Yes, we are in a bear market. And a recession is all but inevitable. It’s tough when we are in the moment, but this is all ‘normal’ stock market and economic behaviour. All bull markets must come to an end. Continued economic growth is not inevitable. Recessions appear with regularity. So here we are. We want to protect our personal health (and that of family, friends and neighbours). We also want to protect our financial health. Do you have a bear market investment plan?
And of course nothing is more important than the steamrolling tragedy known as the COVID-19 outbreak. To help our country and our economy, the most crucial thing you can do is self-isolate and practice that unsocial distancing. That will enable us to flatten the curve. I love how our chief medical officer framed it.
The way we contain the economic damage and the personal financial hardships is to plank the curve. This is a health crisis that creates economic damage. But it is damage that is repairable. As I penned on Thursday I know we will get through this. Please have a read of …
Do you believe in the human spirit?
Usually when you go to war, you are asked to risk life and limb. Dr. Lam is only asking us to create a massive dent in the couch and watch Netflix.
Of course eat well and exercise all while practicing that ‘unsocial distancing’ when you are out and about. We still need to shop. We still need that fresh air and sunshine.
What’s your investment plan?
For years years I have been continually writing about investment risk on Seeking Alpha. That has made me a not-so-popular and not well-read author on Seeking Alpha, at times. After all, we were in the longest-running bull market in history.
The most common theme has been – invest within your risk tolerance level. There is nothing more important. And I often suggest that the stock markets give us a warning shot every now and then. They give us a little love tap so that we can experience what it feels like (again) to watch our portfolio values decline.
Even in 2014 I asked if readers had a written plan of attack for a real correction .
Even COVID-19 (then going by the name of coronavirus) induced a little stock market love tap in late January. How did that feel? We should always be prepared, but I understand that our risk tolerance levels have drifted out of whack. We may not be as emotionally prepared as we think. So on February 1st I offered to Cut The Crap Investing readers how they might prepare for the coronavirus outbreak.
That was posted before the stock markets tanked. Was I clairvoyant? No. I simply thought the viral threat was real and could possibly cause a stock market correction. I obviously had no idea that it would get this bad. At the same time, I am not surprised. It appeared obvious to me in January that there would be a global outbreak.
What will you do next?
If you were already investing within your risk tolerance level you might also have a simple plan. You are investing on auto pilot. You are adding monies on a regular schedule. Applause. Applause.
Of course, no one knows where the market bottom might be. And market timing simply does not work. If you’re investing on a regular schedule you will likely be that rare bird that invests at the market bottom and all along that bottom trough. The market timer will not catch that bottom.
That said, as I had suggested in – Is this an incredible investment opportunity or what? Lower prices are certainly great, but I’d guess that they might get even ‘better’. Some investors are sitting on decent-sized piles of money. They might ensure they save some monies for when investors offer up the ‘big puke’. Sorry for the analogy. That’s the event when most investors run and hide. You’ll see stock market volumes spike to incredible levels as most everyone heads for the exits.
That may not happen. But it seems likely. Epidemiologists and health experts tell us that we are likely only in the second or third inning of the COVID-19 crisis. We have not seen peak cases and peak deaths in North America. And quite frankly, US citizens are not really taking this seriously yet. They don’t really care about these kinds of charts.
The US is setting records for new cases growth rates after the first 100 cases. It does not take a genius to see where this leads. It appears that Americans will only take notice when they see the frightening images on TV, and online.
Here’s some non-geniuses on Spring Break.
Those masses from the beaches are now on their way home to give some presents to Mom and Grandma. Ditto for Canadians heading home from March break vacations.
Wait until Warren Buffett gives the attack signal?
Of course Warren Buffett is the greatest investor of all time. He loves buying companies when there is panic. Mike Philbrick of Resolve Asset Management knows that I own shares of Berkshire Hathaway. It’s part of our overall risk management strategy. For more background on that here’s why the timing might be perfect to own Berkshire Hathaway. That’s one way to keep stock exposure but have nearly $150 billion in cash in the hands of the world’s greatest investor.
Invest like Warren Buffett.
Mike had suggested that while you can invest with Warren Buffett, why not invest like Warren Buffett? Wait ’till the world’s greatest investor goes on the attack? He may start to nibble along the way. You’ll hear press reports of when he’s getting very aggressive. Berkshire holdings are reported every month.
Of course, the risk is that we don’t get that massive sell off. You’re left holding that bag of money. But you’re in good company with Mr. Buffett.
Again, very few would criticize you for investing on a regular schedule. That’s what most of us preach on a weekly basis. You might also have a plan to invest a certain amount of dollars at each stage of market decline. You only want to go value hunting. And that’s certainly a bet. That may pay off or not.
If you buy individual stocks, have a plan as to what companies you want to buy or add to. You might pay attention to sectors as well. Don’t be floundering looking for ideas. Know what you want to buy, and when.
Can you take more portfolio pain?
That may be the most important question. While markets may hold steady or even go up from here, anything is possible. It seems likely that we are in for more pain. While Canadian markets are down about 33% and US markets are down some 32% we may see future declines of another 10%, 20% or more. It might take many years before markets recover lost value.
While I’d suggest you stay invested and have a reinvestment plan, if you cant’ take it, you can’t take it. You may decide to de-risk your portfolio in some manner. I’ll be back with a post on that topic, soon.
Thanks for reading. Stay safe. We’ll limit 0ur contact to the comment section. Do you have a bear market investment plan?
And certainly Canada is not out of the woods. We have to continue planking.
Have a great weekend.
Dale
