviors continues to dwindle, so does investor confidence in Lehman Brothers.”

– US futures are pointing down. “Stocks head squarely toward sharp losses as financial  worries and slowdown jitters call the tune.  Data on trade, jobless claims and import prices on deck. 

–  There’s always a way to profit. Martin Hutchinson in Money Morning says as Treasury bonds suffer from higher government borrowing and inflation the Rydex Juno Fund (MUTF:RYJCX) should see major gains. Ian Davis in DailyWealth says it’s difficult to see how investors can lose on fat-dividend paying Taiwanese stocks.

– The dollar continues to rally. It hit a one-year high against the euro and a basket of currencies.

– Charles Delvalle in Investor’s Daily Edge says investors should factor in 6 to 12 months of dollar strength after the buck broke above its eight-year resistance line.

– The rising dollar is having having a negative effect on crude oil prices. Prices are down to just under $102 a barrel.

– Chris Mayer, however, remains bullish on oil long-term future for two fundamental reasons.

– Gold prices regained some strength. Reuters reports that “investors who propelled gold to a lifetime high of $1,030,80 in March on inflation fears and a struggling dollar are ditching their bullion holdings as the US currency stages a dramatic rebound.”
– Lee Lowell at The Smart Profits Repor, however, gold is oversold. He also says the dollar rally is mainly due to sentiment.

“Investors, showing no sign of concern about the outlook, took the GDP report at face value and pushed stocks up sharply on the news,” ran another breathless piece of editorial, following data that showed U.S. GDP up 3.3% in the second quarter.

But as Addison Wiggan and Ian Mathias pointed out yesterday in Agora Financial’s 5. Min Forecast, the government’s stimulus check program and a weaker dollar were partly responsible…

Government stimulus checks helped boost second-quarter GDP up 3.3%. That’s nearly double the Commerce Department’s initial projection. A weak dollar also helped U.S. exports rise. They’re up 13%… 4 points higher than the expected 9%.

And for every bit of good news, says the 5, there’s a litany of scary data close behind…

Bankruptcy filings, for example, were up 29% in June, year over year. Total filings for the 12-month period rang in just under 1 million.

And here’s a curious bit of data for both Buffett and Greenspan, champions of the “American productivity” school of euphorinomics: Between 2000-2007, U.S. worker productivity increased 18%, but salaries declined, on average, $2,000.

Despite producing an average of 2.5% more geegaws each year, the median inflation-adjusted family has fallen over the past seven years, from $58,000 to $56,000. “It’s a compelling example of a large disconnect,” says Jared Bernstein of the Economic Policy Institute. “Americans aren’t being rewarded for their productivity.”

And as Strategic Investment editor Dan Amoss said in an earlier post about bond king Bill Gross’s plea to Barack Obama to boost the budget deficit to $1 trillion, GDP figures are not necessarily a foolproof measure of the health of the economy…

I’ve always been skeptical of GDP as a measure of economic progress. It treats dollars spent and dollars invested equally (a dollar invested adds to capital formation, while a dollar spent subtracts from it). The GDP equation also treats government spending as a good thing. It is not. Aside from spending on the occasional “public good,” it just sucks capital out of the efficient, adaptive private sector and doles it out to politically powerful voting blocks.

For the sake of U.S. stocks, let’s just hope investors keep on taking those GDP figures at “face value.”

The ABC News Consumer Comfort Index edged down to -50 in the week to Aug. 24 from -49 in the previous week.

If consumer confidence is improving – if such survey’s are worth a damn, that is; we suspect they are not – the obvious reason for the improved mood is a drop in the national average for gas prices. This now stands at $3.66.

Addison Wiggan and Ian Mathias in Agora Financial’s 5 Min. Forecast think differently. The truth, say Addison and Ian, is the jump in the Conference Board’s numbers probably has more to do with skyrocking household debt. (See chart below.)

This from yesterday’s 5…

U.S. households now hold more debt than the entire U.S. economy produces in goods and services each year,” say Addison and Ian. Debt, like heroin, makes things seem a whole lot more euphoric than they realy are. Unfortunately, you need an ever larger amount to keep the high going.