Feeling Really Bummed Out…Don't Be

Nobody can deny the pain that traders feel when almost every stock they hold tanks simultaneously. Stomach churning feelings were made worse by final hour disasters on each of the week's last three afternoons. Media commentators love to spout bad news. CNBC, financial blogs, Barron's and the Wall Street Journal were quick to remind their audiences that last week marked the worst five-day period since the Covid-19 ravaged period ended March 20, 2020. With friends like that, who needs enemies? Constant barrages of negative stories only fanned the fear. Think about what obvious question those commentators should have been asking, but didn't. They should have checked to see what you should have been doing in late March 2020 and at other high profile sell-offs in the past. Why not question whether March 20, 2020, was a good time to sell, or a good time to buy? The chart below answers that question unequivocally. The final bottom in March 2020 came just three calendar days and one trading day later, on March 23, 2020. Despite very real, and quite horrible economic news back then, there had been so much damage to share prices already that it was one of the best times to go long in modern history. Ironically, the previous large sell-off had also started just after Thanksgiving 2018. The Fed had just begun ratcheting up interest rates to normalize while the economy was chugging along nicely. There were almost no up days that December prior to Christmas Day, 2018. The powers that be looked at the 1 p.m. closing time on a very lightly populated market their last chance to scare nervous, and/or overleveraged, traders into selling to them at rock bottom prices. The next trading day, Dec. 26, saw an enormous rally which ran almost unabated for more than a month. Those who panic-sold never got a chance to buy back in anywhere close to where they had dumped their shares. I didn't hear one analyst on TV or print tell that story last Friday or even over the weekend. Not one person pointed out that when everybody is super depressed at the prospects of continued losses, they are willing to part with stocks at almost any price, regardless of what they think they are truly worth. Many of the most damaged stocks last week deserved to be knocked down. They either had no earnings or ultra-high valuations by historical standards. Don't try to be a hero buying up discounted shares that might still be too expensive. This was my Top 10 list for 2022 as of Jan. 14. Each of them was bargain-priced before last week's action. All 10 are significantly cheaper today in the absence of any company specific bad news. The dividend yields indicated are all higher now simply due to lower quotes. I happily added to already good-sized positions late last week in all but . There is no way to know when the market's final nadir will be established. Owning fine companies like these at incredibly low valuations is pretty certain to work out well over any reasonable time horizon. The Law of Asymmetric Returns is still in effect. Simply reverting to the pre-drop prices make for huge gains. Exceeding the old highs can be life changing for those who buy near the lows. Picking up good quality shares after large declines tend to work out brilliantly. Keep your spirits up. Hold tight or buy more of quality names at great valuations, if you dare.

Feeling Really Bummed Out…Don't Be

Picking up good quality shares after large declines tends to work out brilliantly. Hold tight or buy more of quality names at great valuations, if you dare.

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