Sitting On My Hands

DecisionsOn this, the last day of an awful quarter for the equity markets, let’s put the present circumstances into context of a longer term perspective in case some of you are thinking of jumping out of the basement window or any floor higher. The older I get, the more important is having a healthy perspective about short term upsets or bumps in the road.

Through yesterday’s close, the NASDAQ 100 and its Composite are only down by 3.65 and 4.62 percentages this year. The bad news mile marker for the S&P 500 is minus 8.49, for the Dow Jones 30, minus 9.95.

Some company sectors have racked up far greater losses, among them Basic Materials with a 24.30 percent loss and Energy down 28.48 percent. Oil and gas companies that just a year or two ago were absolute darlings of the brokerage houses are now selling at 60, 70, or even 80 cents on the dollar from 2014 year end prices. One would think that gasoline will be free forever by these stock prices. The same applies to metals producers and to a lesser extent, even the venerable chemicals like DuPont, down 32 percent year to date.

As I have written in the past month, the present mess will not be over until the rotund lady sings (trying always to be in a politically correct spirit and in fond memory of Yogi Berra). That will be when there is panic selling with the daily volume of trading reaching in the neighborhood of at least 350 million shares traded in the Dow Jones 30 stocks.

My mentor, the late E. M. Wright, CPA, always asked the question, Would I want to be a buyer or a seller at this time? Since fundamentally the average public company is very healthy and real revenues and profits are still growing, I want to buy. But I am currently sitting on my hands awaiting that capitulation I just described.

The wise approach, in my opinion, is to be ready with a list of best stocks or mutual funds that have been behaving best in this bear market or those with genuine value for the longer term. If you have no cash in your accounts, then determine which positions have been most unrewarding and prepare to dump them.

Do not panic yourself, dear reader. Just wait for those who are going to panic to do it so that you can take advantage of it. Enough other investors will provide our proper entry point. They always do. Markets and companies are always a little different. The constant is human behavior, that swing between greed or euphoria on the one hand, and fear or despair on the other.

On the positive side, someone will be profiting from the new bullish trend soon to come. It may as well be you and me, not just the fat cats! Oops, I slipped into my vernacular.

(Past performance is no guarantee of future results. Advice is intended to be general in nature. All statistics derived from TC2000 Service, Worden Brothers, Inc., 2015.)

September 30th, 2015|Categories: Economy, Investment Management, Stocks|