Almost everyone is looking for a tipping point. At this time we are looking for signs that the decline in the economy and in the financial markets is lessening and that we might be somewhere near the bottom. If this is the case then can the turn to recovery be far behind?

It seems that every piece of information currently being released carries with it the claim that “this decline was less than expected” or ‘the decline was smaller than the last information released.” These are taken as signs of hope.

Even the results of the Treasury’s “stress tests” on the banks are accompanied by the assessment that the major banks that have just been examined are better off than was thought. Therefore, the banking system is not in as bad a condition as feared, and, stock prices can now continue moving upwards.

Fed Chairman Bernanke is still

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Notes from the Investment Underground

April 14, 2009

Palermo Viejo, Buenos Aires, Argentina

Richard Russell: Why this is a bear market correction… That latest outbreak of investor credulity… 25 biggest earnings-per-share movers and shakers heading into earnings season… Banks to be allowed to screw up indefinitely… The great “too big to fail” fraud… Bailouts costing $42,105 for each U.S. citizen… Bush-Obama tag team piles on debt at the rate of $60,000 a second… Bob Higgs on C-SPAN… China wises up… And more!

*** This Richard Russell quote is a must-read for investors thinking about buying back into stocks. Russell, now in his 50th year of publishing the excellent Dow Theory Letter, believes we are now witnessing a bear market correction.

The essence of Dow Theory has to do with VALUES. At the March low the price/earnings ratio for the Dow was 25.79 and the dividend ...

Treasury Secretary Tim Geithner is taking his sweet time to work out the details of TARP II.  But for all the uncertainty surrounding his plans, we know one thing:  Zombie banks will not be allowed to go under.

Geithner just reaffirmed this, though not in so many words, in an interview with Charlie Rose.

Asked about the possibility of letting a major bank fail, he said, “I’ll say again, they play a critical role in our markets, in our financial system. We want to continue to make sure they play that role. Now, where they need temporary assistance through the government to get through that, we’re going to make sure it comes with appropriately tough conditions so that they emerge stronger and that we’re providing a level of conditions and accountability that’s appropriate in this context.”

Translation:  They can continue screwing up indefinitely, and we’ll still come to their

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