The equity markets are in their second worst start to a year in history, the crypto-mania is showing (long awaited) signs of death, and there is the growing risk that we are already in economic recession.  These noteworthy events have transpired as the double-headed nightmare of stagflation and a hawkish Fed.  And as these themes threaten to persist there is the expectation that the hints of forced selling seen in recent weeks could evolve into a panic driven market meltdown. 

Bill Miller says he sold some bitcoin to meet margin calls CNBC
The Debt Time Bomb Facing Closed-End Bond Funds  Barron’s
“Such forced selling happened in both the 2008 and 2020 market crashes…”
Some attributed this to forced selling, but it is too early to tell  Forbes

Suffice to say, there are two reasons to buy equities as prices collapse during a panic-style selloff:

1) Buy trying to catch the “bottom”.  This tactic is usually based on the expectation that market prices will rebound as economic conditions improve or as the Fed (again) enacts emergency bailout measures.  This has been a major theme in the equity markets since Greenspan’ pledged Fed-backed liquidity following the 1987 crash.

2) Buy attractively priced stocks on the expectation that your specific companies will see improving business operations over time.  If you focus on companies with strong balance sheets and durable businesses you shouldn’t really care what their stock price does over the short-term. 

Obviously the first attitude is dangerous and can often times be like trying to catch a falling knife.  Moreover, with central bankers warning of further rate hikes and weakening economic activity potentially required to help control inflation, nothing suggests that a “bottom” is imminent.   

The second option is considerably less dangerous and the investor sleeps well at night even as, and if, today’s market malaise persists.  When compiling your list of potential “panic” buys one exceptionally timely consideration is debt.  Just because a company has an attractive interest coverage ratio today doesn’t guarantee they will be tomorrow.  The seemingly perpetual ability of corporations to roll over debt at increasingly attractive rates of interest may be going on hiatus for awhile.

In short, during the panicky period in late 2008-early 2009 investing was exceptionally easy. If you had cash to invest during this period you could, literally, throw it at any quality company and you would have made a lot of money.  For the first time since 2009 there is the growing sense that today’s bear market will, in time, create similar opportunities.