Yesterday, prices went up on Wall Street... The Dow rose 413 points. There was no follow-up this morning, as investors eyed a mixed bag of 3rd quarter corporate earnings.

But, investors are in a pretty good mood, all things considered. After all, Warren Buffett is bullish on stock prices... Warren is putting his money and his mouth in the same place – equities. He says he’s sure they will do better over the next 10 years than cash.

Here at The Daily Reckoning , we are not rich enough to argue with the Sage of the Plains. Besides, we think he’s right. Or, almost right.

Stocks will probably do better than cash over the next 10 years; but mostly because cash will probably do very badly. Our guess is that everything will do better than cash. Except bonds – which represent cash deferred into the future.

And here, for the benefit of new readers and long-time DR sufferers alike, we give our view:

When Mr. Market goes into a sulk, he takes a long time to come out of it. Real bear markets last 10...15...20 years. And judging by the meltdown in the financial sector...and the rapid losses we’ve seen over the last three weeks...we have a real bear market on our hands.

This bear market actually began in January 2000 when the tech sector crashed. But it was reversed when the feds opened a Hoover dam of liquidity, beginning in 2001-2002. Stocks floated higher...and consumers, business and Wall Street actually increased their indebtedness.

Every bubble expands until it finds its pin. The bubbles in housing, debt and the financial industry began deflating in 2006/2007. But the big popping noise was only heard in September/October of this year, when Wall Street itself imploded.

And now, the feds are out of easy options. They can’t push more credit on the poor consumer; because the credit pipes burst along with the bubble in the financial sector. Besides, if they were to lend the consumer more money, what would they lend against? House prices are falling.

With no more easy credit available to them, consumers are doing what they have to do – they’re cutting back. How much? For how long?

No one knows the answers to those questions but our guess is this: more and longer than you thought.

Why so?

“The real deterioration in the economy is only just beginning,” said a London banker.

Every businessman we know is sharpening his pencil. He’s looking at his list of expenses and circling items that he thinks can be cut. Most of those items have someone’s name connected to them. Unemployment is going to rise more than expected. As it does, consumer spending is going to fall more than expected.

As to what to do about the weakening economy, says the New York Times , a consensus is forming. As might be expected, the mob wants more bread. And as might be expected, the feds are eager to give it to them.

Today’s headlines tell us that another stimulus package is being prepared in Congress. The pols are getting out the lights, the shiny balls, and the garlands – they’re going to Christmas tree this one even better than the last. Earmarks, nosemarks, cheekmarks – this new bill will have the marks of every greedy S.O.B. in Washington on it. Your town need a bridge? Better get the request in soon, so your Congressman can hang it on the tree. How about a new ‘community center?’ Got any indigenous people around...any victim group...any bunch of layabouts or n’er do wells who need handout? Cripples? Half-wits? Republicans? Kiwanis? Butchers? Car dealers! Yes, give the poor car dealers a break. They’re not even selling Japanese cars, according to the news.

Yes, dear reader, the fix is in. Ben Bernanke said he backs another stimulus bill. And this new measure should stimulate just about everyone; it’s sure to include more ‘rebate’ checks...infrastructure spending...and giveaways to anyone with a decent lobbyist.

But where does the government get more bread? More below...

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