September 23, 2008 - Everything is changing. Much of what used to be is gone. Wall Street firms are no more, morphed into banks or simply disappeared. It feels like the end of an era. And so it is.

It's like everything is suspended, caught in a time warp, waiting for something or someone to move the economy forward. Suspended animation, as it were, where investors are frozen, watching but unable to decide what to do next, afraid to buy anything, unable to sell most investments because of low valuations. What should investors do?

Get back to the basics. While the whole worlds seems to be ending, it isn't. Some proof: huge stock buybacks from companies like Nike ($5 billion worth), Hewlett Packard ($8 billion) and Microsoft ($40 billion ) (for a complete list of current buybacks, click here. These companies are thriving, not just surviving. And some of the banks, most notably Wells Fargo and Bank of America are well above their low points (like 81% up for BAC and 75% up for WFC). If the banking world were going down for the last time, these stocks would be hitting new lows. So give up on the idea that armageddon is here or coming any time soon.

The basics, the essence, of investing gets down to earnings. It's what you own as a stockholder: the future flow of earnings. If you do strong due diligence on a stock and find one that has increased earnings every year (especially in the last one), you've got the best chance of doing well in this difficult environment. After all, every investor wants stocks that go up, and stocks with increasing earnings go up. If you've discovered some that are bargain priced right now because of current economic troubles, you'll be well rewarded when some of the above questions are answered and animation is no longer suspended. Not all questions will ever be answered until events run their course, but when some of them are, the stock market will move higher (assuming the answers are good).

Fear and greed run the market. There's no question what's gripping investors now. In fact, it would be hard to find a greedy investor, except maybe Warren Buffett who is reported to have turned greedy after years of fear. That doesn't mean you should get greedy (ever), but it may suggest that getting more involved in the stock market rather than less will be a smart move. Buying fewer shares than you normally would of the best stocks, establishing initial positions, then adding to them if further erosions occur, may be a strategy that will pay handsomely when the market turns for good.

And that's another question: when will the market actually turn around and start heading higher? Again, no one can tell. But remember the stock market looks ahead by at least 6 to 9 months. It's not focused on the now. An upward trend will return well in advance of any real news that underpins it. Indications of better home sales, higher retail sales, more car sales, and stronger general economic data will be reported long after the market has moved ahead. When that is, no one knows, but it will happen. It has ever since the Dow Jones Average started in the late 1890's.

Yes, these are the worst times since the depression. They are very unsettling, disturbing, stressful. But they will pass. Just don't expect anyone to tell you when or how. Those are still works in progress. Caution is the best approach. To do nothing or to make fearful decisions aren't the best options. In fact, they're most likely the worst.

- Ted Allrich