Warren Buffet’s famous advice is to “Buy when there is blood in the streets”. I believe that we are about there.
“Fear spreads a lot faster than this virus.”
Dr. Drew On Coronavirus: ‘Businesses Destroyed, Lives Upended — Not By Virus, But By Panic’
So last year 37,000 Americans died from the common Flu. It averages between 27,000 and 70,000 per year. Nothing is shut down, life & the economy go on. At this moment there are 546 confirmed cases of CoronaVirus, with 22 deaths. Think about that!
All of this over a virus that’s far less impactful then the flu. One day we will look back at this as one of the most overblown hype machine driven moves in history, Elon Musk of Tesla fame was quoted today saying: “Coronavirus is dumb”. I Agree. Of course, I have empathy for the few that had very susceptible weak immune systems (elderly) and have died from it.
Oil prices plunged over 20% this morning the most in a day since 1991. Treasury Bonds prices are at all-time highs. Interest rates plunge to super low (under .5% on 10-year bond) rates and stock prices have dropped to where the were at the end of 2018.
The fact that bond prices have been rising has helped offset the decline in stock prices in people’s portfolio. If you have some balance in your portfolio, you’ve not lost nearly as much as the stock market. With oil prices plunging, oil companies are dragging down the stock market. Bank profit margins are squeezed due to low interest rates so those company stocks are getting hit. Some technology stocks have been hot hard due to concerns relating to making the parts production and shipping.
All of this is temporary. Temporary may last 6 weeks or a few years. I know that most people are concerned about the stock market. Rest assured, the Dow is back to where it was in the fourth quarter of 2018. One factor that should be considered is that the U.S. is in a position of economic strength from an employment and GDP standpoint.
The Gold Rush Analogy:
Back in the mid 1800’s gold mining took off on the west coast. News of the this created a stampede of people heading west to mine for gold. No surprise, more gold was discovered. Was there more gold, or just more people mining/finding gold?
As more people are tested for Coronavirus, more people will shown to have the virus. in most cases, so mild they didn’t even know it. My summation is that many more people in the U.S. will be found to have the virus (as more are tested), but for most there is little reason to panic.
GOOD NEWS:
China & South Korea new Coronavirus cases are way, way down
BEST MOVES TO MAKE TODAY:
- Book air travel now! I just booked a Spring Break trip to Florida with my son and we got tickets from Chicago to Tampa for $49 one way.
- Refinance debt – Student loans and your mortgage. Rates at all-time lows for both.
- When you can stomach it, sell bonds and buy stocks on sale. This is known as rebalancing your portfolio. For example, if you are comfortable with a 60%stock/40%bond mix, you may now be 55%/45%. Rebalancing would be achieved by selling 5% of bonds and adding 5% to stocks. Bond prices are at all-time highs and unlike stocks bond prices have a ceiling (interest rates can only go so low).
- Stock prices are back to where they were 16 months ago. If, at the beginning of the 2020 (Dow at 28,000) you were asked if you wish you could have invested more money when the Dow was at 24,000 the answer would have been “yes”. Now you have the opportunity.
I started in the finance business way back in 1986 and was knee deep on black Monday when the Dow dropped from 2,200 down 22% in a day to 1,750. The Dot com blow up around the turn of the century and the real estate driven debacle of 2007-8. Dow Chart link
THEY ALL PROVED TO BE HISTORIC BUYING OPPORTUNITIES
Lastly, the media seems to be inflaming this panic as a political event, knowing that a weaker economy will hurt President Trump’s chances of getting elected. The more effective they are, the better the buying opportunity in stocks.
I know these are scary times, please call me with questions about your financial plan or portfolio. 630-942-9007
https://www.lifeplanningtoday.com/two-emotions-kill-your-investment-returns/
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