Let's talk panic. As I watch the market plummet and then come back, I say to myself that we had a panic and the panic got bought and lots people think that has to be it. The panic's over, the worst case is in.
But there is no sign that things are contained. None. There is no sign that we have anything for the pneumonia that comes with the virus, at least for the older people as the mortality rate seems very high for them. There is no sign that we have a vaccine that can stop it, although we have the best minds on it. We have a combination HIV drug from AbbVie (ABBV) that's being used and that's welcome. After an initial gaffe I have been impressed by how the Chinese have been trying to get the word out to the rest of the world in a genuine plea for help. Maybe the rest of the world can come up with something?
No one wants to think about what could go so wrong that we have some illness like the Stephen King book "The Stand", one that is made by the government and somehow escapes containment. There are wild theories going around because of a biological warfare experiment lab that is allegedly near where the outbreak is. I trust the idea that it came from the food market. But we have to trust the fact that because it incubates, and because you can give it to others while it is incubating, that unless you take precautions you stand a good chance of getting it if we start getting a dramatic increase in cases here. We have not have that yet but when it comes, at least, to stocks we should be mindful that there will be another selloff long before it comes to that.
The possibility of screaming headlines about the exponential growth of illness here, more than anything else, keeps me from being more than a meager buyer today because if it spreads aggressively here then you are going to have people who bought today sell those very stocks they purchased.
Case in point: I saw some victory laps taken today by those who bought the stock of JP Morgan (JPM) at $131. That's a nice price versus the people who bought it at $138 when it reported that terrific quarter. The stock has being going down relentlessly ever since yields have been dropping in large part because of the virus.
But can those who bought it withstand more stories about how global growth is going to slow because of the virus? Can they handle more advisories including one from the WHO that calls the Coronavirus a pandemic? Can they deal with some sort of total shutdown of China or timely reports from companies doing business in China that confirms why so many people sold stocks? If you hear a big negative number from Starbucks (SBUX) or Estee Lauder (EL) , or a warning from Apple (AAPL) , are you going to regret that you bottom fished?
I think, ultimately, the big issue for many will be what happens in the United States if we hear about people who didn't go to China who have come down with the disease. That is what will be most frightening.
That's why my recommendation is that if you didn't buy in this swoon you will be coming on top of quick sand if you buy, or you will be taking out someone who managed to bottom fish and is scalping out right into you. Then you might have conviction but your fellow shareholders won't and you'll end up being shaken out by more headlines, headlines that will be bigger because we will not be dealing with impeachment or the tragic death of Kobe Bryant.
Please, stay small. I sense you will get a better opportunity down the road, especially given that it's been ages since we have had a big selloff. It just feels to me a little too much like the days leading up to the Super Bowl back in 2018. That's when employment came in too hot, the Fed got hawkish and we had that big VIX backfire. Leave room for some sort further fallout. The worse that happens is you made a real good trade.