The coronavirus finally entered the ring to take on the stock market yesterday. Yes, it won round 1 but my money is still on the heavyweight champion of the world – stocks, bonds, and sensible alternative investments.
The Stock Market
The stock market took a straight left yesterday. News is frantic with words like “markets rocked” and “stocks pummeled” being screamed constantly. I got a lot of text messages yesterday from folks who are concerned. They feel like they are down on the canvas or at least taking a standing 8-count. Here are some stock market thoughts after round one of the fight:
- Don’t pay attention to “points” but listen to percentages. News people like to scream about the Dow plunging over 1,000 points – which sounds scary. Yesterday it did drop over 1,000 points but that is 3.4% which is really not that bad.
- If you are properly invested, well diversified, and your allocation percentages are within norms then you planned for this long ago. You done good. Resist the temptation to do something just because the news makes you feel like you should be doing something. Don’t act because your neighbor tells you he is loading a wheelbarrow full of gold bullion into his basement vault. Remember, this is also the guy with 10,000 rounds of 9mm and his own water treatment plant in his attic.
- The secret to successful investing is time in the market not timing the market. Don’t try to minimize the event’s effect on your portfolio by selling stocks thinking they will dip or buying gold because you think it will rise quickly. Stick with your long term plan. The road to wealth is littered with the corpses of those who tried to time the market.
- Don’t take investment advice from friends who may mean well but have no clue what they are talking about. Remember, they got their advice from a friend who got it from a friend and one of them along the way had a BAL above .10% when they were offering their expert market opinions. Gather news from trusted sources.
- If you do want to own gold, or bitcoin, or wheat because you think that is hedge for the future that’s fine. Commodities should occupy no more than 5% of your portfolio in most cases and speculative investing should occupy no more than 10%. Otherwise a well diversified plan is your best plan.
- Your buddy who “made a killing” buying a Ukraine pharma company that just entered Phase 1 trials in Luxembourg is full of crap. He still has a mortgage, a car payment, and a maxed out Capitol One Visa. I know him…
- Slow and steady wins the race. Don’t react to the news and short term market wobbles. Stay the course, stick with the plan.
The virus seems to be spreading and taking on all challengers. Severe body blows have been delivered across China and the fighter is now entering developed nations like Italy and South Korea. Iran has a big fight on their hands that they can’t figure out and 7,600 people are quarantined in California as the west coast gets ready to rumble. Here are some virus (viral?) thoughts:
- People are scared shitless about this virus. I’m sure grave concern is warranted. I’m sure absolute panic could easily ensue.
- I consider myself prepared but not panicked, and prepared for the panic. I see nothing wrong with laying in a 2-3 week non-perishable food supply – it’s food I will eat anyway at some point. I bought the N95 and N100 masks since I can always use them for lawn mowing or woodworking. I have an extra box of nitrile gloves I’ll use down the road for car repairs. I bought a little extra bleach, Lysol spray, Lysol wipes, soap, and hand sanitizers. Again, I will use them all eventually and their shelf life can be measured in decades. The price of the items will skyrocket should something hit, and supplies will quickly dwindle – many are already hard to find.
- If the virus hits town you will be in lockdown. Italy immediately closed up shop in the Lombardy region when only 38 people were found to be infected. The town quarantines will last 2 weeks. This is the panic I want to prepare for. If someone tells me right this second I need to shelter in place for 2-3 weeks, I’m set. Prepared, but not panicked – I’m about to leave and go to work after all… in a mall…
- I’ll probably refrain from air travel for a while. I’ve never wanted to go on a cruise and I certainly haven’t changed my mind now. I’ll probably avoid large crowds for a bit but I hate them anyway. I don’t think I’ll be summering in Asia.
Alright – that’s all I got. I received so many texts, messages, and emails yesterday about the market I thought it might be fun to record some thoughts here. Many who messaged are concerned and rightfully so. There is no need to panic or act drastically.
And to my one friend who shall remain anonymous – no, you should not take out a 401k loan to short Carnival Cruise Lines while buying platinum futures. I’m sorry I didn’t get back to you sooner…
Cheers, and thanks for reading.