Markets signalled early in the week that there were 'problems' with the fundamentals - not just in the US, but also here in China.

We saw markets drop over 2% and then China slump as concerns over valuations and the massive stockmarket growth this year reared their heads.  There have been quotes of China entering a 'Bear Market'.

So I sat here Wednesday thinking that yes, the rot was starting and it was (was being the operative word here) just a matter of time before we see the global correction shaping up.

But I had overlooked one thing; silly me. 

Batman and Robin (aka. Ben Bernanke and Jean-Claude Trichet) could see the writing on the wall, things were about to go pear-shaped and no doubt the Fed' and ECB's respective Batphones were glowing hot.

Federal Reserve Chairman Ben Bernanke and European Central Bank President Jean-Claude Trichet said the world economy is pulling out of its deepest slump since the 1930s while cautioning that threats to a recovery remain.

"Prospects for a return to growth in the near term appear good," while "critical challenges remain," including possible further losses for financial firms, Bernanke said Friday. Trichet said the presence of "green shoots" isn't enough for him to declare the recovery sustainable and that policy makers "have an enormous amount of work to do."

The mixed outlook was one of the main themes struck on the first of two days of the annual central bankers' symposium in Jackson Hole, Wyoming, hosted by the Kansas City Fed bank. Monetary policy makers from South Africa to Mexico and economists dissected the causes of the financial crisis and debated how to prevent or mitigate the next one.

As the policy makers and academics gathered by the Teton mountains, economic reports showed unexpectedly strong signals of a rebound in the US, Germany and France. US purchases of previously owned homes climbed 7.2% in July to the highest level in almost two years, signaling the housing crisis that crippled the world's largest economy is easing.

US stocks gained for a fourth day, with the Standard and Poor's 500 Index rising 1.9% at 5:01 p.m. in New York. Benchmark 10-year notes yielded 3.57%, up 13 basis points from Thursday.

Following last week's data showing the Euro-area's two largest economies pulled out of a recession in the second quarter, Markit Economics reported Friday that German services expanded this month for the first time since September. Its gauge for French manufacturing rose to its highest in 15 months.
 
After giving welcoming remarks at a dinner the previous evening, Bernanke opened the formal part of the conference Friday with a speech defending the Fed's responses to the crisis over the past year and those of counterparts around the world. A "strong and unprecedented international policy response" averted "the imminent collapse of the global financial system," Bernanke said.

Even with the economy on the mend, Bernanke said "strains persist in many financial markets across the globe, financial institutions face additional significant losses and many businesses and households continue to experience considerable difficulty gaining access to credit." Recovery "is likely to be relatively slow at first, with unemployment declining only gradually from high levels."

Bernanke's note of caution underscored the Fed's decision last week to leave interest rates near zero for an "extended period" and to delay by a month the scheduled end to its $300 billion program to buy US Treasuries.

At lunch, Bank of Israel Governor Stanley Fischer told attendees that "despite the encouraging signs of recovery, it is too early to declare the economic crisis over." The former vice chairman of Citigroup Inc. also said the global banking system may require "radical restructuring" to avoid future financial crises.

But he's the Bank of Israel Governor, the 'Joker' to Bernanke's Batman and his remarks were waved away as if he'd gatecrashed a party just for Superheroes.

Later in the day, Trichet spoke from the audience during a debate period, saying, "I am a little bit uneasy when I see that because we have some green shoots here and there, we are already saying, 'Well, after all, we are close to back to normal.'"

"We know that we have an enormous amount of work to do and we should be as active as possible," Trichet said without elaborating on a forecast.

Bundesbank President Axel Weber, speaking on CNBC, said at the gathering that it's "too early to say it won't be a bumpy road ahead."

Separately, the Organization for Economic Cooperation and Development will next month upgrade its outlook for the economy of its 30 nations, which include the US and Japan, Secretary General Angel Gurria said. The Paris-based group said in June that the combined economy of the world's most-industrialized countries will shrink 4.1% this year and grow 0.7% in 2010.

"We're confirming a positive trend but are still cautious," Gurria said in an interview in Jackson Hole. "There are risks that are important."

So all told, Batman and Robin sat on the fence to all intents and purposes - but importantly both had one foot in the 'we're out of the woods' side and like any good politician, they added a caveat of 'but it will not be without problems ahead'.

Now here's my view on this nonsense; we are not 'out of the woods' by a long stretch, but where we are economically is most definitely in a stronger position than we have been since October 2007 - without a doubt and so I share their views that global economies are starting to find a better footing.

But those fundamentals - whichever way you look at them - simply do NOT support a global stockmarket rally the likes of which we have seen over the past 5 months; they categorically do not and there simply HAS TO BE a major correction in the near future - markets cannot continue in the manner they have for much longer and as I keep saying, the longer the delay before this correction takes place, the harder the fall is going to be.

Just look at the banking sector alone in the US: CapitalSouth Bank of Alabama and First Coweta Bank of Georgia were closed this week by state regulators, pushing the number of bank failures to 80 this year amid the worst economic crisis since the Great Depression.

CapitalSouth of Birmingham, which had $617 million of assets, was closed by the Alabama State Banking Department, and First Coweta of Newnan, with $167 million of assets, was shut by the Georgia Department of Banking and Finance, the Federal Deposit Insurance Corp. said Friday in news releases. The FDIC was named the receiver.

United Bank of Zebulon, Georgia, will take over four branches of First Coweta tomorrow, and share losses with the FDIC. Iberiabank in Lafayette, Louisiana, will take over 10 branches of CapitalSouth and share losses with the FDIC, the agency said.

Federal regulators also closed ebank of Atlanta after the US thrift regulator said the lender was "critically undercapitalized," and transferred assets and deposits to Stearns Bank of St. Cloud, Minnesota, the FDIC said.

There is even talk of over 300 banks in the US being closed before the dust has settled; that is absolutely terrifying in terms of how deeply this shows the US Financial problems were/are rooted.

We look at unemployment and there is no way US unemployment can avoid climbing above 10%, it is inevitable and just a matter of time.

Okay, so a few more people bought a few more homes than were expected to do so - big deal (not) as these homes were existing home sales (as opposed to new starter homes) and did no-one consider that these homes might be sold because the owners needed the cash as they'd lost their jobs?

I am beginning to feel like I am the only person around that sees negativity in the fundamentals; it would not surprise me if some of you are a little 'bored' by my almost weekly rants about 'everything in the markets not being correct' - but Ladies and Gentlemen, I can only call it as I see it and I'm not going to change my tune anytime soon - a correction is due - fact!

On to the numbers on the boards this week: