Be proactive!
Document this "conversation" with the psycho. As soon as s/he files any type of complaint, get an attorney and sue, seek an injunction, file a criminal complaint; whatever your state law allows.
Wacko's, freaks, and bullies only cause trouble for people when the risk/reward ratio is to their benefit. Aggressive self defense will normally deter a nutjob from further mischief.
If all else fails, you can always take out ads (for several concurrent weeks) in the newspaper classifieds: EARLY SUNDAY MORNING GARAGE SALE - EVERYTHING GOES BEFORE CHURCH! (use the psycho's address: every garage sale junkie in town will start banging on his/her door at 4am!)
The following member says Thank You: