Friends

It looked like stocks really wanted to go up today, but alas, it appeared that more liquidation was occurring, it was quadruple witching Friday, and basically investors were scared to buy much of anything heading into the weekend. As more and more forced shutdowns occur, the economic fallout is becoming almost impossible to handicap at this point. But, so much of the selling of all assets in times like these- stocks, bonds, gold, etc. stems from firms being leveraged.  Leverage causes liquidation and having to sell assets at any price.

The important thing to remember is that investors like us do not use leverage. We are not forced to sell assets at fire sale prices. Indeed, as we have mentioned, our portfolios are set up just so we don’t have to do that. We always have a good portion of our allocation in safe, stable securities which are designed to hold steady in these times. If we need access to capital, we don’t have to sell stocks at the worst time, but instead can tap our stable assets while stocks take time to recover.

But, as mentioned, stocks just couldn’t stay in positive territory and by the afternoon, things began to fall apart once again. By the close, the Dow Jones Industrial Average was down 913 points to finish the day at 19,173. The S&P 500 was down 104 points to close at 2,304. Gold was up $7 to trade at $1,486 per ounce, while oil was down $2.34 to trade at $23.57 per barrel WTI.

It was another brutal week for markets and market participants. Despite the efforts of the Federal Reserve and Congress, we simply need good medical data and information to stem the tide. I know I keep saying it, but it keeps on being true. The Fed has been heroic in their liquidity providing efforts, and Congress will deliver something big soon, but fear and anxiety is what is gripping not only this nation, but the world. As I have continuously said, we will be here for you fighting every day to deliver the best service that we can to you. Keep your spirits high and your loved ones safe.

Try to have a nice weekend everyone

Jim

Friends

Today surely felt like a day where fear met reality, and stocks basically were overwhelmed by headlines. The WHO finally declared that the world was experiencing a pandemic with regards to Covid-19. Cancellation of sporting events, concerts, rodeos, and gatherings of any type continued to make headlines, and as each hit the tape, stocks took another leg down. We have said for some time that global economies were going to be affected by Covid-19 and over the past couple of weeks, the markets are coming to grips with that. The problem is, that no one knows how deep the economic slowdown will be. Given all the cancellations, and reduced travel etc., the pain is going to be quite significant. But, as long term investors, we have to understand that however bad the pain will be, and however long it lasts, it is a temporary phenomenon. We talk all the time about disruptions that will happen, and that when they happen we always feel like it’s the end of the world. This is a new one. A health crisis, and the fear it is causing, of this magnitude hasn’t happened in my 35 years of managing money. I’m pretty sure that we won’t turn the corner until we get good health news-drug treatments, vaccines, etc. We will get responses from central banks and governments around the world, but until we get good news on the virus, it’s not likely the others will matter for more than a short period of time. We will likely continue to see violent counter trend rallies, but they are likely to be met with more selling, as have the few that we have already seen. Selling begets selling as fear begets fear. Until we get some good news on the virus, it’s going to be a rough ride.

As mentioned, stocks collapsed under the weight of a series of headlines as for the day, the Dow Jones Industrial Average was down 1,464 points to close at 23,553. The S&P 500 was down 140 points to finish the day at 2,741. Gold was down $18 to trade at $1,641 per ounce, while oil was down $1.62 to trade at $32.74 per barrel WTI.

We will continue to keep you updated on market proceedings. As we have mentioned, our job during these moments is to help you deal with the stress and fear of times like this. Managing human behavior is vital right now. I know it is not easy, but that is what you have hired us to help you do. I have heard from many of you in the past couple of weeks and have enjoyed our conversations, which are sometimes difficult but necessary. Don’t hesitate to call in to hear a friendly voice. We’ll all get through this together, just like we did the financial collapse of 2008 and 2009, the Dot.Com bubble of 2000-2003, 9/11, the Asian contagion in the 90’s, the 87 Crash …

Have a nice evening everyone.

Jim

Friends

Does this maniacal market action make us nervous? Of course, it does. We’re human too. It’s always stressful when you are dealing with the unknown, and things you can’t control. So, to that end, it is much more productive to deal with things that you know and can control. What we know right now is that global economies are likely to suffer from the stress of the Covid-19 virus. We certainly understand that folks will take less trips, stay home more, eat out less, skip going to the movies, stop visiting the mall (well, that’s been happening for some time, hasn’t it?) etc. What we don’t know is how long all of this will last. Obviously, the longer it takes to get the virus under control, both medically and socially, the more damage to global economies. But, logic also tells us that at some point we will get the virus situation under control. Whatever damage is done, will have to be repaired, but is there any reason to believe that that won’t happen?

We position our portfolios with these type of events in mind. During extended moves to the upside, we’ll occasionally get inquiries asking why we have those treasury bills, or other short term fixed income instruments. Obviously, times like this is why we have a portion of our monies in the safety bucket. Sure, we give up some upside potential when using that bucket, but when things deteriorate like we have seen in the past couple of weeks, having money in that safety bucket sure helps us sleep at night. A well-constructed portfolio helps reduce the overall volatility by having a portion of the monies in a safe, dependable bucket.

In addition, as you know, for retirees we like to keep up to 2 years of living expense in an additional safe place just for times like these. With our additional safety bucket available to draw from in times of disruption, we are able to turn off the flow of monthly income from our retirement accounts, thus not drawing down against an asset that has declined temporarily in price. Since bear markets last on average about 9 months, we can then return to drawing our income from the retirement accounts when markets are recovering and moving higher. We then replenish the additional safety bucket when times are good, such as last year’s stock market advance.

As for today’s action, as we mentioned this morning, stocks opened up down 7% and we had a 15 minute halt as the circuit breakers were triggered. After we started trading again, stocks remained in a relatively defined range, but ended near the lows of the day. By the close, the Dow Jones Industrial Average was down 2,013 points to finish the day at 23,851. The S&P 500 was down 225 points to close at 2,746. Gold was up $2 to trade at $1,674 per ounce, while oil was down a whopping $10.37 to trade at $30.91 per barrel WTI.

It was an historic day for the markets, not only in stocks, but we reached interest rate levels on U.S. Treasury Bonds never seen before. The 10 Year Note did slide back up over .50% by the close, but with both the 10 and 30 year paper both yielding less than 1%, we are seeing yields never before seen.

We are going to catch our breath and get some rest. We’ll be back at it tomorrow, and as we mentioned this morning, we’ll continue to send out bulletins updating you on the markets.

Try to have a nice evening everyone.

Jim

Friends

Let the crazy volatility continue. Perhaps it was the good showing of Joe Biden last night during the Super Tuesday elections, staving off communism, or perhaps it was a lack of a devastating corona virus headline, or maybe it was a delayed reaction to the Fed rate cut yesterday. Whatever the case, stocks had another major move today, and this one was to the upside, similar to Monday’s move.

For the day, the Dow Jones Industrial Average was up 1,173 points to close at 27,090. The S&P 500 was up 126 points to finish the day at 3,130. Gold was down $5 to trade at $1,639 per ounce, while oil was down $.13 to trade at $47.05 per barrel WTI.

We expected this volatility to continue, as it has, and what is even more impressive is the size of these moves. Heck, 2% is a small move nowadays. Today we had another monster 4% move. As we said, buckle up, it’s going to be a wild ride for the time being.

Have a nice evening everyone.

Jim