Dear Clients and Friends: March 29, 2020
Sunday Evening Thoughts, +2 Weeks…
It’s Different This Time
Can I see a raise of hands from anyone who is currently on an essential lockdown, that thought staying within your confined space would be this difficult, especially those with kids? I’m speaking from my family’s experience and we are taking this seriously. So, within the past 2 almost 3 weeks, I can count on one hand how many times we have been in the car to leave the neighborhood. Maybe we’re all getting a little stir crazy, or maybe it’s because I long for March Madness Basketball each spring and this weekend would have certainly been packed with great games and we can only dream our team would have still been playing. So this weekend, I just needed a good come from behind pick me up story line that was sports related. We sat down and watched a grizzly coach that wasn’t really that good, who had a drunk of an assistant coach, and a handful of regular Joes play basketball. In the movie Hoosiers, Coach Norm, played by Gene Hackman in one of the movies more memorable scenes walks into the championship arena before practice with his team and asks his players to measure the free-throw line and distance from the floor to the hoop. It was exactly what he thought, 15 and 10 feet respectively. The other scene I want to reference is in the time-out right before the final play of the game. Coach Norm is drawing up who will take the final shot to win the game. He first describes using Jimmy, who’s the team’s best shooter as a decoy and someone else will come off the screen to take the final game winning shot. As he directs his team to take the floor and execute the final play with a, let’s do this attitude, Jimmy speaks up and says, I’ll make it coach, I’ll make the shot. It’s in this moment that the hair stands up a little on the back of your neck and it is the David vs. Goliath moment. If you’re like me and wanting to revive that American Spirit that lives in all of us, watch the movie. Or, watch Miracle, Rudy, or Rocky. But this brings me back to the market and today’s economy. It got me thinking. Over the last few weeks, investors have worried that this time it’s different, and they’re right it is different than the last bear market, and the one before that or the one before that one… What turns a perfectly strong bull market into a bear market, is always different, because we are smarter than making the same mistake over and over again. This is one of the steepest and fastest bull/bear market turns in history. Nonetheless, you still have the construct of changing from bull to bear. Now, let’s talk about what is not different each time a bear market turns back into a new bull market, the American Spirit. Somewhere out there on the horizon sits great entrepreneurship, a great idea, a cure, the American Dream. Someone who wants to better themselves by working hard, doing what they said couldn’t be done, and pushing through failure after failure. This is why bear markets turn back into bull markets, because there is a great few who want to dream bigger and better for all of us. It’s having the confidence to say, I’ll make the shot and taking that chance.
Continued Trials… and Tribulations
We continue to see more drug studies hitting the market for both curing the symptoms of COVID-19 and as an end all vaccine. These are all still in the vary early stages, but with the likes of the FDA, health organizations, doctors in the fields, and entire world looking for a difference maker, we expect many of these are being fast tracked to see results. The healthcare industry remains highly focused on finding something sooner rather than later to put an end to this pandemic. Getting back to anything resembling normal, hinges on this occurrence.
Good news this week, Washington did approve the largest ever recovery package somewhere around $2,200,000,000,000.00 and for those of you having technical difficulties with all the zeros, that’s $2.2 trillion. Some Washington insiders are suggesting this will probably become known as phase 1, and as different issues arise and more follow-up funds needed for specific benefits, those too will be made available in order to help stabilize the economy. The current administration and congress are of the opinion that no amount is too much, at least for right now.
Many things happening right now may not seem real. For instance, I can’t tell you why everyone is buying toilet paper and it has become a precious item today, but only that it has. Or, why the market swings up 8% one day, to be down 6% the next. Did we even realize the 1-3 month treasury bill yields went negative for the first time in our Nation’s history this week? This week an Arizona couple took the non-pharmaceutical version of the drug, chloroquine phosphate, which is a common additive used to clean fish tanks. The husband died and the spouse is in critical condition. You’re not alone when you think these events just don’t seem to add up. Regardless of what may be happening around us today, we need to keep our wits about us. Very few of us can perform at a high level, when pressure smacks us right in the face. Let’s not worry about high level performance right now, but can we at least remain calm enough to see what may be considered very odd happenings around us. Let’s all agree not to participate in those kinds of behaviors and be better than that. This is time to rise up and be a part of the solution, not the problem.
When will the Market Bottom?
No one truly knows this answer and I’m certainly gathering as much factual data as I can to make a better educated decision towards this quest. When considering the question, let’s not forget, we don’t have to be completely right. We can hedge ourselves and alter the plan as necessary. But the correct answer to the investment side of the question above, let’s just make sure we are not 100% wrong. We are always learning from others, so in that vein let’s look to the other economies who have weathered through the COVID-19 storm. For this, we look at China, South Korea, and Japan. In previous letters we discussed how the market may start to turn prior to all the bad news or even the amount of virus cases peaking within the United States. Look at the following charts with those economies.
We are all watching our numbers within our county, state, and country continually rise. We will get to a point where social distancing pays off and helps slow the spread of the virus. It will happen, but we will need to continue to listen to experts in this field of study and our patience may be tested. As bad news lessens, it will pave the path forward and good news may fill a void that is desperately needed.
When can we expect a peak in cases to exhibit itself, let’s compare? We look at China (56 days), South Korea (43 days), Italy (47+), and Iran (22 days).
Expect much of the same market volatility in the coming weeks. Tonight, we heard the President extend the social distancing requirement until April 30th. The market will continue to judge individual company announcements and overall financial strength. Many are curious as to how the $2.2 trillion stimulus package will help large and small businesses survive this downturn. Will they continue to pay rent, cover utilities, pay wages, etc.…? Some good news for anyone claiming unemployment, the bill did stipulate everyone will receive an additional $600/week payment in addition to their normal unemployment payment calculation, through end of June. This will greatly assist many with covering their much-needed minimum expenses.
Great to have you read another edition of Sunday Evening Thoughts… If you have questions or concerns, please reach out to my office. We are here to assist you during this challenging climate. Please remember to add the frontline doctors, nurses, paramedics, and all the various support staff to your thought and prayers this week. They are being asked to perform their jobs under extremely stressful conditions and are exposing themselves to the virus every day. Many are not with their families even on off days, because of the risk of spreading the virus.
If you are not sure how much toilet paper is enough, or how long your supply cache will last, click on the following link for more details. https://howmuchtoiletpaper.com. Stay safe and healthy. We will all get through this together and we’ll be better because of it.
Jeremy C. Ftacek, Accredited Investment Fiduciary
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