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9:00 AM EST, Monday, October 20, 2008: It was a wonderful weekend. The Fall colors were at their peak. Who could resist a long walk?

I played tennis, rested and read. Much reading was gloomy. The present financial crisis is a wet dream for writers. The Economist had a cover "Capitalism at Bay." BusinessWeek had a cover "The Future of Kapitalism." Newsweek was the most optimistic:

It says "The Bright Side by Fareed Zakaria" (their star writer). Writes Zakaria:

Some of us—especially those under 60—have always wondered what it would be like to live through the kind of epochal event one reads about in books. Well, this is it. We're now living history, suffering one of the greatest financial panics of all time. It compares with the big ones—1907, 1929—and we cannot yet know its full consequences for the financial system, the economy or society as a whole.

I'm betting that, in the end, the world's governments will win this battle against fear. They have potentially unlimited tools at their disposal, especially if they act in concert. They can nationalize firms, call bank holidays, suspend trading for weeks, buy up debt and equity, and renegotiate home mortgages. Most important, the American government can print money. All of these tools have long-term effects that are extremely troublesome, but they are nothing compared with the potential collapse of the financial system. And Washington seems to have recognized that it must do whatever is required to shore up that system. Big questions remain. What will it take to stop the fall? How costly will it be? How long before the rescue plan starts to have an effect? But at some point, the panic that gripped world markets last week will end. Of course, that will not mean a return to growth or a bull market. We're in for tough times. But it will mean a return to sanity.

Amid all the difficulties and hardship that we are about to undergo, I see one silver lining. This crisis has—dramatically, vengefully—forced the United States to confront the bad habits it has developed over the past few decades. If we can kick those habits, today's pain will translate into gains in the long run.

He goes on to point out that:

The whole country has been complicit in a great fraud. As economist Jeffrey Sachs points out, "We've wanted lots of government, but we haven't wanted to pay for it." So we've borrowed our way out of the problem. In 1990, the national debt stood at $3 trillion. (That sounds high, but keep reading.) By 2000, it had almost doubled, to $5.75 trillion. It is currently $10.2 trillion. The number moved into 11 digits last month, which meant that the National Debt Clock in New York City ran out of space to display the figures. Its owners plan to get a new clock next year.

"Leverage" is the fancy Wall Street word for debt. It's at the heart of the current crisis. Warren Buffett explained the problem in his inimitable way on "The Charlie Rose Show." "Leverage," he said, "is the only way a smart guy can go broke ... You do smart things, you eventually get very rich. If you do smart things and use leverage and you do one wrong thing along the way, it could wipe you out, because anything times zero is zero. But it's reinforcing when the people around you are doing it successfully, you're doing it successfully, and it's a lot like Cinderella at the ball. The guys look better all the time, the music sounds better, it's more and more fun, you think, 'Why the hell should I leave at a quarter to 12? I'll leave at two minutes to 12.' But the trouble is, there are no clocks on the wall. And everybody thinks they're going to leave at two minutes to 12."

If there is a lesson to be taken from this crisis, it's a simple and old rule of economics: there is no free lunch. If you want something, you have to pay for it. Debt is not a bad thing. Used responsibly, it is at the heart of modern capitalism. But hiding mountains of debt in complex instruments is a way to disguise costs, an invitation to irresponsible behavior.

Meantime, there was a glimmer of hope in the markets as it rose a little last week -- for the first time in months. You can see the "stabilization" efforts in this chart.

I don't know what that means. "They" (whoever they are) say markets tend to change direction nine months before the economy changes. I can't see the economy turning upwards for at least 18 months. If you get back in at present -- either going long or short -- you're likely to be whipsawed by the daily volatility -- i.e. big swings up and down.

Despite Warren Buffett, my philosophy remains "When in doubt, stay out. Don't chase yield. Cash remains King, for now."

Fan of Cramer?: I like watching Jim Cramer, not because he's always right. Who is? But because he knows more about the business of investing than I do. And he's actually extremely well educated. I enjoy his off-the-cuff references to a wide range of literary, business and sport subjects.

There's big piece on him in today's New York Times by David Carr. The story is headlined, "Jim Cramer Retreats Along With the Dow." It's worth reading. It points up his switch from aggressively making money to be aggressively being defensive. The piece begins:

Last Friday afternoon, Jim Cramer, CNBC’s star stock-picker, took time before taping his hour-long show, “Mad Money,” to talk to a visitor in the cable network’s headquarters in Englewood Cliffs, N.J.

After weeks of dreadful performance, it looked as if the Dow was finally giving investors a chance to exhale, up some 200 points during the day, though it later ended down 127 points. He chatted for a few minutes about how the market’s volatility was testing everyone, then he happened to glance at the computer screen in his office.

“We’re now down a hundred just since we started talking,” he said, shaking his head in disbelief. “Wow, what a terrible market.”

How to survive a downturn. My friends are fixing their house big-time, spending huge monies and employing armies. I asked them: "If I were a contractor -- carpenter, plumber, roofer -- what could I do better?" And their answer? "Show up!" Then they regaled me with stories of broken promises.

I asked, "In today's squirrelly world, why would you not show up?" And their answer, "if we knew the answer, we'd get our house finished faster and our contractors would get paid more and faster."

My experiences are the same. The best contractors are those who show up, return phone calls and emails, do what they say they're going to do when they say, and be realistic about how long things will take and about their own skills -- they don't promise to do things they can't.

Woody Allen once said 90% of success was showing up. He's right and wrong, but definitely 90% of failure is not showing up.

Thomas Jefferson on the banks:

'I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered.' -- Thomas Jefferson 1802

How to have fun tonight
Bernie says to his wife Sarah, “Let’s go out tonight, darling and have some fun.”

Sarah replies, “OK, but if you get home before I do, please leave the light in the hall on.”

If God had intended Jewish women to exercise, he'd have put diamonds on the floor. -- Joan Rivers.

This column is about my personal search for the perfect investment. I don't give investment advice. For that you have to be registered with regulatory authorities, which I am not. I am a reporter and an investor. I make my daily column -- Monday through Friday -- freely available for three reasons: Writing is good for sorting things out in my brain. Second, the column is research for a book I'm writing called "In Search of the Perfect Investment." Third, I encourage my readers to send me their ideas, concerns and experiences. That way we can all learn together. My email address is . You can't click on my email address. You have to re-type it . This protects me from software scanning the Internet for email addresses to spam. I have no role in choosing the Google ads on this site. Thus I cannot endorse, though some look interesting. If you click on a link, Google may send me money. Please note I'm not suggesting you do. That money, if there is any, may help pay Michael's business school tuition. Read more about Google AdSense, click here and here.