Navigating today’s sinking market

What happened

The Dow Jones Industrial Average dropped 427 points Wednesday, closing below 8,000 for the first time since 2003. The selloff was attributed to a record drop in consumer prices last month, raising the specter of deflation, and to another decline in home building. (The New York Times)

What the commentators said

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Falling prices are generally good for consumers, said Ben Steverman in BusinessWeek online, just not consumers of stocks—deflation sends stock prices drifting downward, too. So investors used to worrying about inflation “need to adjust to a new reality.” One facet of that reality is that “with prices falling, bond yields offer a safe return that easily beats inflation.”

That’s not bad investment advice now, said Steve Kerch in MarketWatch, but it’s also pretty good advice for the long term. The "bill of goods” we’ve been sold from Wall Street that any good “nest egg” rests in a high percentage of equities isn’t so sound. Investors who put half their retirement savings in bonds don’t come out too much behind heavy-stock investors, and they sleep much better.

“Great investors” get their cues from the market, said Andy Kessler in The Wall Street Journal, but it might be a good idea to “stick wax in your ears and don’t listen to the market until February.” The market can be a lot of things—a “great manipulator,” say, or a “bold-faced liar”—but until January’s gone, one thing it won’t be is a “good indicator” of where to invest.