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?

But what, then, should one DO? Well, the unsettling answer I have come up with is that, aside from stocking up the way people do before a hurricane, there is not a whole lot one can do that would be effective. Buy real estate or gold? How would one use that to pay for groceries after a system of exchange has collapsed?

So what we may be left with is that, in the event of such a systemic failure we are going to be dependent on a lot of other scared, confused people being relatively nice to one another till a new system is up and running. Perhaps the new one will look something like the old, except be less efficient or cost effective and have a lot more government involvement and regulation (be a lot more socialized).

My point, then, is that forces well beyond each of us individually will determine whether we make it through this crisis and how best later to deal with things if the system comes crumbling down. I personally doubt, now that Congress and the Administration are doing what they can to avoid a new Great Depression, that we are in for that kind of fate. But even if I am wrong about that, since I do not know what as a practical matter I can do about it beforehand, I may just as well assume all will be well and go on with my life.

And in THAT case, if the system is assumed to be alright or at least sound enough that it will be sustained by the measures now being taken, then the next question is what difference does it make that the market is now down over 40% from its highs? If I have a well allocated portfolio with little or no margin debt and do not have to use my nest egg right away - and if I did, I should not have been in the stock market in the first place - then the only significant difference, except perhaps to my ego and its ability to inflate itself further by pointing at a fat stash of equity goodies, as if to show how brilliant it was before the bear market showed how full of hubris that was, is that now there are oodles of great stock bargains available in the marketplace and, wonder of wonders, this is just the kind of time to gradually reallocate one's portfolio out of more stable bonds or reserves and into stocks or stock mutual funds.

The biggest fear folks seem to have about getting into a falling market is that they will just be using up precious reserves putting good money after bad, and so getting nothing out of it but red ink. So I say: "Forget about the market price!" Do not think about it at all, except maybe for the limit at which to place a buy order.

First, find out the per share book value of each of your holdings, multiply by your number of shares held, and add them all up. That is your equity portfolio total book value. Say it is $25,000 now - or $1,000, $10,000, $100,000... whatever it is. Set yourself a target of 5%, 10%, or 12% or... (whatever is consistent with your situation) higher by a year from now. I find it easiest to calculate book value targets from the end of one year to end of the next. Set yourself a reasonable rate of compounded increase in book value, based on your or your family's income and expenses, and then just stick with that, regardless of what crazy gyrations the market is up to.

The great thing about a really aggressive bear market is that it creates all these marvelous book value bargains. If a good company has a price to book value of .8 or below, a well funded dividend, and some earnings, it is almost like found money! And if it is that low, it means it only takes $4 of your hard earned cash to buy $5 or more of book value. In some cases, one can even buy $2 worth of value for $1 of your cash. That hardly seems fair, but it is quite legal and will help immensely in one's goal of raising the total book value level by year's end. Thus, as times are getting hard for the stock market as a whole, they are making it easier and easier for you to attain your end of year book value target.

I sound like one of those late night infomercials, but it is true. One can just ignore the general market and go for something more objective, like book value. An especially neat thing is that, on average, once the market sorts itself out and slowly or swiftly starts to head up again, market prices (at least since World War II) tend to average about twice the per share book value. So, if your book value nest egg goes up $5000 by year's end, it could very well represent eventual gains of $10,000 in your portfolio.

Happy investing! These are the kind of market conditions that historically have helped folks like Ben Graham, John Templeton, Warren Buffett, or Charlie Munger get rich.

(*Stats are effective before market trading on 10/20/08. As always, it is recommended that, in advance of purchasing any security, one do one's own due diligence research and/or consult a trusted financial advisor.)

(Disclosure statement: Larry and Val have holdings in some of the suggested assets but do not "make a market" in any of them and do not derive any direct benefit from recommending them, except perhaps for a bit of smug self-satisfaction.)