Financial panics are not new. There are many causes, but there are commonalities among them and some cumulative wisdom as how to handle them. Our Federal Reserve, Congress and state and local governments all have the recent experience of the housing financial panic of 2008 – 2009. They have been and will continue to respond to the current challenges. Here are some points to remember:
- Don’t panic; remember, someone’s fear is another’s opportunity.
- Do make sure you have enough liquidity to meet your immediate needs and those for several months. No need to go overboard here! Riverplace Capital does that as a matter of course.
- Do use the downturn to evaluate your holdings. Weaker positions can be traded for stronger ones; they are both down. It’s a question of what has the best opportunity to recover and thrive.
- Do take some losses. Losses are valuable. They can be used to offset earlier calendar year gains and can be carried forward to offset future ones. For every down position, there is probably another one that has just as much or perhaps even more merit. A swap between the two books the loss but still leaves you in position to recover.
- Don’t panic; this is a time when the wise and the brave set themselves up to thrive in the future.
No one ever knows how long any panic lasts. However, the emotional intensity of one is difficult to sustain for too long. Every historical panic has been followed by recovery. They sometimes happen quickly and with intensity. The Bull and his partners have been practicing the above points of wisdom. Nothing can be done about the past events, but we can certainly put everyone in as good a position as possible to continue to thrive in the future.
Stay steady, my friends.
The Lonely Bull