It is with great difficulty that I write this post. I feel somewhat like a traitor.
On Friday I went largely to cash. I kept a toe in the water in order to keep track of things, but for the most part I am out of the stock market. I do not have any intention of making this a permanent withdrawal, but honestly I have no time line, I have no trigger that will signal my return. I’m on the sidelines watching.
Generally, our participation on this board comes with an expectation that we provide the reasons we have for making the investment decisions we make. I had two primary reasons for this decision:
- The erratic behavior of the stock market was interfering with my sleep. That’s unhealthy.
- In a word, pandemic.
But, it is not just the disease. If I were to detail my reasoning I would have to wade deeply into politics. I’m not going to do that out of respect for the rules of the board. I’ll just leave you with the fact that the political landscape and my evaluation of the present situation led me to this decision.
Maybe I have a different perspective than most. I live about 10 minutes from the Life Care Center in Kirkland, WA where this virus made it’s American debut on January 21. That was less than a month ago. The health care system here in the Seattle area is already under stress. Everyday supplies required to run a health care facility are already being rationed at most (all?) hospitals in the area. From what I’ve read, Evergreen Hospital in Kirkland which received the patients from the Life Care Center has run out of beds. Patients are on gurneys in the hallways. Staff is exhausted and demoralized. A number of staff members who were exposed to the virus were sent home in order to self quarantine. None of them have been tested (as of a few days ago) as there are no test kits available. Those that are asymptomatic have been recalled even though they may be infected.
Testing failures have been devastating with respect to getting the upper hand on this situation. And this is in light of the fact that if we wanted to test we could have done so. The WHO test kits have been available since early January. Those tests work. The only reason we didn’t use it is because there was a conscious decision to reject that test. I won’t say any more along this line of reasoning as it quickly devolves to a political discussion.
This is going to get worse before it gets better. And because of the delays in taking action, it is going to be much worse than it might have been otherwise. Even if we did everything right from this point forward (I have no confidence that we will get things even half right) the impact of this disease is going to be enormous.
Will our companies suffer? It depends on how define “suffer,” but I have confidence that none of them will be driven out of business. They have subscriptions that will continue to feed their coffers, they carry little to no debt and most of them have considerable cash on hand. So what’s to worry? The customers of our companies are not nearly so well postured. The way I see it, revenue growth will be seriously curtailed. There is not any shelter from this. It’s on every continent except Antarctica. The depth of damage and the toll in human life and suffering is going to be very significant.
This is going to take an indiscriminate toll on the market. If it turns into a rout, people are going to get out. As the sell pressure builds, algorithmic trades will trigger thereby exacerbating the situation. For what it’s worth, in my estimation this is where things are headed.
I’ve seen it written on this board numerous times, “This time it’s different.” IMO, that phrase applies to the current situation. I have no idea when the bottom will come. I have no criteria with which to identify the bottom. I have not suddenly become a market timer attempting to make graceful and profitable exits and entries to the market. But of this I am reasonably sure. We have not yet seen the bottom. As the death toll mounts on a daily basis, the market will suffer.
Might I be wrong? Of course I might be wrong. If so I will timidly put my tail between my legs and buy back into the market after having paid taxes and lost the gains I might have made had I not sold. I considered that. I decided to sell anyway.
We are each responsible for our own decisions and actions. I am not encouraging anyone to follow my lead. I am only reporting what I have done, and to some extent, why I’ve done it. Even though I am temporarily out of the market, I’m still a daily visitor to this board. I’m still a member of this cyber-community.
My best wishes to all of you irrespective of your decisions or what you think of mine. Stay healthy as best you can. Social distancing is not just a couple of words, it’s an actual practice. I encourage all of you to put it into practice in your daily life.