A bit of CAUTION by Gus Cosio

8:45 am Friday 5 August 2010

The 500 point drop in the DJIA should keep us very cautious. We will not be able to escape a bloodbath today. While much of the market’s fundamentals had been in our favor, the unfortunate fact is that the tail cannot wag the dog. Our market is so small that ripples seem like waves to us. I had mentioned the mining sector in yesterday’s post. Personally, I think we can find refuge there since most investors who are exposed to the sector are Philippine funds or individuals. If we can keep our cool, we could mitigate the damage.

Nevertheless, if you are low on cash, I recommend that you choose a few stocks that you can sell to generate future buying power. In times like these, it is always good to have liquidity. You can always redeploy positions when all the chaos has died down.