Come and get it!

The slop is in the trough…and the pigs are coming at a run.

An advertisement on the Internet tells the tale. The Obama Stimulus Program is giving away “$10 billion a month in grants.” These grants “never have to be repaid.”

“Finally, a taxpayer bailout!” it continues…explaining “how to get your government grant.”

Then, there is a photo of the purveyor of this scheme – standing in front of the Eiffel Tower in Paris. In other words, these government grants make anything possible – even a European vacation!

Then, there are a series of testimonials…

“I got enough to buy a new car…”

“I didn’t think it was true…but I got my check today…”

“These government grants are great…just what I needed…”

Soooo…eeee…! We never heard that cry personally…but that’s how farmers used to call their hogs when it was time to feed them.

Just in the last few days, the Obama government has announced another $750 billion for bank bailouts…and a $634 billion.

Where’s all that money going to come from? Only a few months ago, the official budget deficit was projected to come to $800 billion…then $900 billion…then $1.2 trillion…and now, get this, it’s gone to $1.75 trillion.

The pols are taking advantage of the situation. Capitalism has fallen down and can’t seem to get up. So, the politicians get to march ahead and take charge.

General Motors just reported a loss for the fourth quarter of nearly $10 billion. You can see what good it does to bail out failing companies…the money just goes down the drain. The government gave GM more than $13 billion – there goes the bulk of it.

And AIG is said to be nearing collapse – despite the government bailout of this past fall. You’ll remember that the Goldman boys got together with the government and decided to rescue AIG, but not competitor Lehman Bros. AIG was reported to have owed $25 billion to Goldman. We hope the firm stays alive long enough for Goldman to get its money…

Sooo…eee!

The Dow fell another 88 points yesterday. Oil rose to $45. And gold fell 23 bucks.

Sales of previously owned houses fell 5.3% in January from December. There are now fewer sales than at any time in 10 years. The median price of a used house is 26% below its peak, we are told.

But despite the bad news, Americans are not quite in Depression Mode.

We have been trying to gauge popular sentiment. Are investors throwing in the towel? Are consumers giving up? Is this the bottom of the downturn?

Not likely…

“Stocks face long road back after crash,” is a headline in the Wall Street Journal.

“Bernanke says slump may end in ’09,” is how one paper reports on the Fed chairman’s congressional testimony.

“Seven signs of an economic bottom,” is a piece at Seeking Alpha.

And Jeremy Siegel, author of Stocks for the Long Run, says he has never seen such great bargains.

What this tells us is that people are still optimistic. Still hoping. Still thinking positive. Like us here at The Daily Reckoning, they make lemonade out of every cloud…see a silver lining in every glass…and every cloud is half full of lemons, rather than half empty. Something like that. “Yes, the markets have been hit hard,” they tell themselves. “But they’ll recover.”

Unfortunately, this is not depression thinking. This is the kind of thinking that happens at the beginning of a depression. Even after recent losses, most stocks are still selling for 15 times earnings – or more. When you get to the bottom, that multiple goes down to 5-8. And while stocks have lost 50% of their value…we remind readers that at the bottom in ’32…and Japan’s bottom now…stocks were down 90%. And when you get to a real bottom, you don’t hear people talking about ‘the long road back’…or what bargains you can get…or signs of a bottom. Instead, they’re convinced that there is no going back…that stocks are expensive at any price…and that the slump will never end.

*** No, dear reader, we’re not at the end of the slump…we’re not at the beginning of the end…or even the end of the middle…

…we’re only at the beginning of the middle.

We have our ‘Crash Alert’ flag flying because we believe there is another 50% drop coming. But it may not come right away. It wouldn’t be at all surprising to see a major rally, such as happened following the crash of ’29 and the crash in Japan. Stocks could rally to more than 9,000 on the Dow.

Mr. Market is a perverse old coot. If he is going down…he wants to take as many investors with him as possible. So he fakes them out…moving sharply to the upside in order to make them think the bear market is over. And then he takes them all down…

…if we’re right, this bear market won’t end until the Dow trades under 5,000…and possibly under 2,000. And it won’t end until the price of gold and the Dow are about the same number.

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