I deduct 1 from my score for GMO's Jeremy Grantham new Q3 column for gratuitously mixed metaphors in its title -- "Reaping the Whirlwind" -- but it is still typically incisive and thought-provoking, so let's give it at an 7.5/10 overall. The gist: Stocks are newly relatively cheap, and he is buying slowly, even if he thinks he is early and we are likely to see lower lows.

His outlier issues to keep in mind:

1. China, which Grantham worries, like me, is an economic time-bomb waiting to go off.
2. The three most important equity bubbles of the 20th century all overshot price trends by at least 50%. While Grantham doesn't think that will happen this time, he does think there are  believable scenarios where we could see S&P 800, or worse.

More here.

My take: Grantham is self-confessedly an atrocious market timer, so keep that in mind. Second, I'll take gentle issue with his comment that the S&P is cheap, even relatively speaking. Let's just say it's not as expensive, but that's about it -- and things could get much worse if earnings really fall out of bed over the few quarters. More broadly, in the absence of solving the consumer balance sheet problem, and with most major economies falling into recession at once, Mr. Market has to do some darn good fortune-telling to see what the other side looks like.

On the other side, I notice that Grantham is being pilloried on some email lists as newly a sell-out now that he's no longer (seemingly) stumping for the financial apocalypse. That should give you pause for concern that maybe the bears have, at least temporarily, overdone things. And relatedly, I have had umpteen recent emails from people critical of fellow Grantham-ian bear Roubini, who is newly being accused of being too bullish. When people are calling Roubini too bullish, and saying Granthan is a sell-out to long side, something important is going on out there.

Let's count some market bears recently turned bullish. Granted, not all the bears are of the perma- variant, and their bullishness is considerably more nuanced than the fevered pom-pom shaking  you hear from the perma-bull side. Nevertheless, here are a few notable market bears that have turned bullish in the last two weeks or so:

• Jeremy Grantham
• Doug Kass
• Barry Ritholtz

No sign of Peter Schiff, David Tice, Michael Panzner, etc., but that admittedly may require considerably more than a mere 40+% year-over-year decline, plus a few major banks and brokers going down, etc.

Feel free to add to the list.

[Update] More names in the comments here, and another name suggested via email is Ned Davis.

This is my favorite email bounce-back of the day. It came from a well-known U.S. economist:

Due to the national economic crisis, neither my assistant nor I can respond to all the inquiries I receive.  We will do our best to respond, but regret that time constraints do not allow responses to everyone from the news media or the general public.

Now and then I like to post an update on the mad post-bailout machinations in currency markets, so here is a quick look. It is still a tale of pain against the U.S. dollar for everything but the Japanese yen, and even it has flattened out a little of late.

[via Pacific]

Markets pounded higher today as investors declared the credit crisis over, and as bears decided more or less en masse this was a buyable low, whether tradable or longer-term. They have proved themselves right, as there is no arguing with the market's move.

How much of a surprise should this be? As I have said a few times here, assuming a rescue package went through, selling would likely create a short-term low from which markets could easily trade double-digits higher. After all, it's only a credit crisis plus a horrible recession, so get rid of the credit crisis and all you've got is the worst recession in decades. That has to be a recipe for a relief rally, even if I remain convinced that we end up churning away for months as the market tries to figure out how bad this downturn is likely to be.

Anyway, here are the gains from the recent lows, both intraday and at the close:

These are staggering numbers. The Dow is now up almost 20% from its lows of a little more than a week ago, and the S&P isn't far behind. The Nasdaq is lagging, at least in terms of the price increase from its lowest close, but it is still doing a moonshot from its "end is nigh" lows.

Let's look at what helped drive things higher today, the overnight Libor. Here, via Bloomberg, the last three months of the overnight U.S.-dollar Libor, which shows that after spiking to almost 7%, it has now fallen to 1.5%, an incredible tumble. A few terra-dollars of Fed/Treasury support, plus backstops, and credit markets are loosening up indeed.

Some data sure to win you bar bets in this chart of first-half 2008 housing price declines. Who, for example, would have guessed that the U.S. was mid-pack, with Canada, among others seeing larger annualized tumbles in 2008?

IMAGE REMOVED

More here.