Gold is in a bull market. Stocks are in a bear market.

That is all ye know, and all ye need to know.

Stocks are being driven down by the market, in a natural, ordinary, inevitable correction.

And gold is being driven up by the central banks’ attempts to stop it.

Buy gold on dips. Sell stocks on rallies.

Simple enough, don’t you think?

No guarantees, though. Mr. Market can do what he wants. And if he wants to set off in the opposite direction, there is nothing we can do, here at The Daily Reckoning headquarters, to stop him.

All we can do is look out the window and see what direction he is heading now.

But what’s this? Is he doing the moonwalk? What bedevils so many investors and commentators is that it’s hard to tell which way he’s going. Mr. Market is clearly marching towards deflation, notably in the prices of houses and stocks. But the feds have a line on him. They’re pulling him in the opposite direction, inflating gold, oil and food prices. Which is it – boom or bust? Inflation or deflation? Prosperity or poverty? The combination of opposing ideas seems to rattle most observers. They can’t tell whether Mr. Market is coming or going. But here at The Daily Reckoning , we take ambiguity as comfortably as gin.

To the question: what’s it going to be, boom or bust? We answer: Yes. Both.

On the bust side, Martin Feldstein, says the coming recession could be “nasty,” unless the feds take decisive action. He wants “aggressive” rate cuts backed by fiscal policy too – say, a tax rebate – to stimulate consumer spending.

Forget it, says Forbes . By the time the feds figure out what to do the recession will be already upon us. It will be too late to stop it.

The BBC says the United States is already in recession. And Congress is out of session for the holidays.

But suppose the pols were already in Washington, with their fat derrieres in their comfy leather chairs and their pudgy, payola-stained fingers at this very moment ready to vote for more zany, FDR-style relief. What exactly could they do?

Well, they could give taxpayers back some of their money, thereby increasing consumer purchases. Well, yes, they could do that, couldn’t they? And they could get Ben Bernanke on the phone and pressure him to cut rates and open up the central bank vaults so that the voters had more money and credit. Yes, they could do that too. And what would be the effect of all this new money and credit (created ‘out of thin air,’ for there is nowhere else it could come from)? Would it not create an even greater sense of urgency among gold buyers?

But our guess is that Forbes is right in the first place. The feds can’t stop a slump. All they can do is react to it. And their reactions are likely to lead to higher inflation levels.

Meanwhile, a bear market in stocks is underway. Whether it is an entirely new phenomenon, or the long-awaited continuation of the aborted bear market that began eight years ago, we don’t know. But stocks are going down.

Maybe – if the feds were able to inflate fast enough – the bear market in stocks could still be turned around. And maybe – if the economy goes bust fast enough – the bull market in gold could be arrested. But one way or another, with Mr. Market pushing so hard in one direction and the feds pulling so hard in the other, either gold is going up, or stocks are going down.

One or the other...something’s gotta give...probably both.

*** The future in a single word: downsizing. Downsizing is going to be popular, hip, cool, fashionable and sensible. People are going to be proud of their small houses, their small cars, their low-impact vacations, and their modest spending.

More than that, people are going to turn against money. Yes, you heard that right. Lucre is going to be filthy again. No, we’re not going to explain; just remember our words.

Last week, in the International Herald Tribune , we saw a photo of a town that had been burned and destroyed in Kenya.

“Yes, there’s almost a civil war going on,” explained a lawyer we met yesterday. “I lived for many years in Kenya. There are different tribes there who don’t get along with each other. Barack Obama’s father is from Kenya. It’s his tribe that does most of the killing.”

But what was remarkable about the photo was the caption beneath it: “Investors hope calm will soon be restored.”

Today, practically every story is a money story. The casual reader is expected to be interested not in the fate of the people, the wailing of widows, the political evolution of the country, the religious or tribal aspects, the effectiveness of the local fire department, the rhetorical appeal of the local demagogues or anything else. The reader’s primary concern is thought to be the money angle. “Gee, now that Kenya is in flames,” he supposedly thinks to himself, “maybe I should move my 401k money out of the All-Africa Fund.”

Speaking of downsizing, India’s Tata Motors just downsized the family car. Yesterday, it took the drapes off its new Nano, which it has put on the market for just $2,500. The photo makes it look like a slightly stretched Smart Car. Not bad really. As far as we know, the vehicle is only for sale in India, but if it were on the lots in the United States, we predict that it would find plenty of buyers. The little can gets 50 mpg.

Bill Bonner is the President of Agora Publishing. For more on Bill Bonner, visit The Daily Reckoning.