But this decline hasn’t been your garden-variety bear market. Instead, it’s been a nasty, sometimes frightening, relentless move lower in equities, one that will be remembered for generations to come. Investing habits for many people will change for the remainder of their lives. Many will be forced to work well beyond their planned retirement age, sometimes at jobs they wouldn’t generally desire. The rebuilding of the banking, insurance, auto and other industries may take well over a decade as well.

There may be many cyclical markets lasting anywhere between 6 to 24 months along the way, market moves I fully intend to participate in. But my expectation as it regards the time required to repair the economic problem is that it will be a “Long and Winding Road” - or for me, “When I’m Sixty Four” (I’m currently 49).

Dear Prudence

• STOCKS
• RELATED ARTICLES
• ALSO BY...

SEARCH:

Dear Prudence, won't you come out to play
Dear Prudence, greet the brand new day
The sun is up, the sky is blue
It's beautiful and so are you

Prudence—the state, quality, or fact of being prudent. Careful management; economy.—American Heritage Dictionary.

If ever there were a song whose lyrics should have been sent to the bankers that cooked up esoteric instruments and the institutional investors that happily bought that overpriced, illiquid, hard-to-digest garbage, this is the one.

We all know that markets and the world’s economies operate fully within the confines of those 2 hideous emotions: fear and greed. Unfortunately, I don’t come across the word “prudence” on Wall Street as much as I’d like. What I do hear is how poorly they’re doing, how much capital they need, how their company’s balance sheet has imploded, and how much pity I should feel for them. The only pity I feel is for their customers.

So where has Prudence gone? Out the window. I recall being told by a senior executive at a brokerage firm I worked for in the early 1990s: Be sure that every investment you helped place in an investor’s portfolio passes the New York Times Test -- that is, would it look good on Page 1 of the New York Times?

Imagine, dear Prudence, if any of the securities and loans cooked up over the past several years would look good there. Hardly; indeed, I’d look for them in the obituary section. And the counterparty that got you into this mess in the first place can be found on Death Row - but with their hands out for more of our money.