March 14, 2020

Making roller coasters out of speed bumps

 On a week when the Dow Jones had it's biggest single day crash percentage-wise, since Black Monday in 1987, and followed by the biggest single day gain in history panic seemed to permeate the collective conscious of North Americans.  At my local Walmart and other stores I visited for my weekly grocery shopping I witnessed it personally.  No bottled water was left on the shelves. Toilet paper was gone.  Who knew toilet paper was critical for the apocalypse?  Canned goods were in short supply.  The meat department was running on empty, except for the ham.  The stores were crowded.  Parking lots were crazy.  This all on the same day that president Trump declared a national state of emergency and the stock market was in the midst of its rebound day.

People panic.  There is a herd mentality to it.  This is definitely something of which people can take advantage if they are less than scrupulous.  My wife saw on Amazon someone selling 6 rolls of toilet paper for $36.  What's interesting is that if you separate yourself from it you are not immune to it.  We happen to be low on toilet paper right now, so we end up swept up in the panic (to an extent) and thereby adding to the chaos (to an extent).

The danger from the coronavirus while real, is clearly over-projected as a crisis.  It is not - it is a problem.   Problems can be managed, crisis need to be avoided or escaped.  People are making roller coasters out of speed bumps. This will pass.  Your 401K, like mine, has probably suffered a material setback, but it is of a transient nature.  The value will return.  You have probably lost 3 to 12 months of growth from this, just like most everyone else. 

Be this guy.
This is no time to panic.  In fact there is never a time to panic. Panic rarely helps, in fact probably never.  If you have extra cash, now would be the time to invest it.  I was saying that to my friends after the 2000 point DJIA loss, before the bounce back yesterday.  Calm and rational assessment leads to smarter decisions.

As of yesterday I believe there were 40 coronavirus deaths in total.  In the U.S. about 10 people a day die from drowning.  Since January 1st that would be 740 deaths.  But I bet I can still go buy a life jacket.  Why?  Because there is no panic over it, it is not a splashy headline.  More importantly I suppose is that my chances of drowning in a boating accident are about zero right now.  That's probably true for you too.  Look beyond the headlines.  Think.  Be rational.  Freaking out is beyond foolish, it's dangerous. 

This will pass.  It will not lead to a recession if people do not panic, and even if it does lead to a downturn it won't last more than one quarter.  President Trump will not suffer electorally from this, and if he is shrewd, he will even benefit from it. I suspect he will.  He is thinking and being rational.  That will never be acknowledged by the mainstream media but if you think about it, their reaction not only doesn't affect him negatively, it's actually a benefit.

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