Sometimes I spend so much time in kortsessions.com outing the work and dubious wisdom of the Cassandras of the stock market media and punditry world that I forget to give any credence to the possibility of a real correction or bear market being on our doorstep. I don't mean to do this. There is always a potential for market pitfalls. They are normal market events and should not be viewed, as my headline would imply, as catastrophes. They are just hard to predict. I can guarantee one is coming, just can't say when and how bad it will be. When it does come, however, we are not going to like it. FYI, "A 'Horrendous Storm'..." was last week's post - check it out if you dare.
How to prepare
- Always remember, however dire the media paints the situation, however negative the majority opinion is, the end of the world is a very rare event.
- Know what you own and why you own it. This will make it much easier to hang in there comfortably during the dire future moments. You are the owner of a business(es). I have never found a business owner to respond in the affirmative when asked if they were absolutely certain a recession was on the horizon, whether they would consider selling their business to avoid the downturn. The concept is ridiculous, and the only reason one would sell a stock based on a certain economic decline is because they could, not because it was the smart thing to do.
- Finally, it is OK to raise some cash if you are uncomfortable but NOT OK to sell everything. If you are still inclined to sell everything, you probably should not be in the market anyway. Having dry powder going into a market decline adds comfort and means you have the ammunition to take advantage of sharp drops in the price of stocks you have comfort and knowledge about. In the final analysis, "comfort" is the operative word.
Here is a little compendium of cheery opinion from this weekend, from CNBC, Barron's and MarketWatch.
"Fed should have erred on the side of caution with soft economy" - Barron's
But, what about those aforementioned rates? (here is a great counterpoint)
(You need a WSJ or Barron's subscription to view all Barron's material.)
"Bond yields are going up, right? Not so fast" - Barron's
Recessions, corrections and bear markets are normal economic events (not extraordinary, like the media would lead you to believe). To make life easier, you need to be comfortable both with what you own and how much of it you own.
What's your take?