Header Ads

The Coronvirus Is Killing Everything...Even The Stock Market

The Coronavirus has one agenda: "Seek, kill, and destroy." I'm only semi-kidding. But the fact is the Coronavirus is even killing the stock market. After Apple released a talk on what they think might happen with the coronavirus and production of iPhones, with no real estimates of revenues, people panicked. Also yesterday was the first time since 2003 that the market dropped over 3% back to back. As if to make matters worse, the CDC issued a dire statement telling Americans to brace themselves for when the Coronavirus will hit them hard. Keep in mind that this is correlation not causation, but it's too coincidental to fathom how after some terrible news, negative price action occurred almost instantly.
People’s portfolios are dying...slowly, and this might finally be that time when a recession hits. But don’t take my word for it. Nobody can truly time what the market will do, but obviously there have been oracles in the markets before. When the market panics, herd mentality tends to set in. When the leader of a pack of wolves makes the first step, the pack follows. Only the contrarians and truly disciplined will stick to their guns and follow through on their strategies. 

Here are my thoughts on the Coronavirus effecting supply chain, offshore workforce, and the markets in general. It’s either going to truly be a real thing where the virus ends up going pandemic, which will really cause panic and withdrawals of cash from banking institutions as a safeguard. Or, it will end up becoming a moderate calamity that ends up being sustained after a few months of panic. However, the few months or years that it does take to finally quarantine the issue, will no doubt hurt businesses that utilize China’s resources either with exports or imports. This is due to bottlenecks regarding quarantine, customs, and etc. Further, Chinese investors that do a lot of business domestically will thin out as a result of difficulties with travel and economic hardships that are beginning in that country. 

Take for instance Riverside Investment Group defaulting on loans for a Chinese Six Flags theme park ($SIX). As a result of economic uncertainty, they decided to stop paying the loans on the project. A few weeks after, $SIX decided to slash their dividends from $0.86 to $0.25 per share further causing a dive in price. If I were to bet, I'd say that they calculated the weighted average cost of capital of paying dividends on equity versus the cost of debt or divestments alongside marginal (a few million) decrease in revenue as a result of the China expansion failure. 

This might be that time to double down on your philosophy and take it all the way home. Whether you are right or wrong, deal with the consequences. But if you truly did everything in your power to commit to your guns, then you left no stone unturned. All of the gas was spent and you are running on fumes. 

Whether you have a DCA (Dollar Cost Average) approach, long-term buy and hold, value investing, swing trading, short bias trading, and more; you will have to stay disciplined, do your due diligence, and commit. Now is the time to find where the opportunities are amidst the panic. Whether it be buying up cheap businesses as a result of panics, or buying up high cash flowing but low PE ratio stocks, or buying the dip of any asset such as Bitcoin or $SPDR. When there is less demand and high supply, prices for products and services tend to cheapen. Maybe you can flip a car from a cash-strapped seller, or look out for a multi-family house that is priced to sell amidst the current rental reforms in NYC which is causing a ruckus. 

DYOR. Divi out. Follow me on Twitter @DividendRaptor Also click on my referral links, I'm broke ASF and I'm also an (W)influencer! 

No comments