Huge Week in the Market
This was one of those weeks financial writers love. They finally have something easy to write.
In case you actually had something important to do, and didn’t hear about the huge losses this week in the market, I will recap the week for you. The market (i.e. the Dow Jones Industrial Average) started the week at 13,850 and ended at 13,250, a 4.5% slide.
Or better yet, here is a graph.
According to the press, the decrease was due to a tightening credit market and mixed earnings reports. Tightening credit markets are evidenced by a more sane LBO financing market. Mixed earnings reports means good earnings, “but we have to blame something for the decline, and it is earnings season…”
The reaction to this type of week is typical. Finally financial writers can write about something important. Something that many average investors are thinking about. “Is this the beginning of the end of this bull market? How should I prepare for the coming bear?”
Well, to be honest, your strategy shouldn’t change.
You mean nothing should change, even after on of the worst weeks in the market? Yes. Because nothing has changed: the bonds that are now considered risky we always risky. The investments that were good buyout candidates (due to good cash generation and low debt) are still good companies to own.
The market, though it’s down 4.5% in the last week is still about the same level it was in May. The market as whole, particularly large caps, offer many opportunities for investment.
This last week was a huge week only in the sense that it will create more attractive investments.
