Yesterday, I received several calls, emails and instant messages with the same theme…

The markets are crashing around us! Should we liquidate? The media (and Obama) are exclaiming this to be the worst catastrophe since the Great Depression! How will we ever survive this mess?

I reminded them if their stop loss settings kicked in and a position was sold, it would be fine because they could get back in if it made sense over the next few days or weeks. I also reminded them if they didn’t get stopped out, that was fine too. Unless you were holding Lehman stock there was absolutely no reason to sell in a panic and if you were holding Lehman stock the damage was already done. Just sell at market, take the hit and move on.

Some actually looked at it rationally, some didn’t. But, now, on the morning after, we can look at the reality of yesterday.

The DOW dropped over 500 points by the close of the trading day. That is the largest single day point drop since 2001. It is a big news story. It has personal drama as the market lurches back and forth to deal with the mentality of the trading herd.

Yet, no one seemed to stop and actually think about the drop. If you go back to all of the news stories about yesterday and the statements from the politicians and you replace “500 points” with “4%” it just doesn’t have the same emotional impact. Yet, that 500 points was just a 4% drop in the market.

But, the media and politicians can’t let facts get in the way of a good story. So, they hype the 500 points and count on no one pointing out it was just 4% of the market cap.

On Black Monday in 1987, the drop was also about 500 points, 508 actually. But, that was a 22% drop in the market. The financial world did not end then and it is not ending now.