US economic data releases make grim reading these days. Jobless claims hit their highest level for seven years in September. US factory orders tumbled 4% in August.

MarketWatch says recent data “make it all but certain that the academic economists will eventually declare that the economy is in a recession.”

Charles Delvalle says we are in a deflationary cycle that will only get worse as more credit is sucked out of the financial system. He recommends high-yielding corporate bonds for investors looking to avoid the stock market gloom.

Losses of $500-$600 billion are enough to make anyone shudder. But Charles Delvalle says these estimates don’t come close to measuring the eventual fallout of the current credit crisis.

Credit losses could reach $2 trillion. That translates to $10 trillion of liquidity wiped out, using a very conservative estimate of leveraging (Lehman Bros (NYSE:LEH) had a leverage ratio of over 30 last year).

Charles says we could be entering the biggest deflationary period since the Great Depression. The best protection lies in top grade corporate bonds.

– The market is holding its breath this morning. It’s waiting to see what the fate Lehman Brothers (NYSE:LEH) will be. According to MarketWatch, “the brokerage is believed to be in its last hours of independence.”

– After yesterday’s wild ride, US stock futures are pointing mostly down. S&P 500 futures fell 2.9 points to 1,249.10. Dow industrial futures fell 12 points. Only Nasdaq 100 futures are up. They rose 1.5 points to 1,783.25.

– It seems pretty clear from where we’re sitting that the government’s welfare for Wall Street shenanigans this year have convinced the market that it doesn’t need to worry too much about the demise of another big bank.

– Lehman Brothers is doomed opines Bloomberg’s Michael Lewis this morning. Ironically, Lewis says Lehman’s (NYSE:LEH) fate is sealed because, following the government’s bailout of rival Bear Stearns, those who do business with Lehman don’t care too much if it stands or falls. The belief is the government will step in to pick up the pieces should Lehman fall apart.

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.

Charles Delvalle says the buck has now broken above its eight-year resistance line. The rally could now continue for the next 6 to 12 months. Investors who want to play lasting dollar strength can buy into the Rydex Strengthening Dollar 2x Strategy H fund (MUTF:RYSBX).

Republicans like to call themselves the party of fiscal discipline. But Charles Delvalle says it’s actually Democrats who are more likely to reduce the federal budget. If Obama makes it to the White House, you may want to bet on a stronger dollar with the Rydex Strengthening Dollar ETF (RYSBX).

Have you ever had your beliefs questioned… only to find out you were wrong? If you have, then you know just how hard it can be to change your belief around to what is actually true. I bring this up because today I’m asking you to take another look at a closely held belief.

Addison Wiggan and Ian Mathias in Agora Financial’s 5. Min Forecast have already warned readers about the risk of taking yesterday’s 3.3% rise in U.S GDP figures at face value. Here, Charles Delvalle at Investor’s Daily Edge says the government’s economic stimulus checks and a weak dollar made U.S. growth seem more impressive than it really is. Don’t expect 3Q data to be quite so favorable…

Big banks don’t trust each other in the post-Bear Stearns market, and lending across the financial system is drying up.

This tighter credit environment is hitting money supply. Last month, money supply actually shrank - it grew at under the rate of inflation.

Charles Delvalle at Investor’s Daily Edge says this means investors should now expect deflation to hit asset prices.

This echoes Bill Bonner’s recent warnings about the risks of a coming deflationary slump in the U.S…

Charles Delvalle at Investor’s Daily Edge says forecasts for a cold winter should drive up natural gas prices. This makes natural gas producer and explorer Chesapeake Energy (NYSE:CHK) a top investment play this fall…