Thank goodness the stock market, real estate market, and economy are all rebounding since the worst of the coronavirus hit in early 2020. That said, here are important details investors should know about the coronavirus. The coronavirus is likely here to stay even though we have multiple vaccines.
Coronaviruses are actually a group of viruses that cause diseases in mammals and birds. In humans, the virus causes respiratory infections, much like the common cold or flu. However, rarer forms of the coronavirus like SARS and MERS can be much more lethal. As of Feb 2020, there are no vaccines or antiviral drugs that are approved for prevention or treatment.
When I first started hearing about the Wuhan coronavirus, I immediately thought about buying stocks. I had worked in Asian equities during the 2003 SARS virus outbreak that started in Guangdong, China. SARS ultimately infected ~8,000 people and killed ~774 people across 26 countries.
Then one day, we stopped hearing about the SARS virus. Asian stock markets stopped going down and began to rebound. My thinking is that the same thing will probably happen again.
Before buying stocks across Asia and the U.S., I decided to do some research to give me some reasonable entry points as to when to buy. Whenever I decide to invest in equities, I like to do so in five tranches. The reality is, I'm always buying throughout the year because I'm always saving and investing at least 50% of my after-tax savings.
If you are an investor, let me share some information I learned about the coronavirus and past viral epidemics to help you make a more informed investment decision.
Market Performance During Past Pandemics
In general, I buy stocks when there are temporary exogenous variables that have no bearing on a company's fundamentals. The key unknown about the Wuhan coronavirus is how far can it spread and how deadly can it be.
The greater the fear about the Wuhan coronavirus, the greater the impact it will have on economic output and company profits. When people are afraid, they stop traveling, buying goods and services, eating out, going to work and so forth.
The worst-case scenario is that the world turns into one giant Walking Dead or Resident Evil set where nobody dares leave their house, except to forage for food and water. I highly doubt this will happen.
Below is a chart that shows the various market performances during the SARS, Swine Flu, Ebola, and Zika pandemics.
The data says the average selloff is -4.7% over a 1- 3 month period followed by a 12.3% rebound one month after peak scare and a 23.1% rebound three months after peak scare.
As of now, the Wuhan coronavirus seems most similar to SARS. Therefore, we can expect the China and Hong Kong markets to initially sell off around 9% or more. Some Hong Kong ETFs include EWH, FLHK, ZHOK and some China ETFs include FXI, CNYA, MCHI.
Based on the chart below, however, the Wuhan coronavirus looks like it's spreading much more aggressively. Is this because the Wuhan coronavirus is deadlier? Or is it because the world is much quicker to track the spread 18 years later due to technology and social media? Perhaps the answer is both.
I'm personally nibbling on some China and Hong Kong ETFs now, but have no expectations for being able to time the bottom.
Back in March – April 2003, the S&P 500 didn't correct at all due to SARS. Instead, the S&P 500 kept marching higher until everything came crashing down starting in early 2008.
The difference between 2003 and 2020 is that in 2003, the U.S. was just recovering from the 2000 dotcom collapse. Valuations were cheap, excess froth was out of the market, and investors were hungry to get back in.
The S&P 500 today has gone through an incredible 10+-year bull-run. I feel investors are much more hesitant now, given valuations are not cheap. Therefore, the S&P 500 could easily correct by 10% or more.
If you are a buyer of the S&P 500 and want to buy more than you normally do, I would leg in with every 2% pullback. Getting back to 3,000 from 3,225 is just a 7% correction.
Based on my stock market bottom evaluation, the S&P 500 could easily drop down to 2,200 when everything is all said and done. Remember, the average bear market lasts around 17 months.
Below is the current and historical Shiller PE ratio which shows rich valuations.
Putting The Coronavirus Into Perspective
As an investor, you want stock markets to overcorrect during viral outbreaks so you can buy. Although it's still early, below is a great chart that shows how the Wuhan coronavirus stacks up against other major viruses.
As you can tell from the chart, so far, the Wuhan coronavirus has a very low fatality rate of 2% compared to the other viruses.
As of March 31, 2020, the latest data shows the deadly virus has spread to more than 70 countries with more than 825,000 reported cases, more than 40,000 deaths globally, and 174,000 recovered. You can track coronavirus cases in the world and by country through WorldMeters.
So far, it looks like the fatality rate is staying consistently low at around 2%. If and when the fatality rate starts to aggressively jump is when I'd start worrying.
Meanwhile, there have been an estimated 19 million cases of flu, 180,000 hospitalizations and 10,000 deaths in the U.S. this 2020 influenza season so far according to the Centers for Disease Control and Prevention. In a bad year, influenza has killed up to 61,000 in the United States alone.
Therefore, the Wuhan coronavirus numbers thus far are small when compared to those of the latest influenza strain.
Another thing investors should consider is a country's preparedness for a viral epidemic. Wealthier developed countries are considered much better equipped to deal with an epidemic than are poorer developing countries. See the map of the world below according to the Global Health Security Index.
Although the coronavirus has arrived in America, we should not be too worried that it will develop into a countrywide epidemic that sickens and kills many people.
After initially stumbling with the initial reporting of the virus, I've been impressed with the celerity in which China has acted to try and contain the outbreak. They've locked down millions of people and even built a new 1000-bed hospital in Wuhan in 10 days to help treat the sick. It seems like Chinese citizens so far are cooperating with government instructions.
Once the flu season is over, I'm betting that the coronavirus' toll will dissipate by the second half. The shelter-in-place orders have significantly helped flatten the curve and lower the total fatality rate across the entire country according to the CDC. This is HUGE! See the chart below.
My main accounts for buying stocks include:
- Daughter's 529 plan. Each adult can contribute up to $75,000 during the first year or $15,000 per year.
- SEP IRA
- Solo 401(k)
- Various taxable investment accounts
As for real estate, I've already used a lot of my stock market gains from 2019 to buy a new primary residence in San Francisco. I also already refinanced my mortgage before the Wuhan coronavirus outbreak.
I highly suggest you refinance your mortgage as well as the 10-year bond yield has dropped close to ALL-TIME lows. Take a look at Credible, a leading lending marketplace where pre-qualified lenders compete for your business and provide you real quotes in a matter of minutes.
Once I start getting a large amount of capital back from my 18 existing commercial real estate investments around the country, I plan to reinvest most of the proceeds. In the meantime, I'm researching cheap states with strong migration trends so that when my capital is returned, I'll be ready to reinvest it.
I believe real estate will outperform the stock market in 2020 as it did in 2018. Investors want to invest in assets that are tangible, provide utility, produce income, and don't just go *POOF* overnight like stocks. My favorite real estate crowdfunding platforms are Fundrise and CrowdStreet to diversify my real estate investments across the heartland of America. Just be careful about the hospitality projects given the shelter-in-place rules.
I'm an aggressive buyer of the S&P 500 below 2,400 to get my equity exposure up to 25% of my net worth from 20%.
The Best Ways To Avoid Getting Sick
Finally, let's go over the best ways to avoid catching the common cold, the flu, or the coronavirus. The strategies include:
- Wash your hands often with soap and water. Anti-bacteria foam and gel help, but are not as effective as washing hands with soap and water for 20 seconds or longer.
- Avoid touching your eyes, nose, and mouth, which accelerates the spread of infections. We touch our faces about four times an hour on average. If you wear glasses and a mask, perhaps you can help prevent contamination.
- Avoid sick people, duh.
- Do not share glasses, eating utensils, water bottles, and other items that can transfer bodily fluid.
- Consider temporarily pulling your kids out of childcare or school during the flu season if you have the energy, money, and time.
- Change into a fresh set of clothes after being out all day.
- Give your house a deep clean and wipe down handrails and doorknobs if it's been a while.
- Reconsider going to a hospital or emergency care unless absolutely necessary. If you go, wear a mask and wash your hands.
One last thought before I go scrub my bathroom floors. If we continue to get further viral outbreaks, the trend towards remote work will probably accelerate.
Who wants to risk getting sick taking crowded public transportation or be in an office for 10+ hours a day with potentially sick co-workers? A viral incubation period usually lasts 7-21 days, so it's really hard to know. The desire for bigger houses will probably go up as well, given we'll all want more space to prevent us from going crazy.
Fingers crossed we get to herd immunity sooner, rather than later!
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Related: How Our Family Is Negatively Affected By The Coronavirus
Sam, does the refinancing you mentioned because of low interest rates apply to student loans as well? Apologies if dumb question. Know very little about personal finance and trying to learn
Thanks!
An interesting perspective.
I see COVID-19 as an extremely dangerous virus and poo pooing the danger through narrative is a simple form of denial of the danger. COVID-19 is a novel virus meaning there is no human immunity. It’s present growth function is about R0=6 and there are super infectors. A single Korean woman infected 40 people in her church. It is now endemic in many countries not just China. It has a course where you can be infective but not sick for as long as 24 days, meaning the 2 week quarantine is a joke. Since it is novel the most you can draw from comparing other infections is some weak sense of correlation and provides absolutely no basis of causality no matter where you lived during SARS. It has a potential second hemorrhagic infection risk which is deadly as well. The course of the virus in the unfortunate experiment ship called the diamond princess seems to show 80% of the disease has a mild course and 20% is fulfillment. Of the fulfillment about half become critical. Death is by ARDS in the first infection which is not immediate and there is a possibility of recovery given adequate medical support, often over many weeks in an ICU. No ICU, death from ARDS is highly likely. So for a given population 10% will likely become critical and if the medical services are not overwhelmed maybe 1/4 of that 10% will die over the course of 4+ weeks of illness. As more and more get sick (R0=6) the medical infrastructure will become completely overwhelmed and deaths will approach 10%.
Wuhan just built a 1000 bed hospital and implemented 40 new mobile crematoria. A body can be cremated in 3 to 6 hours if done as a single body. You can pile a couple together if they are smaller to equal one big one to burn in a 6 hour period. Lets say therefore you can burn 6 bodies per 6 hours x 4 cycles per day = 24 bodies x 40 additional crematoria = 960 bodies per day beside what ever other crematoria is available in Wuhan. Nothing like turning the evidence into dust. So much for the “this is a little flu” perspective Flu has a death rate of 0.1 COVID 2. Do the math, 2/0.1= 20 times more deadly.
The hemorrhagic risk kills in a different way. If you get COVID-19 and recover and a second round of a mutated COVID-19 occurs and you get infected with that mutation the mutated COVID enters the immune system and infects the immune cells which release cytokines and cause a hemorrhagic response which smokes blood vessels and heart tissue, so the first round kills the lungs and the second round kills the heart arteries and veins.
My recommendation is to not get infected until they can create an actual vaccine probably a year or 18 months in the future and keep your family safe as well. This is not an airborne disease so masks are effectively worthless but you can wear one if you like. It’s a bit like virtue signalling. It is spread by aerosol, contact, and fecal routes. So if the guy at the gas pump had it and you pull up a minute later after he drove away guess who has it now. Hand washing for 20 seconds with soap seems effective. Eventually herd immunity will occur but there will be much disruption in the mean time. It will come to the US. We have a 2000 mile open boarder to the south and 3000 miles to the north so it will simply walk in, and take a bus to a sanctuary city.
“My ideal net worth exposure to equities is 25%, but I’m currently closer to about 21% after my house purchase.”
This is a mistake. The best time to invest in equities is yesterday. Timing the market is a fool’s errand. You’ve already missed out on 3% return this early in the year (before dividends). It could be another monster year and you’ll be on the sidelines with your cash.
Thank you for your insight. What specific percentage of my net worth do you recommend I have in equities based on my current net worth composition of real estate, venture debt, private equity, and business equity as well as my risk tolerance and financial goals?
It’s sometimes hard to make the percentages exact after you make a big purchase, like a house. But all advice welcome on how you think I should best accumulate wealth to provide for my family. Thanks
Related:
What If Your Offer Gets Rejected And You Still Want To Buy The Property
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“What specific percentage of my net worth do you recommend I have in equities based on my current net worth composition of real estate, venture debt, private equity, and business equity as well as my risk tolerance and financial goals?”
I don’t know your circumstances and detailed financials (and don’t really care), but your optimal investments would be in the market. Real estate is illiquid, private equity and venture debt is much too risky. The market provides an average of 10% return that is completely liquid. I have about 90% of my net worth in the market and the returns are averaging significantly better than 10% the last 5-10 years, and liquid. I am a long-term investor who is actually outperforming the market by a few percentage points as well.
And your comments about waiting for market moves to invest your capital reeks of feeble market timing strategies. Trust me, they are not effective. Drop these techniques, and you will profit greatly.
Got it. Thanks for your thoughts. I will consider selling my private equity, venture debt, municipal bonds, and business to bring my stock exposure up. But I’m not sure that’s a good idea. Any recommendation on how much cash I should have?
Although my stock exposure has also done well over the past 20 years like everybody else’s stock exposure, my business equity has done more than 10X better. Have you considered building your own business?
Currently, I’ve got about ~$260,000 in passive to semi-passive income based on my current diversification. I don’t need my investments to be liquid as I’m just living off the cash flow. But I am looking to get the retirement income up to about $310,000 – $350,000 in order to get back to early retirement.
So I can understand your situation and where you are coming from when you say 90% of your net worth is in the market, what is your current retirement income and about how much is your net worth? Your age and/or retirement status would help too. thanks!
“Any recommendation on how much cash I should have?”
You should only have cash for 6-8 months for emergency purposes. Any cash beyond you hold just produces cash drag for your investment portfolio.
“So I can understand your situation and where you are coming from when you say 90% of your net worth is in the market, what is your current retirement income and about how much is your net worth?”
I do not need any input for my situation from you or anyone else. I am completely comfortable with my equity exposure, risk tolerance, and long-term future retirement situation. I am 52 and am not retiring for at least 15 years. Net worth is in excess of $2.2M with $2M in investment portfolio for taxable and retirement accounts. I am pursuing IAR certification for current side hustle and post-retirement part-time hustle.
Got it. Thanks for the color and very awesome you are happy to work for 15 more years! I burned out at 34 in finance.
How are you saving for your kids if they are still with you?
And do you believe there is a one size fits all asset allocation?
I’ve become much more conservative since retiring in 2012 and having children in 2017 and 2019.
Thx
“How are you saving for your kids if they are still with you?”
529’s
“And do you believe there is a one size fits all asset allocation?”
I believe in aggressive allocation in equities for all working and retirement investors as retirement can be 30 years or even longer (which is another career duration) that allows significant assets to be passed on to family . Stay invested, don’t attempt to time the market as you write about, and use broad passive index funds with global diversification. Investing is not complicated.
Becoming conservative has cost you significant returns since 2012 and 2017 and will continue to do so in the future.
Got it. Keep working hard. 15 years isn’t too long. Hopefully by then, you’ll have even more money and be confident enough to retire when the time comes. Working until full Social Security retirement age is a good goal.
In the meantime, don’t forget to enjoy life! Time gets more precious as we get older. Although I sometimes wish I worked until 40 to accumulate more capital, I have cherished everyday of freedom since I left in 2012. With two young children now, not working has become even more valuable.
Related: https://www.financialsamurai.com/if-i-could-retire-all-over-again-these-are-the-things-id-do-differently/
Oh wow, good for you for being to work until 67. I could never do that.
I’d recommend bumping up your saving rate more.
See: The Ideal Age To Retire
Crash – With $2 million out of your $2.2 million net worth in stocks, does that mean your $2 million has turned to roughly $1.6 million for a total net worth of $1.8 million? Are you buying stocks after the 30% correction with the remaining $200K? Do you plan to extend your working career as a result? Or are you retiring at a certain age, regardless of wealth?
I’ve taken some of your advice and have been buying on the way down. I’m estimating the S&P 500 will bottom at 2,200, but we shall see. GL and thanks.
Crash – When you buy a house with a downpayment or with cash and your exposure to equities drops from 25% to 21% given you used some of your profits to pay for the house, how is that a mistake? Some people need a house to live in or want a different house.
One can’t conjure up the cash out of thin air to pay for the house or to instantly get back to 25% exposure once a new purchase is made.
It is amusing how you are so judgmental on how someone spends his money and think there is only one way to invest etc. Are you feeling insecure about having to work for another 15 years until your 60s because you didn’t save and invest enough?
Your disposition is so weird based on your subsequent comments. Like you’re a bitter guy whose wife left him and hate that you have to work at your boring job for so much longer. What is the real reason why you are so unhappy?
Crash is indeed an interesting case. He’s definitely projecting because it makes no sense that there’s only one way to invest because no two people are alike and have the same financial goals.
He’s probably unhappy at his job or is a low emotional intelligence engineer who doesn’t know how to properly communicate with other people.
You just never know with some people. They might have not gotten a promotion or a raise and they’re just taking it out online. Or maybe they missed an investment or their wife yelled at them or something.
Not sure what Crash’s motive is. This article focuses on the coronavirus. Not sure why he decided to nitpick on my desire to get back up to a 25% equity weighting after paying cash for a house.
I plan to write a follow up post on why some people think their way is the only way when everybody has different objectives and are at different stages in life.
So if I was 52 and felt like I had to work for 15 more years at a job I didn’t love, I would probably be depressed or at least a little bit disgruntled as well.
So I can empathize with Crash’s attitude.
Advice is always interesting.
I try to get retirement and financial advice from people who have retired early, not those who are still in the process.
How do you magically allocate a percentage to equities when you just bought a house for cash with some of the equities profits? Did you misread?
Weird so judgy.
Guess who’s happy he’s on the sidelines with cash! I know you couldn’t have seen this coming, and hindsight is always 20/20, but wow, would be nice to remove your comment here if you could, huh?
I’m not sure we couldn’t see this coming, given this article is specifically about the coronavirus and what happened during previous pandemics.
However, the swiftness of the decline is quite shocking. Fastest ever! And I should have definitely been even more conservative than I was. But I smell opportunity now.
Hi Sam,
Have been following your posts for a while. I thought I would comment as a physician who undergoes mandatory fit-testing for N95 masks every 2 yrs. If N95 masks are not properly fit-tested, they don’t work. By fit-tested, I mean the trained hospital folks stick a hood over your head and spray scented stuff in there and if you can smell/taste anything while wearing the N95, the size in question is not air-tight which it needs to be to work. Totally agree with your other comments on infection prevention. Hand hygiene is underrated as a low-cost public health measure.
Good to know!
But, nothing is perfect. Better to have a mask then nothing to prevent one from touching their face, nose, eyes maybe.. and coughing out droplets if sick.
I was scheduled to attend a media conference in Singapore, and it was postponed due to the coronavirus. Singapore isn’t in the crosshairs of the virus but since the conference was pulling people from all over the world, in particular Asia, they felt it safer to reschedule. My change fees alone are several hundred. The total amount, when multiplied over hundreds of attendees, is significant. Just another example of the financial impact on individuals and businesses.
Do you buy Chinese stock from the US markets or do you have a foreign brokerage account?
You can buy Chinese ETFs in your American brokerage account.
The Wuhan coronavirus is not like SARS. SARS was only transmissible while patients were symptomatic, which made it easy for China to contain. Consequently it fizzled out after a few months. The new coronavirus spreads from asymptomatic carriers, so can’t be contained by quarantine based on fever detection, and infections are therefore rising exponentially and likely to spread beyond China, possibly very rapidly.
It isn’t a binary choice between zombie apocalypse and minor epidemic. It might well be a pandemic to rival Spanish flu, but I suspect the CFR will be lower and the vast majority of people will barely notice the infection. Even so, tens or hundreds of millions could die, the situation could become chaotic, and markets could fall a long way.
I was going to buy on the dip but after considering the opinions of as many reputable scientists as I can find (and not via twitter), I’m now concerned the threat isn’t fully appreciated in the West.
I’ve stocked up on N95 masks. A very cheap investment with minimal downside and large potential upside, in my opinion. Worth buying while they can still be found, just in case.
With the possibility of tens of millions or hundreds of millions that are going to die in your opinion, have you considered building an underground bunker for you and your family? Could be a wise move before things get out of hand.
Also, why not just aggressively short all markets if you feel there is a good probability so many people will die?
Bunker-building at the speed of a new Chinese hospital might be worthwhile but with planning consent delays etc. it is probably too late to contemplate.
As for shorting, there may be no-one around to take buy orders to close out positions.
For measured, informed and (it seems to me, sensible) interpretations about the Coronavirus I would recommend Chris Martenson’s peakprosperity blog. With an R0 of c. 4, asymptomatic infection, no herd immunity and fatality rates that may be as high as 6 per cent. (likely at least 3 per cent.) then the prospect of millions dead is real enough, with material economic disruption as mitigation measures are enacted. For an appreciation of what an R0 of 4 produces in terms of cases, Martenson shows that after twenty infection cycles, there would be some 366.5 billion people infected (so all c. 8 billion of us on Earth are easily accommodated!).
It could happen! I’m just approaching this thing from an investors perspective.
I invested about $100,000 on January 31 and I’m waiting for any other further opportunity.
1918 saw 50 million deaths with about 675,000 deaths in the US.
Scaled up to 2020 population and it’s somewhere between 175 and 350 million world wide.
No need for zombie apocalypse bunkers…for the most part the power (if you had it at all) and water (likewise…not everyone had running water) stayed on in 1918. Fridigaire was introduced in 1918 and life went on semi-normal except in those really bad months.
Some areas were hit really hard and lost critical infrastructure and major cities had to resort to mass graves. Still not the zombie apocalypse but the more self reliant you can be the better off your odds.
Arguably we are less resilient today with JIT delivery of everything from food to coal. But even in 1918 only 25-30% caught the Spanish flu.
Most likely we can keep the lights on. If we can’t…well it’s probably zombie apocalypse bunker time.
One of the major reasons that China is doing quarantines and everything they can is to slow down the rate of infection even if the final numbers come out to the same anyway. If you can time-shift enough folks you can more easily keep critical infrastructure going and not totally overwhelm your medical capabilities if not everyone (including medical staff) is sick at the same time.
Folks snicker about preppers and their bunkers but having a two week supply of food and water as suggested by FEMA and the CDC isn’t bad to have on hand…if nothing else SF is earthquake territory. Other places it’s hurricane or tornado territory.
Spending a couple thousand dollars for some rational level of preparation for a multi-week Hurricane Sandy (hey, I’m east coast so that’s like our frame of reference) like event is a reasonably good way to spend a small fraction of our net worth for peace of mind. Throw some N95 masks and some other flu related ppe on top of your 2-week earthquake or hurricane kit gives you a decent hedge if San Francisco or New York turns into Wuhan.
A bunker in Kansas is optional but maybe buy one after getting a private jet.
I think you’ll love this post: How To Prepare For World War III
Lol…been reading you a little while and still can’t tell what percentage is tongue in cheek in those kinds of articles.
If you have a secret panic room you’re way way ahead of me.
I just have a closet with some supplies. :)
Again, I don’t think you can dismiss the threat by caricaturing it as a zombie apocalypse scenario. It’s a genuine global emergency, which is why China and the WHO have responded in the way they have. Read the wiki article on Spanish flu if you aren’t convinced. The world is more interconnected today than in 1918, and cities are more dense and highly populated, so the possibility of a similar pandemic is very real.
True. Where were you and how were you investing during SARS in 2003?
The asymptomatic transmission makes it worse than SARS. Also the fatality is quite high. As usual, Chinese data is unreliable so Japan and Thailand having the next highest number of cases is worth watching.
China turned on the spigot and yet the markets fell. Will get a lot worse before it gets better.
If the coronavirus is like a flu virus, it won’t spread easily in tropical countries such as Thailand or Malaysia and probably won’t become established in Africa (as it hasn’t so far). There might be a slowdown in spring and summer as the weather gets warmer and more humid in the Far East. However, it could come back with a vengeance in winter, as Spanish flu did in late 1918 after a lull. The winter peak was far deadlier, possibly due to a new mutant.
Another factor to consider is genetics. It’s possible Asians are more susceptible to the pneumonia, while Europeans and Africans might just have a mild cold. So far, there are no deaths among non-Chinese people, but that might just because the disease has barely got started in other countries.
We’ll probably have answers to these questions in a few weeks. At this point, taking a punt on the market is a random guess, but there is a logic in dipping into shares at moments of maximum panic when markets tend to overreact, only to rebound later.
Netflix’s documentary series Explained has an interesting episode “The Next Pandemic”, it gives some good info and is very timely!
On a side note their “Billionaire” episode is good too!
Wow Sam this post is super informative thank you!! I’ve been hearing a lot about the virus spread but it’s really interesting to gain the perspective of how it compares to other outbreaks and how the various markets reacted as well.
Funny, I was just thinking that the way to bet was for it to be a temporary blip that has no lasting effect as, after all, if it WAS the start of the zombie apocalypse, our only good investments are canned goods and firearms, when I got to you saying it was unlikely to be a Walking Dead or Resident Evil scenario.
Now is probably an ideal time to make your 2019 Roth contributions, if you haven’t already.
One medical hint I have heard that I do know is when I travel by air, if at possible take a good shower as immediately as you can to cleanse your self of the germs from everything and everybody on the plane.
Yes, and change into clean clothes.
Hi Sam,
A very timely post on the topic everyone is wondering about~
Chinese economy in 2020 is way more service sector driven than 2003, which is far more affected than industrial and agricultural sectors by virus outbreak like this. Also, this time the outbreak started during the spring festival, making the spread faster and governance response less effective. Last but not least, the epicenter in 2003 was Beijing, whose governance is many times more efficient and responsible than Wuhan, the epicenter for 2020. For all these reasons, I’m cautious about the comparison between the 2003&2020 on the Chinese market.
As per the US market, 2020 is the year of uncertainty, even without the Coronavirus. How do you see the market develop before and after the election? Or what are the major events/indicators for market observers?
Sometimes trying to improve your financial status makes one sick. I caught a nasty cold in a job interview last week! The interviewer knew he was sick and purposefully did not shake my hand, but it didn’t matter. Sitting in relatively close quarters while he sniffled and coughed was apparently all it took – 2 days later I started feeling it.
Man, that is terrible and so annoying! A phone interview would have sufficed! Or video interview.
No good deed goes unpunished. Had already done a phone interview and the guy was in town so wanted to meet me in person. Sure hope I get an offer after getting infected!
Agree Sam,
If there is one thing I have learned about investing is that taking advantage of market noise and 24 hr news can be beneficial.
If we are talking about $ that is not needed in next 6 months and thus should be put to work, these can be buying opportunities.
I still recall waking up one morning a few years ago when United opened down 7-10% just because of a video showing a customer getting dragged off the plane!! Sure – horrible PR for United but does anyone think that story really shaved 2 billion dollars of value of company?? I bought a bunch of United Shares that morning and over next few months made a nice profit.
Fundamental analysis and long term prospective MUST rule the day.
Currently I have 50% on the sp 500 and 50 on bonds. When do you think is appropriate time to change to international stocks for profit?
The concern isn’t an ultra high mortality rate like bird flu but a high transmission rate like 1918. Even just using 19M cases of seasonal flu in the US a 2% Case Fatality Rate (CFR) results in 380,000 deaths here.
And while we are well prepared, it won’t matter if the medical capacity saturates like it did in Wuhan. Later cases will have little treatment and the CFR for that population will be higher.
China is terrified with good cause. If just 20% catch this thing there will be 277M cases and if it really is a 2% CFR that will result in 5.5M deaths.
But it’s too early to tell what the CFR really is. First, the most accurate estimates occur after it’s all over. Second, China is vastly underreporting deaths because the lack of test kits means many of the deaths are not marked as a result of ncov2019 because those aren’t confirmed cases. Something else that happens when your medical system becomes crushed under too many cases.
That China vastly under reports deaths is no secret because when the US reports 50K fatalities to flu and China reports 100 you know the official numbers are suspect.
caixinglobal.com/2019-02-21/why-arent-people-in-china-dying-of-the-flu-101382286.html
Isn’t it safe to assume all the numbers all the time are underreported due to the incubation period and the inability for trackers to keep up? I think so.
I wanted to write this article last week, but waited since there is so much new info coming out everyday. I’ll be updating this article every week.
Yep, that’s why they figure out CFR after it’s all over.
The “accurate” estimates have huge error bars (.04%-10% or similar) and folks spreading a single CFR depends on whether they want to minimize the threat (the government) or hype the threat (people selling prep gear).
So panicking won’t help but some level of reasonable concern is warranted. I’d probably review the FEMA and CDC guidelines and see if you have the supplies they recommend but other than that just being more conscientious about hand hygiene and other normal flu precautions is probably good enough.
Trying to score things like n95 masks at this point is kinda pointless…either they are sold out or excessively expensive.
I’ve got boxes of surgical masks already b/c we’ve been wearing them when we were sick over the past 30 days b/c we have a baby.
I guess folks can be proactive and buy masks now, just in case.
Surgical mask won’t do a darn thing short of keeping someone from rubbing their mouth. It would take a respirator to protect against the coronavirus. That’s not to mention the fact that the live virus can exist and spread through fecal matter.
Perhaps we should make that announcement to the millions of people who are wearing them now so they can save their money?
As far as I know, wearing a mask helps prevent cough and sneeze droplets from landing on your face. Preventing yourself from touching your nose and mouth can’t hurt.
Perhaps we should reconsider relying on the masses for advice. Didn’t turn out so well for lemmings, the financial crisis, or well…every panic ever. That silly CDC with their infectious disease training probably don’t know what they’re talking about when they say masks are unnecessary right now or that a respirator would be needed to really protect that area.
I hope your short position is working out! The stock market has been rallying hard.
This outbreak is pretty scary because there are so many cases. I saw some videos from China showing nobody in the street. That will be a big economic hit. How long can people stay at home? Where do you buy food?
I think 10% is a good entry point for China. It’s already down 8% so I’m getting ready.
I donno. Perhaps it’s because I lived through the SARS outbreak while working in Asian Equities, I’m not scared. I also am getting over a cold/flu myself, so I’ve already experienced a lot of the symptoms of the Wuhan coronavirus already.
I’m a buyer, and I have the cash to buy.
We shouldn’t panic. We can let other investors panic, but we should stay measured. I hope this article provides perspective.
Watch Taiwan…I’m guessing they report somewhat more accurately and you’ll have a better idea when the virus peaks…they should lag Wuhan by a month or so which puts them on par with Beijing, Shanghai, etc.
Still the natural tendency is to downplay. In the recent Event 201 table top exercise (A corona virus pandemic scenario) one of the participant’s first move was to issue a press release downplaying the risk even though the players knew that a pandemic was happening (heck, it’s the point of the game)…very similar to the statements being made today.