I don’t know about you, but I have this weird feeling in my stomach that is a mix of concern, frustration, sadness, hopelessness, empathy, and persistence all at the same time. The fact that this new virus can be easily transmitted for all and fatal for some is concerning. While I’m not in the high-risk category, many of my loved-ones, clients, and acquaintances are.
What about the professional healthcare community? They did not sign up for this and could be overwhelmed and infected themselves, trying to save lives. But they will do it anyway. The question becomes what is the healthcare system’s capability and capacity to manage a large number of COVID-19 cases? For example, an extended family member helped treat patient zero in D.C. He was in full protection but still ended up with mandatory quarantine along with other coworkers due to secondary exposure. He is fine today, but how does this system fare as the number of cases grow?
It is times like these that I remember one of legendary investor’s, Sir John Templeton, 16 Rules for Investment Success. One of them is:
The investor who says, “This time is different,” when in fact it’s virtually a repeat of an earlier situation has uttered among the four most costly words in the annals of investing.
Said another way, thinking “this time is different” is an ineffective way to manage your finances. But is this time different?
Similar Times
The circumstances are different, but in my lifetime, I remember having a similar emotional response during the Global Financial Crisis in 2008, September 11th, and the Space Shuttle Challenger.
I was only eight years old when the Challenger exploded in 1986, but for some reason, I remember that being a time of hopelessness and empathy. Maybe watching it on television in second grade had something to do with that. But at the same time, I believed that NASA would get back to the drawing board and be better prepared for next time. And they did.
After September 11th, I remember driving home from a Florida vacation cut short. I was a young auditor at Ernst & Young in Chicago. There was a weird, empty-stomach feeling going to work in the Sears Tower and Aon Center in the following days, weeks, and months. First, we had concrete barriers and pat-downs. Eventually, buildings were decorated with steel flower beds and installed metal detectors. Everyone in the country felt a sense of fear, frustration, and sadness. But there was an overwhelming feeling of getting together as a community to heal and be better prepared for next time. And we were.
The Global Financial Crisis was harrowing. I changed hats from CPA to financial advisor just in time for having a newborn baby in May 2008 and the worst financial crisis since the depression. Debt and leverage was the virus, and long-standing financial institutions like Lehman Brothers and Bear Stearns collapsed. Unemployment soared while the market fell.
Unlike September 11th, there was a great divide in this country about how best to respond. Unfortunately, this divisiveness still permeates in the U.S. today. The government took some drastic measures. As Treasury Secretary Timothy Geithner wrote in his book, Stress Test, "plan beats no plan." He had a plan when nobody else did, thankfully it worked. The system finally stabilized, new regulations were implemented, and the market recovered. And so have we.
Coronavirus Time
I am a big believer in evidence-based practices (EBP). EBP means using best practices and procedures that are based on testing and studies rather than intuition and emotion. Most frequently, EBP is applied to the medical field, but it can be applied to many other areas.
Today, the leading EBP for slowing COVID-19 is sanitizing and social distancing.
Michael Osterholm, an American public health scientist and a biosecurity and infectious disease expert, was recently interviewed by Joe Rogan on the Joe Rogan Experience. Osterholm ended his discussion by saying,
“we’re going to get through this, but at the same time, it will be a challenge.”
Like the challenges mentioned above and others throughout history, I’m concerned, but I am also optimistic that we will get through this. Like Tim Geithner said, “plan beats no plan.” This plan has evidence of working historically and other countries today. We got this.
What does this mean for your portfolio?
Well, let’s start with a few questions and likely answers (based on Notes on Scary Markets).
Q: “Why are you invested the way you are?”
A: “Well, because this portfolio was designed to grow over time and provide me with the income I need for my goals like retirement, travel, and family.”
Q: “Those ideas sound important. Are these goals still the same today?”
A: “Yes, they are. But today’s market is scary, and I’m worried about the coronavirus.”
Q: “I totally get that. I feel the same way. I don’t know about you, but I’ve felt this way before. Have you?”
A: “Yes. That financial crisis was bad, so was September 11th. The Cuban Missile Crisis and JFK assassination were pretty scary too.”
Q: “Yes, those times were scary. So while these events were scary at the time, you are still here today. And you are in the fortunate position today to be able to plan for the future?
A: “Sure, I guess we've overcome many challenges in the past to get to where we are today.”
Q: “Got it. So we’ve covered a few important things.”
Your portfolio and plan were designed based on your goals.
Today’s market and COVID-19 is scary.
Throughout your lifetime, there have been other scary times.
You are thankfully still here, these events have passed, and you are able to plan for your future.
“The good news is that we designed the portfolio for you and your goals based, in part, on history that includes many uncertain times. Today with the coronavirus is one of those. With history and evidence as our guide, I have confidence that this situation will pass, and your investments will recover in time as well. We diversify investments the best we can for the long-term health of your finances and achieving your goals. We'll get through this together.”
Today reminds me of a couple of important quotes by long-time investors.
“The time to buy is when there's blood in the streets." - Baron Rothchild
“The stock market is a device to transfer money from the ‘impatient’ to the ‘patient’.” - Warren Buffett
If you can’t follow Baron Rothchild’s advice, following Warren Buffett’s advice for patience is a close second.
So my advice for today is to be patient. I am confident this situation will pass, and the stock market will recover in time.
To speed up the process and stay healthy, it may be necessary to judiciously clean your hands, and keep a safe distance from others. We got this.
Be well.