Watching the US market rise 7% on Monday, drop 1% Tuesday and then soar again yesterday 1.5% has prompted me to bring my usual Saturday Newsletter forward a little. This gives me a double-edged opportunity; firstly to give my views on where the markets are currently sitting and secondly, to make sure that I do release a Newsletter this week, as Saturday I will be traveling.

As is my usual want, I have to be totally direct here and state with certain conviction, that what we are seeing in the US is a completely false picture; a picture built on 'rhetoric' and rumour, conjecture and media-hype; please allow me to expand on this.

Let me start with these so-called 'better than expected' figures - from housing starts to durable goods orders - that as I expected they would, are all coming out 'better than expected'. Ladies and Gentlemen, two points to note here; 'better than expected' is easy to manage if you set your expectations so low that any number at all will be 'better', and secondly, that each and every month, figures are consistently being revised to the negative - so what is announced as good today, will be revised to negative next month. This pattern is plainly clear to see.

The figures themselves are without basis - new home application in some hickey town in the Midwest may be up 5%, but that is not the whole of the country - yet somehow, markets in the US take confidence from some small proportion of the US seemingly doing well in the housing sector.

Financial stocks in the US up almost 60% in March - now if you can find anything - anything at all - fundamentally positive about the US Financial sector (or European financial sector for that matter) then please, do let me know because from where I am sitting, there is resolutely nothing at all 'positive' about the financial sector.

Bank of America and Wells Fargo, the biggest US home lenders, were downgraded by Moody's Investors Service on concern that they'll need another round of government aid.

Bank of America, which reported its first loss in 17 years in the three months ended Dec. 31, has accepted capital and guarantees from the Treasury valued at $163 billion, including aid to its units. Wells Fargo, which had its first loss since 2001 in the fourth quarter, received a $25 billion investment from the US Treasury in October and sold $12.6 billion in stock to the public the following month.

And not just the US stockmarket overall, but the financial sector in particular, goes up!

This is where 'smoke and mirrors' (that well worn phrase of mine) comes into its own; if you have almost complete control of National Media, you can 'spin' CNN, CNBC, Bloomberg and any number of websites to broadcast any amount of positvity that you choose. You only have to watch CNBC to see the most bullish of bulls being dragged into the studio to say how wonderful an opportunity exists, markets have bottomed and you must part with all of your hard-earned cash now or miss the boat.

We've seen it all before and no doubt we'll see it again, but markets have NOT bottomed out and we are going to see further drops of between 10-15% I feel before we can safely say we have reached the bottom of this mess.

The new plan by Mr Geithner for a join Private/Public $1 Trillion USD 'buy-back' (or investment opportunity as he would prefer to call it) is simply not going to work. The confidence in the US Government to honour their part in this package, just does not exist and so that is yet another attempt to rescue the US economy failed. 'What next?' you may ask - indeed, I'm not sure even Mr Geithner and the Fed' know what they'll try next - but for sure, whatever it is, it will be more 'smoke & mirrors' and no doubt a few rabbits pulled out of Federal Reserve hats.

A lack of interest in an auction of five-year Treasury notes led to fears that the government would fail to raise debt and lower interest rates as intended to stimulate the economy.

Could Wells Fargo be the next to go under? I think that we could say they have more chance of going under than BOA .... for the time being anyway (remember, I still don't buy the 'too big to fail' philosophy - not in the current market conditions). Wells Fargo once upon a time even said it did not need 'TARP' money, but the US Government 'forced' them to take $25 Billion (wish someone would do that to me!) - that smacks to me that Wells Fargo do not have friends in Government and could that have been the first nail strategically placed in the Wells Fargo coffin?

It has been interesting this week to see what the recipients of TARP money have been saying about how they intend paying the money back:

JPMorgan Chase is looking into ways to return the government's $25 billion investment within the next three to eight months, a person familiar with the matter said. The company is considered to be in the best shape among rival commercial banks, and Chief Executive Jamie Dimon said on March 11 that the bank was profitable during the first two months of the year.

The bank cut its dividend 87% last month to 5 cents a share, the first time since 1990 the company has made a cut. That will save $5 billion a year, and could be used to help pay off government funds. The company's tangible common equity ratio is at 3.86% Tangible common equity, a conservative measure of capital, will be measured in the upcoming stress test.

Bank of America CEO Ken Lewis said Tuesday that his company would like to start repaying its $45 billion in government aid next month; the Treasury also agreed to backstop as much as $120 billion of the bank's assets. Paying off the government investment could take a while.

Bank of America holds the lowest tangible common equity ratio of any large bank, ringing in at 2.54%. The bank's earnings are vulnerable to rising unemployment, as well as troubles in the commercial real estate market. Bank of America nonetheless expects to take in "close to $50 billion in pre-tax, pre-provision earnings" this year - that's before subtracting losses from bad loans - which means the bank should quickly recover once the economy bottoms. The question is when that will happen. Moody's on Wednesday lowered its credit ratings on Bank of America, citing, among other things, an increasing "probability that systemic support will be needed."

Citigroup is the most hard-hit bank since the financial crisis began, and currently owes the government $45 billion. The government also allocated more than $300 billion as a loan-loss backstop for the bank. The bank said there is no current need for capital after the conversion of a large chunk of preferred stock into common shares. The bank will have a tangible capital ratio of 3.98% once the deal is completed, up from 1.55%.

CEO Vikram Pandit said earlier this month that the bank is also off to a strong start this year. However, like other banks, there remain concerns about consumers defaulting on other debt such as credit-card debt.

Wells Fargo opposed receiving the government's TARP funds as I mentioned, perhaps more than any other bank. Six months after the US government forced Wells to accept $25 billion in government aid, however, the San Francisco bank has far less room to complain.

Wells Fargo purchased crumbling rival Wachovia Corp. and dropped its tangible common equity ratio to 2.82% - less than any large bank except Bank of America - after taking billions of Dollars in up-front losses from Wachovia's troubled loans. The bank will likely need to prove to regulators that losses from its piles of consumer loans have peaked before the bank will be able to repay TARP. Wells Fargo may have traded a quick return to independence for the opportunity to become a coast-to-coast financial superstore.

PNC Financial Services Group may very well have the clearest path of any large bank for repaying its $7.6 billion government aid. The Pittsburgh-based regional bank accepted its government aid to purchase rival National City Corp.

But growing troubles among PNC's $100 billion in construction and real estate loans have pushed its tangible common equity ratio to 2.92%, and could leave the company vulnerable should the US recession grow worse than expected. Like other large banks, to rebuild capital and repay the government more quickly, PNC recently slashed its dividend by 85%.

Goldman Sachs looks set to become the first financial company to return TARP money to the government. It could repay the $10 billion it received by late April, according to a person briefed on the matter. The timing would most likely be after Goldman passes the stress test and reports first-quarter results.

It is widely expected that Goldman will pass the government's stress test, and the company has already said it is on track to post a profit this quarter. Goldman also wants to return the money quickly because it has the means to do so, with more than $100 billion in cash sitting on its balance sheet.

Morgan Stanley CEO John Mack said in February he wants to return the $10 billion of TARP funds by the end of 2009. Morgan Stanley, like Goldman, is also considered to be in a strong position at the start of the year. Beyond a rebounding stock, Morgan Stanley has done well during the first two months of the quarter, Mack has stated.

As for its capital position, the bank last year raised $9 billion by selling a 21% stake to Japan's Mitsubishi UFJ Financial Group Inc. (MTU). Both banks are in the midst of developing cross-selling opportunities, which might include combining brokerage operations in Japan.

So the US Financial system is in a mess, we have no doubt about that and until the 'base' of the economic pyramid is solid, Ladies and Gentlemen, we have not seen the bottom I can assure you.

And all this pessimism from me without even mentioning the auto-makers yet (I will save that for another Newsletter because I'm sure, their time is short-lived too, impossible for them not to be).

And it's not just in the US where all things are not quite perhaps what stockmarkets are showing them to be.

In Germany, Germany's government and its businesses expect the economic slump to continue deepening, giving rise to new calls for more decisive help from the European Central Bank to ease access to credit.

Business confidence in Europe's largest economy plunged to a new record low in March, indicating a deepening recession in the economy, a survey from the German Ifo Institute showed Wednesday.

The Ifo business climate index fell to 82.1 from 82.6 in February, hitting a new record low since the survey began in 1991.

Then we have the UK. Fears Britain might enter a deflationary spiral receded on Tuesday after inflation rose in defiance of expectations last month.

As the sharp fall in the value of the pound fed through in the form of higher prices for shoppers, the consumer price index increased from 3 per cent in January to 3.2 per cent in the year to February, confounding economists' forecasts of a further fall to 2.6 per cent. Inflation has fallen from a peak of 5.2 per cent in September.

The rise in inflation forced Mervyn King, the governor of the Bank of England, to write to Alistair Darling, the chancellor, to explain why prices were still rising more than one percentage point above the Bank's 2 per cent target.

The data appear embarrassing for the Bank. It has cut interest rates to the lowest level in its 315-year history and begun an unprecedented programme to create money and to buy assets.

But Mr King said the rise in inflation reflected retailers' decisions to pass on the fall in Sterling to consumers - although he was optimistic about the medium-term implications. 'Even if we see significant pass-through of the depreciation of Sterling, it may mean inflation is close to the target rather than below it. I don't see a large risk of inflation being significantly above it,' the governor told the Treasury committee on Tuesday.

The effect of higher import prices - reflecting Sterling's near-28 per cent drop in value since the summer of 2007 - seemed to be evident in some categories that made the biggest contribution to the inflation rate.

Continued sharp rises in food prices were responsible for faster-than-expected increases overall. Food inflation stood at 12.5 per cent in February, compared with 11.1 per cent in January. Within that, prices for fresh vegetables were up by 18.6 per cent, partly due to cucumbers and courgette prices rising after a poor Spanish harvest.

The cost of meat was up by 15.2 per cent. A spokesman for the British Retail Consortium said farmers were increasingly exporting meat rather than selling it in the UK because of higher prices offered abroad.

And in France, French banks wrestling with the financial crisis face fresh provisions for defaults by companies loaded up with debt in a wave of leveraged buyouts during the credit boom that preceded the credit crunch.

Risks have been made worse as the terms attached to leveraged buyouts (LBOs), in which companies are taken over and left highly indebted by the loans used to purchase them, tended to be less strict during the LBO peak two years ago, financial analysts said.

One of the threats for certain French banks comes from LBO loan portfolios, especially those stemming from the period from the end of 2006 to the start of 2007, which was the peak of the cycle for mounting LBOs.

Many companies targeted in leveraged buyouts find themselves deeply indebted today.

Banks generally impose covenants demanding that financial ratios be respected before agreeing loans to finance LBOs.

But the LBO peak saw less orthodox financing as we all now know at massive cost.

And the problem is not confined to Europe and the US alone, obviously.

Japan announced Wednesday another record fall in exports as the global economic downturn crushes demand for its cars and high-tech goods and pushes the country deeper into recession.

The sharp decline reinforced fears that the world's second-largest economy will suffer another sharp contraction this quarter, following its worst performance in more than three decades in the fourth quarter of 2008.

Japanese exports plunged 49.4 percent in February from a year earlier, surpassing January's slump of 45.7 percent, the finance ministry reported.

Shipments to the United States and Europe more than halved while even demand from the once-booming Chinese economy dropped almost 40 percent.

Japan's heavy dependence on foreign demand to drive its recovery from a decade-long slump has left it vulnerable to the current global economic slowdown, which has sent sales of cars, televisions and other goods tumbling.

The trade surplus plunged 91.2 percent in February from a year earlier to 82.35 billion yen (840 million Dollars), although that was better than a record deficit logged in January, the ministry said.

Japan's economy logged its worst performance in almost 35 years in the last quarter of 2008, contracting at an annualised pace of 12.1 percent.

Analysts warn that this quarter could be just as bad as Asia's biggest economy heads towards its worst recession since World War II.

The corporate sector was a key driver of Japan's economic recovery following the 1990s recessions, as companies enjoyed strong profits and invested heavily to expand their production facilities.

But the global downturn has caused demand for Japanese goods to dry up, prompting firms such as Toyota and Sony to shed thousands of jobs.

So all told Ladies and Gentlemen, stockmarkets are just an indicator of sentiment concerning individual companies comprising of that stockmarket - they do not have any fundamental relationship with the real economy - other than in good economic times people buy shares, in bad times they sell them.

Yet we see stockmarkets in the US particularly flying in the face of all known adversities and I can assure, this quite simply cannot last - this is a Bear Market rally and one that is about to come to an abrupt end.

On to the market news as we sit today: