COVID-19 -based going to cash jitters?

[Badger]

This stuff is loose and spreading in Asia, Italy, Malaysia, possibly Africa, probably Hawaii, and I would guess in the lower 48. Sounds like a pandemic to me. The media and gubmint have done their best to keep the party going as long as possible ("just the flu, bro"), but I think the herd is starting to get the vague idea that all is not right. Pretty soon I think they are going to start to panic at real or imagined packs of wolves closing in. When that happens, the very overvalued market is going to have its reckoning.

As far as real world outcomes, there is a lot we really do not know. However, just with what we can see now, this new plague spreads very easily, consumes huge amounts of healthcare resources, and in the event that it becomes widely spread the death rate will rise a good bit because the healthcare system will quickly be overwhelmed. With that very definitely in the range of possible outcomes, how do we value equities? If quarantines and the cancellations of anything involving large groups of people become widespread, what will that mean for the economy? Exercises for the reader. I would suggest that merely including these possibilities in the range of outcomes should result in a materially lower price for risk assets.

I don't care to speculate on the truly awful outcomes (this mutates into something a lot worse). Just based on what we can see now, the valuation of the equity market mystifies me. I think cruise lines, hotels, airlines, movie theaters, restaurants, etc. and all at a huge risk if there are either enforced restrictions on gatherings of people or the populace (like me and many board members) simply starts avoiding these sorts of situations. If you don't see the world that way, I would welcome hearing your arguments why the sun will continue shining regardless of this new plague.

+1 but I would speculate that the virus would be able mutate into other strains. Happens with "flu" all the time. Also since there isn't a way to combat this effectively (yet) and the methods of transmission are not completely understood there is no telling how rampant this could be.



Cheers!

 

[footenote]

From 2/24 NYTimes:

"Covid-19 seems to spread like influenza, through the air, person to person. Unlike Ebola, SARS and MERS, individuals can transmit this coronavirus before the onset of symptoms or even if they don’t become ill. An infected person appears to spread the disease to an average of 2.6 people. After 10 generations of transmission, with each taking about five or six days, that one initial case has spawned more than 3,500, most with no or mild symptoms, yet probably infectious. The fact that mild cases are difficult to differentiate from colds or the flu only complicates the diagnosis."

With outbreaks in South Korea, Iran and Italy, it appears this is now a pandemic. Markets responded today with South Korean and Italian stock indexes both down 4% and broader markets down 2-3%.

 

[Ronstar]

I think I may go to a stronger cash position. And unlike the only other time that I tried market timing (y2k), this time it should be easier to recognize when to get back into equities - when the coronavirus news stops.

 

[Thebttmline]

I am definitely not an alarmist by nature - I stayed long through every reset in the stock market over the last 45 years ...

BUT, in non taxable accounts - tIRA and rIRA - is this a good time to be thinking about an "all out" move?

I've also been a non-alarmist. I was 100% equities since my first paycheck, through thick and thin. Until last year. I was 4 years from retirement at the time and decided it was time to started moving toward a more conservative allocation. I had started that transition.
But last week I really accelerated it. I moved ALL of my 401K into stable value. Here were my reasonings.

1. It costs nothing. No fees or tax consequences. The only cost is opportunity cost - if the market goes up while I'm out.

2. While my 401K is now 0% equities, I'm still almost 40% equities overall. That is more conservative than I had planned, but isn't stuff cash in the mattress crazy.

3. It seemed like we are at a tipping point with COVID-19, where it could be contained / burn out - or it could cause a pretty massive impact on the economy. It seemed like we would know which way it was going to tip in short order - a month or two. I thought I would rather just sit out for a month or two, and then re-assess. If the virus burns out and the market goes up 5% in the next month, missing that is not the end of the world to me.

Being a non market timer my whole life, I felt pretty foolish transferring so much to stable value. But, I'm at the point where I've "won the game", and really don't need to take the risk.

If I was my 30 year old self, I would probably have said just don't worry about it and let it ride.

 

[Dtail]

I think I may go to a stronger cash position. And unlike the only other time that I tried market timing (y2k), this time it should be easier to recognize when to get back into equities - when the coronavirus news stops.

Was thinking the same thing, since no tax consequences for me, but decided to stay put, besides the already 5.5% transfer to Tsy.

 

[Golden sunsets]

I think I may go to a stronger cash position. And unlike the only other time that I tried market timing (y2k), this time it should be easier to recognize when to get back into equities - when the coronavirus news stops.

Not so sure about that. Even after the ¨news stops¨, it will take some time to know the total effect on corporate earnings.

 

[NgineER]

I went from 100% equities to 60% equities and 40% cash last week. Looked like it was a bad move early on, but I think that after today I will be ahead...

But I've got to figure out when to get back in. I'm considering adding back 10% back in after each 5% drop, but don't have a plan yet... In the end, I wouldn't be too worried either if I stayed 60% equities, but with retirement looming 5-10 years from now, it would be good to catch an updraft when that happens again.

Does anyone else have a good plan for when to add back in?

 

[Ronstar]

Not so sure about that. Even after the ¨news stops¨, it will take some time to know the total effect on corporate earnings.

Hmmm. And I thought that I had this all figured out.

 

[Toocold]

Most flu seasons peak in February and end by April. I am not too familiar with Covid-19 enough to speculate that this will be the case, but if it is, then this may be a temporary situation.

For me, I haven't sold anything but I am taking my time investing a rather large cash position I already have.

 

[Fermion]

I went from 100% equities to 60% equities and 40% cash last week. Looked like it was a bad move early on, but I think that after today I will be ahead...

But I've got to figure out when to get back in. I'm considering adding back 10% back in after each 5% drop, but don't have a plan yet... In the end, I wouldn't be too worried either if I stayed 60% equities, but with retirement looming 5-10 years from now, it would be good to catch an updraft when that happens again.

Does anyone else have a good plan for when to add back in?

This is the stuff I was worried about at the beginning of Feb, but everyone was saying it was no big deal, just the flu bro. I tried my hand at shorting the cruise lines but they didn't crash. I bought puts on S&P500 and they dropped in value fairly quickly as the S&P500 went on to new highs and Tesla to $960, Microsoft to some trillion and a half or something. There were 100 more articles on Kobe's death than on the virus.

Turns out supply chains and world trade might matter.

I would add back in when the top 5 headlines are back to things the Kardashians are wearing.

 

[VanWinkle]

"Only buy stocks that go up, if they don't go up, don't buy them."

If they are going down, sell them before they go down too much, and wait to buy them back when the go back up(but don't wait too long).

When I read these two sentences, it makes it easy for me to stay invested in my plan(50/50) and wonder how other people will fare when they abandon their plan.

Best wishes on your success, and feel free to say"I told you so".

VW

 

[NW-Bound]

Whenever I make a market timing move, I do not expect to hit the exact high or the exact low. If I can buy back at a lower point than when I sell, I call it a success.

History so far shows that buy/hold works. And if you can get a few more points, that's the gravy. It's not easy to make a killing, and I do not intend to.

 

[NW-Bound]

I would add back in when the top 5 headlines are back to things the Kardashians are wearing.

What? The media has not shown the Kardashians with N95 masks yet?

Perhaps they are still waiting for that new designer mask to promote, but the mask manufacturer is having problems securing a production facility outside of China.

 

[brewer12345]

I have been selling out of terror, not because I like trying to time the markets.

 

[copyright1997reloaded]

Not so sure about that. Even after the ¨news stops¨, it will take some time to know the total effect on corporate earnings.

I actually believe the opposite. The market will start going up before the news flow becomes positive regarding deaths and supply chain issues.

Now when that happens I have no idea.

 

[FREE866]

I have been selling out of terror, not because I like trying to time the markets.

 

[Bigdawg]

I am technically market timing I guess. I am still working 32 hrs/wk. I typically invest about 40K/yr in 401K and taxable (sometimes a back door ROTH). Usually 35-38K would go to equities. This year the plan is for only 25-30K go to equities and the rest stay in MM or CD's. Making no changes to already deployed investments. Tons of buffer for DW and I with pensions already collecting. One additional pension on the way for her and SS for both of us some time in the future.

 

[EvrClrx311]

One thing I haven't seen discussed as much maybe because it's a bit more in the weeds but seems very important in terms of assessing personal risk to exposure is the environment or region factors at play with the spread. The United States is at risk of being seeded because of our travel, everywhere... but in terms of spread, we are much lower risk than most of the regions experiencing a surge in cases. And I'm not speaking just medical, quarantine or education/hygiene...

It's worth noting COVIS-19 will affect cities and more density populated countries the worst... with cultural factors coming into play as well when it comes to gatherings, eating, religious rituals related to burial or death , etc... the United States tends to have a lot less risk in all of those categories, as well as a lower density per square mile of land:

Population per square mile for countries with the highest number of cases as of this weekend:
China - 377 people per square mile (though 90% of the population of China lives in major cities that are more like 5,000 or more per square mile - like Wuhan)
Hong Kong - 17,521 people per square mile
Singapore - 20,212 people per square mile
South Korea - 1,339 people per square mile
Italy - 518 people per square mile
Japan - 862 people per square mile
North Korea - 546 people per square mile
Thailand - 336 people per square mile
Iran - 131 people per square mile


United States - 87 people per square mile

We do have our share of large cities, and densely populated bubbles. But if (big if there, but I'm sure we will if this gets out of hand) travel is controlled, we have a much lower infection rate because we are much more spread out as a country.

 

[NW-Bound]

^^^ There ya go.

And here in the SW, we have so much land to spread out. As long as our food supply is not completely cut-off, we can survive. As long as there are some farmers still farming, and truckers still trucking, we can get some food.

Maybe I have to rinse all my veggie with bleach before putting it in my salad, but my chance of surviving is higher here than elsewhere.

And I still know how to make homemade bleach (very simple). I first learned that when I was 13 or so, from reading a high-school chemistry textbook.

 

[Born2Fish]

I have been selling out of terror, not because I like trying to time the markets.

+1.

(I'm in the over-60 crowd!!)

 

[Gumby]

^^^ There ya go.

And here in the SW, we have so much land to spread out. As long as our food supply is not completely cut-off, we can survive. As long as there are some farmers still farming, and truckers still trucking, we can get some food.

Maybe I have to rinse all my veggie with bleach before putting it in my salad, but my chance of surviving is higher here than elsewhere.

And I still know how to make homemade bleach (very simple). I first learned that when I was 13 or so, from reading a high-school chemistry textbook.

A pound of pool shock (calcium hypochlorite powder) is cheap and will last a very long time.

 

[NW-Bound]

Yes, I still have a 5-gal pail of it for my pool. But in case I run out (unlikely), all I need to make bleach is common salt. Electricity for the electrolysis will come from my solar system.

I mentioned the above in jest. When it gets that bad, will I even be able to buy veggie to wash?

Oh, I have a veggie garden in the back, but in a few more months when it gets to 120F, all the green mustard will go to seed long before that, the snap peas dry to a crumble, and the beans all wilted. You cannot live off the land here in the desert.

 

[NW-Bound]

I have been selling out of terror, not because I like trying to time the markets.

+1.

(I'm in the over-60 crowd!!)

Me too. But I will do some buying/selling until the zombies invade Wall St.

I still remember, 7 years ago, coming out of a major surgery for a life-threatening disease, and on the 2nd day, I already reached for my laptop to check my positions.

 

[brewer12345]

Me too. But I will do some buying/selling until the zombies invade Wall St.

I still remember, 7 years ago, coming out of a major surgery for a life-threatening disease, and on the 2nd day, I already reached for my laptop to check my positions.

I think it will be a while before I do any buying. I have jumped in too early repeatedly. Trying not to make that mistake again.

Enough of the Muppets are panicking that Fido has publicly said some cannot access their accounts.

 

[NW-Bound]

No buying here. Not even way-below-market-price puts. Not yet.

At 60% stock AA, I already have plenty.