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As I write this on February 24, 2009, the DOW is sitting at a 12-year low of 7,200 and predictions from the brainiacs on CNBC are that it will go into a free-fall to 6,000 before it's all said and done.   But I'm not selling, I'm buying - slowly, a little bit at time.  Because if I've learned anything, it's that none of these talking heads knows for sure what's going to happen.  So I use a different barometer to make investment decisions.  My barometer leads me to believe gold must be nearing a bubble, and stocks must be nearing their lows.   What makes me think so? 

I just saw a TV commercial telling investors to sell their stocks and buy gold coins.    Whenever I see that kind of hype, I know the opposite must be true - because small investors are "the last to get the memo".  By the time the mainstream media has picked up on something, it's too late.  Unfortunately this causes the bulk of small investors, who do limited research on their own, to act on greed when markets are going up, and fear when they're headed down.  Panic-selling - or greed buying - is never a good idea.  I have always stuck with Warren Buffett's motto to "be fearful when others are greedy and greedy when others are fearful".  Right now, greed is in gold, fear is in stocks. 
 
True, the market can indeed fall to 6,000 - but the likelihood of the market coming back to where it is today is relatively high.  It may indeed take many years for it to get back to the highs of 2007 - but that's a sunk cost - those profits are gone for now.  Rationally you need to forget about where the market was, and think only about where it is now.  Selling now because we feel bad about not taking yesterday's profits leads to selling at the worst time.  Buying gold now after it's run-up is going to make someone rich - but it likely won't be you, because you won't know when to sell it before it's inevitable ride downwards.  In fact, many of the smartest investors in gold are taking their profits now, as they see smaller investors piling in. They're thinking: yes, gold can indeed go higher - but for how long?  They know they can't time the top and that  the price is being driven by fear, as there is little real economic value to gold.  So they're taking their profits and reinvesting in high-quality companies that have been pounded, as well as oil and energy stocks while energy prices are low.
 
Investing takes an iron stomach in markets like these.  If you aren't sure where to turn, make sure it isn't the TV or magazines touting the headline of the moment.   I like websites The Motley Fool (www.fool.com) and Seeking Alpha (www.seekingalpha.com) as they don't buy into hype.  I find The Motley Fool a calming influence, reminding investors that money is made in markets like these, by buying great companies on the cheap.   Please don't panic and don't rush for the exits now, when the market is at 12-year lows.  If you didn't know to sell in October 2007, it's doubtful you'll be able to time the ride back up.