HOW TO MANAGE CORONAVIRUS HEALTH AND INVESTMENT RISK

{Continuation from last week’s blog:}  WHEN THE U. S. HAS A COUGH THE REST OF THE WORLD CATCHES A COLD – WHAT HAPPENS WHEN CHINA HAS A CORONAVIRUS?

https://wealthbuildingpowers.com/2020/02/24/when-the-u-s-has-a-cough-the-rest-of-the-world-catches-a-cold-what-happens-when-china-has-a-coronavirus/}

 

Last week I attended several sessions where U. S. Administration officials, including Vice President Pence, discussed the Coronavirus, known risk and actions the U. S. has and is taking.  Fifty-nine countries are reporting Coronavirus cases and as of March 1, 2020, there has been one virus related death in the state of Washington.  With the increase in testing kits being distributed to all states, we will start to identify significantly more cases in the U. S.

 

China is reporting that one to two percent of cases result in death.  A two percent fatality rate is significantly higher than the flu, but significantly lower than SARS.  However, much remains unknown about the Coronavirus.  The unknown is creating fear and uncertainty (the enemy of the investment world).

Fortunately, the U. S. shut down travel in and out of China early. The U. S. will expand an existing ban on travel from Iran in response to the accelerating novel coronavirus outbreak, barring any foreigner who has visited Iran within the last 14 days from entering the United States.  The Centers for Disease Control and Prevention upped its travel alerts for Italy and Iran to the highest level, Level 3, which means avoid all non-essential travel. The State Department also increased its warning, advising Americans NOT to travel to certain regions of Italy and South Korea affected by the virus.  The U. S., is considering expanding travel restrictions, including a potential closure of the U.S.-Mexico border.

 

Our government is working with U. S. and Global pharmaceutical and biotech firms and will expedite FDA approval of a vaccine.

 

CORONAVIRUS RESOURCE LINKS

COVID-19 MAPS AND VISUALS – http://www.cidrap.umn.edu/covid-19/maps-visuals

 

For travel alerts and details,  visit the ISOS Coronavirus Information page.  You will find specific country entrance requirements and a list of country airport restrictions.

https://pandemic.internationalsos.com/2019-ncov/?membernumber=11BCPA000079

 

GLOBAL STOCK MARKETS IN CORRECTION

 

The U. S. S&P is down ~13 percent since Coronavirus started dominating the 24-hour news cycle.  A 13 percent correction is PAINFUL and frightening to all Americans. Below I show the historical performance of the S&P 5OO from inception to today, to illustrate corrections are normal and to be expected.

STOCK CORRECTIONS

A stock correction is defined as a decline of 10% or greater in the price of a security from its most recent peak.  The average corrections for the S&P 500 last about four months and values fall around 13% before recovering.   The problems with corrections include, we do not see it coming and are clueless how long the correction will last. However for most of us the market is for the long term.  We know the market will eventually recover, so, while we should be concernd and cautious let’s avoid panicking.

 

TWO TYPES OF STOCK INVESTING:

BUY AND HOLD

Warren Buffett is a buy and hold investor as am I.   Berkshire Hathaway has owned many of the below stocks for decades.

 

“Charlie and I DO NOT view the $248 billion detailed above as a collection of stock market wagers – dalliances to be terminated because of downgrades by “the Street,” an earnings “miss,”  expected Federal Reserve actions, possible political developments, forecasts by economists or whatever else might be the subject du jour. What we see in our holdings, rather, is an assembly of companies that we partly own and that, on a weighted basis, are earning more than 20% on the net tangible equity capital required to run their businesses. These companies, also, earn their profits without employing excessive levels of debt. Returns of that order by large, established and understandable businesses are remarkable under any circumstances.

The GREATEST STOCK INVESTOR OF ALL TIME – Warren Buffett, is NOT panicking nor selling his long term stock holdings.  In fact, I wager he will begin increasing purchases in some of the above investments or new investments, due to the “sale” stock prices.

https://wealthbuildingpowers.com/2019/07/03/warren-buffetts-net-worth-is-driven-by-these-ironclad-ten-reules/

MARKET TIMERS

An alternative approach to Buy and Hold, is to TRY {HOPE} and determine the best times to exit and enter the market.   Some investors TRY to  sell before a correction, {Not sure how they figure that out!} ideally when the market is at its highest point and then re-enter the market just as it starts to go up.  My opinion, 99.9999999……… of us cannot do this. I know I cannot.  Couple of YUGEEEE problems with this strategy.  How do you know when to exit the market? It is easy to look at above YTD chart and see I should have sold my stock holdings in the middle of February.   But I am not smart enough to have predicted that date.

Then comes an even harder question in my opinion.  When do you renter the market because you are CERTAIN the market is now going up?  Twice during earlier corrections, I exited the market.  I modestly referred to those as my STUPID days.   My exit dates SUCKED (my preferred technical term), and my reentry date was as late as an eight-month pregnant lady.  I missed out on significant gains because I was waiting in fear.  I exited after the market reached the bottom {Remember STUPIS}  and was clueless when to go in.  Over the course of years I studied Warren Buffett and learned to buy, hold and forget about it.  If I properly investigated a company’s fundamentals and it is a company I want to hold for years, than why sell when the price goes down?  In fact is that not a great time to consider adding to my portfolio?

https://wealthbuildingpowers.com/2020/01/27/keep-it-simple-stupid-kiss-the-sp-500-etf-index/

WARREN BUFFETT MAY BE GOING SHOPPING AND SO MIGHT I!

 

Berkshire holds over $128 billion cash and another $20 billion in miscellaneous fixed-income instruments.  Buffett’s buy philosophy: “We constantly seek to buy new businesses that meet three criteria: First, they must earn good returns on the net tangible capital required in their operation. Second, they must be run by able and honest managers. Third, finally, they must be available at a sensible price.  “The key third criteria may be here shortly due to the Coronavirus. Buffett tends to buy when others are fleeing the market.

Berkshire Hathaway owns significant percentages in airlines {Delta, United, Southwest), and with that YUGEEEE  cash bundle may consider an acquisition, at sensible prices. The airlines are down about 20 percent this year.

Energy is an existing key business strategy you may see an acquisition, growing the company’s already strong energy portfolio.

I have learned from Mr. Buffett, when others panic and continue to drive the prices down, that is the time to FIRST analyze a company’s fundamentals and buy stock in GREAT companies.   I do have a few companies I want to add or increase my shares, after we reach the bottom and I start to see some increases in stock prices, indicating we may be existing the correction.

 

CONCLUSION

 

  • A correction is a decline of 10% or greater in the price of a security, asset, or a financial market.
  • Corrections can last anywhere from days to months, or longer.
  • While damaging in the short term, a correction can be healthy, adjusting overvalued asset prices and providing buying opportunities.
  • I have no clue what the global Coronavirus impact will look like next week, the month of March, or 2020.
  • If you have financial concerns seek professional financial council from a fiduciary financial plannerDo not listen to me, your mailman or anyone else!
  • I recommend staying informed about the Coronavirus threat by reading trusted government web sites versus the media.  Dead air space is a crime in the media, and they will fill it even when they are wrong.
  • Remember – BREATHE and those that believe in prayer, now is a great time!

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ABOUT ME

 

I am a proud nerd (as my beautiful wife and daughter have told me) investment and finance blogger, with a NC State, Chemical Engineering, University Rutgers, MBA and Harvard University, Advanced Management education.

I left a corporate career because I had a desire for making a difference as a speaker and writer, to help others. I was blessed to be coached and mentored by strong women and men in both my family and professional life.  It is my time to serve and give back.

DISCLAIMER

I started my first business at ~13 years of age (small but brilliantly created plant nursery). I am a successful investor in stocks, options, real estate and happy to share my personal finance and investment lessons learned with you.

However, I am NOT a licensed financial advisor.  Please do not construe my suggestions on this blog, as recommendations for your personal situation.  For individual finance advice please seek your own licensed CPA or fiduciary financial advisors.  

I write this weekly blog to make an impact by reaching an audience and demonstrating the need for financial literacy. I will help you get there.

 

 

Powers Investments Management, LLC

This blog will provide, information and simple strategies, that will assist you to achieve YOUR financial objectives and long term targets. For over 30 years, I solved multi-million dollar problems, for Fortune 10-250, companies. My formal education includes: Business, Finance and Chemical Engineering {Problem Solving} at: Harvard, Rutgers and North Carolina State. And an additional 30+ years, managing my family’s investment decisions. I currently manage/advise people with net-worths ranging from the tens of thousands to several million dollars.

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