Bank of America (NYSE: BAC) stock is up 6.3% in pre-market trading this morning after the bank reported improved earnings.

The European debt crisis has spread to Germany and Russia. But this time, stocks aren't budging.

There will be no bulls running in Spain any time soon. The contagion that is the European debt crisis has officially spread to Spain.

Italy, Greece, Portugal and Spain are all in big trouble... Fortunately for you there's a great way to profit from their unfortunate mess.

Right now, Mr. Market is giving you a variety of warning signs. You don't get market volatility like we've seen over the past couple weeks unless there's something very, very wrong with stocks.

You also don't get Italy, Spain, and the United States' debt all downgraded unless there's something wrong in the sovereign debt world.

Gold and silver don't go on decade-long bull market tears unless there's something very wrong with the dollar.

The market was destroyed yesterday. Volume wasn't meaningfully high, but it was better than the past few sessions. The market ripped lower yesterday morning following concerns that Italy was near a default. And the indices continued to trickle lower into the close.

Most indices finished 2% lower in yesterday's bloodbath. But even that percentage seemed low since most of the stocks I followed declined over 4%.

I can't argue against the strength of yesterday's decline. The selling pressure was strong and it was a continuation of Friday's sell-off. But I can't believe the selling was due to Italy.

When I saw the headline that “Greek Aid Package to be decided by June” my first thought was “Great! That’s tomorrow…”

 

But of course, first impressions can be deceiving, as can misleading headlines.

 

The deadline for a(nother) Greek bailout is the end of June, which means we get to hear about for another month. I’m sure you’re very bit as excited about that as I am.

Starting last week, we saw some of the market's biggest momentum trades sell-off on basically positive earnings reports. I'm referring to Apple (Nasdaq:AAPL), VMWare (NYSE:VMW), F5 Networks (Nasdaq:FFIV) and many of the other tech companies that are helping companies lower costs or are associated with the surge in handheld gadgetry.

But last night, Qualcomm (Nasdq:QCOM) reported good numbers and the stock is actually higher. NetFlix (Nasdaq:NFLX), too. Though not in the same sector, Caterpillar (NYSE:CAT) is also up after good numbers.

Could we be seeing a shift from the "sell first" mentality that emerged last week?

Ask anyone on the street if Europe is in trouble, and they’ll say “yes!”

But ask them exactly why, and exactly how much trouble?

They might answer, “Because of debt problems...and I’m not sure.”

That’s about the most information you’ll get from any mainstream media source. Most news stories about European debt problems will mention the problem, and then immediately quote a bunch of European central bankers and politicians about who’s to blame, and/or why it’s not really that big of a deal.

For instance, this story about the “Euro Crisis” in The Wall Street Journal today doesn’t give ANY specific information about which European countries owe what to whom.

As the ratings agency Moody's reviewed the credit ratings of Greece, Spain and Ireland over the past month, investors have moved out of risky European debt, and into gold. This was followed by today's membership admission of the euro zone's newest member, Estonia, as the 17th member of the club and a country which as traditionally had it's own bouts of debt crises and deficit reduction challenges.

According to metals trader Matthew Zeman of LaSalle Futures Group out of Chicago, "All commodities are going to benefit from the fear of future inflation, and investors will continue to pile into hard assets." Gold appreciated in price by 29.7% in 2010.

Ireland will never be able to afford to pay back the debt it owes. Its debt problems are but a microcosm of much of the rest of the western world. What is playing out in Ireland today will one day soon play out here across the pond in the United States.

So we should pay close attention, because for reasons I will reveal below, the scenario is hugely bullish for commodities of nearly every stripe.

To sum up Ireland’s problems, it recently received a bailout from its chums in the European Union so that the country would avoid default on the many and sundry debt obligations already under its belt.

The recent bailout adds another $115 billion to the already $867 billion they owe, bringing the grand total to $982 billion.

Here in the land of $13 trillion debt loads, anything without a T in front of it starts to sound pretty insignificant.

Welcome back! I hope everyone had a most excellent and relaxing Thanksgiving holiday.

Let’s get started with a discussion on retail sales. As we know, GDP growth came in a bit stronger than expected for the third quarter, largely because of stronger consumer spending growth

The Bank of Ireland is about to have a new majority shareholder. Ireland's government is expected to raise its stake in the Bank of Ireland from 36% to something constituting a majority.

The Irish government is also expected to raise its stake in Allied Irish Bank to, potentially, 99%.

If this sounds like Ireland is taking a page from the U.S. bank bailout strategy you're right. When you're facing the potential of a run on the banking system, the government is essentially the last entity that can to step in and provide a backstop.

Gold continued to make news yesterday and today, but most investors still don’t realize that it’s silver that has posted much better gains this year.

Rick de los Reyes, a metals and mining analyst at T. Rowe Price recently noted that when investors flock to gold, there’s a tendency for silver to fall behind, “silver usually lags [gold]...”

With the mid-term elections still not quite wrapped up and the FOMC meeting Quantitative Easing (QE) announcement not yet made, we are in the eye of the storm.

My over-under prediction for the Fed’s announcement is $1 trillion in new Treasury purchases.

If the announcement is at or under $1 trillion, I think it will be a disappointment to global markets and investors. The effect: stocks and commodities will wither, while the dollar will rally.

If the announcement is over $1 trillion, I expect stocks and commodities to rally, and the dollar to weaken.

I’m getting a little help on the $1 trillion ballpark figure from the Spanish banking group BBVA. Economists there are predicting $1 trillion.

NPR news has been talking about a $500 billion number for a low-ball prediction.

Ireland recently joined Greece, Portugal and Spain to round out the PIGS acronym of debt-downgraded European nations.

It's a legacy Europe won't soon escape for a variety of reasons. But I'm not going to talk about the largely boring reasons why Europe has no chance of escaping massive debt obligations - I'm more concerned with the immediate investment implications of such a downgrade.

To help predict what might come next, it's sometimes helpful to look back. Over the last eight months, buying silver after a Euro nation had its debt downgraded gave you an average one month gain of 2.6%.

Investing in gold is often called a “fear trade.” In times of crisis, it’s believed that gold will hold its value, and even rise, while the value of paper currencies and other assets fall.  

 

If you bought SPDR Gold ETF (NYSE:GLD), which seeks to track the price of physical gold, 2 years ago, you’d be up around 36%.   

 

The S&P 500 is down around 15% during that time.   

 

You probably already know that gold hit a new all-time high yesterday at $1,200 an ounce. And even though other traditional measures of fear – like the volatility index (VIX), bonds and even stocks – didn’t move much today, the move in gold can’t be ignored.  

“It was the last wish of the Icelandic economy that its ashes be spread over Europe.”   

 

I wish I could take credit for that gem.   

 

Flights are grounded once again in Europe as more ash from Iceland’s unpronounceable volcano drifts over the continent.  

 

Europe is providing a major downer for the stock market these days. It’s not the grounded flights, however. It’s debt problems with Greece (again), and potentially Spain, Italy, Portugal and Ireland. 

Stocks continue their upward climb. As TradeMaster's Jason Cimpl  told us earlier in the week, the S&P 500 has kept its date with 1,150. And it looks poised to move higher.   

 

The retail sales data from February is positive. Despite two crippling blizzards on the East Coast, sales still rose 0.3%. And if you strip out autos, sales were up 0.8%.   

 

Normally, it makes no sense to ignore auto sales because they are obviously an important gauge of consumer spending, but in light of the recalls from Toyota (NYSE:TM), it’s reasonable to assume that some auto sales were simply postponed due to the uncertainty.    

 

Sales were especially strong for electronics and at restaurants and bars. Sounds like consumers are celebrating their new iPhone purchase over a beer. That’s probably led to a surge in drunk-texting.   

 

Retail sales from January have now been revised lower two times, from an initial reading of +0.5% to the current +0.1%. Funny thing about this rally – economic data is consistently revised lower, and no one cares. The only exception I can think of is 4Q 2009 GDP, which was actually revised slightly higher.  

 

Economic data has been improving. But it says more about the bullishness of investors that they are consistently overlooking negative data. That gives me more confidence that we will be seeing new highs for the major indices soon.   

 

Now, let’s wrap up our week with some Reader Mail… 

I got this letter in my inbox yesterday:   

 

Good morning Ian,   

 

I followed your instruction and bought MPG at 1.50 per share, today, it goes crazy. Thanks a lot.    

 

I really like to read your articles.   

 

Sue   

 

I first discovered Maguire back in September, 2009. As part of my daily routine, I check in on the stocks that are moving the most every day. You can find this information on Yahoo! Finance by clicking on this link:  http://finance.yahoo.com/gainers?e=us.  

 

This list simply shows the stocks that are putting in the biggest moves of the day. It’s almost always dominated by small cap stocks. You’ll also usually see a few regional banks that are up 15% on 3,000 shares traded. I’m always curious why these big moves happen to small banks on ridiculously light volume, but I digress…