We're hearing that China is recovering. We don't believe it. Who's buying? They say the US economy is close to a bottom, too. We don't believe that either. Wait...let's ask Alan Greenspan.

Here's the Bloomberg report: Former Federal Reserve Chairman Alan Greenspan said on Tuesday that "the seeds of a bottoming" in plunging U.S. home markets were becoming visible.

Speaking to a National Association of Realtors summit, Greenspan said there were reasons to believe that bulging inventories of unsold homes were dwindling and that should bring some stability to prices.

"It looks to me, judging from the balancing of household formation on one hand, conversions, mergers, demolitions...that we're at the edge of a major liquidation in that excess of inventories which I suspect and I hope will be of such a pace that it will stabilize prices," the former Fed chief said. "So as I look at the housing market...we are finally beginning to see the seeds of a bottoming," he added.

We can imagine seeds of a recovery. We can imagine signs of a bottoming. But we don't know what the hell "seeds of a bottoming" is supposed to mean. Do the seeds grow downward? And turn into a bottom?

Then what happens? But that confirms it for us. If the former Fed chief thinks he sees the "seeds of a bottoming," a bottom must be nowhere in sight. And how could it be?

You can't hope to erase the errors of a 50-year debt build up in a single year. Just look at the auto industry. How long will it take to turn GM around...or to break it up...sell off the assets...and put the good pieces back to work? Many years.

How long will it take to work off the housing inventory? Years. How long will it take China to retool her economy for domestic consumption? Years. It makes sense to guard yourself because the inevitable downturn coming our way...sooner than you may think.

Read carefully about how you could protect yourself with the seven "super shields" explained in this special report. And how long will it take the American consumer to pay down his debt to a level where he is comfortable again?

Well...forever... Just do the math. The savings rate has gone up to 5% of GDP. That's $700 billion per year. Yet, the excess debt alone is estimated (by us) to be between $20 and $30 TRILLION.

At that rate, it could take 40 years, or more, to pay it down.

But wait again...while consumers are paying down debt, the feds are borrowing more than ever. While consumers may pay off $700 billion of debt, the US government is borrowing $1.84 trillion - at this rate, Americans will never get out of the hole.

Now over to Ian Mathias in the heart of Baltimore for the news... In today's issue of The 5 Min. Forecast Ian Mathias asks, "After yesterday's major Social Security and Medicare announcement, today we have to ask (again): Can the U.S. hold onto its AAA credit rating? "

'The US government has had a triple-A credit rating since 1917," answers former US comptroller general and I.O.U.S.A. protagonist David Walker, "but it is unclear how long this will continue to be the case.

In my view, either one of two developments could be enough to cause us to lose our top rating. "'First, while comprehensive healthcare reform is needed, it must not further harm our nation's financial condition. Doing so would send a signal that fiscal prudence is being ignored in the drive to meet societal wants, further mortgaging the country's future. "

'Second, failure by the federal government to create a process that would enable tough spending, tax and budget control choices to be made after we turn the corner on the economy would send a signal that our political system is not up to the task of addressing the large, known and growing structural imbalances confronting us.'

"Of course, we must note that the whole credit rating biz is... well... corrupt. The agencies that are responsible for dishing out sovereign credit ratings (S&P, Fitch and Moody's) are the same ones that left us all out to dry in 2007. (Of course, mortgage-backed securities get a AAA... housing prices never fall!) Rest assured, if Wall Street can buy its way into AAA, Uncle Sam surely can too.

"But even Moody's is starting to hedge its bets. It recently created three subdivisions within its AAA rating: resistant, resilient and vulnerable... a corporate way of saying the good, the bad and the ugly.

While the U.S. isn't in the worst of the bunch, it's certainly not the best." "The market seems to be looking as if this is going to be an average recession, but it's not," said Paul Krugman, Princeton University's Nobel Prize-winning economist. Nouriel Roubini also thinks the forecasts of a recovery are "too optimistic." They're almost certainly right. Krugman goes on to warn that the run-up in stocks can't be justified by the fundamentals: "It looks to me now as if the markets are now pricing in a rapid recovery, that they're pricing in a V-shaped recession, which I consider extremely unlikely."

Let's review: stocks get expensive...then they become cheap. That's just the way it works. Prices go up and down in long cycles. At the top of the cycle, they're very expensive - over 20 times earnings. At the bottom, they're very cheap, under 5 times earnings. At the top of the cycle you might need as many as 43 ounces of gold to buy the Dow stocks.

At the bottom, one or two ounces will do the job. At present, stocks are not cheap. In nominal terms, the Dow is 8 times higher than it was when the bull market began in August 1982. In terms of gold, it takes about 9 ounces today to buy the Dow.

That's a lot less than it took in 1998, when the Dow was 43 times the price of an ounce of gold. But it's a lot more than you find at real bottoms. At the bottom of the cycle in 1982, you could buy the entire Dow for just one ounce of gold. And in terms of P/E ratios, you can buy a few stocks at very low price-to-earnings ratios today, but the majority are still above 15.

When they get down to 5, we'll talk. There being no sign of a bottom in the stock market yet, nor even the seeds of a bottom, we'll adjourn today's session...and guess that the real bottom is still far ahead. Time to sell the rally.

Until tomorrow, Bill Bonner