As many of our long-term readers know, we have been very negative on the stock market and economy ever since we first started writing these comments at the beginning of 2000.  We have tried to explain the way we see the financial environment even if we were hoping to be wrong the whole time.[More]
 

Although earlier in the day there seemed to be an agreement in principle by Congressional leaders to pass a bailout plan, the agreement appears to be falling apart as we write.  Whatever happens, though, we believe we are in a severe bear market with major declines still ahead.  If the plan fails to pass within a reasonable time the results can be as disastrous as described by Secretary Paulson and Chairman Bernanke in their Congressional testimony.  But even if a bailout bill passes within the next week (which is still the probable outcome) the most it can accomplish is to prevent an imminent collapse of the global financial system and give us some breathing room.  While this is a worthwhile accomplishment, major financial and economic problems will still remain.  In particular, as detailed below, the economy has lately started to decline at a greater rate and is likely to remain in major recession until well into 2009.

The bearish view on earnings makes the most sense.

Short-selling funds are ready to come out of hibernation.
Bear funds have had a rough run the past two years, as their strategy of betting against stocks has put them on the wrong side of a solid bull market.[More]