Recession Looms

The FED panicked and cut the interest rate in the US, the major indexes have continued downwards the last couple of day and now even the emerging markets are starting to falter.

It surely doesn't look good, but what surprises me is that many investors are dumping all (or most) of their stocks and are trying to find a hiding place (which is increasingly difficult to find at the moment. Only government bonds seems 'safe'). Sure, you should cut your losses before they become too big, but if your stocks have already lost 15-20% of their value wouldn't you be better of hanging on to them until they regain their value? Naturally you can't know for sure that they will make up what they've lost, but given that it's the market as a whole that's going down fast, it's probably better to hang on to stocks in a good and solid company than running away scared. Everyone knows that you should buy low and sell high, so why are people selling? Ok, there might be perfectly good reasons like the need for the money to pay for something unexpected, but I think in most cases it's more of a knee-jerk reaction to seeing the paper value of your assets plummet (much the same way people have increased their spending, seeing the paper value of their houses rise exponentially :)

I have very few stocks, but instead of selling them to minimize my loss, I'm looking to buy more. At the moment I have GM, Starbucks and my Gold iShares (which all have fallen 3-4% since i bought them) but I'm looking at expanding my portfolio with Boeing, some realty iShares (ICF or IYR) and perhaps even some emerging markets iShares as soon as they seem to have stabilized. I'm still convinced gold will pick up and as for the rest; they have taken huge hits lately despite being traditionally solid companies/markets (except perhaps the emerging markets) and I think they'll recover faster than e.g the financial sector that still seem to have some skeletons in the closets that need airing...

Luckily for me, I don't have a huge crowd of investors to please, so I can take the loss of value without loosing my job.