>Stocks continued to rise in Japan.  The Nikkei closed at 9110. Japanese bonds  fell, with the yield on the No. 250 bond, which matures in 2013, rising 10.5 basis points to a two-month high of 0.645, according to Bloomberg.  The yield rise was welcomed by Japanese officials, who had hope of an economic pickup, but hit shares of big Japanese banks, large investors in the government debt market.  Stocks will probably fall in Asia tomorrow, on the back of corrections in Europe and the United States.

>European Stocks fell sharply and across the board.  Stock indexes fell between 1 and 2 percent in a bout of overdue profit taking after sharp advances over the last six months.  ``We see no signs of any economic improvement in Europe; if anything, things are getting worse,'' said Adam Holmes, who manages about $465 million at Credit Suisse Asset Management in London, quoted in Bloomberg. ``We've come a long way on the back of very little change in the economic outlook.''

>US Stocks succumbed to a bout of profit-taking.  The Dow was down 114 points, the S&P 500 was down 15 points, and the Nasdaq was down 28 points.   >Jobless claims fell, but remained above the 400,000 weekly level, and continuing claims reached a 20-year high. The >current account deficit reached a record $136.1 Billion, with foreigners selling stocks and buying treasuries.

Please note this tortured logic from the above mentioned current account article:  "From the U.S. perspective, we are asking foreigners to lend us more of their surplus savings -- buy a greater quantity of U.S. assets -- at a time when the rate of return on that those assets, such as government bonds, is lower than any other industrialized country in the world. Thus, in order to induce investors to buy U.S. debt rather than, say, Canadian, Australian or euro-zone debt, we must offer them better terms," said David Ingram, economist with Economy.com. "Since the interest rate won't increase given the current stance of monetary policy and inflation expectations, the U.S. dollar must depreciate. The weaker U.S. dollar allows foreigners to purchase U.S. assets at a lower foreign-currency price, and creates the possibility of a capital gain in the event of a U.S. dollar rebound."

The factual bases for the above statement are true - all the items mentioned are happening.  But saying that the lower dollar is the lure to get foreign investors to buy more assets at cut-rate prices is cutting off the legs to fit the pants.  Those assets have depreciated rapidly over the last three years, and getting a little more for your money because of currency depreciation is not enough of a lure. According to the same article, stock investors sold in the quarter.  The dollar depreciated, but it was to make exports more competitive, not attact more foreign investment.  Foreign investors bought treasuries, but it's the Japanese and the Chinese - the Japanese because they're recycling their trade surplus into dollars to keep the yen from strengthening, and the Chinese because they're gaming the system by tying their currency to the dollar.  We get cheap stuff and they get i.o.u.s...

>Treasury yields continued to seesaw as traders debated whether the fed is going to cut 25 or 50 basis points.  The Update thinks that 25 basis points is all that called for here.  50 basis points smacks of panic, and that will be all the chips to play. >John Berry, fed watcher for the Washington Post, thinks 50 is highly likely. >The dollar fell slightly as >the debate regarding 25 vs. 50 basis points and a weaker than expected manufacturing report kept its underpinnings weak.

In politics, Dr. George Friedman of >Stratfor, Inc., a private intelligence service in Houston, sent out his weekly message to subscribers on June 18 announcing that the U.S. is officially in a guerilla war in Iraq.  Dr. Friedman describes the situation as follows:

"The United States currently is involved an extended, low-intensity conflict in Iraq. More precisely, it is involved in a guerrilla war in the Sunni areas of the country, including much of Baghdad proper as well an arc that runs from due west to the north. The almost daily guerrilla attacks against U.S. forces have resulted in nearly 50 deaths since U.S. President George W. Bush declared the end of major military operations;"

Bob Schieffer of CBS News 'Face the Nation' describes the losses as one soldier a day.  The major media, covering the attacks on an individual basis, have been too involved in the WMD flap to put the issue in context.  If Dr. Friedman's analysis is correct, we are now involved in a situation that has been neither fully prepared for or adequately explained to the public.