AJ Cilliers’s investment manager has the same approach, and that is understandable if one has enough money to survive on in the meantime – something that he and Warren Buffet evidently have. But most investors do not have the time to wait. It took 26 years, i.e. until 1956, for stock market values to return to what they were in 1929. Few people on the planet can wait that long. So the first question is: do you invest for fun, or is it your nest egg or your retirement funds you are managing?

The next thing that most people don’t have is Warren Buffet’s training and ability, otherwise the world would be filled with millions of brilliant gurus and genial fund managers, and it isn’t. Despite his tips and books, his approach does not fit the circumstancs of ordinary people because they do not have reserve funds to play with, are not a 20 year old starting out like Buffet did in his youth, have demanding jobs to do and cannot spend the time involved in becoming a company analyst.

Ordinary mortal people have to look at things like how bad does the present crisis appear to be, what appears to be involved, what is likely to fail, and compare that picture with how such crises have played out in the past and discuss the differences and similarities. If reality was not like this for most ordinary people there wouldn’t be runs on banks, and there wouldn’t loads of ordinary investors still holding shares today, after a 40% fall on most Western stock markets, due to an investment approach based on hope or bad advice.

What is lacking from present discussions all over the world is a proper analysis of the possible time frame for the present crunch. We know the US mortgage resets are going to go on through 2012, and thus the defaults will continue to occur up until end of 2012. Therefore, surely everyone needs to get real: the credit crunch is not going to stop completely before that time is out. So although is is emotionally painful to try and look at the facts coldly and dispassionately, the fact is the credit crunch is not going to go away anytime soon.

Henry Paulson and so many others have been very insistent on this last point, simply because so many people desperately want to believe that his bank rescue package will put a floor on the market. It won’t. The point of the ‘Chicken Little’ story is indeed to look at the facts, not put your trust in some fox who promises to save the day for you. Henry Paulson certainly does not want to be accused of being the fox in the story later on, and that is why he is openly warning everyone that the present rescue package is not the end of the crisis.

His comments leave the duration of the crisis open-ended. But most people plan their lives along a linear time scale, and most people want to know what is going to go down the tube because they do not want to invest in something this year, next year or the year after that, which then suddenly crumbles and dissipates into thin air.

Most people would now agree that this crisis is the most serious since the 1930s, i.e. the Great Depression. When they say that it means they don’t know yet whether this crisis is going to be as big or perhaps even greater than the Great Depression. It certainly doesn’t look too easy to judge at this point in time.

As an investor it is always important to watch for the approaching top of the cycle and the bottom, to know when to get out and get back in. If of course you have friends in huge investment and insurance companies who tip you off about which sectors they are going to go into that day or season in order to drive up the price before they pull out, leaving the newbies in free fall, then you can get in just before they go in and get out just before they get out. Investing is far easier and some would say a piece of cake. There may also be other large players around doing similar things on the same day which might cloud things a little, but in general the game is predictable, some would say almost boringly easy.

On one’s own, timing becomes extremely difficult, and scornful stories abound about silly people who try to time the top or the bottom, just like there are loads of childrens’s stories about disobedient children who were warned not to skate on Farmer Jones’s pond, and did, and drowned. But these stories should not mean that one should never try to learn to skate, or learn how to test the depth of the ice before one gets on it. Frankly, the scornful stories also do the market a disservice by dissuading people from investing at all. If one never tries to investigate whether a market is going up or down, is near the top or bottom, then one would be a gambler if one merely closed one’s eyes and picked out a stock or a fund and invested in it. Most people are not so stupid as to go along with that. There are better things like horse races for openly risky gambling. Also, if it wasn’t important to try and fathom the top and bottom of market cycles, there would not be any technical market analysts in the world today. So the warning of never ever trying to judge the top or bottom of the market is simply opaque and unhelpful.

To the question of time-frame which might give a hint of how far the downward cycle has to go: if we are looking at the stock market fall as a measure of the Great Depression (leaving aside for the moment that there are many other indicators as well), then surely one should try not to get transfixed and rely only on hope that the market has now hit bottom and will begin to rebuild. For if the crash after the Nasdaq twin peaks took about 3 years to hit bottom and the crash after 1929 took about 4 years to hit bottom, then they beg the question: why should the present downturn be any quicker than that?

The problem I have with the advice A J Cilliers’s investment manager gave him is that it is perfectly reasonable to believe the stock markets are only roughly half way down and I am not a company analyst who can tell which companies are sturdy enough to survive a possible Great Depression. So to get in to the market now means possibly suffering enormous losses until the market hits depression levels of about 20% of their present values.

Even if the companies I buy shares in do survive long term, going on the Great Depression pace of recovery, it would take at least half of 26 years, i.e. 13 years, for them to return to the value at the present time of investment in October 2008. If this crisis is any different to the Great Depression, I want people to tell me why it is different, and how that makes a difference to any investment advice at this point in time. A related question is when will Nasdaq return to the levels seen in 2000? What is it that prevents value being restored to stocks that have undergone an inflated peak, for almost 3 decades?

From history we know that the Great Depression was preceded by a housing boom, and the Great Depression was characterised by a collapse in the banking system because people borrowed money to buy shares. We have the same two problems today. However, one marked difference from 1929 is that we now have derivatives, and the unknown effects of these derivatives being traded in a $62bn unregulated market which far outstrips the values on the world’s ordinary stock markets. Warren Buffet is totally against derivatives but some people defend them as assisting the function of the markets.

So, are derivatives going to dissolve the crisis for us or make it infinitely worse, or is their effect neutral in this context? These questions must be satisfactorily dealt with for any evaulation of the time frame and depth of the present downward phase, and therefore for any advice on when to invest.

Overall therefore, the fundamental questions remain. Is the credit crunch going to on until the last terrible fall on 24th October 2012 creates a final overshooting bottom, or is it going to go away much sooner? If you find the suggested date of the 24th October 2012 disturbing, e.g. way too far ahead, and want to reject it, what are the concrete reasons why it is not perfectly possible as a date for the nadir of the crisis? If you are an investment guru, the date and depth of the final bottom is not crucial and you can invest long-term like Buffet, so the precise date won’t concern you. However I think that if you are managing your nest egg or your retirement funds, the only two things you can invest in while the markets plumb the depths for such a long time are precious metals because they hold value during a depression, or a plot of very arable land to farm in order to feed yourself during the lean years. What do you think?

I can’t help but think that scorning this fact smacks of hindsight vision being 20/20. When planes are falling out of the sky, it doesn’t really make sense to go and get on them – until experience shows that the’ve stopped falling out the sky. I’m sure there is someone somewhere who can do the sums and figure out that this is actually a rational course of action…