The broader S&P 500 bled more, ending the day down just over 3%. The tech-centric Nasdaq was worse off still, losing 3.35%.

And today, the bloodletting spilled over into Asian measures. Hong Kong’s Hang Seng (-2.9%), Japan’s Nikkei 225 (-2.8%), Australia’s S&P/ASX 200 ( -3.1%) and South Korea’s Kospi Composite ( -2.8%) were among the worst hit.

“Asian investors are connecting the dots – with the World Bank’s help – that the U.S. economy is nowhere near turning around,” Tony Sagami, editor of Asia Stock Alert, told the Wall Street Journal’s Asian Edition. “Any Asian companies that depend on Americans for a big chunk of their sales need to prepare for lots of red ink.”

But it’s not just Asian markets.

Russia “officially” entered a bear market after yesterday’s 0.6% selloff pushed the Micex index down 20% from its last peak. Indeed, the MSCI Emerging Markets Index ended the session down 10% from its 2009 high. What do you call that? Half a bear market?

“After the World Bank report yesterday we see more concern about the return of negative growth dynamics,” Commerzbank AG’s Michael Ganske, told Bloomberg. “Investors realize that all the discussions of a sharp, V-shaped recovery are not going to materialize.”

NOW they realize, eh? We wonder how long it will be before they’ll forget that the word depression doesn’t end with a “V”. It ends with a lower case “n” or, as Bill Bonner is fond of saying, “a corrective force equal and opposite to the deception and delusion that preceded it.”

And there’s still plenty more deception and delusion to come, folks. For starters, the FOMC meets tomorrow, no doubt armed with a sack full of optical illusions and prestidigitations for the investing public. History shows, however, that we humans prefer a blissful illusion to a decaying reality…even if the shoots are turning brown before our noses.

or a closer look at what’s going on around town, we decided to ask the Rude readership for some boots-on-ground analysis. As usual, you obliged with emails from Sweden to Singapore and Atlanta to Alabama. In today’s column, we present the second and final installment of our green shoots vs. premature celebration mailbag. Please enjoy…

From Anytown, U.S.A., a reader reports…

Regardless of what the official figures are on inflation, prices are going up. Here are a few examples.

· Grape juice, Walmart store brand, up 17%

· Corn chips, up 27% [price unchanged, but the bag went from 28 oz. to 22 oz.]

· Gasoline, up 84% since January.

· Commodity Futures data provider, up 50% [he apologized, but said the exchange fees are up sharply.]

· Homeowners insurance, down 5%. I guess the cost to replace a house isn’t what it used to be.

I could go on, but you get the point. Meanwhile, I am retired, with a pension that is supposed to include an annual COLA [cost of living adjustment], but because the government declared that there was no inflation last year, I will not receive a COLA come July 1.

My IRA/401(K) accounts are heavily overweighted toward oil, natural gas, gold, etc., in an effort to keep my purchasing power at least even with inflation, and I just hope that it works. Now if we can just sell our house [which we own free and clear] my wife and I are looking to move to Latin America.

A lot of our friends think we are crazy, that the government will never let things “get too bad” here. I think that they are crazy to have that much faith in the government, and I would rather live where people actively distrust their government, but I guess that it is differences of opinion that make a market.

From Texas, a reader reports…

In the Hill Country of Central Texas, life continues at what passes for normal in these parts. The Texas economy overall has been able to withstand the credit crisis quite well. Foreclosures are almost non-existent out here in the sticks since the mortgage loans were never any of the alphabet soup variety and the lending banks keep their own paper. Real estate seems to be selling but at the normally slow pace that is historic for our area. Real estate prices never got overheated here so the market has remained slow and stable. Even the local Chrysler dealership is still in business (must have made a large-enough contribution to the Democrats’ campaign). I own an industrial building and my tenant tells me his business has slowed somewhat but he is still doing a good volume. One note of economic concern is tourism. Friends own a Bed & Breakfast on the lake and they tell me their guest-count has dropped dramatically.

Out on the West Coast, we just bought a second home in San Clemente, CA. It’s a gorgeous ocean-view home that was foreclosed and then we bought it on a short-sale from the bank. I calculated we got a 60% discount overall. From what I see in Southern California, they’re in a world of hurt.

From Oakland, California, a reader reports…

Well, I’ve got some doom and gloom. My IRA is still down over 40% from its high. At the beginning of the year I could not find work for 4 months and finally swallowed my pride and went on unemployment. My house is under water. Bank of America says that I do qualify for a loan adjustment but they won’t do it “right now” because I’m not over 2 months late on my payments.

On the flip side I have started getting work lately and I’m still making money with the short report. Puts and gold seem to be where it is at right now.

From Florida, a reader reports…

I know it is politically au courant to blame all spending on Obama, but that ignores the truths that the Congress is doing a helluva good job in that field as well AND that Eisenhower started building the Interstate highways with money we didn’t have and that every congress and every administration since then has spent more than it has taken in. Our two ruling parties are equally fiscally irresponsible.

As for Kudrin’s “white lies” about US currency, I remember while being trained for intelligence work a lengthy discussion of information, misinformation, disinformation, propaganda and outright lies. And while there are differences in them, it seems these days everything we hear from governments and most media stinks of one or another kind of spin. I read Agora financial info every day to try to get unadulterated information without the spin. Keep up the good work. And keep entertaining us with the fashion reports on the emperor’s new clothes.

From north of the border, a reader reports…

I live in Peterborough, a city of about 75,000 which is 90 miles NE of Toronto.

Things here are slow, but not extremely so, even though we depend on the auto industry and tourism. We have a high retired population and people are very price conscious. Housing sales died during the winter but have come back a little since. Prices are off 10 to 15% on average and houses over 350k usually sit a long time and are then marked down. Some businesses are running ads suggesting people “just think positive”. Since everyone is still looking for the bottom, I’d say we still have a ways to go. I expect this winter to be really ugly.

And finally, an unpaid international correspondent reports from Singapore…

1) Unemployment; graduates are finding it difficult to find jobs, other than the “odd jobs” that don’t fit the qualification; most of which have vacancies because the cheaper foreign workers that were brought in during the boom phase were repatriated back to their countries…Its déjà vu for people who graduated in the 70s; they are repeating the mantra from then – “Graduation = Unemployment”.

2) Retail sales are down pretty big, but those shopping malls continue to pop up all over the place and many of them are continuing their work-in-progress. The government is supportive of these projects… again, uncertainty over the economic climate is putting a gloom over these things.

3) Property prices fell approximately 30%, but have since rebounded about 15% with the stock market rally. The same companies that are building those shopping malls continue with these condominium projects.

5) Consumer credit still seems pretty okay; those stupid banks continue to pull out all the stops to get people signed up for their credit cards.

6) Healthcare costs continue to rise regardless of economic conditions and there is quite a bit of public outrage at the moment; no worries, just let the government handle everything… we’re a nanny state. (That disgusts me btw and I’m pretty close to swearing never to work for the government… having said that, I might choose the porridge over my ideals).

Source: For Better or Worse, Part II

Crude oil for June delivery reached $129.331 per barrel on the New York Mercantile Exchange, eliciting dismissive comments from industry experts who say the United States attempts to bring prices down have already been checkmated. Indeed, after a series of repeated failures in that venue, it’s clear the final United States recourse is to break what President George Bush referred to in 2006 as an “oil addiction.”

And that will take years.

Last week, on the same day Bush made a visit to Saudi Arabia, the world’s leading exporter of oil announced it would pump an additional 300,000 barrels of oil a day next month. But investors and analysts alike shrugged off the increase as an insignificant, and token action.

“The 300,000 barrels a day hike in June didn’t help at all,” Eugen Weinberg, an analyst at Commerzbank AG (OTC: CRZBY), told Bloomberg News. “The market is still very robust.”

Since the announcement, Saudi Arabian officials, and many of their colleagues in the Organization of Petroleum Exporting Countries (OPEC), have played down the increase, making it clear that they don’t intend on taking any further action to boost supply. OPEC president Chakib Khelil said Monday the oil group would make no decision on output levels before a meeting in September.

“Current prices aren’t linked to the law of supply and demand,” said Algerian Energy Minister Chakib Khelil, OPEC president, according to government newspaper El Moudjahid.

Khelil forecasts approximately $80 billion in national oil revenues in Algeria for the year.

The U.S. government took another swing at undercutting the price of oil by halting the shipment of oil to the country’s emergency stockpile. President Bush signed off on the bill Monday – even though he had opposed it – in the hopes it would somehow soothe investor speculation, but oil prices have continued to advance.

“He remains against it,” deputy press secretary Scott Stanzel told Reuters, but “I think he saw the overwhelming numbers of members of Congress who want to attempt to have an impact on prices by stopping the fill of the Strategic Petroleum Reserve.”

“Congress keeps… going from Band-Aid to Band-Aid that they think will have an impact but really won’t.”

Congress had previously applied pressure on the president as he left for Saudi Arabia, by introducing legislation to stop a scheduled arms sale to Saudi Arabia unless the country opened its valves a little wider.

“When the President meets with King Abdullah Friday, we cannot settle for a smile, or a handshake, or even a glimpse into his soul,” Senator Charles Schumer of New York said. “We need a commitment to pump more oil. If Saudi Arabia and other OPEC countries do not substantially increase production, we in Congress will block their lucrative arms deals.”

Still, neither the Saudi increase or diversion of oil from the U.S. emergency stockpile have taken the sting out of record-high oil prices, which have driven the price of gasoline up for 13 straight days.

Gas prices roared above $3.75 a gallon yesterday, as the average national price of a gallon of regular gas rose 2.6 cents overnight to a record $3.758 a gallon, according to AAA and the Oil Price Information Service. Gas prices are 67 cents higher than a year ago, and are expected to continue rising through the Memorial Day weekend.

Unfortunately, the American consumer – already hampered by a credit crisis, a lack of home equity and soaring food prices – will find no reprieve at the pump, as oil prices seem destined to keep rising.

It was just last week that Goldman Sachs Group Inc. (GS) raised its price forecast for the second half of the year to $141 a barrel. Goldman Sachs analysts had previously quoted a price of $107 a barrel.

That assessment was corroborated yesterday by billionaire hedge fund manager T. Boone Pickens, who said the price of oil would reach $150 a barrel by year’s end. Pickens’ Mesa Power LLP recently unveiled the first phase of an eventual $10 billion alternative energy project that has the potential to become the world’s largest wind farm.

“You find an oilfield, it peaks and starts declining, and you’ve got to find another one to replace it,” Pickens said of the deal. “It can drive you crazy. With wind, there’s no decline curve.”

Though Pickens once operated one of the largest independent oil-and-gas production companies in the country, he believes it’s time for a new energy direction.

“We are going to have to do something different in America,” Pickens said. “You can’t keep paying out $600 billion a year for oil.”

Money Morning Investment Director Keith Fitz-Gerald – a longtime energy bull – thinks prices will ultimately spike as high as $225 a barrel.

That projection represents a revision from a market call he made in December, when crude prices were in the $90-a-barrel range. At that time, Fitz-Gerald caused a stir when he predicted that oil prices were headed for $187 a barrel. He reiterated that prediction back in early March – just before the investment-banking crowd started making their hefty forecasts for oil and gasoline.

With no end in sight for soaring oil prices, the United States finally began working towards a greater level of energy independence with the Energy Independence and Security Act, which mandates that alternative fuels be mixed into the nation’s gasoline supply and requires cars to have a fuel economy standard of 35 miles per gallon by 2020. 

The act became a law in December 2007 and the effects can already be seen. In the first three months of 2008, foreign oil imports accounted for 57.9% of the United States’ oil supply versus 58.2% a year ago. The drop may have been slight but it was the first decline since 1977, the Financial Times reported.

Foreign oil dependency is expected to fall from 60% to 50% by 2015, before rising back to 54% in 2030 according to the Department of Energy.

“The 1970s is the last time we saw any significant decline in net import dependency in the U.S.,” Guy Caruso, head of the U.S. Energy Information Administration, told the FT. “It shows that markets do work, policy changes do work, technology does work.”

Reducing the amount of oil it imports from overseas seems right now to be the only viable solution to the country’s energy conundrum, as oil prices show no signs of abating in the near future.

Source: With Oil Nearing $130, Kicking the ‘Oil Addiction’ Looks Like the Sole U.S. Hope