Market Collapsing… do this now…
As I write this, we’re watching a historic melt down of the markets.
Last week we saw a selloff, when the Fed held rates steady.
Like I said then, the Fed was teasing us, and nobody likes to be teased!
Global markets started coming under pressure.
It started over the weekend with Japan… their market has seen a fall, not rivaled since Black Monday… back in 1987. The Japanese Nikkei fell 12.4% in just one day!
South Korea got dragged down too… falling 8.7%
Then the European markets started falling… The Europe Stoxx 600 is down almost 3% as I write this…
The US markets aren't faring any better… The Dow is down almost 3% and the Nasdaq is down 4%.
This spreading market fear is like a virus spreading around the globe (who doesn't remember Covid!?) The idea of a global recession may be taking shape.
Famed Economist Jeremy Siegel went on the news today and called for an emergency rate cut - remember the Fed just met 4 days ago!
So, maybe I’m wrong about the September rate cuts - but consider this - interest rates have plummeted over the last few days…
Anyway, what’s strange is… there’s no big event driving markets lower. Remember in 2020, the fall was because of the pandemic. In 2008 the big banks collapsed causing that meltdown. And I remember working on wall street in 2000 when the dot com bubble burst.
Recently we’ve been climbing a market wall reaching higher and higher valuations (thanks AI Stocks!). However it looks like we missed a step and took a tumble.
Some analysts point to jobless claims… others point to the consumer softening… Some say the markets were due for a valuation correction.
WHO CARES WHY… HERE’S WHAT TO DO.
Look, you and I are not going to stem this tidal wave of selling… so why it’s happening isn’t the question.
The big question is what do you do now?
I’ve got the answer…
But before I share my thoughts, I’ve got a question “What kind of investor are you?”
Here’s why:
If you’re a trader…
If you live for the short term and like the volatility… then for all purposes trade. The momentum is down so purge your stocks, take up short positions, buy puts to capitalize on the down trend.
Trading short term overnight options (Zero DTE) may be for you! Take advantage of the VIX and sell options for premium. Do this, if you know what you’re doing and have strong intestinal fortitude!
However, If you’re a long term buy and hold Investor… If you love dividends…
Now is the time to dust off that long held “Stocks I’d love to buy, but are just too damn expensive LIST.”
Look at your investments - Find the ones you love - and start scooping up shares at these discounted rates… in 10 years you’ll thank me.
One word of warning though…
Don’t spend all your money at once. Consider stepping into your positions… buy some now… buy more in a few days and next week, and maybe the week after.
You have no idea how deep this pullback might get. Stocks might get cheaper over the next week or month.
Think about this market like buying Christmas Presents… sales start on black friday, but as Christmas day approaches deals get better and better. But you have to buy BEFORE the store sells out.
Shopping this stock market sale is the same thing!
Consider this chart.
Source: Stockcharts.com
In 2022 we had the market weaken, and stocks - specifically the S&P 500 traded lower for the next 10 months.
Now I’m not saying the markets are going to fall for the next 10 months… Nobody knows what the markets will hold.
You just need to be prepared for a longer downturn.
This is what I’m thinking… Consumer spending numbers have been down for the last few months, and companies have been saying consumer spending has been softening.
Might this market turmoil be the next shoe to drop?
If this market turmoil scares consumers from spending… that could lead to a very “soft” end of year holiday spending cycle. That means more companies struggling, earnings falling, and the economy softening.
Unemployment might rise… and the dreaded recession may appear.
Some investors are going to Cash…
Warren Buffett's Big Move
Hidden in the market turmoil is news of Buffett’s latest big move.
Buffett dumped 50% of his Apple stock.
Damn, he timed that trade just right!
This is what worries me more - straight from CNN reporting:
“Berkshire Hathaway sold off $75.5 billion in stock in the second quarter. Along with Apple, Berkshire cut its stake in its second largest position, Bank of America, to $41.1 billion.”
Buffett is now sitting on billions in cash. $277 Billion to be exact.
There are very few things he can’t buy with a cash hoard like that.
But since he’s not deploying his cash - It tells me Buffett thinks things are overvalued - and he hasn’t found a deal yet. Where would you put that kind of money???