What to do now?

I know that seems like a century ago in the light of what has happened since, but flash back for a moment to that day. The TSX had just plunged another 349 points to bring its loss for September to almost 1,900 points (13.75 per cent). The Dow had fared even worse, dropping 450 points on the day. Stocks were sinking faster than a ship with a holed hull and people were selling everything in a rush to the lifeboats.

My response to the CP writer was to tell his readers to stop panicking and take a deep breath. The stock markets weren't going to zero. Quality companies like Enbridge, TransCanada, Rogers, Shaw, and Fortis, just to name a few, were not going to implode. Enbridge will still be delivering natural gas to your home 20 years from now. Rogers will still be supplying cable TV services to folks in eastern Canada and being paid very handsomely for it and Shaw will be doing the same in Alberta. Fortis will still be generating electricity and TransCanada will be carrying oil and gas through its pipelines.

Yes, Canadian banks and insurers have been sideswiped by events in the U.S. but there is no comparison between their situation and that of Lehman Brothers, Merrill Lynch, AIG, Fannie Mae, Freddie Mac, and all the other fallen American icons. Royal, TD, Scotiabank and the others will be around decades from now, unless the federal government some day decides to let some of them merge.

However, I did tell the CP reporter that people shouldn't put their heads in the sand and do nothing. Painful as it may be, investors need to take a long, hard look at their portfolios. We can't change the past but we can try to minimize the damage going forward.

I pointed out to him that history tells us that big stock market losses are always followed by a rebound, often a dramatic one. I said I expected it would happen again this time, and reasonably soon. His story hadn't even made it onto the wire before my prediction became obsolete!