"As far as I can see things could be a lot worse than they are right now"
We can all see that things could be a lot worse, but if we think that is going to happen then not selling out is foolish.
I am still thinking there will be a bounce this year.
The US Fed's money markets "operation twist" is ending in December 2012 and I understand they will then commence an additional treasury bond purchases program of $40 billion/month. Perhaps that will finally generate some inflation around the world, especially in China and India to make holding gold there more attractive (in addition to causing some more social instability in third world countries as living standards fall).
If they can generate some inflation while keeping real interest negative in the US and so long as Europe does not implode, then perhaps equities can hold their ground or even rise. That would be good for gold and goldies. The alternative would be falling asset prices which the US Fed fears. Greenspan says that the Fed is targetting the US share market, and not just inflation and unemployment.
So the only reason for staying invested, unless one happens to pick some company going against the trend (I suppose there are often some such companies), is engineered inflation and/or a significant stimulus in China.
Disco Stu has the right idea. Preserve cash and us it when there is some sort of significant market bottom, but only on cashed up companies with real assets and low costs. This could be a long wait or not.
The bull phase of this market cycle is pretty long in the tooth. It is being kept up by CB and govnut manipulation. The risks are much higher while the rewards are much slimmer. Everybody knows this and that revenue and profitability growth has slowed to a crawl so what is left is mostly PE multiple expansion in response to financial repression by CBs on savers.
I will continue doing some market speculation so long as there is a reasonable expectation of a significant return. The markets are not broken as in the second half of 2008 and the financial system is not falling apart. However risk appetite is pretty muted, so mistakes get punished badly. Any perceived or real under-performance is treated with a rapid fall in the share price - for me that has meant getting kicked in the behind by RED in the last few days. Even a well cashed up company with strong management and millions of ounces of good grade gold like PVM has been marked down over 20% from its recent high just a few weeks ago despite the high POG.
There are some good short term trades for the quick, but the share price appreciations do not last for most companies.
(20min delay)