It’s time to go shopping! Stocks are on sale!
The bull run is over. Anyone that was waiting for a correction got what they wished for. In spite of the 1,175 point loss, it’s still not a “bear market”. That’s based on the percentages of the Dow Jones and S&P averages and their respective losses. A bear market would be a result of a 20% drop. The Dow Jones has only lost 8.5% from its record high, nowhere near 20%.
Don’t wind yourself up into a tizzy over the stock market. I giggle when I read headlines like, “This pullback is the largest seen in the last 236-and-a-half days.” There’s always some arbitrary measure of time in an offbeat number of days, weeks or years. As I write, Marketwatch.com has two side-by-side headlines that contradict each other. One promises a bear market, the next link calls this slump a correction, not a bear market.
The way I see it, this downturn is taking some of the fluff off the top. If you bought high, like some Bitcoin investors did, your losses don’t feel so good right now. But, hopefully you didn’t chase investments that have topped off, hoping that they’ll continue their increase. That’s Investment Sin Number One: buy-high, sell-low. If you’ve done this (again), it’s time to step away from the Quotron.
I don’t have any control over the jobs report or the GDP, and neither do you. But I do know that I can control my reaction. This is the time to test yourself. Are you thinking about getting out of stocks? Or are you prepared to wait it out? Better yet, are you thinking about buying? My mouth starts to water when stocks go on sale. When I don’t buy after a price descent, I regret it later.
It’s time to run when companies are buried in debt, when credit dries up, when new trade laws block commerce and when growth has come to a stand-still. Entire industries can be wiped out based on one piece of legislation. But if that’s not happening and fundamentals are strong, you’re looking at an emotion-filled selloff.
My best example of this was back in 2009. I followed a number of stocks, mainly out of curiosity, one being GE. When stocks were at their lowest, GE’s stock price was below $10. I couldn’t believe my eyes. There were no bad reports on GE specifically, just an underlying nausea associated with the economy that sent all stocks south. I knew that GE was here to stay, and that the low stock price was related to the pessimistic aftermath of the near-collapse of the global economy. I bought 1,000 shares at $7 a share and knew that it was going to double in a very short time. It never felt more right and within several months, I cashed in my shares at $14. That money paid off a car loan. GE went on to move into the twenties. I was anxious to pay off a debt, but easily could have quadrupled my money. Even better, I could have bought more using idle cash but I stayed conservative and made it work for me. As Jim Cramer says, “No one ever got hurt taking a profit”, and “Pigs get slaughtered.”
I’m watching GE again and deciding if I want to grab a few hundred shares.
My plan at this time was to make some alternative investments, but this is a rare opportunity to jump on. If stock prices get too low to pass up, I may split my cash between some good buys and the TIPS.