Indeed Sheldon. We hope everyone can learn from this experience as they may not have from the 2000-2002 downturn. The markets are NOT the markets of past generation when a Buy&Hold approach and reliance on portfolio rebalancing , asset allocation and diversification are the tools investors are taught to use to manage risk. We have a $3Trillion hedge fund industry running unregulated besides a massive derivatives industry also behind the scenes. Investors need to stay protected with an active risk manager in place for themselves. One that is intelligent - constantly adjusting itself to the stock's behavior and overall market conditions. Setting that optimal exit point so that losses can be kept to a minimum but profits allowed to run is indeed a challenge. It can be done!

Anyone who has spent a decade or so living in Manhattan learned that you made money in the stock market by buying low and selling higher. That is why Wall Street types had bigger apartments, German manufactured autos, and houses in the Hamptons,while most of the rest of us, rented. You make money when you sell, everything else is numbers on a on a screen that can change, for better or worse , for any reason, on any day. The only thing you hold onto in Manhattan is a rent controlled apartment. Everything else is for sale!

Good commentary and sense in all on a general basis. I too, have "crying wolf" for over two years with posts to prove it. However, it is not the end of the world and it's simply a repeat of "laissez faire". In the present, the government was supposed to be here, but it looks like the watchdogs took a long lunch. Seems like humans have short memory and difficult learning curves. Times change, but we don't. Anyone that does not believe - read the biblical account of Moses going up the hill to get the 10 (actually 100's he was a tad P.O'd and broke a lot) commandments. In any case, this has been going on in one form or another for a long time and will happen again.
I am retired, have a lot of time to listen to commentators, Hank Paulson (today), look at world news sites and read what I find here. All in all, everything is bleak,bearish, negative and pessimistic and I have been in this camp for a long time. Times and events change and while not running into optimism, I see hope. Everyone blames housing as the root cause of today's debacle, which is true, but not 100%. The price of fuel is a major secondary and that is coming back to reality - at least at wholesale. If this can get down to retail, things will improve as it will take pressure off the consumer, both for vehicle use and later on the food shelf.
To stay with the intent of the blog and go back to investing, long, short, buy, sell all depend on conditions. Holding long in a fast moving market would be poor judgment and you would probably not make much. Holding solid asset long in unstable conditions could go either way. When I was much, much younger I had a work associate who was much older and a small time investor. He told me that he bought American Nickle in 1935 when money was tight and the stock cheap. He told me that he took a big gamble, but felt he was young and could recover if wrong. I think this was around 1967 when he told me he was going to take an early retirement. His "nickle" stock was around 400,000. The type of conditions that prevail today are ripe for the young and savvy, especially those that also know about legal tax avoidance. I guess this is somewhat like poker - you have to know when to hold em, or fold em.

I agree with all that we need to reexamine constantly the conventional wisdom to see what makes sense currently.

I must disagree with Mr. Lindblad, I don't think the watchdogs were asleep, they were chained up & not permitted to do the job originally intended.

I submit that the root cause for our troubles is leveraging/debt. On all levels, from the Federal Government through the States, from Wall Street to Main Street, Corporations & Individuals; we've all taken on too much debt. When the value of the assets underlying the debt begins to fall, it is far too easy to have all the equity in a position wiped out. & I remember reading that the very same thing happened with margin buying in 1929.

So, how do we fix it?

Dan,

Maybe Mr. n will chime in with your answer...or Beltway Greg...or Al Coholic...or one of my other regulars.

...or just keep reading and I will provide some thought son the subject in a upcoming post.

I like this article Sheldon, it might be the best article you have ever written,(just kidding). As far as my rants against "buy & hold", I was talking about the constant mantra we were always hearing (and still hear) mostly about buying index funds or managed funds that basically track the market. Yes, they paid off greatly for a 20 year span or so, but you can say that about alot of investments if you choose the right 20 year span to go along with it. The idea that buying & holding these funds was or is a risk free way to invest in the stock market just isn't true if you ask me. I think ideas like that are some-what dangerous if enough people believe in them. What I urged people to do was to look at things realistically. And keep an open mind, be willing to listen to those who disagree with the majority opinion if he offers some logical arguments to back up his opinion. Then make up your own mind, realize there is risk in all investment decisions. Don't be afraid to take risks, but be aware that they are there.
As far as fixing some the problems we are facing today, well that's a tough one.
I think the ones who are running the banking industry have to also wake up and look at things realistically, or resign so thay can be replaced by some one who is willing to make some tough choices. They have to look at the loans on their books and re-evaluate them. Keep the good, re-negotiate the bad, and sell the ugly. You will find buyers, you won't get the price you want for them, but, that's life. Call some of your customers who don't have any debt, and have good credit, maybe they would be interested in a real bargain. (and I mean a REAL bargain, not more b.s., we've had enough of that).