There is no way an ordinary mortal can know what is really happening now. The best we can know is from watching all markets carefully and thoughtfully. World markets are inundated by continuing massive private liquidations and by government interventions around the globe. Think about it. Governments are on the prowl for banks and other assets to keep everything running in some semblance of normalcy (normality). It's just a normal recession they say. But governments from Japan, China and Russia to Europe, Britain and the US are nationalizing the banks and other "strategic" assets. There are a variety of politically correct terms to describe the takeovers: re-financing or rescue or whatever.
Gold flew up to $900 this week while the dollar gained as well on its trading partners (assuming we all still trade) except for Japan. That means Europe and Britain got rocked after having projected "what me worry" status so long via ECB chief Trichet. It's been apparent for quite some time that this was not just a New York deal. In an inflationary time, all economies are synchronized, unlike what we lived through from the late 1970's to the late 1990's. Measured by the US ETF RSX, the Russian equity markets are down over 80% since May 2008 net of persistent devaluations of the ruble to the dollar. Russia is still far better off, so far, than after the 1998 bankruptcy blowout that helped bring down LTCM.
Is this all just another decennial wipeout after which we resume upward progress? Or is this too much this time? I think the former not because I am a perma-bull or lazy historian, but because inflation should continue in this decade. I caution that this does not mean equities or bonds have to go bullish, only that some aspects of economies and crude goods prices can or should go back up. In other words this should be more like the late 1960's to 1980 for a while yet. Bonds should go down as some recovery takes hold. How could they stay up on Everest after 28 years of gains? With stocks it should be very,very selective. I don't even want to go into it, but government-favored sectors (you know them) and materials should revive somewhat.
But perhaps one should just own the commodities as Jimmy Rogers used to say and Dennis Gartman says recently. Why bet on how well a corporation may do with it all when you can buy gold or copper or agricultural ETF's and coal and uranium ETF's? It's a commodity era not a bond or equity era, and this collapse proves it to this economic Long Wave fan. Forget standard stocks and standard bonds. Look for dividend-paying substitutes for bonds and for capital gains in commodities. Buy some on signficant pullbacks and sell some on significants gains, just like good commodity traders do. (Learn about and thoroughly study US closed end funds, and look at US and Canadian oil and gas royalty trust income stocks.) If you can make 10% per year trading and 6-8% on interest or dividends, welcome to the new market. Unfortunately even if you are retired, you may not be able to sit and hold a "diversified portfolio". On the other hand, would you rather sit in front of a market trading screen or be a greeter at WalMart? Not literally, I hope, but "in concept". Capital preservation and modest goals and risks may require some new skills.