That was the title in the Globe and Mail today.  Here is an eye-opening quote from the article:

"The market is finally starting to wake up to some realities out there," said Murray Leith, director of research at investment adviser Odlum Brown Ltd. in Vancouver. "The rest of the world is not going to decouple from the United States," which is likely headed for recession, he said.

According to the article, the drop in global markets dealt Canadian stocks their biggest one-day blow since 9/11.  Almost every stock across the board got creamed - it wasn't pretty.  My portfolio is getting annihilated as well.

Many StokBloggers have been wondering what's going on, whether the bloodbath will ever end, and whether any of us are buying.  Let me try to answer these questions here.

For me, I am almost getting squirmish myself.  Obviously I don't like seeing my stocks getting hammered 60% and it makes me question whether any of my valuations and analysis are correct.  Obviously I wish I had not committed so much of my funds to the market because the prices available today are fantastic.  But you never know what's going to happen in the markets so you do the best you can with the information you have at the time and accept the risks of the current situation.  Again I would like to point out that if you are in Canadian equities, especially commodities, and are getting crushed, it is not just you, but all of the best 5-year and 10-year funds are down by just as much.  This is called volatility.

For this reason, and my belief that I am in stocks that will be materially higher over the next few years, I am not going to sell.  The only exception is that I might switch a few positions as some of the best names, such as Oilexo (OIL.TO), are now being given away.

Why are the markets falling?  Well obviously the fears of the U.S. recession is the big one.  The liquidity crunch is another.  In Canada some people also think that the commodities boom might be over.  I believe that might be true for base metals, but my research tells me that oil, uranium, natural gas, and gold have a long ways to go.  Another major contributor to the volatility is margin calls.  Whenever we have days like today, those with extended amounts of margin are forced to sell which worsens the problem.  I know because that happened to one of my friends today.  Now imagine that happening to the big hedge funds with too much leverage.

I am grateful I de-margined myself and have a chunk of cash left.  As I said above, since I am not yet squirmish, I am waiting until there is absolute panic.  A few more days or weeks like today should do it.  With the cash, I will be buying energy (oil, natural gas, and uranium) and gold stocks and mutual funds.  Meanwhile, I am trying to stay calm and keep busy with life since everyone else is panicking and selling their stocks which is the wrong thing to do.