The long-held (and correct) view of this newsletter – right up until the market’s collapse from mid-September on – was that the credit crisis was essentially a financial event, and that the broad economy, housing excepted, had yet to hear of it.

This material is loosely adapted from my forthcoming book, Behavioral Investment Counseling. Bits and pieces of this material have certainly appeared, explicitly and implicitly, in this newsletter over the years, and will not be unfamiliar to longtime readers.

It is a season of mounting hysteria at both ends of the political spectrum. The new administration invoked the specter of an irreversible economic cataclysm if its stimulus bill were not passed, while the right predicted, with equal fervor, a cosmic economic disaster if the bill did pass.

Let us begin with a statement of the obvious: other than as a reserve for emergencies, cash is an irrational long-term holding in the portfolio of the long-term investor.