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7:00 AM EST, Wednesday, December 10, 2008: "Gas was $1.49 a gallon yesterday morning at the Race Track gas station in Waco, Texas, reports reader David Rhoden. He says it's "the best stimulus package going and it's going lower."

There is more good news. It's now clear that our present and our upcoming government will do everything, and anything to keep this economy from slip sliding away.

While I clearly can't time this market, it does increasingly look like the time to start nibbling at solid equities -- not financials. Keep reading.

America's lost decade: This week's Economist's leader is called "Where have all your savings gone?" And the Economist's conclusion? "Implausible as it may sound, right now equities and corporate bonds are a better long-term bet than cash."

Investors may draw the wrong lesson from history

FOR American and European savers it has been a lost decade. After two booms and two busts, stockmarkets have earned them nothing, or less, in the past ten years. Low interest rates have made bonds and bank deposits unrewarding too. Were it not for the tax relief they receive, contributors to personal pension plans would have been better off keeping their money under their mattresses. It will be little consolation to Westerners that savers in Japan have known this empty feeling for far longer.

This year’s figures are enough to put anybody off saving. American mutual-fund assets have declined by $2.4 trillion—a fifth of their value—since the start of 2008; in Britain, the drop is more than a quarter, or almost £130 billion ($195 billion). The value of global stockmarkets has shrunk by maybe $30 trillion, or roughly half. These figures put the losses on credit-related securities—where the financial crisis began—into the shade.

Nor has the bad news been confined to equities. This year the value of all manner of risky investments, from corporate bonds to commodities to hedge funds, has been clobbered. The belief that diversification into “alternative assets” could prevent investors losing money in bear markets has proved false. And of course housing, which many people counted on for their retirement nest-eggs, has lost value too (see article).

As a result, saving seems like pouring money into a black hole. Any American who has diligently put $100 a month into a domestic equity mutual fund for the past ten years will find his pot worth less than he put into it; a European who did the same has lost a quarter of his money.

It may seem an odd time to worry about savings. This week the National Bureau of Economic Research declared that the world’s largest economy, America, had been in recession since December last year. The economies of Japan and much of western Europe have been shrinking. A rapid, global, private-sector shift to thrift is exactly what the world economy does not need. That’s why governments around the world have been passing hurried measures to try to encourage people to spend more of their incomes.

In some countries, they should. Asians (and Germans too), have been squirreling their money away with excessive enthusiasm. But other countries’ citizens have been putting too little aside for their old age. In America, the household savings ratio (the proportion of disposable income not used for consumption) has been below 2.5% since 1999; in Britain, it has been below 3% in each of the past two years. The Asians’ parsimony made the Anglo-Saxons’ profligacy possible. Through their increasingly sophisticated financial systems, the Americans and British were able to borrow from the thrifty Asians to finance their spending spree. And, because their house prices were rising so fast, they had the collateral and the confidence to do so.

In other words, Anglo-Saxons were able to save their cake and eat it. They did not have to sacrifice consumption in order to build up assets for the future, because lax monetary policies encouraged borrowing that pushed up the prices of housing and other assets, which gave them the illusion of having saved enough. But now this debt burden is being unwound, asset prices are collapsing and savings rates are rising because consumers are unwilling, or unable, to borrow.

Though this is bad news for the American and British economies in the short term, it ought to be good news in the long term. How good, though, depends as much on where people put their savings as on how much they put aside.

If savers treated financial assets as they do other goods, they would sell them when they are expensive and buy them when they are cheap. Actually, they do the opposite. They piled into the market in 1999-2000, at the peak, and are piling out of it now. They should, of course, have got out in 2000, when the global price-earnings ratio was 35; shares look relatively much more attractive now, since the ratio is down to ten. A recent analysis shows that, when American price-earnings ratios are low, returns on equities over the next decade average 8%; when they are high, returns average 3%.

But people’s recent losses have made them cautious. They are putting their money into cash or money-market funds, rather than equities or corporate bonds. The returns they are getting on their savings look increasingly pitiful. Interest rates are falling sharply, with more central banks announcing cuts this week. Savers may initially be shielded from the full impact of those reductions, because commercial banks are competing for retail deposits. But rates in many big economies are heading for, or have already reached, 1-2%.

Caution is understandable, after the trauma of this year. Equity and corporate bond markets could yet fall further, especially as the news on the economy seems to get worse every week. But it is still perverse that investors were happy to buy shares nine years ago, when the ratio of share prices to profits was three times what it is today, and are now determined to keep their money in cash and bonds.

That approach will be hopelessly inadequate for those who want to build a decent pension, especially in defined-contribution, or money-purchase, schemes, where the employee bears all the investment risk. The average American scheme member contributes just 7.8% of salary to his pension scheme. His employer, on average, contributes only 4.4%. He has a pot worth only $68,000. A rule of thumb is that total contributions need to be around 20% of wages to match a traditional final-salary scheme.

Inadequate savings, badly invested, are a problem for individuals and the economy. Cautious savers are putting their money in banks; banks are reluctant to lend; companies therefore find it hard both to borrow money and to raise equity capital. This timidity hurts companies and, in the long term, savers. Implausible as it may sound, right now equities and corporate bonds are a better long-term bet than cash.

Bill Miller's rise and fall. It's chronicled in a long article in today's Wall Street Journal. The piece is called "The Stock Picker's Defeat." I wrote about Bill Miller and his 2008 appalling performance last week under the headline Yesterday's "experts" are today's experts.

Muni bonds yield big. I am eyeing a New York City GO (general obligation) muni bond that is yielding 6.10% triple tax-free until its maturity in 18 years. That's over 10% pre-tax. Is the bond a good deal? It is an incredibly good deal if you assume New York City won't go broke and default on its bonds. Is that a gamble I'm willing to make? Or am I, as usual, chasing yield -- being a yield hog?

Yield hogs get slaughtered.

It's bleak in New York City, with financial jobs evaporating daily. But will Washington really let New York go? Like it let Lehman Brothers go? We live in weird times when I have these thoughts. And then a reader sends me these horrid words:

There are credit default swaps that insure against the US government and several European Governments defaulting on their debt. These swaps hit record highs last Tuesday. Yes, there are people buying insurance against the US defaulting on its debt. Which is one reason for owning gold! The COMEX gold price and the leveraged futures market is becoming less relevant by the day to the actual price of physical bullion with rationing, shortages and premiums on all coins and bars rising very significantly – rising even on a daily basis. Bullion coins that once retailed at some 5% over the spot price are now being traded at 10% to 15% over the spot price. Most wholesalers and retailers nationally are out of Krugerrands and other popular bullion coins and much of the public are now seeking to buy bullion on Ebay where prices are also surging.

In recent weeks there have been little or no bullion sellers and nearly all buyers and bullion owners will have to be incensed by and are waiting for far higher prices prior to even a minority of them selling. Many are “buy and hold” investors and savers and will not be “taking profits” even at higher prices as their motivation is not profit rather wealth preservation. It seems increasingly likely that gold and silver will have to rally to over $1,200/oz and $25/oz before there is some selling and liquidity returns to the bullion market.

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GM spends $2 billion a year on advertising. This is not one of their ads. Believe it or not, there are people who think the auto makers shouldn't get a bailout.

The governor of Illinois was arrested yesterday. The governor, a Democrat, tried to sell Barack Obama's Senate seat. He got offered $500,000 by one candidate. When he got arrested and handcuffed, he offered the seat to the arresting policeman. I don't make this stuff up. I can't. No one can.

This column is about my personal search for the perfect investment. I don't give investment advice. For that you have to be registered with regulatory authorities, which I am not. I am a reporter and an investor. I make my daily column -- Monday through Friday -- freely available for three reasons: Writing is good for sorting things out in my brain. Second, the column is research for a book I'm writing called "In Search of the Perfect Investment." Third, I encourage my readers to send me their ideas, concerns and experiences. That way we can all learn together. My email address is . You can't click on my email address. You have to re-type it . This protects me from software scanning the Internet for email addresses to spam. I have no role in choosing the Google ads on this site. Thus I cannot endorse, though some look interesting. If you click on a link, Google may send me money. Please note I'm not suggesting you do. That money, if there is any, may help pay Michael's business school tuition. Read more about Google AdSense, click here and here.