All Market Theories are now toast

Everything theory you every learned about how markets operate - ex. Portfolio theory - just throw it out in the garbage and set the can on fire.

Nothing right now is operating based on these 'tested' market theories. The last 10 years worth of gains in the markets have been eviscerated in the past 4 months.

They always say "Past performance does not guarantee future results." We have all become the proverbial Turkey on a Turkey Farm. For a thousand days in a Turkey's life, the Turkey is kept well fed by the farmer and is looked after by him. If you asked that Turkey what the next day will bring, the turkey will tell you that tomorrow will be like any other day. He's not going to expect the farmer who fed him well and took care of him for his entire life to off his head.

Markets are supposed to act rationally. Bullshit. Markets are behavioral, and people aren't rational. We had irrational exuberance at one time and now we have irrational pessimism. Markets are a collection of financial transactions of a common unit of trade that are transacted by people like you and me. When one person sells, someone else needs to buy. If one individual gets jittery and dumps a lot of shares, everyone else starts questioning it. The price may tick slightly downwards - "what information does that person have that we don't?" Others may become paranoid and follow suit. Some others may say, "these guys are nuts" and buy. Others will think to themselves, "ok the stock went up a little, time for me to bail now." The stock drops, some people may decide that "oh my gosh, I better cut my losses now" or "this drop is temporary, better pick up some bargains now." And so the stock swings wildly. In this market, there's a lot of this activity going on - trading based on a collection of individual whims - and it results in unprecedented volatility. Right now paranoia is winning - a lot of people couldn't handle the uncertainty and decided to bail on a whole slew of equities.

One golden rule I follow is that stocks can generally lose value faster than it can make it up. So trading on a day to day basis is generally not advised - you have to wait quite a while before you get a shot at making money. Not only that, you expose yourself to a time period of extreme volatility which the stock can lose value faster than it can make it up.

Another golden rule of mine - equities which do not pay a dividend are worthless (about 90% of firms). At some point, that company's business will cycle and it will lose enterprise value. It would have never provided you with any sort of return - in fact, all you got in exchange for your hard earned dollars is a piece of paper saying that you own a part of XYZ company that provides you with no value until you sell it to some other unfortunate individual.

I'm quite sure that the market is going to make up its losses in the next couple of years, but these kinds of events will occur and they will wipe out larges sums in portfolio values at some point in your life - whether it's 10, 20, 30 + years - we're going to face another one of these "unprecedented" events. All it takes is one catastrophic collapse in the market and your toast. And given your time frame, there's plenty of opportunities for this to occur.

After stock values recover (if they do*) and I get to the point where everything is break even or slightly higher, I'm bailing on everything equity based and no longer investing in this phantom market. Basing your retirement on a market based upon people's whims is not a strategy and it is not option.

*There have been cases in history which entire markets have collapsed and never recovered.