Corona Madness

A “Week 2” update on COVID-19 vs. USA

The Markets

As predicted the market took a kick in the bualls last week, dropping 11% in the worst week for the stock market since 2008. The market’s drop from record highs into “correction territory” was the fastest drop since 1929. Needless to say, it was a reckoning on Wall Street and a Maria “The Money Honey” Bartiromo breathless fantasy.

Then on Monday the markets had their best single day since 2009, up 5.1% in a fierce rally. Tuesday ended up being a bonk, but as I type on Wednesday the market is up another 3%. Jim “Mad Money” Cramer is probably chomping 9 different types quaaludes and inserting his 12th heart stent – it’s wild and crazy out there!

This is a perfect example of why you should stay invested long term and not try to time the swings of the market. Fidelity has done an in-depth study on market timing and the findings are eye-opening. Over the lifetime of your investment (they used 10,000 days or or 38 years) missing just the 5 best trading days can cut your returns by a whopping 35%. Miss the best 10 days out of 10,000 and your long term return is cut in HALF. That is life-altering!

I hope you did not miss Monday’s gains while sitting on the sidelines in fear. You will be hard-pressed to recover! Get in the market, stay in market, and add to your investments on a weekly or monthly basis. Remember, it’s not timing the market that leads to wealth, it’s time IN the market that matters!

Robinhood Crashes

Twitter was all abuzz on Monday because Robinhood was offline all day as markets rebounded in tremendous fashion. People were panicking! Folks who sold their holdings last week during the dramatic tumble were not able to re-buy as the market was quickly recovering.

Let me say this – if you panic when your free online brokerage shuts down during the biggest stock market day of the last decade, you may be running a really bad investment strategy. Get yourself into a real brokerage and then seriously consider your appetite for risk. You can easily adjust your portfolio accordingly and easily find a much better trading partner.

Sorry folks, park’s closed…

Strategy

I’m seeing a lot of flashy words being thrown around that raise red flags. These are terms like “oversold”, “support levels”, “finding a floor”, or (my favorite), the “Moving Average Convergence/Divergence”.  Look, if you want to gamble on trends, random stock price movements, or “Bollinger Bands”, then more power to you. If you want to invest in businesses and world economies, this is where you will make the long term money. 

Interest Rates

The Fed cut rates .5% on Tuesday. What does this mean? The Fed will lower rates when it wants to stimulate economic growth. Cheaper available money means more people and businesses are apt to borrow money to spend and/or invest. This is supposed to spike the market upwards but on Tuesday it did not work. Bond yields plummeted and the yield on a 10-year Treasury Bill dipped below 1% for the first time in history. This sent bond prices to records highs (remember, bond prices move opposite their yield).

By the way, if you want to really learn how credit and the economic machine work, this is by far the best 30 minutes you’ll spend this week.

Allocations

Checking your allocations in these volatile times can prove profitable. On Friday I saw bond prices at record highs and stocks on sale at an 11% discount. I was able to sell 3% of my bond holdings and move that money over to equities near the end of the day. Sell high, buy low – Boom!

This got me back inline with my 85/15 stock/bond mix and proved to be a fortuitous move. I will check again this coming Friday to see where things sit and make another small move if necessary. Nothing crazy, nothing dramatic, just moving the chess pieces one square at time and taking my time doing it.

2019-nCoV

What about the virus itself? Panic is still in play, that’s for sure. The Olympics may be canceled. Even worse, the Olympics of schmoozefests – SXSW – might be cancelled as well. Glad-handing is a high risk endeavor these days.

The CDC is telling people not to buy facemarks because they don’t protect you from the virus and plus we need the facemasks for our healthcare professionals to protect them from the virus. Huh?

While many shake their heads and claim the flu kills way more people per year than COVID-19 will, officials all around the world are taking drastic measures to curtail its spread. Even if you don’t fear the virus itself, social and economic risks are still risks you need to prepare for. Italy is closing ALL schools. Seattle is a ghost town. LA has just declared an emergency. Now it’s come out that we’re dealing with two different strains.

WHO is revising their figures and detailing a 3.4% mortality rate for COVID-19. This is roughly 2,000% higher than the mortality rate for influenza. WHO is also saying, “they don’t know how COVID-19 behaves, saying it’s not like influenza.” Folks still comparing COVID-19 to influenza may have a little research to do. 

I would go ahead and make sure you have some hand sanitizer, soap, Lysol, and sanitizing wipes. You’ll use them all at some point within their shelf life, but they may get hard to find and really expensive near term. Amazon sellers are marking up hand sanitizer 300% while masks and gloves are almost impossible to find.

Out of curiosity I walked over to Kroger today on my lunch break and they are completely out of the above items. There’s still plenty of food, but you can definitely see several bare spots on the shelves in the non-perishable sections. Trader Joe’s is, however, very well-stocked with food & wine. By the way, RIP “Trader” Joe Coulombe – thank you sir!

Conclusion

Alright – that’s all I got. I hope someone out there got rich on a trade last week where you paired a Honduran gold mine against Clorox options. Maybe your Uncle Barry’s boss has a mistress whose neighbor’s friend’s son works for Goldman Sachs and he tipped you off to the hot Romanian pharma company that’s the equivalent of buying Amazon at its IPO… Help a brother out, ok? Let’s do this!

Cheers, and thanks for reading!

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: