2020… Corona Crash or Everything Bubble Pop?
I created this series to serve as a living artifact. This is the 1st post in the series. I’m striving to capture major current events and financial market action from the lens of a retail investor in the US. It’s essential to understand how one feels and behaves during times of economic uncertainty and market volatility. What better way to do that then keeping a log here to reference in the future? This is not investment advice!!!
Much of 2018 was a continuation of the previous bull market until Q4. The S&P 500 and Dow Jones indexes finished the year down ~6%– the most significant annual losses since 2008. 2018 saw record highs and sharp reversals.
Stocks, bonds, gold, and oil all bounced. S&P 500 finished up ~28%. Dow & International up more than 20%. But the 2-10 yield curve inverted for the first time in the summer. And in December, something called Coronavirus (specifically COVID-19) started to sicken people in China.
Married. No kids. 30s. 2019 brought a lot of change for us.
We’re in an extremely fortunate position relative to most. I’m employed (at least through the initial creation of this living page in March) as a remote knowledge worker. My wife works in healthcare. Job security & personal health is an obvious concern on everyone’s mind right now, including ours. While her job security is better than most, I worry about her health, primarily because she’s immunocompromised as a T1D.
We’re observant. I remember the Dotcom crash, 9/11, the 08-09 GFC. We’re savers. We learned from those crises despite not being market participants due to our age. I dedicated most of my reading capacity in my 20s to the greats (The Intelligent Investor, A Random Walk Down Wall Street, Stop Acting Rich, Bogleheads, etc.). I think personal finance is one of the most important topics for people to master. Don't leave it up to so-called experts. I started positioning our portfolios more conservatively in mid-2018. It was becoming clear that we’re later in a cycle than earlier, so I wanted it to be more defensive than offensive. We’re pretty much as prepared as it gets, and yet it's still scary for us. Everyone has a unique relationship with work, finances, and their health. And I have extreme empathy for those less fortunate or less prepared than us.
When it comes to financial markets, the question on everyone’s mind is if this will go down in history books as the Coronavirus Crash, or the popping of the Everything Bubble? When it comes to our health, everyone is wondering if this will blow over in a month or dictate how we live our lives for the next year. Much of the hot spots are on lockdown– responsible people are quarantining and social distancing. How will the US compare to the rest of the world? It’s bad. But how bad?
Business as usual for the markets. But the COVID-19 endemic is growing. We know about it. The world knows about it. But it feels far away from us. Out of sight, out of mind for much of the public.
I shouldn’t say that there weren’t warnings. I remember listening to MacroVoices podcast, episode after episode screaming about how the public doesn’t know what’s about to hit them and that it’s as good a time as any to load up on gold. I converted some more of our allocation from money markets to $GLD in some of our retirement accounts.
Boom. Things changed over the past few days. Major indices dropped ~10%.
I re-tweeted some advice from my personal finance thread that I felt was relevant to remind people (and myself) of today.
Tren Griffen sends a very Tren Griffen tweet. Cash is king.
That was a hefty drop. What’s going to happen next? FinTwit got to work sharing historical charts to help provide guidance, or at least to look back on– will history rhyme or repeat?
A shift to working from home kicked off for information workers across the country, starting with companies like Square & Twitter.
A little bounce. I see people tweeting about how they bought and/or are buying the dip.
I’m not falling for it, though. No way. This is BAD. And it’s early. It appears to be spreading like wildfire. This can’t just be a dip. I don’t know what’s going on with the markets, but it’s not rational. I did some selling while I read about others doing some buying. This is never comfortable, especially as a non-trader, but logical given all I know about behavioral finance. Plus, I’ve been expecting a turn down since mid-2018. I’m not going to panic-buy.
More companies joined the movement to encourage working from home, as well as limiting travel. For example, today, my company announced the suspension of international travel effective immediately, with restrictions for domestic travel as well. I commend everyone who is acting swiftly and taking the CDC seriously.
Saudi Arabia and Russia entered into an oil price war. US oil prices dropped 34%. WTI is down 72% and VDE is down 45% ytd. Ouch. I averaged down here on my relatively small $VDE position.
Look out below. Things are going down and it doesn’t feel like it’s going to stop here.
All hell broke out last night. It was wild! the NBA suspended the season. Nothing seems real.
During times of uncertainty, I look to Twitter not only to try to help others but as a tool to help reinforce my own beliefs to myself. If I write it, I’ll be more inclined to go with it. We just had a significant drop, but I don’t think we’re done, and I don’t think we’re reversing either.
School closures are becoming common across the country. Ohio, Maryland, Michigan, Oregon– the list goes on and will likely continue. They’re saying it’s just for a few weeks, but it seems unlikely that they’ll open back up that soon. They may remain closed for the entire school year.
I started to worry more about my wife. She’s finally feeling shook. And I hear stories from friends of hers in the healthcare space. They’re all scared. They lack protective equipment, and many infected are asymptomatic. So they start to think that they’ve been exposed with every human interaction. That becomes stressful. And to most people’s surprise, most aren’t compensated for the value they provide, ESPECIALLY during times like these. Sometimes people need to be reminded how good they have it (myself included).
This thing is real. It’s real bad. But when it comes to the markets, it’s not unprecedented. Everyone is curious… what will happen? So we look to what has happened for guidance.
Pretty much every company capable of enabling support work has now switched to having employees work from home. For many, it’s no longer encouraged; it’s mandatory. Many offices are implementing other measures such as 2-week quarantine guidelines for travelers, limiting office visitors, and enhanced cleaning processes where employees still need to go to an office. We don’t know how bad this thing is, who might have it, who is vulnerable, if you can get it multiple times, etc. Seemingly every company with a workforce capable of working remotely made the switch.
It doesn’t seem like people get ‘it.’ Take social distancing seriously! It’s not fake news. It's real and it’s spreading. It's the time to try to help slow it down.
Oh, and I need toilet paper.
Floor fell again recently. S&P now down 26% ytd, Dow down 30%.
EVERYONE in finance including Scheplick are wondering what Buffett & Berkshire are up to (long $BRK).
Most of our portfolio is in target-date funds and ETFs/Index funds (aside from our sizable allocation to cash/money markets & $GLD right now, which I hope to transition to equities during this downturn). But I’ve been waiting for years to get into a few companies. It’ll be interesting to reflect on these posts in the upcoming years. I think there will be a lot of lessons for myself and others within this page. I decided to log some of my buys primarily to serve as a bit of a trading journal (despite not being a trader). I plan to eventually use this to see how I behaved during different periods of uncertainty and volatility. None of my buys or sales should be considered investment advice! With that being said, I started to nibble.
HHS announced a regulatory change that will allow doctors to practice across state lines.
The private sector started to show how important of a role they’ll play in the upcoming year. It’s more than clear how big of an impact this is all going to have on small businesses at this point. Companies like Square are announcing changes to do things like refunding fees.
The shortage of PPE for our healthcare workers and ventilators in the hot spots has been and continues to be one of the biggest concerns. If our healthcare workers get sick, who is going to take care of them? This is not blowing over quickly. This is going to be a series of tsunamis for the foreseeable future.
People are still acting like fools. It’s Spring Break. Shitty timing. They’re not taking social distancing seriously. Local and fed gov need to step up in places that aren’t acting strongly like SF.
Peter Attia & his wife give shared a message to all the idiots who appear to be posting harmful, idiotic social media posts in droves right now.
The only good news is that it seems like testing is becoming more accessible. It’s at least on a path forward. Private companies like Everlywell are helping out.
Telehealth has progressed a decade in the past few days. It’s clearly going to help decrease stress on the healthcare system and is here to stay.
Policy changes like opening grocery stores up to just vulnerable populations for specific hours (with cleanings before/after) are incredible and being rolled out by the day. These are things that should probably stay in place forever going forward regardless of COVID-19.
Ben Carlson reminded us where we’re at with the S&P 500:
I donated to at flexport.org/donate/. They’re going to help increase the supply of PPE and get it distributed. Any effort to help with this should be supported by anyone who can contribute.
Florida finally started to get its act together by closing beaches, bars, restaurants, etc. (except for take-out). But people from NY/NJ are still traveling down here in droves to escape the Tri-state hot spot.
My wife and I look forward to hearing Dr. Birx and Dr. Fauci talk every day.
Lt. General Todd Semonite has also become a popular man. His decisiveness and ability to articulate a sound plan regarding increasing hospital capacity is what everyone wants to hear and see.
Most states have joined the ‘stay at home’ order to help enforce social distancing. The FDA approved a rapid 45min test. Texas is allowing nurses with an inactive license to practice without reactivating (like those who are retired).
Bezos published a solid, heartfelt memo. Long $AMZN.
I averaged down a tad with $BRKB at $161 and $AXP at $72.
Howard Marks published a memo that will likely be a popular read for decades to come. I love everything he writes. He and Oaktree are going to provide investors like me with great material through the duration of this ‘event’ for lack of a better word. After all, his book on market cycles helped me position defensively in mid-2018. Read the memo.
Ryan Detrick with the history lesson:
McKinsey published a COVID-19 report to “help senior leaders understand the COVID-19 situation and how it may unfold, steps to protect employees, customers, supply chains, and financial results.” Here’s a collection of material they’ve put together.
On the bright side, testing really seems to be accelerating here in the US. But this also means we’ll likely start to see really high case counts and growth rates of positive cases for the foreseeable future.
US jobless claims surge to unprecedented levels. 3.3M. And it’ll balloon higher over the next few weeks.
The Senate passed an unprecedented $2T stimulus bill. Here’s a thread with highlights from Bill Sweet.
And here’s another thread on the same topic:
So what happened next?
Markets are green. Of course! That makes so much sense.
Such short term memories. People are wondering if we’ve reached rock bottom.
I don’t think we have, but I entered a couple of new positions that I’ve wanted to get into—very tiny amounts. I’ll only add to them if they drop 10%+ like $TGT at $92. There are deals out there, but it seems highly unlikely that maximum pain has been felt, that we’ve reached full capitulation, or that this virus and its impacts are going to get better from here. Thankfully the market experts like Ryan Detrick provide us with some relevant history:
It’s Friday. Last day of the week before markets nap for the weekend. As expected, the rally of the past couple days ended (some called it the new bull market– I shit you not). But the S&P 500 finished up for the week. I entered $MA today for the first time at $250.
Nick Magguilli shared a post of Greatest Investment Quotes of All Time. I love quotes.
By the way, not all markets take naps. Let’s check in on some others to see how they’ve been holding up. Adding in BTC and Gold.
Not bad… $GLD up 8% and $BTC down just 5.6% ytd (despite a brief but steep ~50% fall from $7,900 on March 12). It’ll be interesting to see how all of these break away from the pack soon. Everything dumped initially. Everything. Nothing felt safe (but cash). But divergences are happening.
Lets take a peak at Oil ($WTI) & Energy ($VDE):
10 year lows:
Today is paycheck day for me. I feel fortunate to get one and to have my personal finance house in order enough to feel comfortable continuing 401k contributions. I know I’m lucky compared to many out there. I hope it lasts, but my confidence isn’t at 100%. I say this to stay grounded. Remaining grounded is essential. I’m an information worker. No job is ever guaranteed, and I don’t want ever to forget that. I feel horrible for those in industries like restaurants and hospitality. And EVERY small business owner and worker who is struggling. I also feel for those in their 50s-60s who aren’t prepared for retirement. It’s important to remind yourself how good you have it sometimes.
I hit a new Peloton PR (30min) today and it followed a 60 minute ride. I’ll include it in my March Health Review. Gotta stay healthy!
Apple came out with a COVID-19 screening tool that looks pretty cool.
Family members found a few masks and gloves in their basements from past projects and sent them to my wife. She’s very appreciative.
Saturday. Major markets are napping for the weekend. But the pandemic doesn’t nap. And financial bloggers are out in full force.
What type of headlines would you expect to see during market turmoil? One like this from the WSJ: Coronavirus Sparks a Global Gold Rush.
NPR published an article titled, What’s Inside The Senate’s $2 Trillion Coronavirus Aid Package.
Brent Beshore from Permanent Equity is awesome. They published an article titled, What The “CARES Act” Paycheck Protection Program Means For Small Business.
And here’s a deeper dive from Kitces: Analyzing The CARES Act: From Rebate Checks To Small Business Relief For The Coronavirus Pandemic.
Yahoo Finance published an article titled, A glossary of the Federal Reserve’s full arsenal of ‘bazookas’ to help highlight how far the Fed is willing to go. Who the hell knows the long term impacts though.
It’s probably worth including some videos on this page for easy reference in the future. Who better than the man, the myth, the legend– Dr. Fauci.
On the subject that matters most right now… ventilators and PPE. President Trump ordered General Motors to make ventilators under the Defense Production Act (which is a statute that can force certain American companies to produce materials that are in short supply). It seems like he’s finally recognizing the seriousness of the shortage with his vow today to “get 100,000 ventilators within 100 days.”
Abbott received FDA approval yesterday for a rapid COVID-19 test called ‘ID NOW COVID-19’ that delivers results in as short as 5 minutes. They supposedly have plans to produce up to 5 million tests per month. Very promising development. We need more like it.
Sunday. In this afternoon’s Trump & Coronavirus Task Force media briefing, they announced an extension of the ‘Social Distancing Guidelines.’ It was initially two weeks, but now they’re in place until at least April 30. This is a massive relief because up until today, Trump has been hinting at trying to relax the guidelines. Big tone shift.
Bill Gates has been extremely impressive. He’s been making the rounds, and I’ve caught him on CNN a few times in the past week. Watching him talk is oddly terrifying and comforting at the same time. I suppose being a billionaire helps you smile even when you’re aware of horrifying things that others don’t realize. Here’s an interview with him from last night.
FT removed their paywall for their up-to-date Coronavirus tracker some time back which is worth including here as a reference. The chart below indicates that deaths in the US are doubling every 3 days:
While more than $300B are earmarked for small businesses for relief, it’ll be a challenge to take in applications, process them, and disperse the funds. Easy to earmark, hard to support. Firms like Goldman Sachs are trying to put together resources to help small businesses navigate. Speed matters, and the system isn’t built or staffed for speed. Here’s the SBA Loan Application page. Many SBA lender banks are working on developing solutions to help. Jo Ann Barefoot, with regulationinnovation.org, Shamir Karkal, and others, are stepping up to build support for the SBA loan program through a hackathon this weekend. Again, speed matters. Small businesses need the money asap. The size and speed of the stimulus won’t matter if it takes a month or more for SMB’s to get the money. Not to mention the stress they’re experiencing knowing the money is there (somewhere) but they aren’t clear on qualification, mechanics, when they’ll get it, how much exactly, etc.
Monday. The day after Trump announced that he’s listening to Dr. Fauci and the task force regarding their latest projections by extending the quarantine guidelines through April 30th. Their models must be very disheartening. I think they’re going to share them with us during tomorrow’s briefing.
It’s this type of response that makes investors like me question if I’m being paranoid and greedy, or patient and prudent. I don’t know. Nobody does. But I think I’m right not to react. I think I’m right to fight FOMO. Time will tell.
A new Twenty Minute VC podcast episode with Howard Marks was released today. Well worth the quick listen.
Josh Brown published a blog post titled, How to safely take money from your retirement account now. He provided info about how the CARES Act affects IRAs.
Companies in my space (financial services) are beginning to announce significant changes, and I expect this to accelerate as we enter Q2. Global Payments/TSYS announced cutting employee salaries by 10%. But that’s not all. The CEO is forgoing his salary and bonuses for the remainder of the year. Their executive team is taking 50% salary cuts and forgoing their bonuses just like their CEO. It’s an admirable approach. Unfortunately, not every company will or can approach the situation like that. Kabbage announced the need to furlough “a ‘significant number’ of its U.S. team of 500 employees” (effective immediately). In other spaces, Bird announced layoffs of ~30% of its workforce. Supposedly they’ll be “providing four weeks of pay, three months of health coverage* and an extended time frame of 12 months to exercise their stock options.” Still much better than many people will get. Bob Iger at Disney announced that he’d be forgoing his salary (after raking in ~$47MM last year). CEO Bob Chapek will supposedly be taking a 50% salary reduction. So… lots of fear.
On the topic of small businesses and the stimulus, Silicon Valley Bank announced initiatives to provide relief programs to startups (where regulations for eligibility are super murky right now). They also announced support for ‘Hello Alice’ which is a free platform for providing guidance to business owners. Their COVID-19 Business Resource Center looks like a great resource.
Citizens [Edmond] Bank announced a program to give their depositors early access to their federal stimulus checks. I think this is really, really awesome. More banks should be able to pull this off too.
Johnson & Johnson announced having a lead vaccine candidate that could potentially be available for emergency use authorization in early 2021. They (and others working on potential vaccines) are already ramping up manufacturing capacity in case one of them ends up working. Although expensive, that will enable immediate, rapid distribution.
We’re about to pass 3,000 deaths in the US. 38,000 globally. Dr. Fauci and Dr. Birx sound pretty convinced that we’ll exceed 100,000 deaths in the US alone (even if we behave exactly as we’re supposed to). It’s really sad to accept that given that we’re just at 3% of that today.
Tuesday. Last day of the month and Q1. Barron’s published The Dow Just Had Its Worst First Quarter in History. Here’s What History Says Could Happen Next. Dow down 23% for the quarter with the S&P 500 down 20%. I can’t help but think we’re nowhere close to the bottom.
Crude oil declined more than 60% this quarter. >60%!!!
Families across the country (and the world) are financially stressed. Those fortunate enough to have their personal finance house in order with adequate savings are still worried about hanging onto their jobs. Those less fortunate have already been laid off, many without any savings at all. Many don’t even know what they’ll do about rent tomorrow given that the stimulus checks won’t be distributed in time. Here’s a Bloomberg article on the topic.
Candor put together a list of companies with their hiring status (frozen, active, laying off). Far from exhaustive but some of my audience may find it useful. They also have an informative guide for handling layoffs. Know your rights.
Retailers like Macy’s, JCPenney, and Gap announced major furloughs today. Most retailers aren’t considered essential so their physical stores are closed. They’ll likely remain closed for at least 2 more months.
a16z partner Alex Rampell wrote a great post called Small Businesses Depend on the Stimulus Package. The Stimulus Will Depend on Fintech. He elegantly summarized the problem with operationalizing the distribution of >$300B in relief to SMBs. He proposed a solution to leverage modern fintech techniques & technology.
I purchased a few masks today for hospital workers at https://covid19.shapeways.com/.
March felt like one of the longest months of all time. But April will feel longer. The Coronavirus Task Force is confident that we could see 100,000 to 200,000 die in the US from COVID-19 soon. And they’re warning that the worst may occur in the first few weeks of April.
Young kids or corona babies who aren’t even born yet may stumble upon pages like this in 20 years to understand how these days feel. Some will have older family members tell them first-hand stories. Some stories will be terribly sad. What I’d say is that watching Dr. Fauci and Dr. Birx tell us to expect at least 100,000 deaths is like watching the radar of a raging hurricane brewing 2 miles off the coast, and the eye is likely to head right for us. And it’s too late to escape. Too late to prepare any further. It’s coming. It’s sad and scary. It feels surreal. Life, as many know it will be changed forever.
The world passed 40,000 deaths. The US is at less than 5% of the expected 100,000+.
- It’s always a good time to learn about personal finance.
- Podcasts are a great way to stay informed & entertained:
- This too shall pass, like everything always does.
- It could always be worse. No matter how bad shit gets in your life, there are always ways that it could be even worse.
- Don’t be selfish. Help others. Stay home. Stay clean. Donate.
- Stay rational. Don’t panic.