OFF THE WALL: What to do when your stocks are nuked by SyriaBy Rene Pastor
There are simply no pearls of wisdom to be had when the possibility of war with Syria for its alleged use of chemical weapons sends almost every stock in your portfolio diving over the Niagara Falls.
Threats of missile strikes against Syria and Russia coming to Syria’s defense conjure possible military confrontation that could involve countries in the Middle East. That provided a spark for the market’s sell-off this week. Syria is a geo-political beat-down for markets the world over. I looked at the stocks that I owned. Nearly everyone was flashing red.
Of the 40 or so stocks in my IRA, only two went up last Tuesday. One was Coca Cola and the other is Kinder Morgan Inc., a company that runs oil pipelines and storage facilities. In all, I lost several thousand dollars on the day.
I am not any good at options so I never asked permission from TD Ameritrade to trade those contracts. So I am stuck at managing my holdings.
As the day got going and I saw how bad it was going to be, I reminded myself of a couple of things. One, sell your weakest holdings, the ones whose performance has been fairly flat or where you earned a small profit. I got rid of a small amount of shares in an investment bank, a pharmaceutical company, an insurance company, an industrial conglomerate and cut in half my modest position in Amazon.
I like Amazon. I buy my books there. It is one of the great online retail stores. But I am just not comfortable about the business model. But being Pinoy and a bit of a ‘segurista,’ I kept a small position just in case.
My reasoning for cutting out those positions is because I already have shares in other companies that run the same business. I have a large position in biotech giants Celgene, Gilead and Amgen so the small pharmaceutical holdings were redundant. I also have a long-standing position in Johnson & Johnson, one of the best big pharmaceutical companies around.
For the investment bank I let go, I still have Goldman Sachs. For the insurance company, there is AIG and Berkshire Hathaway B, which is owned by iconic investor Warren Buffett. For the industrial company, I have chemical giant Dupont.
By selling those stocks, I got cash. The wonderful thing about cash is it does not lose value in a sell-off. Instead of losing, say $10,000, you cut the losses to about $5,000. I then remembered a saying by Buffett, something like, “Be fearful when others are greedy, and greedy when others are fearful.”
I looked at the Tuesday sell-off as an opportunity to buy more shares of companies I believe are going to be strong over the long haul, or at least until I retire 15 years from now.
I decided to increase my position in an investment management company that already handles trillions of dollars, which means the company has assets that are bigger than many countries in the world. The thing is you can’t panic just because you see all that red on your stock screen.
Playing the stock market with your IRA is serious business. It’s your nest egg, I understand. But panicking is the last thing you should do. It is not the end of the investing world. The fear will subside so use the chance to pick up some more stocks.
Don’t listen to the breathless noise you would often hear on the financial TV networks crying doom and gloom from investors and analysts. Remember, these guys have positions in the market so they will try to defend their holdings. Bottom-line, what they are saying is pure noise. Buffett is right. Long-term, good American companies will earn money for your portfolio. Sit back and enjoy the ride.
The FilAm is running a regular column on the stock market by Rene Pastor, a long-time business journalist and commodities analyst. Rene writes analyses for Southeast Asia Commodity Digest, an affiliate of Informa Economics based in Memphis, Tenn. Prior to SACD, he was a financial journalist for Reuters for 23 years. The comments expressed here are the author’s personal views and are not meant to recommend the buying or selling of stocks.