If the extreme volatility of the last few weeks hasn’t already raised suspicion in your mind that something of great proportions is going on behind the scenes then it might be time to start paying greater attention if you are invested in the stock market or precious metals.

The major stock indexes have seen wicked swings of late. Gold has rocketed to new highs only to be taken back down hundreds of dollars in mere days. Investors are uncertain and so too are the professionals. These are not healthy markets. One look at the spike in volatility will reassure you that there is currently a lot of fear priced into these markets.

The situation in Europe is far from over. What we thought was a bailout of Greece turned out to be nothing more than an event to save banks. The yields on Greek debt will show you that absolutely nothing has been done to resolve that situation. Yields are now back to where they were just days before the supposed ‘bailout’ was announced. America is on the brink of bankruptcy and there is no lack of direction from political leaders (not that they would know what to do anyways given that we are in uncharted territory). President Obama’s approval rating is at the lowest point of his presidency. Markets rally on bad news and sell off on good news. Sometimes we get two or three percentage point moves for no reason at all and just because they have to, financial news networks will tell you that the markets moved because of some very obscure event just so that they have something to talk about.

The markets have become a place where wicked swings occur not on what the facts are but what “might” be said by central bank leaders. The hopes of recovery have been dashed as the true economic picture comes to light and the world starts to wake up with the knowledge that nothing that central bank leaders have done since the start of the recession in 2008 has worked.

Let’s face it even the professionals don’t know what to do in a time like this. The market loves to follow the big players…a copy cat game in which the market piles into what the “professionals” are doing. I mean they are supposed to know what’s going on right? Had you followed or been invested with John Paulson’s hedge fund you would find yourself underwater by 40% this year. So much for “the guru” knowing his stuff. Complacency kills.

These are not healthy conditions. To steal a theme from The Lord Of The Rings, something is stirring deep inside of Mordor. An evil shadow that seems to be getting larger every day. Thank goodness I’m not the only one who sees this and that I am not the only one with great concern.

In case you missed it, The Telegraph today published a piece that reminds us that something bad is brewing. The concern according to bankers interviewed by The Telegraph is so great that the piece speculates that bankers warn a market crash 'could hit within weeks'. Sure we’ve all read about these things over the last 3 years but never has there been so much uncertainty and fear grasping the markets. It seems everyone is on edge when discussing the markets but this time, the anxiety is tangible and the stench of an underlying rot is finally becoming too great to gloss over.

Bank shares around the world have been struggling to keep their heads above water of late. If you follow the markets as I do then you very well know about the attacks on Italian financial institutions by short sellers. The selling go bad that short selling halts had to be put in place. It didn’t stop the bleeding though. Simply put, banks around the world, some more so than others, are exposed to too much bad debt and are finding it impossible to find cash. No money coming in because of bad debt = the inability to led money. The end result is a liquidity crisis.

Bank shares did come back a bit today. Ignorant and irresponsible individuals like CNBC’s Jim Cramer will tell you that Warren Buffet’s bail out of Bank of America represents a turning point going far enough to say that “Buffett's bailout marks the beginning of a massive multiday short-covering rally in the financials." However he isn’t telling viewers the big picture. He failed to mention that (as I wrote in my previous piece) that the terms of the deal are so bad for Bank of America and common stockholders of BAC that the bailout screams of desperation. When an institution as big as Bank of America requires a bailout we don’t cheer. It actually drives home the point that The Telegraph tried to make. There is a real lack of liquidity in the system. The audacity to cheer a bank obtaining a bailout is asinine. Instead of warning investors that such an event actually speaks to the problems haunting major financial firms across the world, he instead tries to spin it as a positive for the industry.

The Telegraph piece paints an entirely different picture but you didn’t hear that being discussed by Cramer or the knuckle heads on CNBC, The Telegraph reminds us that insurance on the debt of several major European banks has now hit historic levels..levels even higher than those recorded during the financial crisis that rocked the global community in 2008.

Credit default swaps on the bonds of Royal Bank of Scotland, BNP Paribas, Deutsche Bank and Intesa Sanpaolo, among others, flashed warning signals on Wednesday. Credit default swaps (CDS) on RBS were trading at 343.54 basis points, meaning the annual cost to insure £10m of the state-backed lender's bonds against default is now £343,540.

The cost of insuring RBS bonds is now higher than before the taxpayer was forced to step in and rescue the bank in October 2008, and shows the recent dramatic downturn in sentiment among credit investors towards banks.

"The problem is a shortage of liquidity – that is what is causing the problems with the banks. It feels exactly as it felt in 2008," said one senior London-based bank executive.

"I think we are heading for a market shock in September or October that will match anything we have ever seen before," said a senior credit banker at a major European bank.

Remember that Bank of America face fears that it might need raise as much as $200 billion … why should the injection of $5 billion be cheered? What Cramer didn’t tell viewers was that notwithstanding Buffet’s bailout, the rebound in the share price was not reflected in the credit markets, where its CDS reached a 12-month high of 384.42 basis points.

Be careful out there.