I wasn't questioning that historically it has been more profitable to invest/prepay but rather whether recent market conditions and the impending fallout from subprime lending practices have/will altered the equation.
I guess I got to reading and started mentally catastrophizing. The stuff I was reading seemed to imply that this was not a normal part of the cycle but the beggining of a major downturn, or maybe I just interpreted it incorrectly. I'm not sure if this analogy will be lost on this audience, but I was essentially "googling while pregnant"
if you have an adjustable rate mortgage, perhaps contributing more to pay off early is wiser. even if the fed lowers rates to help with this mess, chances are high that creditors will increase their rates in order to cover losses as well as re-evaluate and constrict what they seem as credit worthiness.
if not, there are great stock values out there with the market being down. There are solid companies that do not have or have minimal exposure to all this mess. if you can accept the risk, then you could find bargains out there, perhaps in the investments that you already own.
echoing what someone else stated, it will depend on your comfort level (i.e. risk). there are plenty of people who have similar thoughts as you and head for more secure, less risky investments during times like these. there is nothing wrong with this. if you have a higher risk aversion, you might take a look for bargains in the market. if you have a low risk tolerance, you might do as you suggested and start reducing your debt and moving securities into safer ones. the thing not to do is panic. as pf101 suggested, your plan shouldn't change because of a market downturn. why? because if you have securities, you should have goals already for them and reasons you have held onto them. you should also have sell triggers in order to protect your assets or limit your losses. if these are good companies and they reach your sell triggers, you can always sell them and then buy them at the lower price. of course your sell triggers will depend upon your risk tolerance; however, they should be out of range of normal fluctuations. People lost a lot of wealth in previous drops, because they did not think about seller triggers since everyone is always focused on long term investing and forget that sell triggers are part of long term investing strategy.