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Have we gone as low as we can go? A Chinese philosopher said, when it's obvious that goals cannot be reached, don't adjust the goals -- adjust the action steps. Global central banks have taken those lessons to heart. The construct of capitalism has changed forever, and investors are spinning from the volatility gripping financial markets. Moves of 20% in major market averages -- session over session -- are tough to stomach regardless of your directional bias.One year ago, when the writing was on the wall as the Dow Jones Industrial Average  probed all-time highs, pundits confidently proclaimed there was clear sailing ahead. Last week, as perception caught up with the daunting reality of debt and derivatives that we've warned of for years, depression was debated across mainstream America. You can't blame folks for being confused. We're past the point where bulls and bears profit or lose. We've entered a new world order, a scary stretch where politicians rewrite history on a daily basis in an attempt to escape the devil of deflation. Last week, when we offered a more constructive stance on a trading basis, the pushback was palpable. In fact, the variant views were consistent with feedback received after previous against-the-grain stances such as shorting crude in May and shifting to 100% cash at the beginning of summer. Nobody is smarter than the market and I've long ago learned that if you don't stay humble, the market will do it for you. What I'll say with confidence is that the tape tends to follow the path of maximum frustration and rarely rewards herds running aimlessly towards a cliff. McCain misstated Obama's position on health care when he claimed people like Wurzelbacher and small businesses would be fined under Obama's health care plan. That's not true. McCain also misstated how Obama's tax plan would affect small businesses. But Obama was wrong when he said all of McCain's television ads have been negative. That's not true. Obama also underplayed his connection to the community organizing group Acorn. Ultimately, McCain didn't do enough to stop people from voting for Obama. Over the course of three debate the Obama campaign met their goal of reassuring the American people that he's ready to serve as president. The only thing that McCain could have done tonight to change the tenor of this campaign was to get under Obama's skin or force him into making an error but that did not happen.

What investors should do now It's time to panic. Okay, now that we've got your attention, let's be clear: We're exaggerating - at least a little. We don't think the financial system is on the verge of collapse. But the complacency exhibited by many market pundits in the wake of the most wrenching episode in modern financial history is sufficiently shocking that it almost demands some scare-tactic response.By our count some 300 articles were published last month telling investors "don't panic" or "not to panic." Urging calm is one thing. But too much soothing talk implies that there are no lessons to be learned. What's the use of a vertigo-inducing bout of market turbulence if the only conclusion is "stay the course"? At the very least, it's a good reminder to take a hard look at your financial plans and to reevaluate how much market risk you can truly withstand in your portfolio. Because - don't panic! - this might not be completely over.Richard Bernstein, the chief investment strategist at Merrill Lynch, worries that investors still don't appreciate the scope of the credit crisis. "It's weird - the canary in the mineshaft has fallen over, and now everyone thinks there's a problem with canaries," says Bernstein, who, despite sounding the alarm about a global credit bubble as far back as 2006, could find himself out of a job after Merrill's forced sale to Bank of America. (Too bad Bernstein's Merrill bosses didn't heed his warnings.) In Bernstein's eyes, the canary is the U.S. mortgage market, but the silent killer of loose credit was an international epidemic. "I don't perceive that most investors fully appreciate either the depth of the credit bubble or how broad-reaching it was in terms of emerging markets and hedge funds and commodities and all these other inflated asset classes that were dependent on easy credit," he says. Here's another reason to be concerned: The professionals managing your money haven't gotten this market right. Consider that at the market low on Sept. 17, only five diversified U.S. equity mutual funds - out of a universe of 9,100 - had positive total returns for the year, according to Morningstar. FIVE! Even after the market rebounded, there were still only three funds with returns this year of 10% or better: Parnassus Small-Cap, Heartland Value Plus, and Forester Value. If you haven't heard of any of those funds, that's the point. The investing world's best and brightest appear to be just as confused as the rest of us. Like Bill Miller. His streak of beating the S&P 500 now a distant memory, the Legg Mason Value Trust manager is down 35% this year. CGM Focus's Ken Heebner, whom Fortune dubbed "America's hottest investor" in June, is down 16%, while FPA Capital's Bob Rodriguez ("the best fund manager of our time," according to our sister magazine Money) is down 3%. So how did the three 10%-plus returners beat the odds? One common thread is that they all stayed away from bank stocks. Beyond that, each went his own way.

Everything's changed now -- for the worse I was wrong. I no longer think we're facing a garden-variety recession. At a minimum, it will last longer than the two quarters I projected on Sept. 30. Economists are now talking about a recession that will last three, four or even five quarters. (Keep some perspective here, please. We're still not looking at anything like the Great Depression. In 1932, the economy contracted by 13% and unemployment hit 24%.) And I don't think we're looking at anything like the hoped-for V-shaped recovery, in which the economy zooms out of the bottom, showing growth of 5% or more. The economy, I believe, is going to crawl off the bottom with growth that's likely to linger at less than the 2.5% the Federal Reserve calls the U.S. economy's noninflationary speed limit.I no longer think this is the typical bear market, not even if your benchmark is the painful one of 1973-74 or the excruciating one of 2000-02. Stocks now face a triple-whammy. First, a slow-growing economy will keep earnings growth depressed from levels investors now regard as customary. That means price-to-earnings ratios will have to come down to something below the historical averages for stocks. Second, the higher interest rates will cut into earnings further as all companies have to pay more to raise capital and as some companies defer expanding production or developing new products completely. In industries where this deferral leads to supply lagging demand, it will also lead to higher inflation, which will push up interest rates. So how should you position a "rethinking everything" portfolio? Begin building the "rethinking everything" portfolio by dividing your stock market assets into four unequal parts.

• Barton Biggs Says U.S. Stock Markets Are `Uninvestable'

How to rescue your retirement  It's rough traveling out there, with the market's twists and turns surprising us daily. But this 5-part road map could lead you through the coming dips and curves. The landscape is changing so quickly that no map can pretend to offer more than momentary accuracy, but even the most rapidly outdated guide can tell us when we've missed a turn. It can separate the minor deviations where a bad or good choice doesn't make much difference from the truly decisive forks in the road. And it can give us a sense of when we have a chance to adjust our course and when we don't have any option but to ride out the route we're on. So where are we? Let me try to give you a financial road map. It breaks down into five stages. Stage 1: In the next month or so, a big rally, Stage 2: The rally fails in early 2009, Stage 3: By mid-2009, pessimism deepens. I know right now it feels like the stock market can't get worse and that investors can't feel more pessimistic. But it can, and they will. The mere fact that so many investors are anticipating a bear market rally announces to me that we haven't hit bottom yet. Investors haven't reached the stage called capitulation, which will finally put the bottom in this bear. Stage 4: In late 2009 and early 2010, the bottom  This time I don't think we'll get a rocket of a recovery off the bottom. The damage to the economy has been too deep. The destruction of trust in the financial markets is too profound. The deleveraging of balance sheets is too big a break on corporate earnings growth. Stage 5: Recovery after 2010. You know what this stage looks like: It's the economy and stock market of the 1990s before the dot-com boom turned into a bubble, or the economy and market before the housing boom turned into a global financial market bust.

Stocks are safe again -- for now Realizing that investors were properly scared out of their wits by the lack of cooperation among governments in an era of intense globalization, U.S. and British finance officials have abandoned half-baked plans to buy bad banks' lousy mortgages at a premium and instead are attacking the problem of solvency and confidence by directly injecting capital into good banks to immunize them against future potential losses and by proposing a blanket guarantee of all deposits, period. The Dow Jones Industrial Average ($INDU) soared more than 900 points Monday. Volume on the New York Stock Exchange tracked around 10-1 positive -- meaning more than 90% of trades were buying shares at a higher price -- as investors recognized this was a very important step forward. The session constituted the sort of "90% upside day" that I suggested in this July 24 column would signal at least an intermediate end to the 2008 slide. And signal that it's time to get back into the market, at least for a while. More on that in a moment. Yet once the market stages a classic retracement rally, we must recognize that still not all will be well in the world: So much personal wealth has been destroyed in recent months -- particularly among people who sold stocks and won't buy them back until they're much higher -- that consumer purchasing power is impaired. Analysts at institutional research firm ISI Group in New York had held out against making a recession call for most of the year but finally gave way a month ago. Now they've gone farther: On Friday, they cut their gross-domestic-product estimate for the fourth quarter to minus 4% for the fourth quarter of 2008 and minus 2% for the first quarter of next year, as they say their company surveys have weakened significantly as credit markets have remained frozen.

Stocks Meredith Whitney loves Meredith Whitney, the über-bearish bank-stock analyst at Oppenheimer & Co., continues to tell clients to steer clear of the financial sector. But Whitney makes one exception: She tells Fortune that she likes the preferred shares of the "strong" U.S. banks - JPMorgan Chase, Bank of America, and Wells Fargo. Whitney isn't the only market sage who prefers preferreds these days. Warren Buffett recently bought $3 billion in preferred stock from General Electric (GE, Fortune 500) and another $5 billion from Goldman Sachs (GS, Fortune 500). What's the attraction? Yield, in a word. Buffett's GE and Goldman shares carry a dividend yield of 10%. While you can't get the same deal he did, the yield on the leading preferred-stock exchange-traded index fund - iShares S&P U.S. Preferred Stock (PFF) - now stands at 11.5%. Best of all, those bond-like yields are not taxed as regular income but at the much lower dividend tax rate (usually either 5% or 15%, depending on your tax bracket). Preferred stock is safer than common shares, but still comes with plenty of risk. In the event of a bankruptcy, preferred shareholders have a higher claim on assets than common stockholders, although that might not be much help in the event of a complete meltdown. The preferred shareholders of Fannie Mae and Freddie Mac are expected to be nearly wiped out. That said, depending on your stomach for risk, this may be a buying opportunity in preferred stock. Sophisticated investors might take Whitney's suggestion and buy the preferred shares of JPMorgan (JPM, Fortune 500), Wells Fargo (WFC, Fortune 500), or Bank of America (BAC, Fortune 500), all three of which recently yielded between 8% and 9%. A more diversified approach would be to buy the iShares ETF, which has exposure to the three names Whitney likes as well as 60 others, including nonfinancials such as miner Freeport McMoRan Copper & Gold and less robust names like Ford.

Inside Details of Sequoia Capital’s Doomsday Meeting With its Companies For the fourth quarter, analysts say companies in the Standard & Poor's 500 Index will earn about $241 billion, the most ever.  ``It's absolutely ridiculous,'' said Nick Sargen, chief investment officer at Fort Washington Investment Advisors in Cincinnati, which oversees $30 billion. ``Analysts are playing catch-up. It's crystal clear that you've got a weaker economy for several quarters. That's inescapable.''  Investors who are expecting a rebound after almost $7 trillion was erased from U.S. equity markets this year may be disappointed as earnings fail to match forecasts. S&P 500 companies that earned less than analysts estimated in the past year dropped 13 times more than the index's average decline, data compiled by Bespoke Investment Group LLC show. Another 56 S&P 500 companies report this week after the index fell 23 percent over eight straight days of declines. The benchmark gauge's 39 percent retreat in 2008 would be the worst since 1937 as banks' losses on mortgage-related investments ballooned to more than $600 billion worldwide. Operating profit at S&P 500 companies fell 7.5 percent last quarter and will jump 28 percent this quarter, led by banks and brokers, according to analysts' estimates compiled by Bloomberg. That would exceed the record $222 billion they earned in the April-June period last year. Six of 10 industries will report record profits or come within 5 percent of all-time highs, according to Wall Street projections, which are usually based on company outlooks. ``The consensus will have to go down significantly,'' said John Praveen, Newark, New Jersey-based chief investment strategist at Prudential International Investments Advisers LLC, a unit of Prudential Financial Inc., which oversees $638 billion. ``The numbers are way too high.''  Any rebound may hinge on whether companies can overcome higher borrowing costs and a slowing economy to meet analyst forecasts that earnings will increase in the fourth quarter for the first time since April to June of 2007.

Oil: Remember Iran? I went tactically long of equities at the end of last week, expecting a sharp bear rally, and Monday's one day move, particularly in Japan (up 14%) and the US (up 11%) was what I might have reasonably expected for this whole week, so I've booked some profits. We're in a period of what veteran investor Barton Biggs has termed 'condensed lunacy'. The speed and scale of moves across asset markets are stunning, and in stocks we have seen nothing like this volatility since the huge swings during the 1929-33 Great Crash. This hasn't been a 'buy and hold' market for a very long time, as evidenced by the appalling returns generated by mutual funds over the last decade. So stepping back from the gut wrenching volatility, what's the big picture? We're still in a huge bear cycle for US equities. I wrote on 24 July that 'we're now probably midway through a structural cycle that may last to 2015 or so. Another way of looking at it is that returns were 'front loaded' during the huge bull market from 1983 to 2000, making the entry point crucial for successful investing'. Indeed, I'd expect the 2002 lows to be tested in the next few months, although with the immediate threat of financial meltdown averted, this rally may get us into the New Year, albeit in choppy fashion. Last Friday looked like an important interim low, although it may be tested. Even in long term bear markets, big rallies lasting weeks and even months are common, and a wise investor will make the most of them and then cash out and sit on the sidelines. It's buy and fold, not buy and hold. Away from the banking mess, it is notable that big mining groups like Rio are now warning of a slowdown in Chinese demand; I warned as long ago as last Spring that China would stumble as their growth model was simply unsustainable. As US consumers retrench dramatically, we now need Chinese and other Asian consumers to take up some of the slack to sustain global growth. Alternatively, China needs to use its huge holdings of US Treasuries held at the Fed to help support the US economy eg by swapping them for MBS and other securities to inject liquidity into financial markets. Otherwise, China will become part of the problem, not the solution. Iran has also fallen off the market's radar screen; back in July, there was probably $25-30 of geopolitical risk premium in the oil price related to Iran/Nigeria, now there's zilch. I correctly identified the investment bubble in oil a few months back and was a seller against the overwhelmingly bullish consensus; now I'm going long crude call options.

Buy American. I Am. A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now. Let me be clear on one point: I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over. A little history here: During the Depression, the Dow hit its low, 41, on July 8, 1932. Economic conditions, though, kept deteriorating until Franklin D. Roosevelt took office in March 1933. By that time, the market had already advanced 30 percent.