"Bears make money, Bulls make money, pigs get kicked in the head."
Rumpole, in a speech on October 12, 1987, exactly one week before Black Monday, October 19, 1987, when the stock market lost 22.6% of its value, the largest one day financial loss in US history.
Our email in box is flooded with panicky investors seeking our advice.
This correction (it's far from a crash) was bound to happen.
The market was overvalued under any rational view of stocks. And it was thin, meaning when it rose, it only a few favorite stocks brought up the averages.
What to do?
First. Don't panic.
Second, if you can, be a contrarian.
If you have stocks, and don't need the money for the next few months, hang on to them. Don't sell into the panic.
Second, if you had money a few weeks ago and were looking for a stock who had a PE under 15, good luck.
Now there are many very good stocks at a reasonable value.
Third. Today was not the end of the panic selling or bad down days. There will be more to come, unless the Fed makes an announcement postponing any rate hike in September.
There will be more days of whip-saw stock moves, short covering, and panic selling.
But there are good companies and good values out there.
There is no systemic risk to the economy, like there was in 2008 when banks were failing, credit dried up, and the economy teetered on an abyss. There is nothing like that out there that we can see.
But there is danger on the horizon.
China is worse than we know, because we cannot trust China's numbers on its economy. (For those of you who received my email on YANG-which shorts the Chinese markets, when it was 70 -it closed at 141 today- you're welcome. Take your profits and get out. It's a weird fund, and you never fight the Fed, even the Chinese Fed.)
Small, regional oil companies will fail as Saudi Arabia refuses to stop pumping oil at record levels, driving prices even further.
As markets roil, overseas investors seek refuge in the dollar. A strong dollar hurts US companies that do business overseas.
So there is a lot to worry about.
But companies like Cisco, Clorox, Apple (under 100) Disney, General Mills, Pepsico, Bank of America (a cash machine),CVS, Home Depot, and others are good companies that will retain their value and will bounce back.
There are two things you can be certain of:
first, the market will come back.
Second, nobody, and we mean nobody can call the bottom of a market, or the top. We often say we can't buy at the bottom or sell at the top but we'll take the middle 80% every time.
Don't panic. It will be ok.
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