You have to hope for the best, but prepare for the worst. That's been my philosophy in life and in portfolio management and never have the two been more intertwined than today.
Yes, I am talking about the coronavirus, which the Centers for Disease Control and Prevention now tells us can't be contained and is not a matter of if, but when we are going to be hit.
Yes, the agency is telling us that it will be here shortly.
"We are asking the American Public to prepare for the expectation that this might be bad," said Nancy Messonier, the director of the National Center for Immunization and Respiratory Diseases. She says we should expect significant disruption in our lives.
Her wisdom, which, overnight became conventional, is why the market sold off so badly today.
Of course it's a little more complicated than that. Our stock market is following the much larger bond market and the bond market is hitting record lows in multiple maturities. When interest rates collapsed Tuesday, stocks, which had been trying to rally -- reversing a three-day streak -- went with them. The bond market is sensing a dramatic decline in economic activity because of the coronavirus. We can't ignore the bonds and we can't ignore the virus.
So, what's the point of even thinking about money?
Arguably, because the vast, vast majority of people in this country are going to come out the other side of this coronavirus and go back to leading their normal lives after they get sick. I don't want you to think, I am going to get sick, sell everything. I do want you to think if I do get sick I am not going to worry about my money, because I have some cash and when I get better -- because almost all people will get better -- I can buy shares of companies that didn't skip a beat, or came close to not doing so.
Look, I am not an epidemiologist, but I sure listen to everyone I can find. Dr. John LaPook, my personal physician, who covers medical issues for CBS, recently interviewed Dr. Larry Brilliant, one of the great pandemic hunters, and he spoke in English about what we are up against.
"I'll tell you what it's not; it's not the zombie apocalypse, this is not going to be an extinction event. It's going to be a rough ride." Brilliant says the illness is already pretty much all over the world already, but most countries have no ability to even gauge whether a disease is the coronavirus.
One of the reasons I like Brilliant is that he was the science adviser for the extremely frightening movie "Contagion," and recognizes something devastating when he sees it or helps create it.
He makes it clear that this virus is not like that. But it is more dangerous than the regular flu, for certain.
The Chinese have done us no favors in trying to get a profile together of who is most vulnerable. But we are learning. Many more men than women are getting the virus in China. Many more men smoke than women. There's a link. The air's bad in Wuhan, that's a link. You have respiratory illness that's a link.
We understand that about 2.2 percent of the people we know who catch it, die. But we don't know how many catch it and don't think it is anything but the regular flu or just feel lousy, so perhaps it's not as lethal.
Young kids may have some sort of immunity. Again, we don't know.
I am not asking you to equate it with the flu of which 60 million people have had this year and 14,000 have died. It will be worse.
What do we have for this disease? We hope that Gilead's (GILD) Remdesivir, which is in trials, can help patients. We don't know. Maybe we find out in late April. Maybe it's so great we learn before that. Maybe it isn't.
How about Moderna (MRNA) ? The young vaccine company -- which has taken on some tougher illnesses than the flu -- thinks it might have something for the virus and it's already being rushed to the National Institute of Allergy and Infectious Diseases, a part of the National Institutes of Health. Vials of the experimental vaccine, mRNA-1273, that have been sent are planned to be used in a Phase 1 study in the U.S.
Health of Your Portfolio
If you are preparing for the worst with your health, what's preparing for the worst with your portfolio?
I think you must still regard anything travel-related as something that could have to preannounce a shortfall.
We have Mastercard (MA) on tonight on "Mad Money." Its stock is one of the biggest winners of all time and we have its current and future CEO on tonight. Last night the company preannounced weaker earnings, because of the coronavirus. I am confident that a year from now we could look back and say that was a one-time event. But that didn't stop people from selling the company's stock hard. Mastercard's book of business is pretty metaphorical for the entire worldwide economy, not just South Korea or Italy, where the outbreaks have really taken off. My point is that if it can happen to Mastercard, it can happen to anyone in travel and leisure and of course, retail, where cards are heavily used. You just don't shop a lot when you are under quarantine or worried about your basic existence for that matter.
Commerce will go on, it always does, but at a rate that is not commensurate with how high this market is, hence, while I am still recommending a heavy cash position. Take Macy's (M) . The company reported a good quarter, but it had to address the coronavirus and that was all she wrote. The stock reversed and went down.
Who doesn't miss numbers in these kinds of events? Utilities, many of which have run but some of which have more to run. I continue to like Dominion (D) . Con Edison (ED) is too cheap.
I can't emphasize gold enough: Think Barrick (GOLD) as I said last night.
You want to be creative? I think that Netflix (NFLX) is a winner if you don't go out. You have no theme park risk. I would recommend Amazon (AMZN) if I were not so concerned that delivery could be a problem.
Alphabet (GOOGL) and Facebook (FB) can go lower, of course, but they have strong businesses.
Finally, cash will be king as we roll through this moment.
When will stocks be so low that they reflect the coronavirus? I think the answer to that will be if it strikes here in a way that your life will be altered by it. By then I suspect we will have repealed a lot more than we have of many sectors that need you to go out and spend, not just look at each other on Zoom Video (ZM) at work or buy from Prime at home.
Now, you have been prepared for the worst. I think hoping for the best is still too premature.
