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9:00 AM EST, Friday, February 20, 2009. The stockmarket closed yesterday below its November low. My charting friends tell me this is a seriously bad thing. The only way to play this (as I've been saying) is through shorts and gold. But don't bet the farm. All bear markets have strong rallies.

Here's the story in pictures. We are now below what the market was in 2002.

This is not the time to buy shares also. They're not cheap.

According to the latest Barron's, the P/E ratio for the Dow is now 18.62, and 17.90 for the S&P. That's way too high to be interesting. These numbers are high because earnings are falling.

There is talk that the big banks will be nationalized. If this happens -- and certainly the market is hinting it will -- then the banks' shares will be worthless.

GE is half finance and half industrial. Its fall has been a major destruction of wealth.

Ditto for Warren Buffett's Berkshire Hathaway, which has now fallen roughly 50% from its one year high.

Gloom and Doom revisited:
1. It's seriously bad. Cut your expenses. Bargain harder. Don't even think about paying retail. I own a closet of tools. But I use only two. I call this Harry's argument for owning nothing.

2. This weekend's Economist:

So much has been written about the destructive power of the global financial crisis that the collapse of manufacturing has barely been noticed. In fact the contraction is the worst since the 1970s. In the fourth quarter of last year Germany's industrial production fell by 6.8%; Taiwan's by 21.7%; Japan's by 12%. The number of cars being assembled in America this January was 60% below last year's figure. Industry is collapsing in eastern Europe, as it is in Brazil, Malaysia and Turkey. Thousands of factories in southern China are now abandoned. Their workers went home to the countryside for the new year in January. Millions never came back.

3. From Forbes.com, Nouriel Roubini ("Dr. Gloom") chimes in:

Laissez-Faire Capitalism Has Failed
It is now clear that this is the worst financial crisis since the Great Depression and the worst economic crisis in the last 60 years. While we are already in a severe and protracted U-shaped recession (the deluded hope of a short and shallow V-shaped contraction has evaporated), there is now a rising risk that this crisis will turn into an uglier, multiyear, L-shaped, Japanese-style stag-deflation (a deadly combination of stagnation, recession and deflation).

The latest data on third-quarter 2008 gross domestic product growth (at an annual rate) around the world are even worse than the first estimate for the U.S. (-3.8%). The figures were -6.0% for the euro zone, -8% for Germany, -12% for Japan, -16% for Singapore and -20% for Korea. The global economy is now literally in free fall as the contraction of consumption, capital spending, residential investment, production, employment, exports and imports is accelerating rather than decelerating.

To avoid this L-shaped near-depression, a strong, aggressive, coherent and credible combination of monetary easing (traditional and unorthodox), fiscal stimulus, proper cleanup of the financial system and reduction of the debt burden of insolvent private agents (households and nonfinancial companies) is necessary in the U.S. and other economies.

Unfortunately, the euro zone is well behind the U.S. in its policy efforts for several reasons. The first is that the European Central Bank is behind the curve in cutting policy rates and creating nontraditional facilities to deal with the liquidity and credit crunch. The second is that the fiscal stimulus is too modest, because those who can afford it (Germany) are lukewarm about it, and those who need it the most (Spain, Portugal, Greece, Italy) can least afford it, as they already have large budget deficits. The last reason is that there is a lack of cross-border burden sharing of the fiscal costs of bailing out financial institutions.

With its aggressive monetary easing and large fiscal stimulus putting it ahead, the U.S. has done more. Except for two elements, both key to avoiding a near-depression, which are still missing: a cleanup of the banking system that may require a proper triage between solvent and insolvent banks and the nationalization of many banks, even some of the largest ones; and a more aggressive, across-the-board reduction of the unsustainable debt burden of millions of insolvent households (i.e., a principal reduction of the face value of the mortgages, not just mortgage payments relief).

Moreover, in many countries, the banks may be too big to fail but also too big to save, as the fiscal/financial resources of the sovereign may not be large enough to rescue such large insolvencies in the financial system.

To read his entire piece, go to Forbes.com.

"Clip our coupons": My wife is insistent. She's right. Last fall we bought triple tax-free New York municipal bonds. Yields were high -- way over 50%. Then bond prices rose and yields dropped. Now they are edging up, as investors worry about the ability of municipalities, states and counties to pay interest on the bonds. Muni bonds appeal increasingly to me, since my local New York City and New York State taxes are definitely going up.

So which bonds? The key is to understand what will is the underlying revenue stream that will pay your interest. A hospital bond will be less sound than a water bond. Hospital bills may not get paid. But water bills definitely will -- even if they rise.

In short, understand the underlying revenue stream. Understand the whole "business' model. Check out the "management." And don't trust the rating agencies.

Todd thinks bond yields will rise. Dennis says if you like today's yields go for it. Predicting interest rates is on the same level as astrology.

Latest email scams: Delete instantly.
1. There is money sitting in a foreign bank. Nigeria. Iraq. Hong Kong. Send money and we'll send you more money.

2. You have won a lottery. Send all your personal details.

3. You are entitled to a free dinner, a free discount coupon,

4. You have been picked to complete our survey for the opportunity to receive a $500 Sears, Lowe's, Home Depot (etc.) gift card.

What caused all the anger in New York: An editorial cartoon in the print and online editions of The New York Post was criticized for linking a chimpanzee with the economic stimulus package signed by President Obama. The New York Post issued an apology on Thursday night “to those who were offended,” while maintaining that the cartoon was not intended to be racist.

Top 10 top reasons the market is in trouble...
1. The Sunday paper costs more than NYT stock

2. The Citi ATM fee costs more than C stock

3. The paper that a mortgage is written on costs more than FRE stock

4. A subscription to Sirius Satellite radio would cost more than SIRI stock

5. A gallon of gas costs more than F stock

6. One ride costs more than SIX (Six Flags) stock

7. A bottle of soda costs more than JSDA (Jones Soda) stock

8. A 5 minute long distance phone call costs more than VG (Vonage) stock

9. A 5 stick pack of gum costs more than RAD (Rite-Aid) stock

10. The strawberries in a smoothie cost more than JMBA (Jamba Juice) stock

Favorite recent New Yorker cartoon:

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.