Coronavirus - Financial, Health and Other impacts II

[sirsavesalot]

Against what I have always done (stay the course), I moved my entire 401k from my latest employer (150k balance, 90/10 allocation) into the stable bond fund on Wednesday (took effect at 4PM). So far, I've saved close to 9% in losses. I had a gut feeling this was the move to make, and trusted my gut. I've had a lot of gut feelings in the past that I've never acted on, and every time I should have. No joke. Netflix at $60 - skip. AMD at $2 - skip. AMD when it hit $20 - skip. AAPL back in 2009 - skip. DUMB. I've always just invested in the total market...

My company also has a stock EPP that I had $78k sitting in (some from stock option bonuses). I sold those the same day, and have "saved" a 7.8% loss on that.

Every time the market dumps like this, the recovery is waaaay slower than the drop. I figure I will wait this out until it starts to move up a bit, then jump back in. Worst case, I come close to breaking even. Best case...who knows?

I'm also glad I didn't contribute to my Roth IRA last year. I'm going to sit for a while and see where this goes, then dump my 2019 and 2020 contributions in. I'll probably also dump the $78k from company stock back into the market as well, at some point.

I know...I'm crazy. But, I'm only 39. I still have $110k in 401k from my previous employer I didn't touch, and my Roth IRA I didn't touch. So, I guess I only messed with about 50% of what I had in the market.

Wish me luck!

 

[Chuckanut]

I did a Roth conversion today. More shares converted for the same tax dollars. It’s my usual yearly conversion before RMD hits in a few years.

Other than that I will sit tight and see what happens. No point in betting the farm.

 

[Corporateburnout]

I was never a market a market timer and on the couple of occasions when I attempted to time my Roth conversions I failed. I had my annual Roth conversion in January.

Staying the course is the only prudent thing to do at this time. My risk tolerance is already baked into my AA so I have no reason to change now.

 

[2177V]

Every time the market dumps like this, the recovery is waaaay slower than the drop.

Wish me luck!

Great quote about the recovery being wasssy slower than the drop.

I am 68 and I could not afford to wait for the recovery since I may be dead by then.

I was 100% treasuries when this event happened... so I am in good shape.

People should look into treasuries such as VFIRX, VFIUX and VUSUX as part of their portfolio to prepare for the next crash. They earn little during a bull market but during a bear market, they are like having gold. The "flight to safety" causes the yields to decline but the value of treasuries to increase.

Naturally when the bull market do return hopefully in a few years or so, I will sell all of my treasuries for stock and better performing assets.

 

[Corporateburnout]

Naturally when the bull market do return hopefully in a few years or so, I will sell all of my treasuries for stock and better performing assets.

Congrats....You're a much better market timer than most of us here especially when you can predict the timing of the next bull market.

 

[Purron]

Hi all. Been a while since I checked in. Logged on to see what the community is saying about the latest market news. Our portfolio took a hit of about 4%. Our losses were minimized due to a mixture of stocks, bonds and cash. Yes, we’re concerned but are inclined to stay the course for now. Not planning on any major changes in our investments. If we had a crystal ball, we would have made changes before the market plummeted.

We were relieved to see the market went down *only* 357 today. Not good, but an indication the bleeding is subsiding. No one really knows how this will all turn out. Our biggest concerns are disruptions in global supply chains and diminished consumer confidence. Also, worries about how prepared the USA is should the worst happen. We’re also very uncomfortable with how this has been politicized. Hopefully, this will be another episode we’ll look back on and be glad we rode out without freaking out.

 

[2177V]

Congrats....You're a much better market timer than most of us here especially when you can predict the timing of the next bull market.

I do not call it market timing. I call it 40 plus years of experience of knowing who to listen to and..... who to disregard. ....

Jeffrey Gundlach (Bond King) stated that investors should be in an asset preservation mode in 2019. That is exactly what I did. His timing was off but his strategy was sound. His net worth is $2 billion starting from $0 net worth so he is doing something right. BTW a bull market always follow a bear market and it is the timing of the bull market that is difficult to estimate.

 

[Closet_Gamer]

I'm still in accumulation mode...so as far as I'm concerned, please take the market down another 20-30%. I'm all in favor of a big sale on retirement assets.

Seriously though, in answer to the original question:

No changes planned to existing assets.

Two changes to normal behavior:

1) My bonus pays next week. I normally dollar cost average and bleed the bonus money into the market over 6 months or so. That could be much quicker if we get some sort of panic/capitulation crash.

2) I normally sell my company stock as soon as it vests in order to diversify. I won't sell at these levels. Too under valued. Will hold and risk the marginal reduction in diversification.

Finally, I'm in the process of getting my 85 year old mother pried away from her financial advisor. (This guy is every reason to hate that industry rolled into one package.) We were going to liquidate and move her assets to another firm anyway, so yesterday we just pressed "sell" on everything and got her to cash. She's 85 and part of the issue was that the guy had her way too invested in equities, so I decided we weren't just going to ride the storm with her money.


Side note...I personally think this entire thing is way over blown and the world is well on its way to a self-inflicted recession. I think the mortality rates are hugely overblown. This thing is obviously super contagious and lots of people have mild cases. I suspect the denominator on the (dead/(dead+recovered)) calculation is way bigger because millions of "recovered" cases aren't ever identified. During flu season, over 200k people/day are getting the flu just in the US. Either this thing really is not contagious -- which doesn't seem likely -- or the denominator is super big and we're freaking out over nothing. My $0.02.

 

[Chuckanut]

2/18/2020 after the close of the market today.

Just a few minutes ago I was listening to an NPR reporter interviewing a supposedly knowledgeable person on the Coronavirus effects on the econmy and the stock market. This person, who is smart enough to be interviewed on NPR, said that this week's losses wiped out all the gains from last year (ie. 2019).

 

[GenXguy]

I haven't even rebalanced yet. I need to do some calculations to see how far my ratio is off. But, I think this issue will get a lot worse and that it may very well kick us into a recession, with a long recovery, so there could be a lot more downside to this market to come because it finds a new bottom. Fortunately, I'm invested pretty conservatively.

Side note...I personally think this entire thing is way over blown and the world is well on its way to a self-inflicted recession. I think the mortality rates are hugely overblown.

There's some evidence the mortality rate could be even higher when excluding those still under treatment and looking at only those who are recovered vs. deceased. I saw this link posted elsewhere.
https://www.worldometers.info/coronavirus
Also concerning is the high number of serious/critical. Anyway, the best thing is not for anyone to panic as it's still too early to draw conclusions.

 

[Looking4Ward]

2/18/2020 after the close of the market today.

Just a few minutes ago I was listening to an NPR reporter interviewing a supposedly knowledgeable person on the Coronavirus effects on the econmy and the stock market. This person, who is smart enough to be interviewed on NPR, said that this week's losses wiped out all the gains from last year (ie. 2019).

Actually it's only wiped out about half of my 2019 gains. But substantial nonetheless.

 

[Chuckanut]

Actually it's only wiped out about half of my 2019 gains. But substantial nonetheless.

Agreed. My post was more of a warning about media talking heads. Obviously this person in uniformed, can’t do math, or has other motives. Maybe all three.

 

[Bdroc]

Don't abandon stocks

The PE multiple is still a bit high at 22 but what are the alternatives? 10 year treasuries yield 1.3%. Dividend stocks like utilities yield over 4%.

I'm not saying that the market is a bargain or that I fully understand the impact of the virus. I'm just saying that some dividend stocks seem relatively safe.

P.S. Oil companies took a beating. Chevron now yields 5.4%. Exxon yields 6.9%.

 

[VanWinkle]

I transferred bonds from my Tira to my Roth and will buy the extended market fund in my Roth. I did about 2/3's of my Roth conversion now and will try to do the other 1/3 when the time seems right. It gives me something to do other than just sit and watch. No sales of equities, I plan to buy more to re-balance.

 

[pb4uski]

Staying the course but the last week has made my AA somewhat more conservative. Heard on the radio that schools in Japan will be closed until April... I suppose to reduce the risk of the the virus spreading. I suppose it'll take quite a while for supply chain disruptions to get sorted out once the virus is contained.

I'm feeling pretty good about those 3.0% and 3.5% CDs that I bought in 2019.

 

[Teacher Terry]

My son teaches English in Vietnam and the schools are closed.

 

[NW-Bound]

Yes, as I pointed out in an earlier post somewhere, I found it peculiar that Vietnam closed all schools while it had only 16 cases, and most or all of them were in a town that was put under lockdown.

And yesterday, it was said that all 16 cases were cleared, and the recovered patients were released home.

So, what are the Vietnamese afraid of?

The just-released WHO report said that youngsters were under low risk. See excerpts below.

... people interviewed by the Joint Mission Team could not recall episodes in which transmission occurred from a child to an adult.

... Disease in children appears to be relatively rare and mild with approximately 2.4% of the total reported cases reported amongst individuals aged under 19 years. A very small proportion of those aged under 19 years have developed severe (2.5%) or critical disease (0.2%).

... COVID-19 transmission in children appears to be limited compared with influenza...

 

[copyright1997reloaded]

Yes, as I pointed out in an earlier post somewhere, I found it peculiar that Vietnam closed all schools while it had only 16 cases, and most or all of them were in a town that was put under lockdown.

And yesterday, it was said that all 16 cases were cleared, and the recovered patients were released home.

So, what are the Vietnamese afraid of?

The just-released WHO report said that youngsters were under low risk. See excerpts below.

Maybe they don't want to have what we have: A case in Washington State of a high school student and a case in Oregon of someone who works in a school.

Every school in the United states should be setting up ways of doing disinfectant (e.g. having students do this upon entry, sanitizer in rooms and hallways, etc.) My kids school doesn't have this and the water in the bathrooms is cold.

ETA: I guess my 7K/year in school taxes isn't enough to include these kinds of extravagances.

 

[Old Microbiologist]

We went to cash but not because of COVID-19

Actually, since this administration came into power and the problems that caused the crash in 2007 not only weren't fixed but became much worse. we adopted a cautious strategy. We are 100% in equities which we manage ourselves and have had very good success, mostly because we are cautious. We noticed a trend that the market stopped reacting to news far different than normal. For example when we were on the brink of nuclear war over Iran the market didn't even react. Then there are some very bizarre valuations for equities which reminded me so much of the dot-com bust times we became even more cautious. We adopted a strategy of not holding any equities overnight and stopped trading entirely if things looked shaky. When we see things like Tesla worth more than GM and Ford combined or Siemens of Philips combined it makes you start to think hard about what is going on. We went to cash 100% and have stayed there on 21 January.

We did the same thing in 2007 and timed it perfectly and sat it out waiting for the bottom. When it hit bottom we jumped back in only to find out it was a false bottom and there were in fact 2 more bottoms after that failing to realize the real consequences to an overblown market. This time, because we were burnt before we will wait it out much longer.

Capitalism must correct periodically. It is a mandatory aspect to the system and it corrects periodically as stresses mount. Banks are again leveraged over 150% with the same shady instruments as before and the circle jerk system of insuring each other. The last collapse the banks were supported with fiat dollars raising the debt. The Fed cannot raise interest rates as then the interest on the debt becomes catastrophic. The Petrodollar is in jeopardy and more and more countries are now trading in Euros and not dollars. It is the Petrodollar system that supports the US's enormous debt. Losing that is in fact an existential threat to the American economy and why we fight anyone who threatens to move out of using the dollar, but now there are simply too many for our ineffective military to attack.

Add in the COVID-19, which is actually not all that serious a threat with a death rate of roughly 2.5% and an R0 of roughly 2.2. Yes, it is going to spread and by year's end probably 40% or more will be infected and 81% will recover with minor symptoms or none at all. The rest will put a strain on medical systems. It is the impact on the labor force which is the real problem and attempts to limit the spread with quarantine and isolation are already being shown to be futile. It is this shutdown of systems which are the problem. But, it is only a problem as we all adopted the Just In Time manufacturing and supply systems to maximize profit at the expense of keeping low inventories. When the majority of parts shifted to low cost nations such as China it all depends on a smooth flow of parts to the end users and assembly plants. The loss of even one part shuts down entire lines. China is basically now shut down and the parts already in the supply distribution process will run out with nothing coming from behind. This is the big problem and there is going to be a fairly long catch up period when China begins production again maybe by next week as their case rates have dropped very significantly.

What this means to me is the financial problems are only beginning and we have a long road of correction to valuations of the market coming. Will it be a depression? Maybe because the one we should have had in 2007 was thwarted by printing $7 trillion dollars and it is a necessary evil we all have to live through as it is simply part of the system to correct itself. How far the market will drop is anyone's guess but I am guessing at least a 40% correction. Will our government bail out the banks again? That is political suicide.

 

[cyber888]

Coronavirus - Financial impacts II

I went from 70% to 50% equities on Monday. I also bought puts the last few days, which overall have almost doubled. That’s a small amount though and doesn’t negate the losses in my overall portfolio.

I don’t think this is over yet and I suspect it’ll lead to a global recession. There’s still too much uncertainty around this virus. But maybe I’m wrong? Even if so, the market was overvalued. This was a trigger for a long overdue correction.

Does anyone know if manufacturing in China is operating again?

I haven’t had a chance to look at that yet. I don’t see this ending until people can get back to work.

I have the same view. Market went up much in January, then the virus .. more uncertainty coming .. bottom is not in yet

 

[BeachOrCity]

Here is the good news folks.....

I surmise that what does happen economically will be V Shaped. I say this because basically this will be a temporary global “stay at home” phenomenon and then at some point it will sink in that like the flu it is out there and people just need to wash hands and try to limit their chances of getting it.

No country can or will quarantine until “it’s over”. Quarantine is done to buy time and slow the entry into general population so we can prepare. That’s why China is restarting now and quarantine is starting to be lifted a bit. It’s not over there by any means.

As far as the markets and actions. I was fortunate to do a bit of rebalance before the drop and bought some SPY puts (May) early during the drop, but like everyone I have losses. That’s life.

There is no use what so ever trying to time things now or predict how steep (though my gut says much more to drop).

The only action I have planned is to rebalance per my IPS WHEN my equity decline goes beyond my bands. I say when not if as that is my belief. But were I to temporarily change my bands I am not sure what I would change them to? Or for how long?

Keep this in mind though. There is NO REASON why after this is all over that corporate profits and stock prices should not quickly return to 2018/2019 levels So a bit of rebalance when the market is low should aid in the personal portfolio recovery.

 

[BeachOrCity]

In 2008, our megacorp 401(k) was still "paper" based, and I just didn't open my statements until 2009 when things started looking up. My 401(k) was a 201(k), and I didn't even know it until it was a 301(k) . .

When I got my 2008 401K statement in the mail :
my first reaction was “they sent me the wrong statement”
Next I thought “who stole all my money”?
One minute later I thought “oh, this is mine and this is what I have left”

Funny and depressing!

 

[BeachOrCity]

and I won’t cut back until short term funds run low.
.

I actually think you (and everyone else) WILL CUT BACK.
It will just be in a way that is not because you don’t have the funds, but because you (and everyone else) won’t be taking what would be unnecessary PERCEIVED risks.

What does that mean?
Less travel in public transport (airplanes cruises subways)
Less entertainment (theatre, sports)
More hunkering down and books and Netflix.

This is why the FED can’t solve this for us. It’s not about the money or liquidity. It’s about people staying home. Which was the number one thing our government wanted us to do after 9/11. Go out and spend!

 

[Jollyquick]

Coronavirus - Financial impacts II

We’re staying the course with a ~90% equities, ~10% cash (mm) AA. At age 52 with a military pension we have no urgency to change our AA. However, We will be converting the last of our tIRA to Roth next week...A small silver-lining consolation to this market thunderstorm.

 

[audreyh1]

I actually think you (and everyone else) WILL CUT BACK.
It will just be in a way that is not because you don’t have the funds, but because you (and everyone else) won’t be taking what would be unnecessary PERCEIVED risks.

What does that mean?
Less travel in public transport (airplanes cruises subways)
Less entertainment (theatre, sports)
More hunkering down and books and Netflix.

This is why the FED can’t solve this for us. It’s not about the money or liquidity. It’s about people staying home. Which was the number one thing our government wanted us to do after 9/11. Go out and spend!

I won’t argue that I might not be able to spend as much as I would like due to circumstances, but that isn’t the same as deciding to spend less because markets are down. For example, I’m haven’t decided, as others have indicated, to put off a new car purchase because stocks are down.

But you have a good point about the inevitable economic slowdown.