D Is for Defense

Iam long on record as an extreme skeptic of doomloop and daisy-chain scenarios, where action A causes market reaction B and then investments C, D and E crash as traders and investors lose nerve and everyone's portfolios drown ina flood of madcap selling.

- JEFFREY R. KOSNETT

For 40 years I have written that it is dumb to make quick portfolio decisions based on political and international events. And I have been correct to believe that when reliable investments get indiscriminately slammed, there is enough smart money to undo some of the damage.

That is the DNA of my threeday rule, which holds that in any news-driven plunge, sober-minded buyers will arrive in roughly 72 hours wielding significant sums of cash. The exception was the crash of 2008, and that was because multiple banks went bust and Wall Street had no rescue money. Bank failures and widespread bond defaults are crushing. Fortunately, with the U.S. economy borderline booming entering this year, the banks seem sound.