It is 5:26 AM on Sunday March 15th, 2020. These are strange times. I wanted to get this post in because we are in the middle of virus hysteria and it will be interesting to read my thoughts many years from now.
The future is always uncertain and hindsight is always 20/20. This is so unusual and unique that I have nothing to compare these times to. The only thing that comes close is the financial crisis of 2008. At that time I remember seeing the DJI index counter outside the Charles Schwab office go down to the 8,000 level or something like that. The only tangible thing I experienced were that businesses suddenly disappeared in the skyscrapers whose maintenance engineers were my customers. I actually got to see the empty floors that just a few weeks ago were brimming with desks, people and activity.
At that time I didn’t have much money to invest as I had just returned from Vietnam where my salary was $22,000 per year. Very good for Vietnam but nothing for San Francisco. However, I did put my meager savings into a few stocks and they performed very well over the past decade. Those stocks are Bank of America, Costco, and GoDaddy. Unfortunately I sold Facebook and Netflix much too early and still kick myself for it.
During the financial crisis we didn’t know if we were about to face another depression that could last a decade or more. Perhaps there would be a return of the depression era bread lines. We didn’t know how bad things would get and people were scared. Eventually everything turned out alright and we had a decade of explosive growth.
Enter COVID-19 and all that growth has abruptly come to an end and is crashing hard. I waited for many years for stocks to come down again but just in the past two years I’ve put my money back in the market. Being a bit more savvy this time I put my money in blue chips that were already way down, paid dividends and are generally seen by the finance community as safe stocks. I also saved a portion in cash for when stocks did crash.
My moment came two weeks ago with the first major declines. Unfortunately, I “blew my load” too early and bought Delta Airlines, Boeing and J.P. Morgan. Well, I should have waited because stocks crashed hard last week. I’ve lost all my gains from the financial crisis and am currently down $14,000. This is a relatively small number compared to the devastation Coronavirus is causing Boomer 401Ks and my older friends who frankly have a lot more money than I do.
I am not worried about the stocks being down however. These are in buckets that won’t be touched for 10 to 20 years, are dividend paying and I’m confident will turn out very well.
What I have been growing more concerned about is the effect this is having on the economy. Life for the most part is pretty much shut down. Everything is cancelled or suspended. Mass gatherings are prohibited and everyone is wondering if we’re going to go into complete lock down like Italy. To the rational person this is most likely the logical next step although nobody wants it to be.
Just like the financial crisis businesses are going to start disappearing. This time the crisis is much more real to me because I’m farther along in my career than in 2008. The job I have has taken a long time to get to. I have more bills and responsibilities now. Unlike when I was 30, I cannot just ditch the job and find a new one as quick and easily as I used to. It is also much more real because everything is being cancelled and we’re on the verge of a complete lock down! This wasn’t the case with the financial crisis. Nothing was cancelled, people still went about their lives and I really didn’t notice much of a difference.
But this time is different. There are long lines in the supermarkets, everything is cancelled including school, there is the possibility of mass lay-offs and the Fed can’t fix a disease with liquidity injections. So here we are again. Does the future hold that things get better come mid-April / May or do we continue on our downward spiral? Forget everyone talking about a ‘recession’ how about a full on depression?
I wish I could time travel to the future to see how this plays out. Actually I wish I would have had that ability a month ago because I’m locked in at the moment with little cash to invest should things fall further. Looking back at the financial crisis I often kick myself for not investing more. But that isn’t fair to do to myself because there was so much fear, so many unknowns. Therefore, many years from now when I look back at this time I cannot kick myself because there are too many unknowns now! Yes, I would invest more and already have although I acted just ahead of the main bloodbath. I’ll invest the little cash that remains in those savings buckets just as soon as I think the corner has been turned. The thought is this could go on for a while so I’m not going to rush and wait until things start to get better. I feel we’re in the darkest part now as we’ve not hit the climax of the outbreak, are on the verge of a complete lock down and all of this is really going going to F-up the economy pardon the language.
As for cash not in those savings buckets I figure we could go for three months before I’d have to sell stock at a loss. This puts us in pretty good shape and certainly in better shape for a large amount of Americans that live paycheck to paycheck. Furthermore, my company is very strong but we are having pretty much weekly calls because like my personal finances, the cash reserves cannot hold out forever. My current thought is that there will be furloughs by May. I’m on the corporate side and we need to take care of our customers regardless so it isn’t as cut and dry as those on the operations side of things. If things get really messy then I’d still work without pay but would do so from Ohio or Japan. Might as well make the best of the situation and this one-in-a-lifetime surreal situation we find ourselves in.
But to summarize, there is real fear right now but for me it is due to what this virus is doing to the economy. I’m not concerned about the virus and we even went to karate yesterday. That is one of the few places that isn’t closed although it may this week. The Jiu-jitsu place across the street had closed. The reason people say this is worse than the flu is that there is no vaccine and the mortality rate is higher although some say it is only 1% higher than the flu while others say it is 10% higher. Either way it affects mostly the old and only those with underlying health conditions.
Therefore, I don’t need to worry much about the effect of the virus on my immediate family but I do have concern for my parents. I spoke with them a few days ago and they do not seem overly concerned. In fact they are still going to church which kind of irks me. Here we are with governments banning meetings with 50 or more people yet the church, slow as always, has yet to tell people to stay home. Yes, continue coming to the place of salvation only to be killed by a virus for going. How is that for irony? By the way, can’t people just pray harder and make coronavirus go away? No, no, God doesn’t work like that of course. Some preacher please tell me whose fault the coronavirus is. Is it the gays again? The Democrats? Yes, I know, God works his magic when the house has burned down but the Bible is left untouched. Yay Jesus!!
So where do we go from here and how long does this last? What will the markets reflect tomorrow? I’m sure it will go down again but I wish I could be certain. I’m starting to think that the market swings are my own fault. When I finally invest markets go down. If I sell then markets go up. There seems to be no certain logic to how the markets react except for a negative reaction to the actions I take?Perhaps life is all one big simulation and those playing are having fun at my expense?
If I were to predict, I think the markets are due for another big drop but will settle out following a larger than usual up/down pattern but not deviate too much from one more new bottom which will occur in the next two weeks. We’ll have the worst behind us by mid-April and things look better by May. If a vaccine can finally get out then the markets won’t be too concerned about a resurgence come the fall.
But then again, who really knows. This is my optimistic forecast and I’m sticking to it. I don’t want to think much about the alternative.