Is This the Big One?
No two ways about it: The stock market's been hit hard. So is this the "Big One"?
The Big One? Yeah, that's where things fall apart, a financial crisis ensues, the economy tanks as a result, the huge bear market that's been dying to strike at the historic bull finally growls and bites us all...Oh, and the Coronavirus becomes a pandemic and, like the Black Plague in the 14th century, wipes out 1/3 rd of the population of the world...Or maybe it'll only be as bad as the Spanish Flu in the 1920s that killed millions around the world.
Yeah, any and all of the above might be going on. But let's all take a deep breath and slow down a minute...Okay?
Now, when it comes to the Coronavirus, there's no doubt we simply don't know what's really going on with it. Will it become a pandemic? Could be.
The virus has the potential to impact all of us on two levels: our personal health and our investments. Given this fact, it’s been worth taking time away from our usual professional and business activity to try and get - close as we can - to the truth of what’s going on.
One of the pieces I've read links to this video from a researcher in London whose organization is devoted to researching diseases. The interview rather understated (to say the least!) so you have to pay close attention to what the researcher is saying. The interviewer is also rather dead-pan - the opposite of the typical media interviewer. I could be wrong, but this strikes me as a reasonable objective source for what's going on now.
I pass this along now because a) This virus is not dying out, as some reports have stated; b) While I'm not anticipating, or lying awake at night fretting over, a world-wide pandemic, it's far too early to rule this out. (You'll notice the doctor interviewed does say this is the worst disease outbreak since the 2009 flu pandemic/2003 SARS outbreak.) c) The comments about the unusually wide range of symptoms - from severe to very mild/almost unnoticeable - argues that, at the moment, we really have no clear idea of the current or possible severity of this virus outbreak.
With all that in mind, it's my view that it's worth keeping an eye on this on a day to day basis. However, don’t rely on this email or my personal read on what’s happening. I’m not an expert. I urge you to take some time to read up on this yourself and keep your own eyes and ears open in the coming days and weeks - perhaps months. Given what could be at stake, it should be time well spent.
Here's the video link:
https://www.youtube.com/watch?v=ALQTdCYGISw&feature=youtu.be
If, like me, you don't like clicking on links in email, try Googling: Neil Ferguson Corona. Better still, go to YouTube and search for Neil Ferguson Corona. The video as about 10 minutes long.
You'll notice the video is already a couple of weeks old. But nothing I've seen or heard radically changes the view this guy's offering. So let's go with his assessment for now and just wait and see.
Now on to stocks, the financial markets, and the economy.
Stocks were itching to correct for a few weeks - at least. Each time prices would drop, buyers would step in. The overbought conditions never abated. Whatever triggered today's sell-off, buyers didn't step in. Thus you get prices sinking like a stone. That being the case, though, there's just not enough overall evidence to claim that the stock market's foreseeing a health crisis based on the virus. It might eventually turn out that way, but it's too early now to tell. For now, we go with stocks correcting as they've wanted to for weeks.
Financial markets have been a super-fragile state for years. With the Fed and other world central banks propping up markets after the financial, there was the expectation that they would eventually "normalize" things after a spell when things calmed down. But instead of normalization, we got negative interest rates in much of the world, and a failed attempt by the Fed to reduce its balance sheet - a balance sheet bloated by its purchases of treasury securities after the financial crisis.
We're not going into any detail on this now, except to say that the post-crisis actions and their continuing actions since have artificially driven up prices in financial markets, creating dangerous imbalances. Is today's action the first inklings of a fragile system collapsing? Again, there's not enough here to go to "collapse." Let's see what unfolds in the next week or so.
As for the economy, well, it's already in recession in some parts of the world. What about the U.S.? It's touted to hearty and hale by many economists and the financial media. But autos and manufacturing are clearly behaving as they might in a recession. Employment figures were apparently inaccurately to the tune of about 500,000 reported jobs. The corrected numbers don't scream recession, but they're more modest.
So we have to say the Big One may be hovering over us, but it's not here yet. At least I don't think it is. Should you take defensive measures? We did in our portfolios. But the measures we took were based on trimming gains in a number of very strong positions more or less unrelated to the stock market. We might have made those trades with or without the current stock price plunge. At the end of the day, we'll still take some losses in our portfolios. But you can't invest in financial markets and not expect that to happen, no matter what you do to try to prevent it.
The Big One? Yeah, that's where things fall apart, a financial crisis ensues, the economy tanks as a result, the huge bear market that's been dying to strike at the historic bull finally growls and bites us all...Oh, and the Coronavirus becomes a pandemic and, like the Black Plague in the 14th century, wipes out 1/3 rd of the population of the world...Or maybe it'll only be as bad as the Spanish Flu in the 1920s that killed millions around the world.
Yeah, any and all of the above might be going on. But let's all take a deep breath and slow down a minute...Okay?
Now, when it comes to the Coronavirus, there's no doubt we simply don't know what's really going on with it. Will it become a pandemic? Could be.
The virus has the potential to impact all of us on two levels: our personal health and our investments. Given this fact, it’s been worth taking time away from our usual professional and business activity to try and get - close as we can - to the truth of what’s going on.
One of the pieces I've read links to this video from a researcher in London whose organization is devoted to researching diseases. The interview rather understated (to say the least!) so you have to pay close attention to what the researcher is saying. The interviewer is also rather dead-pan - the opposite of the typical media interviewer. I could be wrong, but this strikes me as a reasonable objective source for what's going on now.
I pass this along now because a) This virus is not dying out, as some reports have stated; b) While I'm not anticipating, or lying awake at night fretting over, a world-wide pandemic, it's far too early to rule this out. (You'll notice the doctor interviewed does say this is the worst disease outbreak since the 2009 flu pandemic/2003 SARS outbreak.) c) The comments about the unusually wide range of symptoms - from severe to very mild/almost unnoticeable - argues that, at the moment, we really have no clear idea of the current or possible severity of this virus outbreak.
With all that in mind, it's my view that it's worth keeping an eye on this on a day to day basis. However, don’t rely on this email or my personal read on what’s happening. I’m not an expert. I urge you to take some time to read up on this yourself and keep your own eyes and ears open in the coming days and weeks - perhaps months. Given what could be at stake, it should be time well spent.
Here's the video link:
https://www.youtube.com/watch?v=ALQTdCYGISw&feature=youtu.be
If, like me, you don't like clicking on links in email, try Googling: Neil Ferguson Corona. Better still, go to YouTube and search for Neil Ferguson Corona. The video as about 10 minutes long.
You'll notice the video is already a couple of weeks old. But nothing I've seen or heard radically changes the view this guy's offering. So let's go with his assessment for now and just wait and see.
Now on to stocks, the financial markets, and the economy.
Stocks were itching to correct for a few weeks - at least. Each time prices would drop, buyers would step in. The overbought conditions never abated. Whatever triggered today's sell-off, buyers didn't step in. Thus you get prices sinking like a stone. That being the case, though, there's just not enough overall evidence to claim that the stock market's foreseeing a health crisis based on the virus. It might eventually turn out that way, but it's too early now to tell. For now, we go with stocks correcting as they've wanted to for weeks.
Financial markets have been a super-fragile state for years. With the Fed and other world central banks propping up markets after the financial, there was the expectation that they would eventually "normalize" things after a spell when things calmed down. But instead of normalization, we got negative interest rates in much of the world, and a failed attempt by the Fed to reduce its balance sheet - a balance sheet bloated by its purchases of treasury securities after the financial crisis.
We're not going into any detail on this now, except to say that the post-crisis actions and their continuing actions since have artificially driven up prices in financial markets, creating dangerous imbalances. Is today's action the first inklings of a fragile system collapsing? Again, there's not enough here to go to "collapse." Let's see what unfolds in the next week or so.
As for the economy, well, it's already in recession in some parts of the world. What about the U.S.? It's touted to hearty and hale by many economists and the financial media. But autos and manufacturing are clearly behaving as they might in a recession. Employment figures were apparently inaccurately to the tune of about 500,000 reported jobs. The corrected numbers don't scream recession, but they're more modest.
So we have to say the Big One may be hovering over us, but it's not here yet. At least I don't think it is. Should you take defensive measures? We did in our portfolios. But the measures we took were based on trimming gains in a number of very strong positions more or less unrelated to the stock market. We might have made those trades with or without the current stock price plunge. At the end of the day, we'll still take some losses in our portfolios. But you can't invest in financial markets and not expect that to happen, no matter what you do to try to prevent it.
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