Now, it’s official. We have entered bear market territory, and the market still has an hour to go today. Don’t be paralyzed by the headlines.

Here’s a reminder that if you are switching investments in mutual funds (either inside your retirement account or outside), you get the closing price — IF you enter your order well before the close of the market. If you wait until later tonight, you’ll get tomorrow’s closing price.

If you’ve been following my commentaries, you should already have plenty of liquidity to ride out your needs for income and required withdrawals for the next few years. But if you are having second thoughts, you might want to make some switches today– before the close, and before the screaming headlines of “Bear Market” incite another round of panic selling.

Ill be brief here. It’s quite clear that the markets haven’t — yet– fully factored in the economic impact of progressive shutdowns, cancellations, etc. I can’t see how we will avoid two consecutive quarters of negative growth — in other words, a recession.

The government’s ideas being discussed now — payroll tax cuts, delaying filing of income taxes, loan guarantees — may mitigate the economic damage. But until we know the full extent of the spread of the virus — by TESTING and COUNTING — we can’t estimate the impact on our health, or on our economy, much less the markets. And the markets hate this uncertainty.

No long laments here, just a dose of reality in short form. Your 40l(k) plan should have a money market account or a short term government bond fund or a stable value fund, where you can stash some of your money for liquidity and safety. Part of your IRA can be moved to a money market mutual fund with the stroke of a computer key.

This is not an “end of the world” situation, nor is it time to panic. But, we know the average bear market since 1929 has lasted about 3-1/2 years, and we have seen several bear markets (read my letter from last week) that have declined about 50 percent from top to bottom, and at least one bear market (1972-82) that lasted nearly a decade.
Yes, those are the extremes — but they are within the realm of possibility. Act accordingly.

This email is directed to those who don’t get their hands held by financial advisors, and who suddenly realize the seriousness of the situation as it potentially impacts their lifestyle over the next few years.

If you’re younger, still working, and at least 5 years from retirement — by all means stick with your regular contributions to your retirement plans. But if you were counting on that retirement plan for living expenses in the coming years, consider the impact of a market decline that could be deeper and longer than most pundits are willing to discuss.

As I’ve said before, if you follow this liquidity strategy, the worst that could happen if this blows over quickly is that you’re left with a pile of cash in your account!

PS In various radio and TV shows today, I’ve been asked if it isn’t time to BUY! Good for you, brave souls. In hindsight, yes this may be a great time to buy some stocks. Hindsight is 20/20! Let me know how it works out for you!