Dow Down 500 points: 5 Reasons You Shouldn’t Care

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The Dow Jones Industrial Average (DJI) dropped 416 points today. There is a big media frenzy with titles such as “Biggest Drop since 9/11.” There really isn’t a tremendous reason to panic. In fact this is a great buying opportunity.

1. Fundamentals of the economy are still strong. Interest rates believe-it-or-not are still very low. Any market weakness may even encourage the Fed to reduce rates further, lowering business capital expense costs and improving profits. Capital-intensive companies like Dell would welcome such a cut.
2. Averages catch up. This may be a termporary correction that will be smoothed over with time.
3. Dow is only 30 stocks. I don’t even own a single one of them so why should I worry.
4. Today is just that 1 day. Tomorrow things can go up. 1 day a trend does not make.
5. The Dow has dropped before and it has gone up again, always. It takes time sometimes, but the fundamentals suggest the market will rise up again.

Tomorrow I will be buying some stocks. In particular I am going to be buying Goldman Sachs (GS), Cisco (CSCO), and eBay (EBAY). Its a good time to average down and pick up some fundamentally good stocks. I’m going to buy 25% of my target position in these 3 stocks tomorrow. That is if I want to own 100 shares of each, tomorrow I will buy 25 shares of each stock. I’m going to wait for the market to drop some more, then I’ll swoop in and buy 25% of my position. This is my strategy. If it turns back up, great. If it drops, I’ll wait a few more days and buy some more. The key is that I believe this is only a temporary drop and will return back to positive. I am an Economist afterall, and I believe in the current economy (at least for the next 6 months).