I am still 85% invested in stocks and mutual funds, and still believe in the long run. The long term record of the stock market says to do so.

I believe the stock market will find its bottom in the coming months and hold its value if not resume its advance in the intermediate term. The Dow average will likely find technical support at the 200 day moving average (Dow 11800), though could slice through this support into a selling climax.

A caveat here is the direction of interest rates. Should the discount rate continue to be increased, that could tip us into a bear market. Many a bull market has been stymied by a series of discount rate increases, though it often affects the market with the time lag. A series of discount rate decreases would be extremely constructive. In general our market has been very resilient over the last series of incremental interest rate increases.

Many people are pointing to a "debacle" in sub prime mortgage loans as a possible threat to the banking system and to our stock market. You may recall the savings and loan crisis which reverberated through our banking system and stock market in the late 1980's and early 1990's. This crisis was portrayed by bank failures, plummeting bank share prices, and a real estate collapse. This was enough to cause a general bear market, punctuated by Saddam Hussein's invasion of Kuwait. The factor of today's sub prime lending and the "crisis" mentality which is being daily discussed on financial television everyday is just not enough, in my opinion, to bring the system down. The only thing that could affect the economy and equities would be for the authorities to starve the system of providing mortgage money to potential borrowers - in other words, a credit crunch.

All the fishing for stock market direction aside, the stock market has been a wealth building machine since the depths of the Great Depression. Super bull markets may last as long as two decades, followed by periods of sideways to down markets. This is plenty of time to make money in good stocks, or to hold mutual funds through thick and thin in order to create your own wealth.

I describe my method of investing in stocks in my e-book, A Way to Wealth - The Art of Investing in Common Stocks.

These and other readers can read my article, Hedge Funds - Derivatives - Debt - China and the Risk of Systemic Market Panic, to gain insight into what systemic event could cause stocks to surrender their investment value.

About the Author

John Reizner was first exposed to financial markets when he started reading the stock quotes out of the newspaper to his businessman grandfather, who was legally blind, when he was about ten. Papa always told him: "Buy Triple A" (the best stocks). Later, John studied economics at both Vassar College and Columbia University, where he became intrigued by the link between psychology and economic theory. His current e-book, A Way to Wealth - the Art of Investing in Common Stocks, is available at his website, http://www.ReiznersWay.com.

This article contains the opinions and ideas of its author and is designed to provide useful information to the reader on the subject matter covered. The author may or may not have current positions in the investments mentioned in this work, and the author may from time to time make investments in a manner that is not described here. Past performance is no guarantee or prediction of future results and any investments made, based on the opinions and ideas contained in this work, may or may not be successful. The strategies contained herein may not be suitable for every situation, and the author is not engaged in rendering legal, accounting, investment advisory or other professional services.