Well, that was fun. Three down days in a row, each successively bigger. Today, a bit of the smell of panic selling; then I see this news item and I must smile. Oh, I’ve no doubt that it contributed to a failed mini-rally off what might have been a bottom — today and going forward — but these sorts of things have a funny way of working. Do you sell or reduce your position because some ‘bond guru turned bearish?’ No, you might sell or reduce your position because you know others are going to sell on such news…because they think others are going to sell on such news, and so on. Crowd behavior: don’t get left standing. If the smart money sells, however, it’s only for the purpose of buying back in at a lower basis once the panic subsides. When we next enter a bear phase, you’ll know it soon enough by all accounts. You’re not going to predict it ahead of time (no one is, except by complete accident; or, predicting so often that they eventually have to be right), so why guess? Wait until you know. Then just go to something that does well in a down stock market, like bonds.
If you hold appreciating assets, what’s materially different today, or yesterday, or the day before, from, say, last week that would make you wish to not hold those appreciating assets any more? Huh? Unless you have a crystal ball that actually performs, I think you’d be hard pressed to make the bearish case. And don’t forget: in terms of real dollars and this government’s accelerated practice of inflating the dollar to pay for the war (a tax increase without you catching on) we’re only halfway to recovering from the 2000-2002 bear market. We’ll probably have a 20% correction before we recover, but I see no reason to not expect dollar-denominated assets to appreciate for years to come, particularly in view of inflation pressure.
Personally, I took today as a great signal to go long on remaining cash (money market) sitting on the sidelines in a 401K. I’d been averaging into funds since transferring the account from a worthless managing company some months ago, but with a dip like this, it’s just too good not to buy, in my estimation. Sure, I could do better, should the sell off continue, but even if we shave off another 3 or 5%, I’ll still be plenty satisfied with the buy.
If you’re a perma-bear libertarian who thinks it would only be just if the stock market and economy crashed, what difference does it make if you’re right? Whether or not it should, in your estimation, it’s going to do what it’s going to do — completely unpredictably to anyone — and the ideas of Rothbard, von Mises, or anyone else, no matter how meritorious, are going to have nothing to do with the individual value judgments people make — increasingly worldwide — which is ultimately the driving force of all economies; indeed, of humanity itself.