We all try to imagine what it was like in 1929 or 1930 but we at best, we may get stories that may be half truths from those that are still around to tell them.  I'm not saying 1929 was easy and the Great Depression was nothing, for crying out loud, it gets capital letters when referenced so it must be serious.  But my point this evening is to use the power of technology to capture the moment.  The Dow was swinging around hundreds of points in a matter of minutes.  People that are casual observers of the market are extremely scared and those who are more than that are getting a nervous twitch.  The market is acting strangely and the world is on edge.  To me, this is not really different than the last bear market that I've personally experienced, although some may beg to differ.  Bear markets are hard. During a bull market you may read a book or two about how capitalizing on a crash is the way to outperform the market.  When the crash hits, buy until you can buy no more and you'll surely outdo the market.  Afterall, the old adage is buy low, sell high and the first part of that equation is buying low.  So if the market crashes, what a great way to buy low, right?  Well, what they fail to mention in these books is that buying low is hard.  This is why the low buyers are rewarded.

As the market plummets hundreds of points, you start to doubt yourself.  I mean if it can fall a few hundred points an hour, surely it can fall a few hundred more, I'll just wait, right?  Well, I did that in the last bear market and lost.  Face it, you're not going to pick a bottom, so if the market it off 20%, 30%, 50%, keep buying your indexes and whatever else according to your plan.  If you don't have a plan, stay the hell out! 

When is it considered a crash?  It always seems obvious after the fact.  While this one wasn't a big and spectacular presentation like 1929 or 1987, we've lost almost 20% on the Dow in just a week.  This is certainly low.  What happens if we go lower?  Buy some more.  Just because you want to buy that doesn't mean to go all in.  And if you're going to buy, diversify ... grab indexes, not individual companies.  Like my hero Roger says, "how many companies go to 0? ... how many indexes go to 0?"

Of course, my standard disclaimer applies.  This is not a recommendation.  Do not put money in the market that is money you'll need in the next 10 years.  It's one of those things that if the market goes down 1000 points tomorrow, you'll say "ah well, let me put in some more and average out".  If you can't say that, then put that money in the bank.  Period.  As most are realizing (too late), this is not for the weak or faint of heart.  You're being introduced to risk first hand, which has been awfully quiet for the last few years.  If this is your first bear market, get used to it.

I'm in line to have a nickel thrown my way every time I hear "this time it's different".  The was the case during the last bear and this one has been no exception. Before you get in the "this time it's different" camp (and end up owing me a nickel), please consider this article at Seeking Alpha.

There's Light At the End of the Tunnel

Not another gambling vs. the market thread.  <sigh>.  Actually I have a point to make and I'm actually in favor of the market over gambling (most people think they're one in the same).  There have been a few people in my life who enjoy gambling and some even think they have an edge.  Most of the time this involves roulette where the person doesn't understand that each spin of the wheel is independent and has no memory of the previous spin.  Here's where the market is different.  The market has a memory of yesterday which is why it doesn't go between 0 and infinity each day.  The second item is that the market has a bias towards the upside, long term, otherwise there would be no market. Folks, this is your edge.

So why is it that people will double down on red after 5 black spins, but when the market has 5 down days they're picking up their chips and walking away?  This is your opportunity to get in at a better price to actually beat the market over the long term.  This is also why most investors underperform as a little volatility shakes their confidence, they sell low and buy at a higher price later.

And for the record, I have to be near the most boring person to take to Vegas.  I hate losing money (which is why I feel this pain just as much as anyone), but in Vegas there is a greater probability that I won't get it back than in the market.  So you'll find me over by the penny slots killing time while you have fun at the blackjack table.

I believe that the market will reward us for our risk taken when its ready and I think that reward will beat a room comp at a Vegas hotel.

Here's where I do agree with the casinos and the market, only put in what you can afford to lose.  Never should food, clothes or shelter money be in the market. And if your timeframe is short (less than 5 or even 10 years), you should not be in the market or you should've had a significant hedge in place to prevent serious losses.

Is this the time for you to get in?  I don't have a clue, it depends on you.  I have less cash now than I've had in quite some time.  I have more arriving from risk free accounts as my plan has been all along has been to go "all in" in the event of a crash.  It may have taken 5 days instead of 1, but we're down over 20% which constitutes a crash in my book.  But that's just me following the plan I put in place years ago.  Is it a good plan?  If the Dow goes to 0, clearly not.  Is it a plan for everyone, clearly not.  My first bear market, I had no plan and lost my ass.  If this is your first bear, I think you should sideline yourself and watch the events unfold in real time.  Think of it as running a backtest and seeing a bear market from a numbers perspective (looks harmless, like seeing the '87 crash on a 50 year chart of the Dow).  Then you take your backtested system and start to run it for the first time with real data during market hours.  Seeing the system perform in real time is quite different (psychologically) than looking at backtested results.  So watch your "system" in simulated mode this go around.  If you're less than 60 years old, I can pretty much assure you that this isn't the last bear market you'll be participating in.  If you're older than 60, I hope you're not exposed to market risk that could sink you and you're sitting back sipping an adult beverage watching this go by.

Be careful out there.