Keep in mind that there is a relationship between the prices of most things, especially in a “free market” economy.  I have noticed that over the years that there is a close relationship between a gallon of milk, a gallon of gas, a dozen eggs and a barrel of oil.  And it is those relationships which are the most profound in terms of how we all will live out our individual lives.  Of course, it is painful to watch as your 401K sinks, but keep in mind that you are very likely, even today, to have more in that 401K than you actually invested there.  If you do, then be very careful about changing it around too quickly.  Remember the “market break” of Oct 19, 1987 (they, the SEC, didn’t want to call it a “crash”) the DJI dropped 500 points in one day and about 20+ percent in a few weeks, and then came back to pre “market break” levels in just a couple of months.

Will the DJI come back in a couple of months this time?  Probably not.  It went up about 7000 points in 60 months, it took 60 years to get the first 7000 points so it didn’t really make sense to be at 14000.  A lot of froth, stirred up mostly by the “players” and hopefully this correction will bag the players most severely.  Added to the mix is the fact that this time the situation is complicated by the “credit crunch” ( a subject for another treatise, but for now, just recognize that your banker is probably not any smarter than you and I are. Yeah, I know, she, or he, has an MBA, but that only means she knows how to get an MBA.)

The equities and debt issues markets will likely provide reasonable returns and yields over the next couple of years, but nothing to fantasize about, especially in the short term. 

The preceeding is an excerpt from the series "From The Mouth of a Old War Horse"
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