If the coronavirus has similar characteristics as the regular flu, except it is much easier to catch and kills at a slightly higher rate, why are people panicking and selling stocks?
I think it's for several reasons:
- Here we are in month two of the reign of the virus and we still know very little about it, including the statement I just wrote at the top of this piece.
- We don't know a lot about it because the Chinese Communists have chosen to tell us very little -- or they actually don't know much.
- Because of the dissembling and blatant incompetence of the Chinese, we don't know the actual number of people who have the illness and I would contend we don't have any idea of the real death rate for:
- Healthy people
- People with diabetes
- People with pre-existing respiratory illness
- People over the ages of 65, 75 and 85
- Men versus women
- We are so in the dark on this that we are capable of believing in any rumor including:
- It's man-made in a lab and it escaped so we don't know what it really is and if it is more virulent than we think. This rumour has never been denied to the point where we think it is fiction. (The Stephen King "Stand" version of events)
- Once you cycle through it, if you do cycle through it, you can get it again.
- There are actually many, many more people infected than the Chinese are letting us know, and many, many more deaths than they are admitting.
So, in that vacuum, how are we ever to expect that it can be contained?
I have fought the rally from the dip before the Super Bowl the whole way, selling stock up on every percent for the trust. We have much too much money to know what to do with... until today that is. And yet, I am still tempted to sell. Let me give you my logic.
No one in their right mind wants to come on TV and even talk about financial losses in the face of such loss of life. At the same time, if you try to present yourself as someone who believes that this is just a version of the regular flu and you should buy stocks, you could be pilloried beyond belief, if or when this thing spreads around Europe. I mean, really, why in heck should this stop around Milan, which happens to be one of the better run parts of Italy?
You want to go on air and say it is just a version of the flu and then see France or Germany get an outbreak?
You want to be "thoughtful" and say, it can only get better -- and then we have outbreaks here from people who came from South Korea or Italy? It's not hard to fly from Milan today. You want to risk that?
I am conscious that of all of the people who come on the air on any station at any time, I have been more critical of the Chinese government -- not the people but the government -- than anyone. It is precisely because of this event and how they are handling it that I have been so negative on the stock market and why I believe that selling some things is still in order.
It is only now that the mainstream media is believing my paper tiger story about the Chinese, that they spent more money on the military than they did on public health and infrastructure, that they pumped hundreds of billions of dollars into their so-called Belt and Road initiative, which, by the way, has a DOMINANT presence in Milan for anyone who has been there.
If you don't trust the Chinese, then you have a hard time believing that they can maintain their total war/total peace initiatives where they literally are telling people to go back to work before it is safe to. If you have a hard time believing their "back to work" story, then you have a hard time believing that the economies worldwide will bounce back quickly.
Therefore you can only continue to believe that the dip is not yet a buy, even if it bounces off of some moving average somewhere and the industrials that have been so strong are reflecting pre-coronavirus when things really were strong and orders really were good.
In sum, can we accept that we have never seen anything like this, where we are worried about our own safety, and trying to make money in the stock market? We are trying to find masks that work -- they don't, unless they are the special 3M kind -- and trying to buy stocks?
How about this? How about you keep raising some cash in stocks you are way up on, as we are, and then wait for the warmer weather that should slow the virus down?
And why not bet that the inept Chinese government comes to its senses and sells the trillion dollars in Treasuries that it has to both prop up the stock market -- you have to register with the government to see which is why it hasn't fallen, but how long can that last -- and build more hospitals in 10 days' time.
How about we worry about that a little further along in the process of something we really don't know anything about yet?