Too eager to buy?
That's what I felt like after returning from a weekend in Miami for the Big Game. Too many people wanting to buy right here right now, as the buying is good after Friday's selloff.
I didn't do much talking. I listened.
What I heard were people wanting to buy. We've all been pretty much trained, Pavlovian-style, to buy the S&P 500. The only stocks anyone mentioned to buy were Apple (AAPL) and Tesla (TSLA) . The dialogue was pretty simple: "Can I buy Apple on this dip? Or, do I have to wait for Tesla to go down, or can I just buy it Monday." In each case, I was circumspect. I like both of them very much, but I think buying right here might be ill-advised, not because I fear a gigantic decline, but because I want to know more about how this virus is spreading.
Right now, I think it is pretty clear that the math is not good, the math as laid out in article in the Lancet, that both David Tepper, the owner of the Panthers and a long-time acquaintance, and I had read, shows that the virus could run a very long time, maybe not peaking until April of 2020. Before the run out, there could be a lot more loss of life around the globe, the article contends. The Lancet is a very rigorous peer-reviewed general medical journal that is held in highest esteem by the healthcare community. The article is dry. But you could see how it seems almost like science fiction in how something like the coronavirus could spread if a cure isn't found, a vaccine isn't develop and the quarantine is too little too late.
That's a lot that has to go right, and it certainly could go right.
Plus, I cannot change my take on the Chinese. I have felt that PRC, a Communist dictatorship mind you, has not been forthcoming about the illness, something that could mean that the numbers might be substantially higher. The reporting from independent sources like the New York Times would indicate that. Things have gotten so charged that those who doubt the Times for its so-called political leanings might have stopped even reading the darned thing. Read it, you will come away with a deeper belief that the government has been less than candid about the dangers to its citizens. The PRC has effectively banned discussion of the virus. Not a good sign. The new hospitals going up in Wuhan seem little more than Potemkin village established by the party.
So why not tell people to sell everything? Oh boy have I ever been down that road. I think you want to have a much higher cash reserve than normal and I don't think this is as buyable a dip as everyone else seems to feel, except Tepper -- at least that I can tell. But when I said that everyone who needed their money in the next five years should take out their funds now, I was widely criticized as being an alarmist. The fact that the Dow then subsequently was almost cut in half meant nothing. The fact that I said to buy when my late friend Mark Haines said I should, meant nothing. All that mattered was that the market came back and the effort to sidestep the biggest decline in the forty years I had seen except the two week crash in 1987, was regarded as ill-advised and I don't think this is as serious as that time.
Simple: because there are companies that will be hurt and companies that won't be. This event, in fact, is the ultimate in how all of your money should not be put in an index fund. If you own stocks of less economic sensitivity and don't involve travel, I think you will do fine. Otherwise, I think you will have to take some financial pain.
Is this systemic risk, something that requires a 2007-2009 response?
But is it a buying opportunity right here? I am going to say let the others take advantage of it. Know, however, that you are making a wager on a vaccine, a cure or an effective quarantine -- and right now I would like to wait and see if that's possible, knowing I could miss some real upside if I don't take advantage of Friday's decline.
We are just too close to the highs for my taste. I will let others make that hard money. I would rather stand pat and trim the stocks of companies directly impacted so I can buy them lower or use the capital to buy other stocks that are down a great deal, brought low by S&P selling by hedge funds who want to get out no matter what, including a $200 billion injection of capital by the PRC into the system.