Last week, as the Dow breached the 14,000 mark for the first time, bullish swagger on Wall Street went into overdrive. Some of the bulls that I’m often pitted against on television used the occasion to specifically heap scorn on my assessment of the U.S. economy and my investment advice. Although the attacks on my economic views were inaccurate on many levels, perhaps their largest oversight was that the Dow was propelled to its milestone largely as a result of multinationals that had seen their foreign earnings increase with the weak dollar. While many of these stocks set new 52 week highs, stocks primarily dependant upon the U.S. economy and American consumers were setting fresh 52 week lows. This divergence of performance provides strong evidence that the U.S. economy remains on track for a severe disruption.

More egregious however, was their dismissal of my investment advice. In their ridiculous attempt at a victory dance, they conveniently ignored the far superior returns produced by the foreign investments that I have consistently recommended for years. Given the unquestioned superiority of non-dollar investments, and the accuracy of my predictions regarding the continued weakness in the mortgage and housing markets, you would think the permabulls would have offered some grudging respect. But it seems their collective delusions regarding the “goldilocks??? economy prevent them from acknowledging anything that doesn’t serve to bolster their positions. So, despite a clear, well-documented, and unarguably successful track record, they simply assume that my clients have done poorly because I don’t share their viewpoint. Their refusal to give me the slightest bit of credit for being right about anything might mean that they harbor a secret fear that I might be right about everything.

This week however, the preponderance of bad economic news on the U.S. economy finally trumped the good news coming from abroad. Perhaps the hardest pill for the market to swallow was Countrywide’s admission that its earnings had been negatively impacted by late payments on its PRIME loans. This threw cold water on Wall Street’s self-induced delusion that the problems in subprime had been contained. This notion had been so universally accepted that the very word “contained??? has been conspicuously paired with subprime with almost every utterance.

More proof that the problems that initially surfaced in subprime are now emerging in other areas was evidenced by the horrendous losses being reported from home builders Beazer and Pulte and several more high profile companies blaming earnings shortfalls on weakness in the housing market. Still more evidence that the credit problems are anything but contained is Wall Street’s failure to arrange for the sale of 12 billion in loans necessary to finance the Chrysler buyout. This calls into question the whole private equity buy-out craze, which had been a major driver of recent stock market gains.

Finally, today’s GDP numbers revealed very slow growth in consumer spending. As ARM payments reset higher, home equity continues to vanish, and consumer prices continue to rise, actual declines in consumer spending are also likely in future quarters. In fact, to produce a 3.5% annualize gain in 2nd quarter GDP, the government assumes an annualized inflation rate of only 2.7%. My guess is that were a more accurate inflation measure used, the result would reveal what millions of ordinary Americans are actually experiencing — that the recession has already begun.

Even with all of this irrefutable evidence that the credit rug is being pulled out from under the feet of American consumers, Wall Street’s permabulls nevertheless remain undaunted in their blind optimism. Their one-way views are so myopic that they are blinded by their own arrogance. They are completely clueless regarding the fragility of America’s bubble economy or the phony nature of a prosperity based on low cost, no questions asked consumer credit. Now that those doing the lending are rethinking the wisdom of doing so, the party is coming to an end. However, the permabulls have barely noticed that the music has stop playing and will likely be among the last to leave. Unfortunately for them, or anyone foolish enough to have confused their mindless cheerleading with legitimate investment advice, they will be broke by the time they finally do.