The most important things to remember about this severe correction is 1) it was going to happen as I wrote two months ago and 2) don’t panic.
What’s happening right now is about fear and is based more on the uncertainty of the Chinese economy and less on the fundamentals of the U.S. Economy. In fact, things are fairly good right now. Unemployment is down, there have been some healthy earning reports and the housing market is stable, if not picking up steam. We are OK! And just because there is profit taking or fear mongering doesn’t mean it’s based in reality. It’s what I hate most about the market.
However, there is some good news. First, there will be many great opportunities to jump into the market and make money once this panic selling ends. In 2008 when the housing market plummeted and major financial institutions closed their doors, we were on the brink of financial collapse. We are not there at this time so relax and be prepared to get back in. It’s probably going to take a week before things quiet down. In fact we may even see a several hundred point gain tomorrow. Second, while everyone is talking about the Chinese collapse as a bad thing, I also see it as an opportunity. The dollar is strong and getting stronger against the Yuan. As a country we should be looking to pay down our greater than 1 trillion dollars in debt to the Chinese. Why is no one speaking about this? A strong dollar is a good thing. and don’t let anyone convince you that cheap oil prices are a bad thing. The few thousand jobs lost as a result of the downturn in oil is nothing compared to the savings for the average American family and businesses that use their cars/trucks in order to either commute to work or ship their products. We are saving tens of millions of dollars a day, due to cheap oil. Let’s take advantage of it. Finally, all products that involve the use of oil will be less expensive to produce. It’s great for manufacturing which is ultimately great for the economy.
One thing about this country is that our economy is so big that we are largely self-sustaining. Companies in the U.S. can survive without markets abroad, certainly in the short-term. Depending on the industry, that is true to a lesser or greater extent but we are not doing well in this country due to our incredible exports. We import far more than we export. The Chinese economy while large, is completely controlled by the government and that is proving to be a bad thing. The devaluation of the Yuan will not stave off a Chinese slow down if the fundamentals aren’t there. And it appears that’s exactly what’s happening. The dictators in China are panicking and trying to figure out what to do next. They are in unchartered territory and completely flying by the seats of their pants. It’s actually enjoyable to watch despite the market response.
Don’t Panic! and look at this market as a money-making venture as there will be much to celebrate if you play your cards, correctly. I’m watching AAPL, DIS and FB. But there are many others.