Who the heck knows. But I would guess, first, that the powers-that-be around the world will succeed in resuscitating the patient. I have high confidence in Hank Paulson, Ben Bernanke, Barney Frank and others who are talking to each other – Warren Buffett, Bob Rubin, Larry Summers, European Central Bankers . . . and of course our I-hope next President and the people he will have working the problem.

(It will not surprise you to know that Senator McCain does not inspire the same confidence in me. His top advisor, Phil Gramm, helped get us into this mess; his 2000 top advisor wrote that the Dow should be 36,000. He seems to jump from one ill-considered ad hoc position to the next: let’s waive the federal gasoline tax for the summer; let’s cut taxes for the oil companies and CEOs while rooting out greed and excess (you know, CEOs with seven homes and 13 cars); let’s acknowledge that the fundamentals of the economy are strong; let’s acknowledge we are in the worst economic crisis since the Depression; and . . . Tuesday night . . . let’s buy up $300 billion of mortgages at face value, wildly overpaying for them, which everyone agrees is a completely bad idea.)

I think all this authority the Treasury has been granted (but only begun to use), and that the Fed and central banks around the world already have, may begin to kick in soon . . . and that one day, a panic of greed (however short-lived) may overcome the panic of fear.

‘Omigod – American Express down from $63 to $24? What if the world doesn’t end? Omigod – General Motors $25 preferred at $5.55? What if GM gets the kind of help Chrysler did ages ago and GM survives? Omigod – GLDD down 50%? What if we try to resuscitate the economy in part by renewing our infrastructure, like keeping our waterways navigable? Omigod – Anadarko down from $81 to $30? What if oil drops to $70, or even $40 before eventually going back to $70? Is there no money to be made at $70 a barrel?

(Omigod – did you see on the nightly news this week where some beautiful new $275,000 four-bedroom Florida homes have been marked down to more like $60,000 or $80,000? How can you go wrong with that?)

And those are just some semi-random Omigods, not meant to represent a shopping list or the most enticing opportunities.

But you can see how overwhelming fear could suddenly become panic at possibly missing the boat.

So with our ‘double-inverse S&P exchange-trade-fund,’ RSW, at $169 – double where it was when first suggested six months ago – I’d sell a third to half of it, especially if you bought it in a tax-deferred retirement fund where selling exposes you to no income tax.

But don’t sell it all, or sell it thinking the bottom was reached yesterday afternoon. It’s possible the resuscitation will fail. And even assuming it succeeds – as I think it will – will that success really mark the end of this bear market?

I’d guess not. It seems to me we are headed for a rough recession, no matter what (but, hey, we’ve had them before), followed by a rough inflation (we’re printing money like crazy, as we should be, but that devalues the currency), followed by rising interest rates to tamp down the inflation, followed by another recession . . . this is not going to be an easy decade, any more than the post-Vietnam decade was in any sense easy.

Recessions depress earnings, which depress stock prices. Higher interest rates depress price-earnings ratios (not to mention home values, as mortgages become less affordable), which also depress stock prices.

Then again, through hard work . . . more prudent personal, corporate, and national behavior . . . the increases technology will bring in productivity and opportunity . . . and just the passage of time, like the time it takes to digest a gigantic meal and finally feel fit again . . . we will one day return to better times. At which point, because of the inflation, the companies that have survived may see their stock prices significantly higher than they are today because the price of everything is by then significantly higher . . . except the price of fixed income securities, like long-term bonds, which, by not gaining a dime in face value, will in fact have lost value adjusted for inflation.

In the long run, if you had bought stocks every month starting in 1929, or any other time in our history, you would eventually have made out far, far, far better than keeping your money someplace safe.

With both Vietnam and Iraq, we attempted to have both ‘guns and butter.’ In the Vietnam era, it was to fight the war and simultaneously wipe out poverty – a well-intentioned but significantly flawed and hugely expensive effort. During the latest tragically misguided war, we have attempted simultaneously to slash taxes on hedge fund managers and oil company CEOs. Not as noble a goal as eradicating poverty, perhaps, but uniquely Republican (Senator McCain is fully on board) and similarly expensive.

The world will probably not end. The basics, as always, apply. Spend less than you earn, live light on the land, enjoy the simpler things, get plenty of exercise, floss, and look for ways to brighten the lives of those around you – it will brighten your own as well.

Have a great weekend.


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