Before I get started….I wanted to wish my nephew Noah a big mazel tov on his Bar Mitzvah yesterday.. I have been sitting at home recovering from the kidney stone while the family headed up to Portland for Noah’s big day. Reports have been streaming in of a job well done. I hope one day soon Noah’s parents will forgive me for watching the movie Jaws with him when he was six. He just seemed so into it with me at the time.
The S&P is down 8 percent through Friday. Losses are getting real.
It is my job to be prepared!
Home alone, I have had way too much time to call on smart friends asking for their opinion of both the panic and the virus.
Like an ass, I started by going to Twitter to get a head starts and I found Elon Musk tweeting – ‘The coronavirus panic is dumb‘.
A little more helpful was Nassim Taleb’s response to Musk (Taleb is the author of Black Swan):
I quickly decided to shut Twitter down and do what I always do, wait to do my Momentum Monday show with Ivan (today) but in the meantime hit up JC, look at some charts and talk to some of my favorite venture capitalists and from around the world to get their take (not going to use their names). I love talking to the venture capitalists because they rarely give me stock market opinions or picks, but plain strategy thoughts and scenarios.
I won’t bore you with gory details but offer up some links.
JC had the most interesting take for me because he entered February bearish stocks and long bonds. That was literally the perfect trade. I think his post titled ‘Was That It? Or The Eye Of The Storm? is a great piece on what could happen next. For the real lazy…
People are like, “Well JC, you’re supposed to have the answers. Why do you ask so many questions?”
I hate to break it to you, but I have absolutely no idea what will happen tomorrow or next week or next month and I have even less information about next year. All I can do is analyze the behavior of the market that we have in front of us.
To me, there is a very very high likelihood that we get a face ripper in stocks. Bonds get crushed, rates go up.
I think the relative strength coming out of china and emerging markets and the fact that Copper is NOT making new lows, is evidence that no, this is not the end of the world, after all. Because if this was the end of the world, wouldn’t these things be leading us lower, rather than outperforming?
From my venture capital calls I got the sense that most people believe the panic is inevitable but overblown. From those with large China exposure it was…’ Q1 was a disaster but after 60 days of panic, things were starting to clear up’. My worry after hearing that is the United States can only tolerate one day panics. The most interesting venture capital takeaway I got is that COVID-19 is also an economic diseases that is hurting a lot of people. That truth is what will make the stock market very difficult for most short-term. Cash is king to venture capitalists as well.
Finally, I rarely listen to podcasts but I really enjoyed this whole 1 hour 40 minute podcast between my two friends Pomp and Raoul Paul who discuss the panic and markets. Pomp pushes Raoul to go into the dark corners of worry. I loved that he called Raoul a ‘crisis chaser’ because that is a perspective I want to hear from. Hope you enjoy it.
Have a great Sunday.