Small Cap Network Blog

To my memory, this is the worst single-day loss the S&P 500 has taken since October of ‘87. It fell 21% on October 19th of 1987, but had lost 5% on the Friday before that (the 16th). It fell 7% on August 31st of 1998, and only fell 5% on September 16th, 2001 …the first day back from the 9/11 attacks. Some of those days were part of bigger bearish moves, but this 8% selloff is the biggest one-day drop I’ve seen that I can recall. (If anybody can think of a bigger, more recent one, chime in below.) 

Anyway, this kind of plunge gets me thinking….

I’m admittedly hesitant to even bring it up - as it potentially could put egg on my face - but I’m wondering if it’s time to buy. In all three cases above, the horrifying plunge was also at least a short-term bottom, if not a long-term bottom.

I know that seems crazy, but it also seemed crazy in 87, in 98, and 01, yet all those buyers were rewarded to some degree.

Valuations? They suck, in most cases. However, I think the aim in this scenario is to find stocks that will be worth more six months from now than they are now. They’ll still be worth very little six months from now, but that’s not the point. 

In the short run it’s still anybody’s guess. In the long run though, I still believe the current crisis will be overcome. They always are. Today’s selloff is just a protest of Washington’s failure to get a plan - any plan - in place. Will it all be reversed once the plan is in place? Could be.

Don’t hear me wrong - throwing $700 billion at the problem won’t solve the problem. It will go far in investor’s minds though.

I’m going to stay on the sidelines here for today and tomorrow. I may do something tomorrow afternoon though. I don’t want to make it an official Small Cap Network trade, but for those of you who see where I’m coming from, I think you’ll agree today could be a pivotal day for all of us. History is on the buyer’s side here, it seems.

Stay tuned.

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