Jim:    What's driving this market?... Fear is driving this market, not facts... not the fundamentals of so many great American companies...

Fear is the reason we were down 449 points today... an irrational move. But fear and irrationality... they don't end like this... That's right... it doesn't mean the selling is over, not by a long shot...

At times like this, when you're overwhelmed with panic, it helps to know the history...

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Now, we've been here before...

Now, you may not know it, because you're not as old as I am, or not trading for as long as I have been...

What did it feel like today?... It felt like 1987... it felt like 1990... when the fear was palpable and the market was getting crushed... pulverized.

But just like 1987 and 1990 - and these are worse cases, okay - to draw from FDR's first inaugural, the only thing you have to fear is fear itself... in both cases.

The people who ultimately, not quickly... maybe not here but, ultimately, listen to the positives, did the homework, and bought good, steady companies on the cheap, were the ones who came out ahead... maybe it took a year...

The people who didn't come out ahead were the people who sold repeatedly, repeatedly into the panic.

The reference to FDR's statement is frankly a little ironic... What Roosevelt was talking about... he was talking about trying to calm Main Street America... because regular Joes and Janes were frantically pulling their money out of commercial banks and savings and loans, destroying those institutions in their wake.

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You know what's doing it this time?...

This time it's hedge funds... scared to death after Lehman's collapse... a collapse by the way that left... and you haven't read this, heard this or anything, but I'm going to give it you... left many of the hedge funds unable to withdraw their capital from Lehman's overseas arm... These people are doing the panicking... these hedge funds are now just like the regular Janes and Joes in the '30s... are frantically trying to withdraw their capital from all the investment banks, because they're fearful, and they're creating the real panic you see on the screen... and that's how we had those great stocks down today, and it's probably not done.

See, it's a run on investment banks by hedge funds, not a run on savings and loans by the public, and that's all happening in the wake of the government's decision to let Lehman go without a plan to make all those with money there, good.

I don't care whether you like that or not, but that's what happened.

Also, I'm not saying hedge funds are to blame. I'm saying they're pulling their money out. I'm not giving you some sort of, ooh, I hate hedge funds... I'm just telling you what's happened.

Now, in the crash of October of '87 - a moment that I don't invoke lightly, and I have never invoked on the show - I was running my hedge fund, and I was firmly in the grip of the terror myself.

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What was I worried about?...

How about survival... my firm surviving. I was worried about my mortgage, okay... I was worried that I'd bought a place and that I couldn't fund it... that I'd default. I was absolutely frightened.

I was lucky enough to be in cash on that fateful day, when we dropped 508 points... and that, from a much lower level than we are now, so the percentage loss on 508 was just gigantic... we were at the 2300 (Dow) level.

But we had dropping for weeks into the crash. Like now, the fear was palpable. I didn't want to take advantage of the decline to buy, even though we'd been cut in half, because I was too concerned that the brokerage houses were all going to fail.

Familiar?...

Or the customer on the other side of the trade was going to be able to deliver on what I bought... I was worried, like everyone is worried today, about the system... It turned out to be wrong. I was more afraid of the fear than I was of the fundamentals. I knew it, but it didn't matter. I was paralyzed.

People often forget Terrible Tuesday, the day after Black Monday, where the market dropped 33% at the open... although you couldn't tell... because most of the stocks didn't really open... They couldn't open... too many sellers.

Again, I sidelined myself, because it was just too scary. It felt just like it does today, or maybe like it will tomorrow, or maybe Friday, or maybe next week... I mean, this is what it feels like. I'm not saying, hey, this was the bottom... Do you hear that? Not at all... But, back then, we didn't bottom until many of the major firms came in all at once to buy stocks, and the Fed issued a statement saying it would provide all the liquidity we needed. There was confidence built. Confidence is totally shot right now, totally shot... There's no confidence in the system.

We stopped going down, but the fear was still too thick for me to act. We still thought at my firm that many of the major brokerage firms would go belly up... And many of them weren't in compliance with the paperwork, and many of them simply weren't picking up the phone... I was trying to buy some Microsoft, and no one would take my call... no one was picking up... It felt like the end of the world... It turned out it wasn't.

Now, I don't think anyone looking at what happened today to Morgan Stanley (MS*) and Goldman Sachs (GS*) - and I own these for my charitable trust... these are good firms - would dispute that we are in that same survival mode again, like '87. The stocks of these companies are reflecting that they're in dire straits - much worse than I actually think they are - but so what? So Cramer thinks they're better... big deal!

I think they can withstand the hedge fund redemptions. I think their balance sheets are good. They can always get money from the Fed, in my opinion...

But, in many ways, this time is indeed worse than 1987... AIG, Fannie and Freddie, Lehman, Bear Stearns....

Lehman still hasn't been sorted through... too fast... We had too many aftershocks that we have to worry about, and there's too much damage to they system, plus... there's now a sense that the U.S. government is now a "cartoon government" with a "cartoon Fed"...

But you've got to recognize that this is a "the only thing you have to fear is fear itself" moment... with the fear driving us into an irrational panic, which means the selling might not be done tomorrow. Who knows when the selling panic is over. Maybe next week, maybe next month...

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So what do you do in times like these?...

What are the lessons of the history of '87 and '90?...

In '87, when I was sure the system would work... of course, the market had already moved a lot then, and I think the same now, frankly... more than I did then... I finally looked at the actual fundamentals of the companies that were trading... who had cash, who had little debt... who was trading through their cash... who could make it through if we had a severe recession which, by the way, I don't think we'll have now, and didn't think we'd have then... but it didn't matter. I figured it had to mean something...

You've got to recognize that there are strong companies out there. We're not a bankrupt nation filled with bankrupt companies...

If you feel confident now, and you're not paralyzed by fear, that's where I would look, at the many, many companies outside of the financials, where the fundamentals are not only sound - and I hate to use that term, because the government so abused it - but where the balance sheets are great, and there's a lot of cash...

Of course, I do not think we've bottomed, so I would be cautious about buying... Keep your powder dry, because we could always go lower... as we did after the worst week in '87, which then turned out to be the crash. Don't let the fear overwhelm you though. The lower we go, the more important it will be to start doing some research to buy things. If you can't take the pain though, take some losses, just take some off the table. I believe you'll probably get a chance to buy things lower in the ensuing weeks... the fear is that motivational.

Look, I know you probably scared. But, in '87, in the worst-case scenario, where most of the stocks I bought got cut in half and then, in some cases, cut in half again, everything I bought made me money six months later... everything. And, in fact, every stock that was on the most active list the day before the crash... before the crash... the worst day to buy, perhaps, in history... was up one year later.

That's right! You made money if you bought on what was arguably maybe the dumbest day in history to buy, but you had to wait a year... Remember that, before you succumb to the fears that are driving this market, and exit all together.

Now, in many ways, it's true, again, that this period is worse than '87. I keep stressing that. The obituaries... AIG, Lehman, Fannie, Freddie, Bear... and do I know who's next? No. I'm just a guy... I'm a TV guy... I'm a TV guy who's traded in bad markets.

We're experiencing a meltdown in the financials, and I don't see how we can turn that around without foreign help. This is how 1990 felt too, when most banks in this country went belly up... and we didn't bottom until Prince Alaweed - a Saudi - came in and bought a huge chunk of Citigroup, at $5. Nobody that he would. No one thought that it would matter. No one thought that would cause a bottom...

We were all too fearful... like now.

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I don't want you to repeat my mistake back then of almost staying negative forever. The financials need money from the Middle East or China to put a stop to the panic. We don't have enough money in this country to stop it.

I wouldn't rule out though that some foreign grown-ups give us some cash - a cash infusion - to stop the bleeding... If that doesn't happen, then you can't take the '87 scenario off the table...

Now, let's remember what that was...

We didn't bottom until we were down more than 50% from our highs... and, frankly, you could say 65% if you count the prices at 11:05 a.m. that Tuesday... after the crash... after the Black Monday...

This is the point to remember though...

We did catch bargains of a lifetime... Oh, I'm no bull tonight... I'm not saying, now's the time... I'm saying there will be a time to buy... and, if you panic, you'll miss it.