Most assuredly NOT.

What the proposed stimulus constitutes is NOT A BAILOUT but rather a modest effort at achieving a SLIVER OF A BAILOUT. As such it is a component of the ongoing policy of what we have called: "Bailout by Bits and Pieces." This is not to suggest that there actually exists a coherent, integrated, well thought-out strategy constituting a bailout by bits and pieces. Not at all. The government is responding to a very serious crisis the way it typically responds to a crisis which has taken it unawares: emergency measures, ad hoc measures, seat of the pants moves.

The stock market panic is escalating. We are led to believe that a major component of this sell-off is the dumping of large quantities of solid -- and not so solid -- stocks by hedge funds and other highly-leveraged speculative players who have lost huge sums gambling in the mortgage-backed and junk bond markets, and who are now desperate to raise cash by selling whatever salable assets they still possess in order to avoid bankruptcy, liquidation, disaster.

There is, of course, absolutely nothing new about this. The history of financial manias and subsequent panics is replete with such examples. Indeed, every speculative frenzy develops in the same way, and only is enabled by the leveraging of liquidity to reach the maniacal phase from which it inevitably crashes and typically produces a general financial panic, an acute liquidity crisis, and, ultimately, an economic depression. Immense capital destruction ramifies through the economy.

In view of the fact that the structure of the yield curve has historically proven, far and away, to be the most reliable of all economic forecasters, we are taking its bullish forecast for 2009 seriously. While the extreme front end of the curve remains inverted due to the FED's behind-the-curve approach, the rest of the curve is nicely upward-sloping. Once the FED bows to the inevitable, the curve should be in fine shape.

Consequently, we opt to leave any emotional baggage to the side. If the curve says the economy will grow in 2009, that is good enough for us.

In the current financial imbroglio, the media are gorging on their own tripe, in our view. We find the sight disgusting. We have always believed in a very generous interpretation of the constitutional mandate of freedom of the press. Lately, however, we have been having our doubts. The liberty of free expression in print (and on the airwaves) is being corrupted into something else: LICENSE. This license is driven by the pecuniary self-interest of the media. Nor is the media making full, partial, or even minimal disclosure of how the hysteria it generates subserves its financial self-interest. For the reader of the financial press, it is crystal clear that the term "journalistic ethics" is a contradiction in terms.

What passes for "reporting" on the current global market downturn is heavily colored by adjectives and nouns which are deliberately employed because they fan the flames of fear. Fear, as we have said repeatedly, sells newspapers (or TV viewership, as the case may be). The sham of current financial reportage has several hallmarks:
--overuse of highly colored and highly misleading verbiage;
--overstatement piled upon overstatement, and misstatement piled upon misstatement;
--ignorance of basic economic and financial truths concealed behind a torrent of meaningless snippets of misinformation, verging upon disinformation;

It becomes increasingly clear, with the passage of every day, that the dire forecasts (samples here and here) about the banking system and a forthcoming credit contraction which we made last summer and have reiterated periodically was only too accurate. We are NOT happy about this; we would rather that we had been wrong.

Looking at stock market prospects for 2008, we believe that it is not too useful to attend closely to the prognostications of Wall Street seers. Our skepticism here results from far more than a contemplation of the erroneous forecasts of this company over the years, and the sad fact that an investor would probably have done better by flipping a coin.

No. The crucial question each investor needs to answer for himself is the question: are we heading into (or already in) a "normal" mild recession, or is it going to be something different.

Well folks, we have been doing some thinking in recent days about the credit card securitization "situation." In view of the reports that late payments on credit card obligations are mounting, and defaults rising, we are wondering if this may prove to be the precursor of something far more serious. It is as clear as day that credit card "problems' will be mounting in the days, weeks, and months to come. As the delayed impact of the burst of the house price bubble moves into real time for more and more credit card borrowers -- unable to refinance their houses, extract "equity" from shrinking housing values, hardpressed to pay reset mortgages, faced with the domino effects of the credit contraction in the form of downward pressure on wages and a rising risk of job loss -- the lenders will be forced to write down rising losses. This will further impact negatively on the lendable capital of the banking system, intensifying the risk of a general financial and economic implosion.

The rise in bad loans to credit card holders will also impact negatively on the retail sector, and on consumer spending. It is a truism that you can't spend what you don't have, or what your friendly bank won't -- or is unable to -- lend you. As retail and consumer spending generally suffer, there is a ripple effect to other economic factors: employment, business investment, production.

Frequently, when an economy is close to recession, economists will warn that some unspecified and perhaps unpredictable "external shock" will push the teetering economy into recession. As we ponder the prospects for the economy, it occurs to us that -- leaving aside the possibility of some external shock intensifying the weakening of our economy -- it may be that what we would call an "internal shock" could have the same effect. What "internal shock" are we thinking about? Well, the possibility of a further decline in stock prices, interrupted only temporarily by short-lived rallies. Such an unfolding of events -- currently, seemingly, well on the way to realization -- could give the economy a strong downhill shove.

There are several reasons for this, we believe.

One of two things is happening in the stock market: either panic reigns supreme, or else the market senses that a deep, deflationary recession impends. One thing is crystal clear: the market judges that Bernanke & Co. still dont't GET IT!

Indeed, we found Bernanke's congressional testimony to be rather astounding. Instead of a mea culpa, we had another iteration of his inept forecasting. Most striking was not his adverting to his inflation worries -- we will overlook this as a ritualistic central bank incantation against the ancient enemy. No. What was incredible was his insistence that the economy would be growing in the second half. Has Dr. Bernanke ever heard of the word "evidence," we wonder? What, pray tell, are these assertions based upon? Our illustrious FED chairman can hardly ask us to place credence in his prediction based upon a non-existent previous record of successful forecasts. These, obviously, never occurred. Indeed, Bernanke's forecasts consisted of piling error upon error.

This is getting to be an exceedingly difficult question to answer when applied to the banking system. One mind-boggling loss surpasses the next, it would seem. Still, the rosy view has more than a handful of adherents. These folk argue that the worst is past, that the financial firms are taking their lickings and putting their past errors behind them. In this they are being assisted mightily by huge foreign capital inflows, as well as by the FED placing hardpressed banks onto life support.

Well, this all sounds very promising, to be sure. We do have a couple of concerns, however.

We have all been reading and hearing about the boom in commodities and the spectacular rise in commodity prices. We are all familiar with the case for the endless, secular boom in commodity demand and commodity prices. Certainly, on its face, it is a mighty compelling story.

Our impression, in fact, is that there has been an acceleration in the volume of reportage and what passes for "analysis," in tandem with the rise in price. Indeed, while prices and demand may have risen arithmetically over the past 5 years, the volume of reportage is perhaps increasing GEOMETRICALLY. This is hardly a surprise. As we have pointed out on innumberable occasions, it is the rise in price which constitutes the prime catalyst in raising bullishness. The higher the price, the greater the bullishness. Remember tek stocks in 1999, early 2000? Remember California real estate in 2005? Remember Japan in 1989, when the Nikkei was 39,000, and property prices were 1,000-2,000% ABOVE WHERE THEY ARE TODAY??

In point of fact, we do consider that generally the intensification of the volume and decibel level of "reporting" and "analysis" of the bull run in any asset or asset class is a useful WARNING SIGNAL.