The current crisis in the credit markets is not going to be alleviated with conventional tools traditionally employed to address credit crises.

In the early 1980’s, the U.S. also faced stagflation as we recovered from the 1979 energy crisis. In May of 1980 the unemployment rate was 7.5%, inflation was at 13.5% and industry was facing a severe downturn that began in housing, steel and automobile production and spread to the broader economy. In an attempt to tackle the rampant inflation, Federal Reserve Chairman Paul Volcker took the federal funds rate from 11% to a June 1982 peak of 21.5% while slowing the growth of the money supply.

If enough people ask you a question, you should go out and find the answer. I finished up a few days giving seminars at the Money Show in Orlando and four people asked me about a company I do not follow or recommend, Accuray (ARAY). After reading some and talking to others, I am still not recommending it in my service but thought you might want to take a look, in part because it was recently crushed when it reduced revenue estimates for 2008.

Accuray makes several products but its leader and growth engine is CyberKnife Robotic Radiosurgery System, used to directly target cancer tumors with narrow and powerful doses of radiation. Sales doubled in Q4, year over year, for the company, but a few days ago the company reduced sales estimates for 2008 to $210MM-$230MM from $250MM-$270MM. They blame tightened credit conditions, specifically as they apply to cancer and radiation treatment centers, for slowing growth. They also earned about four cents a share.

I must admit, there were times when my conviction was tested as LDK Solar (LDK) management was besieged with Short Selling and Naked Short Selling attacks. When Bill Alpert of Barron’s insinuated this company was based on fraud and that if found complicit they could face bankruptcy, it sent the stock tumbling.

When Carolyn Cui released an article for the Wall Street Journal bashing LDK twice, both times accompanied by a suspicious volume of short selling, the stock plummeted. Goldman Sachs helped the fall when they initiated coverage with a sell and a $35 dollar target. Piper Jaffray was quick to downgrade the stock and issue lower targets – despite issuing higher earnings estimates at the same time. Lazard Capital markets came out of nowhere to issue a sell rating and doomsday predictions.

Naked Shorting: The practice of selling “virtual shares” to the open market with the intent of driving the price per share [PPS] of the underlying equity down so that you may purchase real shares at a cheaper price. You then deliver the shares bought cheaply to the party you’d originally sold “virtual” shares too and pocket the difference.

What a game! You sell a retail investor a counterfeit share. Then, if the price starts to climb, you sell more and more to progressively lower prices and fix a downward trend. No free market here. What’s worse, the retail investor cannot play this game – we can only be the victim.

Stock manipulation takes many forms. While it is always unethical, some of the recent practices are borderline illegal. Let’s take the actions of analysts in Cummins (CMI) recently as an example.

While the company issued guidance indicating they would have the best year in company history, analyst collectively raised estimates far above even that. When faced with the unrealistic targets, Cummins reiterated guidance. When CMI reported earnings for Q3 it was a home run. Blowout numbers with increased revenues and profits. More importantly, they were in line with guidance. The stock fell more than 20% that day due to not meeting analyst “expectations”.

In talking to others about the current concerns facing our economy, I’m often asked questions such as how one should play the high oil prices, where do I see potential fallout from the financial sector, and, most often, how am I positioning my personal portfolio? My answers, like most solutions, are simple: Exposure to emerging markets, good fundamentals, deep value, and growth potential.

With a declining dollar, and a potential slowdown looming the in U.S. economy, exposure to emerging markets can still provide the type of steady, sometimes even explosive, growth you are looking for in your growth and value portfolio. While some prefer to play those markets directly, I prefer to temper my exposure by going through U.S. multinationals with strong overseas markets or through foreign companies who have listed on the NYSE. This strategy lends itself well to strong growth while providing a level of regulatory security and transparency. My favorite companies in this category are Cummins (CMI) and LDK Solar (LDK).

The smear campaign aimed towards LDK Solar continues today with the Thomson Financial News author Ryan Vlastelica penning "LDK unable to provide specific timeframe for end to audit investigation". When you skip the sensational headline you find that LDK Solar issued updated (raised) guidance for Q4 and reports that the audit will be concluded no later than early December.

I'm not sure how specific Mr. Vlastelica thinks a company can be when an third party is auditing allegations. Perhaps Mr. Vlastelica's employers at Thompson will educate him about the legal ramifications of forward looking statements in order to avoid such misleading headlines in the future. In fact, considering the company is faced by no fewer than 7 class actions stemming from false allegations of a disgruntled ex employee and the firm must run all PR through two of the top law firms in the world, one would be wise to conclude that statements fall well withing the conservative range and are above reproach.

Investors of the sorely maligned LDK Solar (LDK) got much needed support Friday from an unlikely corner. According to sources, Siemens (SI) is making a €55/share bid for LDK (80/s U.S.). Siemens is up 1.3 per cent to €95.17 in Germany on the rumor.

LDK is a leading manufacturer of multicrystalline solar wafers, which are the principal raw material used to produce solar cells, devices capable of converting sunlight into electricity. LDK sells multicrystalline wafers globally to manufacturers of photovoltaic products, including solar cells and solar modules.

Write-down. Such an innocuous word. Let’s take a look at the word of choice for the financial community and what it is really telling us. According to Investopdeia, the definition of write-down is to reduce the book value of an asset because it is overvalued compared to market. In other words, for quite some time now we’ve been lied to. Told that a company was worth much, much more than it was. None of us here are so naive that we believe these companies woke up this quarter and “suddenly” realized they had grossly overstated their value. The ongoing problems with the underlying assets, namely mortgages, have been a growing one for quite some time now and will likely not peak until mid to late 2008. Yet it was only a couple quarters ago when these same institutions were pointing the proverbial finger at their rivals while saying their own assets were solvent. Remember the rhetoric coming from the financial institutions and Washington alike as they told us “we don’t foresee significant spill over from the subprime problem into the general economy”?

Did financial institutions not see the problem? In April, Deutsche Bank Securities initiated coverage on Citigroup (C) with a Buy rating and a $62 target. One month before that both Bank of America and A.G. Edwards upgraded to buy based on “valuation”. In fact, you have to go back to 2002 to find a single sell rating on Citigroup. This is spite of the company’s model being publicly decried as one that is not tenable and in spite of regulatory problems and dismal performance. Merrill-Lynch was upgraded to buy in April by both Deutsche Bank and Goldman Sachs and again in August by UBS. Goldman cited “valuation” as the reason for the upgrade.

I am not any sort of self-proclaimed market guru, nor am I an overpaid analyst riding the markets coattails rather than lighting the way for investors. I, like you, look for the fundamentals whether trading or investing…and frankly I’m a bit confused right now about the current trends in the solar sector. Recently, while researching an article, I created a spreadsheet, a snapshot of the solar sector, to try to get a picture of what is going on with the sector as a whole, and a couple companies in particular. What I found is interesting:

LDK Solar (LDK), a leading manufacturer of multicrystalline solar wafers, served notice yesterday that they will not be pushed any further. Recently the company was the subject of allegations from a disgruntled former employee (Charles Situ) that there were improprieties concerning scrap inventories carried on the books longer than 180 days. The company was subsequently victim of a massively coordinated naked short selling [NSS] campaign resulting in a 50% reduction in market capitalization since the allegations first became public.

To date there have been three rounds of heavy short selling, each commencing within minutes of sensational headlines being released by one of several “news” organizations under a single corporate umbrella. One round of NSS actually came simultaneously with a re-post of an old article with a misleadingly new headline that would lead a reader to think new and damaging information had surfaced. While the headline has been retracted, the damage done by the NSS campaign has not. In what would have been the final chapter in the trilogy for most companies, there were multiple class action lawsuits, filed by predatory law firms, not privy to any actual information, filed in several states.

This week's economic calendar kicks off Monday at 10 a.m. with Consumer Confidence. Tuesday we have GDP-adv. at 8:30 a.m. followed by the Chicago PMI at 9:45 a.m. and Crude Inventories at 10:30 a.m.

While the recent run-up in Crude prices has many looking for this week's inventories report the market will be waiting anxiously for Tuesday's 2:15 p.m. FOMC policy statement. General consensus amongst investors calls for a 25 basis point cut at the meeting. Wednesday at 8:30 we have Personal Spending, Core PCE Inflation and Initial Claims.

Yesterday, an American powerhouse, Cummins Inc. (CMI) reported earnings. By any logically derived measure it was a blowout quarter. Third quarter net income rose 7.6% to $184 million, or $1.84 a share, from $171 million, or $1.69 a share, year over year. Third quarter sales rose 20 + % to $3.37 billion, up from $2.81 billion year over year. More importantly perhaps, Cummins reaffirmed year end guidance of $7.15 - $7.65 per share, making 2007 the most profitable year in the companies history.

Some quick facts about CMI performance: YTD +126.32%, 5 year +984.15%. Yes, almost one thousand percent increase in five years.