I'm writing this Thursday evening, after the wildest day in the stock market since the craziness of 2008 and early 2009. To me, the worst of the volatility late in the day had all the signs of a technical situation -- some kind of error in some trading system somewhere. As of Friday afternoon, we still don t know the truth.

But that doesn't explain why stocks were down so much before whatever caused that late-day oscillation. And it doesn't explain why, when whatever it was happened, stocks were so vulnerable to it.

That's simple. Stocks were way overbought. They were ready for a correction, and a nasty one. We got it.

Or perhaps I should say we finally got it. I don't want to be one of those guys who claims victory when something happens that he's been predicting for so long that he comes off like a broken clock being right twice a day. That said, to some extent that's the nature of the beast. When you make a call that stocks, broadly speaking, have risen too far, too fast, and are due for a correction, that kind of statement inherently doesn't have a lot of timing precision to it.

The reality is that from the bottom in March 2009 to the highs late last month, stocks had the best run since 1935, and the sixth best run in the recorded history of daily U.S. stock prices. It doesn't take a genius to figure out that's not sustainable.

There were a lot of good reasons for stocks having risen as they did. First, we came from a terrible panic in March, 2009, when they were deeply oversold. Then as the rally progressed, it was fueled by a huge increase if corporate earnings, as the economy came out of deep recession.

But all these things are cyclical. At the lows, earnings were depressed, and prices were depressed even more, so the price/earnings ratio for the S&P 500 was about 10. That's about as low as it gets . There have been times when it as lower, but that's about where it was at the worst in the Great Depression.

At the highs in late April, the price/earnings ratio had risen to about 15. That's about as high as it gets. Sure, it got higher in the crazy years in the late 1990s. And there have been other exceptions. But that's about where it was at the highs in October 2007. So what we've seen was simply running from the low bound of the p/e ratio to the high bound; a classic cycle.

None of this means that the economy is heading back into a recession. But it should take some wind out of the sails of the most optimistic who thought that an endless upward run in stocks indicated a "V-shaped recovery." No, it's going to be a little slower going than that.

After the severe global credit crisis we had in 2008 and 2009, the economy doesn't just spring back to normal. You can't put Humpty Dumpty together again. You have to lay a whole new egg.

It takes years. In the meantime, there are aftershocks to the initial crisis. We're seeing that right now in Europe. As I wrote here last week, I think it's a good bet to buy distressed government debt in Europe, because I think there's a near certainty that there will be a bailout of weak countries by the strong countries. But in the meantime, there's a lot of uncertainty that drives big market moves like Thursday's.

But more important, it's great that the strong bail out the weak -- if you are an investor in the weak, at fire-sale pre-rescue prices. But it's not so good it you are an investor in the strong, because bailing out the weak makes you a little weaker yourself.

Take the case of Greece. Weak Greece will get bailed out by strong Germany and strong France. But that will make Germany and France weaker. I think that's what Thursday's panic was about. It's not about saving Greece or not saving Greece. It's about the cost to the whole global economy of weakening the strong, because the strong are the ones that are most likely to lead a robust economic expansion. If they are weakened, what does that say about growth going forward?

You just have to remember that what we've been through is not a "business cycle." It's more complicated that just the tidal flows of expansion, recession, recovery and expansion. This was something else entirely. This was a credit crisis. Sure, there was a recession. But the credit crisis caused it. We can get out of the recession, but we'll still have to live with the aftermath of the credit crisis. In my judgment, that means the normal business cycle has had its gears stripped. We can have a recovery, but not an expansion.

Economists were saying just that a year ago. They were all saying that the worst was over. They were right. They were all saying that growth, going forward, would be slow. They were right. But then they let themselves get fooled.

They saw the stellar performance of the stock market. They saw two decent back-to-back quarters of U.S. GDP growth. And so they all started telling themselves that everything was back to normal. Somehow Humpty Dumpty had actually managed to put himself together again.

Sadly, no. The worst way for an economic forecaster to be wrong is to first be right, and then abandon the correct position just before it comes true. That's what all the economists and market strategists have done. They came in cautious, but just couldn't resist getting bullish right at the top.

I'm not suggesting you become bearish. I'm just suggesting you become cautious. Let Thursday be a warning to you. We're not out of the woods yet.

So where do you put your money, if not in stocks?

I think you know what I'm going to say: gold. In Thursday's panic, gold surged to challenge all-time highs. It's just a couple dollars away. If you price gold in euros, it's already been at all-time highs for weeks.

It happened because gold is sensitive to the biggest risk on the global stage right now -- the risk that the governments of the world will resort to inflation to bail out the weak, or for that matter to bail out the strong, too. There's no better way to make debt disappear than through inflation. There's never been a government in history that could resist it.

There's only one thing that's safe from that ultimate risk: gold. Think of it as the world's strongest currency. The one you can spend no matter what happens to the dollar, the euro, the yen or anything else. That's where I have my bets placed.