Panic Mode

     Today the Dow Industrial Index is down over 370 points. There are three things an investor can do in this situation: 1 Sell in a panic, 2 Buy more stocks at a discount, 3 Relax and have a glass of your favorite beverage. I chose option #3. My preference is Wild Turkey bourbon on the rocks with a slice of lemon garnish. Institutional investors and market makers on Wall Street would like for you to choose option #1. Why? Because panic selling by retail investors cause prices to fall on good stocks, giving the Pros a bargain price. The Pros on Wall Street are always looking for a way to generate short term gains for their clients. It's the client who is responsible for the tax on these gains. To sell into a panic means that I have lost control of my long term strategy and that I am willing to sell at any price just to exit a position. Readers of my last post will remember that I was selling (with limit orders) some of my big pharma (drug) stocks last month. All of those orders were filled at the price I specified. I wish I could say that I knew The Donald was going to do something stupid and cause a panic, but the truth is that the drug stocks just got pricey as expressed by the PE ratio. I like to sell into strength while the market is going up instead of weakness (when people are panic selling). Since this blog is about finance and not politics, I only have one thing to say about the events this week at the White House: Trump's outrageous behavior is not accepted in government like it was in the business world. End of political analysis. Now about option #2-buy more stocks at a discount. Let's put today's action into perspective- the Dow only fell 1.78% today, hardly a huge discount to previous levels. I don't know if there is more pain to come or not so I am not willing to catch a "falling knife" by buying a stock on its way to lower levels. When Richard Nixon was caught breaking the law and lying about it in 1973, the Dow fell 50% in about a year. Funny thing is this country, the economy, and the stock market all survived the resignation of Nixon. If this is what happens to Trump, I suspect my long term strategy to survive also.