I've come to appreciate the prescription,
I'm preparing to pay higher taxes and can't stand the whining from peers about the coming tax hike. If you don't go into work in a uniform each day, then you have nothing to complain about.
When the economy bottoms out (probably in 2010), corporate taxes are going up too for that matter.
Having called 20 of the last 2 recessions, I'm not really in the prediction business. But I also think Manhattan housing will drop 25-40% next year (on a stronger dollar & lower Wall Street compensation) and the next bubble to be blown will be in the US Dollar. You can see the USD bubble already in the huge US Treasury rally this year, but it will also be reflected in the financial sector (I am a long-time bear on banks, so this is a big change for me). My 401K has always been very conservative for my age, with 50% in fixed income. Next year I am changing it to 90% equities.
I don't recommend selling or buying stocks with your discretionary income. It's too late to sell and too early to buy.
If you don't think you'll need to draw on your savings, I'd recommend buying municiple bonds (make sure they are "general obligation", so they're backed by taxes and not dependent on a specific project). While the bond yields are low, they'll be going higher with the state fiscial crises, and they're tax efficient (~ 8% return).
Most important, tough times are ahead; pay off your credit cards and keep your debt low. Be generous to those less fortunate to you.