During the 1987 stock market crash, the Dow fell 22% in a single day. Although it is down over 40% since its highest level, in October, 2007, that market index has so far not had this big a daily drop since that frightening day 21 years ago. And within a year or two after its seemingly cataclysmic 1987 fall, stocks had rallied well enough that investors who had kept their cool were not just back to where they were before, but making real profits on the bargains the plummeting market had created.
So now, the question is not whether we should be (or have been) in or out of the market. If one has already sustained major drops in principal, it is certainly too late to be completely out, safely instead in Treasuries or money market funds, CDs, and the like. To sell at this point would simply lock in those losses.
Rather, the issues might be whether or not the system as a whole is vulnerable to collapse and if that matters. Many smart financial types on both traditional sides of the U.S. political aisle have been warning for weeks now that we are indeed in a situation in which our entire financial system is vulnerable. They hope the measures already taken and in the offing by the current administration and Congress will prove to have been sufficient to forestall a collapse of our economy and of ways of handling and dealing with monetary exchange. Some may consider this hyperbole. I was one of them at first. But when even the savviest among our financial gurus are singing the same tune, it may behoove us to listen.
Still, if one accepts that most everything monetary may soon come crashing down around us due to excessive debt, lack of adequate liquidity or credit, the housing bubble collapse, "swaps," whatever those are, and derivative bets, on future outcomes of money fluctuations, that are leveraged against real money at the rate of 40 or more to one, deflation, the potential devaluation of the dollar, and/or hyper-inflation, or the unwillingness in future of third world countries, such as our Chinese Communist friends, to keep propping up our huge indebtedness (debt being lately our biggest export) with new investments in U.S. bonds, what possible meaning does that have in terms of an individual investor's plan of action?