A chimp can do no worse

That was the conclusion a friend and I had reached today in predicting what the economy and the stock market will be like in the coming years ahead.

So far I have not found strong consensus from the "experts" on a bottom..

1. Harry S Dent on Fox News who predicted the Japan crash in the 1990s thinks a Great Depression is coming. I thought the link to demographics is an interesting perspective.
   
2. Itulip recommends gold and short term T-bills until things stabilize (although the price of gold today vs last month seems to point that it is not a good hedge against the stock market). We are already worse than dot com and could be half way to Great Depression losses.
   
3. Not all doom and gloom. Niall Fergusson believes that this isn’t the end of the US but more likely an opportunity for the US.

I'm really tempted to break from discipline and reallocate majority of of our 401K holdings to bonds now. It's not an easy thing to decide since I know that missing key "up days" hurts long term performance and at the same timem long term charts of the indexes reveal plenty of head fakes. Today's drop is really testing my belief in buying and holding for the long term. I think what scares me right now is that the US indexes will follow the behavior of the Nikkei 225. 19 years after the crash of 1990, and it has not recovered from it's peak. I am still trying to understand the similarities and differences (if any) between the Japanese government response and it's effects back in the 90s vs US government response today.

Edit 3/3/09: Today, I was looking at the historic S&P 500 P/E . I think the historic PE for S&P 500 is around 10? And from the chart , the average P/E during a recession is around 5-8. Right now S&P500 PE is around 12. So to get to 8, S&P500 would need to go to 450-500 level. So it would not surprise me if the indexes fell even further before coming back up. As to when, is anyone's guess (including a chimp).