This bubble was so extreme by any standard but Tulip Mania, that even after a 40% fall, the exchanges are full of junk stocks priced to go down another 40-100%. Where are the earnings? Where are the dividends?

Here are some prime examples:

• Home Depot. How on earth is this company supposed to make money in the future? It is still priced at 10X last year’s earnings, and we were just entering a recession then. What will they do in the depression?

• Blue Nile. It’s a great business concept, but how many diamonds are going to sell at retail next year, and the year after that, and after that? How do you put a 38-handle on last year’s earnings when the business is toast and they don’t even pay a dividend? Also take a look at Zales and Tiffany while you’re at it.

• REITs, poor REITs. Kind of hurts to have to service all that debt with tenants dropping like flies. Expect zero equity to bring zero bids on a few of these before 2009 is out. Many are still down less than 50% from the crazy prices of 2006.

• FedEx. Still a trailing PE of 20 and dividend yield at 0.6%! That’s a long ways from value. The stock ought to be priced at 5X last year’s earnings, because they will be lucky to see any next year.

I could go on and on. Stocks are still ridiculously overpriced. If you have Buffett-esque skills, you might be able to find the needle in the haystack that will hold up from here, but why swim against the tide? Your cash goes up in value every day.

Brave New World

The world from 2008 forward will be completely different than the last 60 years. Enormous shifts are taking place that will disrupt every business model and interrupt earnings in a major way. That has only begun to be discounted. This is not 1929, which was just a setback in the growth of western civilization. The utter economic cluelessness of the elite and middle class alike is paving our road to serfdom. My advice to anyone who doesn’t want to live in a Huxley or Orwell novel is to make like Jim Rogers and head east.