Don't jump off the roller-coaster.

A friend called me yesterday, a little panicked about the market's sudden plunge on the news that the bailout was defeated in the vote.  He wanted to know what was going on.  I told him that I thought it was nothing more than fear overriding greed: that half of those who sold sold on the expectation (and fear) that the bailout would pass, and that they'd lose money as the government started seizing more and more companies; and the other half are those who sold when the bailout failed, certain that the economy was going to completely collapse.

Well, today, the market was back up, and with a vengeance.  The Dow dropped over 700 points (roughly 7%) yesterday, but was up by nearly 500 points (roughly 4.5%, more than half of yesterday's loss) today.  Those who sold yesterday lost a lot of money.  If they'd had the intestinal fortitude to leave their money where it was, the market wouldn't have dropped, and fewer would have been hurt as bad financially.

There's a folk tale out there that, one day when Wal-Mart dropped severely in the market, a reporter asked Sam Walton how he felt about losing that much money.  His reply was that he hadn't lost any money, despite the stock dropping, because he didn't sell.  

The moral of the story is that we shouldn't be afraid.  Though it doesn't look like it now, the fundamentals of the economy really are sound--just let them work.  The average investor is terrified, though, because of the atmosphere of terror in the government, media, and on Wall Street.  They're forgetting the safety rules of riding roller-coasters: tighten the belt, hang on, and don't try jumping off because you're scared, because that's when you'll get hurt.