As nerdy as it is, I over think my retirement account. I'm of the opinion that since my investment horizon is 25 more years, the items I purchase now during the downturn are probably important to my overall gains. I'm not really excited about taking breakeven positions and riding them down and back up again until I'm 67.
So I'm going to set my bets with Prock, and assume we're bottoming out the Dow at 7,000. Various bears have predicted recession through 2010, unemployment topping out at 10%, and housing prices to drop another 20%. As a reference, unemployment during the Great Depression hit 25%.
We won't fully "re-leverage" for several more years after that, if not over a decade. The total purchasing power of the consumer is going to be dampened because of the lack of available credit, and that will be a drag on every business (and their revenues and stock price) as well.
So it's time to accumulate cash. I've got limit orders to fire on anything that rises high enough to be break even to where I bought it originally (believe it or not I had a bond fund that just did that) and I've turned off automatic purchases. In another 800-1000 points of Dow losses, I'm going to start bargain hunting. I don't need to buy at the bottom (I know the fallacy of market timing), I just want to catch it within 5-8% or so. I'll let the 25 year time horizon correct any mistake I make about not psychically timing the absolute bottom.
