The Dow Jones Bull died yesterday after a brief battle with Covid-19, otherwise known as the coronavirus. He was eleven years old.
The Bull had a long history of tussling with ailments, Fed rate hikes, erratic policy statements, overly exuberant froth and hedge funds who would come on TV and fret endlessly about the Federal Reserve. But it was an actual illness that laid him low -- and when he was toppled, he landed upon thousands of dip-buying flies who had always thought they could dart in and out without much worry. They were faster than he was until he departed. Then fell like a ton of bricks.
He left no known survivors. Donations should be made to a fund he wanted set up to fight the coronavirus, which ultimately took him after a remarkable run.
You know, I was an obituary writer for several years. I hated it simply because it is so sad to write a real one, so I don't mind penning a fictional one. But I can't help but love the irony that all of the things that were supposed to have killed the bull, the ones that so many hedge fund managers constantly blabbed about -- the Fed, an erratic president, too-low interest rates, too-high interest rates, too-high consumer prices, too-slow top-line growth and so many other boiler plate villains, more than in an expanded game of Clue -- ended up playing no role.
Instead it was an unseen organism, a scary one at that, which made so many investors cash out and ultimately drive down prices. I do think that a lot of the selling was simply to get ahead of other selling. And a lot was just pure fear as in if the bonds are saying something by having rates this low then I want to get out of something that could fall even if the fundamentals are good.
Which brings me to the heart of the obituary matter: It turns out that when we finally got to the top it didn't take much to knock us down. Any death is too many, but we have only suffered 35 fatalities so far, less than many mass shootings, and most of those fatalities were from people who might have died from pneumonia without Covid-19 because of pre-existing illnesses. You can actually see how our leaders could so easily dismiss this illness. Even at the time of the Super Bowl, I asked pretty much every rich person I spoke to -- and there were a ton of them -- whether they were worried about the coronavirus and, with the exception of David Tepper, an old mentor of mine from Goldman Sachs who owns the Carolina Panthers, no one seemed to even know what it was. And there were a lot of rich owners down there for certain.
I point this out because the coronavirus is truly something that we may look back on even one year from now and say "you know what? Warren Buffett was right again. He said buy and he was right to buy. Sure enough we are well above where he said that." Even as you and I all know, anyone who bought that fated morning after Becky Quick interviewed the Oracle of Omaha just had their lungs ripped out, unless they were so rich it didn't matter and their lungs remain in place.
But let's go there. Let's imagine that Buffett is right. What happens? Why aren't we buying right now if Buffett's always right about stocks in the long run.
First, we aren't buying because we have no idea what awaits us. The fact that we have had so few deaths actually makes it all even more menacing. It's some sort of ticking time bomb where, one day, we will awake and what will happen is we see an Italian or Wuhan-like explosion in infections and deaths and we will say, "why did we buy ahead of that, what a bunch of idiots we were." So we fear the big numbers are coming and we know when we see them there will be people who will sell, maybe even us, because we secretly did hope for the best and we got the worst.
Second, the kinds of people who own stocks these days are people who don't think that they represent pieces of companies at all. They typically own them through the sainted index funds, so it doesn't matter that they are throwing out some perfectly good companies' shares when they dump their funds, they don't even seem to care if they are companies in a basket. They care about the baskets themselves.
I am sure 95% of the people who own an S&P 500 basket couldn't name 5% of the companies in the index, because they have become hopelessly divorced from the fundamentals of individual companies in favor of these aggregations. They are rank amateurs and rank amateurs cut and run when they don't know better and they never get back in when they should. I know this because I told so many people to sell at Dow 12,000 and 11,000 and then told them to buy at Dow 7000 -- and most did the former but not the latter, and still blame me to this day. These owners turned out to be renters and they all gave the keys back at the same moment.
Third, we are a deeply politicized country that has little-to-no faith in anything. Hate Trump or like Trump, he is not why stocks are going down. They are going down because we have to slow the virus and we don't really know how to do it because we are in a free country. So many people who listen and read and watch seem to think that Trump or Powell are the main actors in this play. They are sideshows. The star is some virus that was conceived in ignorance and spread because of rampant globalism. We want villains. But the simple truth is that a free society is too easy an opponent for this Greatest of All Time Virus. The GOAT got us.
Finally, most people are really afraid to have a loss, let alone take a loss. I remember thinking that the single dumbest day to ever buy a stock in my lifetime had to be the day before Black Monday in 1987. I mean who could be that dumb, right? Yet almost every single stock was higher one year later and it turned out to be the last great buying opportunity for years on end.
That's right, the day before the biggest crash in history was actually a decent place to buy.
I don't know how many people are going to die from Covid-19. I will do my best not to get it. So will you. Somehow, though, I think we are going to have to remember that after all the guidedowns and forecast cuts are made because of this illness, there will be commerce, there will be activity, there will be houses bought and dinners out and trips overseas. New businesses will be created. Losses for some will turn into bargains for others.
The problem is the wait. The pain and the wait. Just remember though, if you think buying tomorrow is more stupid than buying that Friday before the crash, I think you are too pessimistic. And that turned out to be a decent place to buy as long as you believed in what you were buying and believed that the center would hold and anarchy wasn't loosed upon the world.
