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The Dow Jones Industrial Average has now halved from its peak. That is going some. From a high of 14,164 early in October 2007, it has taken only 503 days to fall 50 per cent, a full 320 days faster than the ludicrously overvalued Nikkei 225 took to halve after Japan’s bubble burst. To be fair, the Nikkei almost got there at twice the clip as the Dow before bouncing like a samurai’s severed head.

Forget the destruction of wealth and terrible repercussions for those approaching retirement. This is also a betrayal. America believes in equities, its investment philosophy summed up in best-selling books such as Jeremy Siegel’s Stocks for the Long Run. Warren Buffett, high priest of the “buy and hold” view, is one of America’s most trusted citizens.

What if he is wrong? What if, like Japan, this is only the beginning and the Dow has another quarter-odd century left to fall, or just flatlines? After all, it never regained its 1929 peak until 1954. Normally, such agonising would be a fair indication that it is time to buy. Is it? Those investors, such as Mr Buffett, who banged the table towards the end of last year imploring punters to re-enter the market have already lost another fifth of their money.

Sure, US equities now look cheap – the forward price/earnings ratio of the S&P500 is just 12 times compared with an average of 17 since 1923. But they also looked tempting on 15 times four months ago. Stocks can overshoot on the downside. Still, in the past 14 recessions, the average trough valuation has been 11 times, according to Capital Economics. But just as the “p” sometimes falls too far, the “e” can also plummet. That is the worry now: corporate profits are collapsing and investors are losing hope that there is anything the government, the Fed or anybody else can do about it.

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