It seems these last few days everyone is selling everything some of the selling can be attributed to U.S. data but mostly it's the return of the European concerns. Every investment is in the red; commodities, stocks from all over the world, 10 yr treasuries, euro, oil and gold. It seems people do not like gold as much for the time being investors prefer cash. Fear and panic make people do unexplainable things.
If there were a flood coming would you sell everything you have; possessions, gold, cattle, investments and your house? Why would you want to have so much cash during a flood in that case all you would need to survive would be an ark. You would probably need some healthcare on that boat that is probably why healthcare stocks have fallen the least thus far. Unless you are retired, near retirement or have a serious heart condition you should not be heading for the exit so fast. You should be considering your entry if anything you should have exited at the beginning of the month.
What if you had timed your exit perfectly before the recession sometime in October 2007 when the Dow was making record highs. You would have protected your money from the severe crash that followed but you would also have had 4 years of little or no returns on that money. The worst part is that you would have missed out on one of the best bull markets in history that followed. A nice dividend paying stock is a good alternative right now since interest rates are down worldwide in the places where one can safely invest in. Being in cash only can be good at times but not for the long term. Sooner or later that money has to be put to work otherwise you begin to work for your money. Things could get worse with Europe but at some point the market will begin to rise and that is when it will be too late to enter to get the real returns the ones that double your money.
During these market panics and crashes a risk taker and investor starts looking for entry points. If a major catastrophic event were to come then I would be happy that I left with at least some of my money invested.