Coronavirus Week 2
Now seems like a good time to take inventory.
Last week was a pretty good shake up in the market. I touched on the statistical Components of the events.
This week let’s discuss the emotional and visceral components.
It appears that the impacts of the Covid 19 (Coronavirus) are not going away. While the fears of imminent death sweeping the globe may have assuaged the economic impacts are there. I have spoken with several people who had meetings or trips planned which are now canceled. The trickle down of this will be felt. The question becomes how deep and for how long.
As discussed many times many of the members of the RIM Family are in their 30s and 40s, which means we will stay in our accumulation years for 20+ years. A loose way to look at this is we are in the middle of the 2nd quarter. Dabo Swinney, Head Coach of the Clemson Tigers is famous for saying “ain’t nothing less important than the score at half time.”
Often taking small actions can calm the mind. So what are the next steps.
Take action with your finances away from your portfolio.
-Interest rates continue to be at historic lows. Today 3/3/20 the Ten year Treasury Note traded below 1% for the first time ever. Now may be a good time to refinance a mortgage, consolidate debt.
-If you have excess cash on the sidelines pay down some debt that is outstanding.
If you do decide you want to make changes to your portfolio perhaps take some risk off the table. It’s appropriate to do this from time to time during different market cycles. As interest rates drop bond prices have historically increased. Maybe take a look at moving some of your stock holdings/savings into bonds.
Avoid making wholesale changes. A lot of decisions made are appropriately done during calmer markets. This means these decisions were made with the rational mind.
Howard Marks, Chairman of Oakmark Capital this week finshed his memo with this thought.
-”Buy, sell or hold? I think it’s okay to do some buying, because things are cheaper. But there’s no logical argument for spending all your cash, given that we have no idea how negative future events will be. What I would do is figure out how much you’ll want to have invested by the time the bottom is reached – whenever that is – and spend part of it today. Stocks may turn around and head north, and you’ll be glad you bought some. Or they may continue down, in which case you’ll have money left (and hopefully the nerve) to buy more. That’s life for people who accept that they don’t know what the future holds”
Lastly. Most importantly. Understand that the News Orgs are compensated for blowing things out of proportion and their time horizon and business model is opposite of yours. Theirs is short yours is long.
If you have questions or concerns lets talk.
Take the Long View!!
PK
Links referenced:
https://www.oaktreecapital.com/insights/howard-marks-memos