The stock market is closed today. I want to wish everyone a happy, healthy and profitable New Year!

The latest report on manufacturing came in below expectations. This is more evidence that business spending has hit a wall. Businesses usually borrow at the LIBOR rate, which is still high since banks don't trust each other. So despite the Fed's easing, businesses' cost of capital remains very high.

This past weekend, my wife and I went to look at a new home. There are so many homes for sale that sellers are desperately looking for bids, even if they're just 60% of the asking price.

Another problem that I noticed is that the California homes in Tahoe have outrages property taxes that are just as bad as Florida. Nevada passed a 4% transfer tax on all property sales/transfers and that's killing the market.

Florida is now over $1 billion in the red and California is potentially $18 billion in the red, so the housing slowdown is definitely hurting state revenues. Unemployment is rising so the Fed needs to come to the rescue fast!

Monsanto (MON), one of my favorite Blue Chip Growth stocks, just reported amazing earnings. Investor's Business Daily reports:

Agricultural giant Monsanto (NYSE:MON) kicked off the year with a running start on Thursday, blowing out first-quarter views amid hefty demand from Latin America.

The seeds and herbicides dynamo earned 46 cents a share, up 188% vs. a year earlier and 11 cents ahead of Wall Street forecasts.

Sales grew 36% to $2.1 billion, the fastest growth in at least four years. Monsanto also upped its fiscal 2008 earnings guidance.

"This has been a very strong start to our fiscal year," said Carl Casale, Monsanto's executive vice president, strategy and operations.

Monsanto's shares shot up 8.5% to a new high of 120.92. Farm machinery and fertilizer makers also surged, extending their big runs.

Monsanto's key drivers were growth in its Roundup agricultural herbicides and corn seed sales in Brazil and Argentina, he said.

Monsanto produces corn and other seeds, and develops biotech traits integrated into the seed itself. These traits offer farmers ways to protect the inherent yield potential of each seed.

We now have a 319% gain in MON in three years. The stock is a strong buy up to $112.

You may have seen that the price of oil finally broke $100 a barrel. The inventory data from yesterday showed a larger-than-expected drop in crude oil inventories. This was the seventh straight weekly drop and we're now at three-year low. That clearly rattled the market.

Also, the freeze that's hitting the East Coast is causing fears of a surge in demand for heating oil. Right now, I'm out West in Jackson Hole where it's -1 (but it's dry and there's no wind).

The real risk is what happens when the summer driving season begins and gasoline demand jumps. How high can oil go? In the worst case, I think light, sweet crude could hit $115 this summer. In North America, we run predominately on heavy, sour crude that typically trades $20 per barrel less than the light stuff.

Right now there' a lot of speculation going on, and I don't see it stopping anytime soon. In the meantime, our oil service stocks continue to look great. In fact, in my January issue of Emerging Growth, which is being released to subscribers later today, one of my new recommendations is an oil services stock that shot up 17% in one day after its last earnings report.

Find out how you can subscribe to Emerging Growth right here.

On Friday, the floor fell out from underneath the U.S. stock market in the wake of the December payroll report. Specifically, the Labor Department reported that seasonally adjusted non-farm payrolls rose by only 18,000 in December, far below economists' estimates of 58,000 to 70,000 jobs. Since the U.S. economy needs to create 100,000 to 150,000 new jobs per month just to keep up with population growth, the unemployment rate rose from 4.7% to 5%. Since 1949, any time the unemployment rate has jumped 0.3% or more in a month, a recession has followed.

Even more disturbing, private-sector payrolls fell 13,000 in December, the first monthly decline in more than four years! This is a result of U.S. business spending virtually evaporating. Even though many U.S. interest rates have fallen, the all-important London Inter-Bank Overnight Rate (LIBOR) remains stubbornly high. Most business loans are tied to this stubbornly high LIBOR, which is one reason business spending has fallen. In particular, goods-producing industries lost 75,000 payroll jobs in December, led by 49,000 jobs lost in construction and 31,000 less in manufacturing. Of 278 industries surveyed, only 48.4% were hiring in December, the first month since September 2003 in which fewer than half of all industries were adding new jobs.

The bright news in the December payroll report is that service-producing industries added 93,000 new jobs, of which 43,000 were professional and business services. Education and health-care remained strong, adding 44,000 new jobs. However, service sector layoffs in the finance industry will likely return soon, so service sector jobs are expected to start falling in the upcoming months.

Due to Friday's devastating payroll report and the sudden contraction in business spending, the Fed is really left with very few alternatives other than to cut key interest rates sooner rather than later. Currently, the Federal Funds rate is at 4.25%, while market rates, based on the 3-month Treasury bill, are currently only around 3.15%. Since the Fed cannot fight market rates for very long, the Fed must get its act together and get in line with market rates as soon as possible.

The New Year has begun with what I feared most for U.S. stocks--a huge new wave of analyst downgrades, especially in financial stocks, due to the ongoing credit crisis. The latest shoe to drop is from State Street Corporation, which manages $2 trillion for pension funds and other institutional investors. State Street announced on Thursday that it is setting aside $618 million to cover legal claims stemming from its investments in subprime securities, especially Collateralized Debt Obligations (CDOs) and Structured Investment Vehicles (SIVs). So, unlike Legg Mason and SEI, which have stepped up to the plate and bought back controversial money market investment, like SIVs, State Street basically is refusing to settle and is saying, "Sue me."

In addition, Lehman Brothers, which paid Jeb Bush as a consultant (and effectively ruined his future political career), sold the State of Florida the controversial SIVs that are anticipated to lose between $900 million to $2.3 billion is also refusing to settle. Last month, a town in Australia that lost 84% in CDOs is suing Lehman Brothers. In other words, lawsuits for losing money in money market investments (like CDOs and SIVs) are just starting and will likely persist for years.

The next big wave of Wall Street layoffs will likely come from Citigroup, which was responsible for originating about half of all SIVs extant. These SIVs are a kinky form of commercial paper that bets on up to one-year yield-curve spreads that have incurred excessive risks by betting on yield differentials tied to short-term mortgages. Although the new chairman of Citigroup did the right thing by putting these "off balance sheet SIVs" back on its books at a whopping $49 billion cost, this depleted the bank's capital, so layoffs are inevitable. In the end, I expect Citigroup will be broken into pieces and eventually be a shell of its former self.

Since institutional investors don't intend to lose the principal on their "safe" money market investments, there will likely be wave after wave of litigation against Lehman Brothers, State Street and other Wall Street firms that refuse to settle or buy back their controversial securities.

Central banks have already attacked the problems associated with subprime mortgages, CDOs and SIVs by adding one trillion dollars of liquidity, but the problem has simply gone from bad to worse. Last week, the Fed increased the size of its special liquidity auctions to help the banking industry, but it is uncertain whether these auctions will resolve interbank lending problems, since most banks do not seem to trust each other. Specifically, Fed President Jeffery Lacker (from the Richmond Federal Reserve Bank) stated in a speech to the Charlotte Chamber of Commerce last month, "It's not clear that this facility will address fundamental issues in inter-bank markets such as constraints on balance sheets, the need to raise capital and, importantly, concerns about counterparty risks." Translated from Fedspeak, the Fed is essentially up a creek without a paddle.

Not only is the credit crisis negatively impacting business spending and manufacturing, but consumer spending on big-ticket items is also in trouble. New home sales are running at the slowest pace in 12 years, with over nine months of unsold inventory. Vehicle sales are also dismal. On Thursday, Autodata, which tracks vehicle sales, announced that only 16.1 million new vehicles were sold in 2007, the lowest total since 1998, when 15.8 million vehicles were sold. In December, Ford and GM posted 8.9% and 4.4% sales declines, respectively. Clearly high crude oil prices are curtailing the sales of SUVs and other vehicles that get low gas mileage.

Overall, with business spending contracting and consumer spending on big-ticket items at 9- to 12-year lows, the U.S. economy is clearly on the verge of a recession. In fact, many states, such as California and Florida, are already characterized by rising unemployment and are already in a recession. As a result, the Fed must act fast. I firmly believe that the Fed cannot wait until its next meeting to cut interest rates. But this is good news for us. A sinking dollar works in our favor. Due to weak U.S. economic growth, the U.S. dollar has already given back much of its gains since October. Additionally, emerging economies, such as Brazil, China, Israel and Russia, continue to post steady currency gains relative to the U.S. dollar.

People have been asking me, "What do the results in New Hampshire mean for the stock market?" My answer: not much. For now, it's just entertainment.

Instead, the stock market is very focused on earnings. Many financial stocks are still a mess. MBIA (MBI), for example, just cut its dividend by 62%. Among the homebuilders, KB Home (KBH) had horrible earnings yesterday. Revenues plunged 31%. Not surprisingly, both stocks were rated "F - Strong Sell" in PortfolioGrader Pro.

Many of my favorite stocks continue to look strong. This morning, Mosaic (MOS), reported that earnings grew nearly six-fold and shattered Wall Street's expectations.

MarketWatch reports:

Mosaic Co.'s (MOS) said Wednesday that its fiscal second-quarter net income rose sharply to $394 million, or 89 cents a share, from $65.9 million, or 15 cents a share, a year earlier. Results for the latest quarter included a foreign currency transaction loss of 9 cents a share and a tax benefit of 8 cents a share. Sales at the the Plymouth, Minn., fertilizer company grew 44% to $2.2 billion in the period ended Nov. 30. Analysts polled by Thomson Financial expected earnings of 73 cents a share and revenue of $2.17 billion. Mosaic shares closed Tuesday at $88.37.

Another massive write-down, this time from Merrill Lynch (MER). The New York Times reports:

Merrill, the nation's largest brokerage firm, is expected to disclose the huge write-down when it reports earnings next week, according to people who have been briefed on its plans. The loss far exceeds the $12 billion hit many Wall Street analysts had forecast.

To shore up its deteriorating finances, Merrill is now in discussions with investors in the United States, Asia and the Middle East, including American private equity firms, to raise about $4 billion in the coming days, these people said.

The developments underscore the rising toll that the mortgage crisis is taking on many once-proud Wall Street banks. In recent months Merrill and several other firms have grabbed financial lifelines from wealthy foreign governments. Further investments by so-called sovereign wealth funds could prompt scrutiny by Congress.

Merrill is currently rated as "F - Strong Sell" in PortfolioGrader Pro.

This week, Wall Street will be carefully watching the quarterly earnings announcements (and loan loss provisions) from Citigroup, J.P. Morgan Chase and other major banks. Some big banks, like Wells Fargo, have almost no exposure to Collateralized Debt Obligations (CDOs) and Structured Investment Vehicles (SIVs), while American Express warned late last Thursday that it is experiencing rising delinquencies and slower spending from its card members.

The banking industry is in a tailspin. Banks are desperately seeking fresh capital to stay afloat. On Friday, Swiss banking giant UBS said that 2008 was "likely to be another difficult year." As a result, UBS is seeking permission to receive 13 billion Swiss francs ($11.8 billion) from the Singapore (government) Investment Corporation and an unidentified Saudi Arabian investor.

Currently, there seems to a race to see which financial institution will have the biggest cumulative writedowns. Until Friday, Citibank and UBS were leading the way, but a report on Friday from The New York Times (see below) said that a massive writedown of up to $15 billion will be forthcoming from Merrill Lynch. Clearly, UBS, Citibank and Merrill Lynch are desperately seeking new capital infusions. Citigroup is reported to be seeking up to $14 billion from the Kuwait Investment Authority and China's recently formed sovereign wealth fund, despite the fact that it received a $7.5 billion capita injection from the Abu Dhabi Investment Authority two months ago. Merrill Lynch is also seeking a second capital injection from a Middle Eastern sovereign fund. It looks like these sovereign wealth funds are poised to virtually take over the U.S. financial industry.

In the interim, the official lenders of last resort - namely the Federal Reserve and other central banks - have injected approximately $1 trillion into the system and are still struggling to restore confidence in the banking system. Although there was some improvement in London Inter-Bank Overnight Rates (LIBOR) last week, we still have a long way to go before lower LIBOR rates can help stimulate business spending and lower all the adjustable mortgages tied to the LIBOR index.

Let me give it to you straight: The economy is slipping into a recession. The credit crisis has gone from bad to disastrous and is now impacting business and consumer spending.

For the first time in four years, the private sector isn't creating new jobs. Consumer spending is also showing signs of strain as American Express (AXP) reported slower spending and higher delinquencies. Big-ticket items have fallen for three of the last four months.

Now before you sell everything, let me tell you what I see unfolding. Now that big states like California, Florida and Michigan are already in a recession, both political parties are taking about stimulus programs. However, by the time any stimulus legislation arrives, it will probably be too little, too late.

The Wall Street Journal recently had an excellent article that implied that the prices in many major housing markets wouldn't bottom out until the second or third quarter of 2009. And housing problems go hand-in-hand with other problems: For instance, the bigger a state's housing problem, the more likely it is to have budget problems. Layoffs from local governments could also subtract from GDP growth. In December, the unemployment jumped from 4.7% to 5%. Since 1949, anytime the unemployment rate jumped 0.3% in a month, a recession has ensued.

So the course of the economy falls into the lap of the Federal Reserve. The good news is that Ben Bernanke has finally acknowledged the crisis. The bad news is that the Fed didn't do anything about it except to continue with its special auctions that have helped to lower the LIBOR rate a bit.

An artificially high LIBOR rate has been hindering business spending and the resets of many adjustable-rate mortgages. Until recently, the LIBOR rate refused to budge even though the Fed had already cut rates a full 1%. The higher LIBOR rate implies that banks simply don't trust each other.

So what can the Fed do now?

Well, if I were on the Fed, I would have already cut rates at an emergency meeting in January. But since the Fed has decided to wait until their meeting on January 29 and 30, they now must cut rates 0.5% at their meeting and promise more cuts in the future. The reason why the Fed can't cut by more than 0.5% is that if the Fed panics, then the whole world will panic. The dollar is very soft as it is. If the Fed is more aggressive than Wall Street anticipates, the dollar could go into a tailspin, which would result in severe inflation on imported items.

If the Fed only cuts by 0.25%, then Wall Street will likely sell off. That will signal that the Fed is still well behind market rates and any recession will could deep and long. Traditionally, the Fed has kept the pump primed heading into an election, so I hope that history will repeat itself in 2008.

The good news for us is that earnings season has arrived. The market is very focused right now on stocks with superior earnings growth like the stocks I recommend in Blue Chip Growth and Emerging Growth. Typically, the vast majority of my favorite stocks handily beat Wall Street's earnings estimates, and often gap higher as traders rush to buy more shares.

Yesterday, the Dow Jones closed at 12,501, its lowest closing level in nine months. The Dow is already down 5.8% for the year.

Now let me turn it over to you--where do you think the Dow will be at the end of 2008?

Update: I voted for "13,501 to 14,000." So far, the median response has been in the "13,001 to 13,500" group, which implies a return of 4% to 8% for the rest of year.

From MarketWatch:

NEW YORK (MarketWatch) -- Another top-performing bull may be getting cold hoofs, although he's still charging.

Louis Navellier's Blue Chip Growth Letter is seventh-best-performing letter over the past 12 months according to the Hulbert Financial Digest, up 29.88% vs. 5.62% for the dividend-reinvested Dow Jones Wilshire 5000. But its success goes much further back than that. Over the past 10 years, Blue Chip is up 14.11% annualized vs. 6.31% annualized for the total-return DJ Wilshire.

That is a remarkable record. However, as I've occasionally noted, Navellier (or his publishers) feel the need to make it even more remarkable, with ruthless promotional mail shots and eye-catching impossible claims. See July 14, 2006 column

Ignoring my harrumphing, Navellier is still at it. In a recent emailing, he writes: "Our goal is to hand our readers 35% to 50% gains every 12 months. It's a vow I've kept for more than two decades."

Bunk. (See above).

Whoa, Peter! I love your writing and I'm always grateful for the coverage, but remember--there's a difference between a claim and a goal. My goal is to completely annihilate the market, but I can only claim to have given it a severe beat down. See, it's all in the wording.

As for my promotions being "eye-catching" and "ruthless"...well, I darn well hope so!

But what really caught my eye was Navellier's opening: "Make no mistake about it there's a ton of risk in this market and a lot of investors are about to get burned. Unless you squeeze the risk out of your holdings, you're going to find 2008 a better year to lose a fortune than to make one. After all, with house prices tumbling, bank losses rising, and oil prices hitting the $100-a-barrel mark, only the strongest stocks will survive the shakeout."

This is news, because Navellier has been a staunch supporter of this bull market throughout earlier stumbles.

Trust me, a lot of folks are going to get burned this year. But we have to differentiate between my favorite stocks in Blue Chip and Emerging Growth and the rest of the market.

Fortunately, we've steered clear of these financial stocks that have had huge write-downs recently. The stock market is going to get very narrow this year. In fact, it's already happening. That's why only a few dozen stocks of the thousands that are publicly traded ever make it on to one of my Buy Lists.

As Peter said, I beat the market by more than fivefold last year (29.88% to 5.62%). I did it because I didn't make dumb bets or let my emotions take hold of me.

Ruthless? You better believe it.

I'm currently working on the February issue of Blue Chip Growth which will be posted for all subscribers on Tuesday. I'm going to have four new buys plus two sells.

In the issue, I explain that the U.S. economy is sliding into a recession. We're not there yet, but things are heading that way. The ultimate fate of the economy falls in the lap of the Federal Reserve.

The credit crisis has put the economy into some really hot water. Big states like California, Florida and Michigan already appear to be in a recession. In December, unemployment rose from 4.7% to 5%. Since 1949, anytime the unemployment rate has risen 0.3% in a month, a recession has ensued.

Today there was more bad economic news:

A closely watched index of future economic activity dropped for a third straight month in December, implying growth will remain sluggish and faces rising risks of weakening, the Conference Board said on Friday.

The business research group said its Index of Leading Economic Indicators fell 0.2 percent in December after drops of 0.4 percent in November and 0.7 percent in October.

Wall Street economists surveyed by Reuters had expected a slightly smaller 0.1 percent decline in December.

In the issue, I explain why we our Buy List should continue to do well regardless of the broader market.

The U.S. stock market is closed today in honor of Dr. Martin Luther King's birthday. Markets are open in other countries and it's not a good day:

Stocks from Germany, Hong Kong and India to Brazil tumbled, and U.S. futures posted their steepest drop since 2001 on mounting speculation the world economy is slowing and company defaults will rise.

The MSCI World Index slumped the most since 2002, while Europe's Dow Jones Stoxx 600 Index sank into a bear market as Allianz SE and BNP Paribas SA slid. Hong Kong's Hang Seng Index had its biggest drop in six years after BNP Paribas said Bank of China Ltd. may write down overseas securities by $4.8 billion because of losses from U.S. subprime mortgages. Citigroup Inc. retreated in Frankfurt.

The MSCI World slipped 3 percent to 1,394.23 at 4:47 p.m. in London, extending its decline from an Oct. 31 record to 17 percent. India's Sensitive Index lost the most since 2004, while Germany's DAX had its biggest loss since 2001. Futures on the Standard & Poor's 500 Index sank 4.5 percent. Trading in the U.S. is closed today for Martin Luther King Day.

"It's the worst I've ever seen," said Johan Stein, who helps manage the equivalent of about $14 billion at Nordea Asset Management in Stockholm. "The financial system is in terrible shape, and no one knows where this will end."

Apple's earnings tomorrow will be a big deal. Stocks that can deliver strong earnings in this environment will buck the overall trend.

Bernanke to the rescue! Here's the Fed's statement:

The Federal Open Market Committee has decided to lower its target for the federal funds rate 75 basis points to 3-1/2 percent.

The Committee took this action in view of a weakening of the economic outlook and increasing downside risks to growth. While strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households. Moreover, incoming information indicates a deepening of the housing contraction as well as some softening in labor markets.

The Committee expects inflation to moderate in coming quarters, but it will be necessary to continue to monitor inflation developments carefully.

Appreciable downside risks to growth remain. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act in a timely manner as needed to address those risks.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Charles L. Evans; Thomas M. Hoenig; Donald L. Kohn; Randall S. Kroszner; Eric S. Rosengren; and Kevin M. Warsh. Voting against was William Poole, who did not believe that current conditions justified policy action before the regularly scheduled meeting next week. Absent and not voting was Frederic S. Mishkin.

In a related action, the Board of Governors approved a 75-basis-point decrease in the discount rate to 4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Chicago and Minneapolis.

Apple (AAPL) had a great quarter, but its guidance wasn't what Wall Street was looking for:

Apple blew past Wall Street's bullish expectations in the first quarter with a 57 percent jump in profit, but a dramatically lower forecast sent shares falling amid fears about slowing consumer spending on electronics.

The Cupertino, Calif.-based company's report, released after the market closed Tuesday, reinforced investors' worries that even a hot company like Apple isn't immune from fears of a recession.

The company forecast profit in the second fiscal quarter of 94 cents per share, far short of the $1.09 per share that analysts were expecting. Revenue is also expected to be lower, coming in around $6.8 billion, compared with the $6.99 billion forecast by analysts.

Apple always issue cautious guidance and then posts huge surprises. Their Mac sales are simply unbelievable. iPods sales are slowing a bit, but are still firm. This stock is mostly about Mac sales and Apple will continue to capture more market share in the computer world. By the way, the new Leopard operating system is also hot.

Nokia (NOK) just reported amazing fourth-quarter results. Earnings soared to 0.47 euro a share which was 0.03 higher than forecasts. The company now has a 40% share of the market. Sales grew 34% which was the fastest pace since 2000.

Operating margin generated in the mobile-device business widened noticeably, to 25% from 17.8% a year earlier--evidence that Nokia has found a sweet spot between volume growth and profitability.

Over the past three quarters, Nokia has shown it can sell more handsets, raise profit and gain market share even as it continues its expansion into emerging markets, where consumers can pay as little as $20 for a phone.

The stock is up strongly today.

Futures traders expect that the Fed will cut rates by 0.5% next week. I hope they're right:

Odds that the policy-setting Federal Open Market Committee will lower its overnight lending rate to 3% from the current 3.5% dropped to as low as 58% Thursday before closing at 76%.

On Wednesday, traders had priced in a 100% chance of a 50-basis-point cut and a smaller chance of an even larger, 75-basis-point cut. They have fully priced in at least a 25-basis-point cut to 3.25%, according to futures contracts traded at the Chicago Board of Trade.

Frankly, I've been so happy with all the snow in Lake Tahoe, near my Reno office, that I just plain forgot to go to Davos, Switzerland, where the famous Economic Forum kicked off last Wednesday. Apparently, the gathering began on a sour note after a pair of prominent economists warned that the global economy cannot cope with a deep U.S. recession. Specifically, Nouriel Roubini, the chairman of consulting firm Roubini Global Economics, said that "the rest of the world can't decouple from the recession" in the United States. Roubini added that a potentially "severe" U.S. recession is inevitable, predicting a contraction that's likely to last at least three quarters. Roubini concluded that the U.S. consumer--the driver of global growth--is tapped out.

Roubini's words were followed closely at Davos, since he was the only member of last year's World Economic Forum panel to predict a significant U.S. downturn as a result of what he called the "three bears," namely a credit crunch, a bursting housing bubble and soaring energy prices. As if to second Roubini's outlook, Morgan Stanley's Stephen Roach said that with U.S. consumer spending amounting to some $9 trillion, a tighter grip on pocketbooks is going to have big consequences for the U.S. and world economies alike. Roach said, "I think it's going to be a fairly painful and relatively lengthy recessionary period." Interestingly, Roubini said the European Central Bank is likely to end up following the Fed and other central banks in cutting interest rates.

These opening comments by Roubini and Roach led others to pile on the U.S. economy. For example, George Soros stated that the U.S. economic downturn would put an end to the U.S. dollar being the world's default currency. He stated, "the current crisis is not only the bust that follows the housing boom," but Soros said, "it's basically the end of a 60-year period of continuing credit expansion based on the dollar as the reserve currency."

Continuing this dismal theme, Nobel Prize-winning economist Joseph Stiglitz said the Fed was losing control and "made bad judgments." He added that the Fed's 0.75% rate cuts were too little, too late, because monetary policy usually takes 6 to 18 months to be effective and the United States is clearly in the midst of distress. As a result, there was a lot of gossip about whether or not the Fed would cut another 0.5% at its meeting this week, to catch up with falling market rates.

The other gossip at Davos was the growing influence of Sovereign Wealth Funds, which continue to bail out many troubled financial institutions, especially in the United States. These Sovereign Wealth Funds control assets believed to be worth at least $2 trillion. Some of them have recently invested more than $30 billion in Wall Street banks, including Citigroup, Merrill Lynch and Morgan Stanley. But with additional problems at Societe General and other European banks, it may just be a matter of time before these Sovereign Wealth Funds come to the rescue of Europe, too.

By week's end, however, the party atmosphere at Davos appeared to cut short this dismal debate. As usually happens in such gatherings, the contrarian optimists may become next year's heroes.

The Federal Reserve is obviously worried about inflation, but the threat may not be that severe. In an effort to win Super Bowl business, Wal-Mart is cutting prices on certain items up to 30%:

A Wal-Mart spokeswoman did not have an exact figure on the number of items included in the price cuts but said the world's largest retailer was reducing prices on groceries, popular electronics and other items that shoppers might buy before the Super Bowl football championship game on Sunday.

Wal-Mart typically announces such widespread price cuts during the ultra-competitive holiday shopping season.

But with 2008 U.S. retail sales forecast to rise at the slowest pace in six years, retailers are turning to promotions to lure shoppers into their stores to spend their limited budgets.

Ahead of the Super Bowl weekend, Best Buy Co Inc's Web site is advertising no interest for three years on all Samsung flat panel TVs $999 and up, while in a similar move, Circuit City Stores Inc is offering no interest for 36 months on TVs $999 and higher.

Wal-Mart said it is charging no interest for 18 months on purchases of $250 or more with a Wal-Mart credit card.

This will hurt Wal-Mart's operating margins in the short-term, but it may help them in the long run.

The Fed cut rates again by 0.50%, bringing the Fed Funds rate (short-term interest rates) down to 3.0%! Here's the official statement:

The Federal Open Market Committee decided today to lower its target for the federal funds rate 50 basis points to 3 percent.

Financial markets remain under considerable stress, and credit has tightened further for some businesses and households. Moreover, recent information indicates a deepening of the housing contraction as well as some softening in labor markets.

The Committee expects inflation to moderate in coming quarters, but it will be necessary to continue to monitor inflation developments carefully.

Today's policy action, combined with those taken earlier, should help to promote moderate growth over time and to mitigate the risks to economic activity. However, downside risks to growth remain. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act in a timely manner as needed to address those risks.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh. Voting against was Richard W. Fisher, who preferred no change in the target for the federal funds rate at this meeting.

In a related action, the Board of Governors unanimously approved a 50-basis-point decrease in the discount rate to 3-1/2 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Atlanta, Chicago, St. Louis, Kansas City, and San Francisco.

Despite this unprecedented move from the Fed, there's still a risk that the market will retest its lows at the end of earnings season in early- to mid-February. So please stay tuned to my Blogs, my Issues and Weekly Updates--I'll have all the latest news and any actions I want you to take.