I’ve seen a lot of people put the blame for this mess on free markets, often citing Greenspan’s deregulation policies.

The problem with that argument is that Greenspan wasn’t drinking his own Kool-Aid. It’s true that he was a proponent of deregulation of certain things (where it was politically convenient), but he never let go of that central planning via manipulation of the interest rates.

So, we have people blaming free markets, but they ignore the fact that we never had free markets in the first place. We don’t know how free markets would have done over the past decade (albeit, I suspect that free markets would be hard pressed to perform worse).

[C]onsider the arguments of this humble student of the markets. He considers survivorship bias and war as factors that investors should consider. I agree, and I would urge all to consider that wars often occur as a result of economic crises.

You misunderstand what I wrote. Investors need to be continually questioning the assumptions behind their models. In other words, you need to ask yourself: “Does the assumption hold? Are we approaching a ‘boundary value’ when the model doesn’t hold?”

Where we are today: While wars and revolutions are an inevitable part of the historical record, neither war nor revolution are realistic possibilities in the near-term. If that is the case, then the assumptions do hold and this is probably just a nasty recession.

Stocks are cheap and we are in the process of making a bottom in the market: http://humblestudentofthemarkets.blogspot.com/2008/10/does-market-bottom-in-1q2q-2009.html