Time To Be More Vigilant About Covid-19 In Your Life and Portfolio

vig·i·lant adjective 1. keeping careful watch for possible danger or difficulties.
com·pla·cent adjective 1. marked by self-satisfaction especially when accompanied by unawareness of actual dangers or deficiencies

I caught the pilot episode from the year 2002 of the TV show, Monk, the other day. It’s about a Sherlock-like detective who’s germaphobic, and in the time of the Coronavirus Crisis, the main character’s germaphobic behaviors are sadly normalized rather than humorous.

Here in the state of NM, everything is basically “essential services only” mode so it’s impacting small businesses in this resort town I live in very badly. Not to mention this town is dependent upon oil wealth from Texas to keep the real estate market and economy afloat here, which is not good with oil at $25 stuck near generational lows.

My life hasn’t really changed much because I was already pretty much hermit as much as possible whenever I’m not traveling or playing golf (which I often used to do by myself anyway). I am all alone at the back corner of the office complex where my office is located. Because I have a daughter who breathes though a trachea tube and requires oxygen assistance already, we have always been very germaphobic at my house. We’re more careful than ever though and a couple days ago we even made a conscious effort to double down on our efforts to avoid exposure, rather than let ourselves get complacent.

I know people in NYC whose lives are being impacted by Coronavirus deaths. Here’s part of an email from a friend of mine in NYC, a Trading With Cody subscriber who also happens to be a large real estate developer in NYC:

“People here are certainly hopeful we are past the worst of it but no one knows how we will go from red light to green light.  The frustrating part is there doesn’t seem to be a plan from the government. Hopefully that materializes soon. I fear that while NYC is at the apex many cities around the country (New Orleans?) are still climbing the hill. I’m worried for how poorer and less organized states will fare.  There are still a lot of people dying here. My cousin lost both grandparents last week. One of our employees lost both his wife’s parents this week  One of our accountants died today. Very sad. There are also a lot of people recovering.  Two of our employees fathers were released from the hospital. One of our partners is okay now. A golf friend is fully recovered.  Surreal.

Real estate is a lagging industry (outside of current rent payments). Generally, I can’t figure out if I’m missing it and the virus will will dissipate or if we are going to live in purgatory until a vaccine shows up. For example would you get on a plane right now?  Cruise ship? Taxi? Subway?  Go to a bar?  Get on an elevator with other people?  What would change that?  How do we change that?”

Real estate, unemployment, debt defaults from big retail and other corporations…it’s hard to imagine how the economy ramps right back up even if the Coronavirus data continues to slow…will the stock market reflect these risks or look past them? It won’t go straight up or down, that’s for sure.

This is a new world that we are living in and that we will be living in post-Coronavirus Crisis. My best guess in deciding how many people will go back to living their lives post-Coronavirus Crisis world vs how many will be drastically different is to use the 80/20 rule. The big question is, whether the 80% is comprised of the people who change their behavior forever or the other way around.

As for the markets, just six days ago, I’d noted that: “The markets are gyrating following a path of least resistance lower for the last couple weeks but I wouldn’t necessarily try to bet that these trends continue. Feet-to-fire, I’d expect that the markets spike and tank 2-3% on a day-to-day basis with a continued downtrend unless the data clearly were to start showing that the number of people getting and transmitting Covid-19 has suddenly dropped dramatically or if there’s a cure or an easy, cheap treatment for those who come down with it.”

In the last six days, we first saw an acceleration of most of the numbers of Covid-19 and then we saw a slight decline in some of the numbers the last couple days.

It’s not quite a week later and I’d change my last week’s analysis very little except where bolded in the following update: “The markets are gyrating following a path of least resistance higher for the last couple days but I wouldn’t necessarily try to bet that these trends continue. Feet-to-fire, I’d expect that the markets spike and tank 2-3% on a day-to-day basis with a resumption of the recent downtrend unless the data clearly were to start showing that the number of people getting and transmitting Covid-19 has suddenly dropped dramatically or if there’s a cure or an easy, cheap treatment for those who come down with it.”

So I’m saying, don’t be complacent, rather be vigilant with the risks around yours and others’ lives from Covid-19. Likewise be vigilant with your portfolio right now. I’ll be trimming more longs if the markets spike from here and I’ll cover more shorts if the markets tank from here. Being vigilant the whole time.

I’ll remind you that even with my cautiousness, I remain bullish about our individual stocks and individual baskets of stocks. And I’m more bullish than ever about technology’s ability to help mankind as it creates fortunes for investors. There are some companies out there that we can invest in right now that are shifting their business models to adapt for whatever the strange new world we will find ourselves living in post-Coronavirus Crisis. And in this economic recession, just as in every past economic receession, there are some amazing new companies being created right now. Many companies that are being started in 2020 based on entirely new business models for a post-Coronavirus Crisis world, whatever it looks like, will come public in the next few years, some of which will be worth hundreds of billions of dollars in just the next five to ten years.

Our job is to keep finding those companies early and investing in them for the long-run.

In that broader sense, let the markets do what they will, we will focus on great individual ideas and navigate the ups and downs with our steady handed strategies.

Since Friday is market holiday, we’re going to skip this week’s Live Q&A. We’ll do another Live Q&A over video chat next week.