Well the destruction continued this week on Wall St., and simply put, what started out as a health crisis has turned and caused a financial one. Why have the markets been going crazy despite some movement in legislation?
Well, it’s the internals of the markets – things like commercial paper, overnight window use, etc.; the nitty gritty that probably put you to sleep in economics/finance class.
Basically, the internals of the market began seizing up and have led the Federal Reserve to launch initiative after initiative in order to maintain things running smoothly. Like when an engine begins seizing, you add oil.
Speaking of oil – the battle between the Saudis, Russians, and the U.S. and what seems to be rush to 0 on oil prices is one thing that is also weighing heavily on the markets.
Now I understand that this is extremely terrifying to you. It is to me as well. We all have reasons that we are fearful. I have jokingly said I am going to name my new ulcer after the virus when this is all said and done. However, inaction is the prudent and responsible measure.
We must not let fear dictate our path nor our decisions.
Yesterday you may have seen the headlines that famed hedge fund manager Bill Ackman alluded to awful things for the economy, and that ‘Hilton could go to zero, but I have been buying Hilton’. This side-talk is ridiculous…which is it? Either you think its going to be bad or you believe in the markets.
I for one am tired of the negativity.
There are green shoots, folks, happening everyday and I am not referring to your spring flowers blooming!
I want to share a couple of them with you:
– Folks are able to cut years off their mortgages by having heeded our advice to refinance. Right now is not a good time, but hold steady – the same mortgage professional I mentioned in earlier commentary told me that the week rates were down, applications were up 300-400%!
– Mom & Pop investors are not letting fear take over their portfolios. Quite the opposite – they are buying! It is institutional trading that is causing some of this volatility.
– GM and Ford may help make up the shortfall in ventilators (WW2 mobilization of industry here!).
– Believe it or not in this mess, there are some companies being upgraded to BUY ratings. And some companies have even gone so far as to start calling bottoms (I for one do not believe that, but its an encouraging start).
– Cases have dropped sharply in South Korea and the world is looking to them and learning.
– Portfolio manager, Bill Nygren of the Oakmark Fund, during a conference call on March 17, made the following observation: ‘Insider purchases have increased by a 3 fold in the recent weeks.’ Simply translated, executives and board members are seeing how cheap their stock is and acting upon it
Bruce Springsteen once famously sang: “You can’t start a fire without a spark…”, and the same can be said with stabilizing and turning around the medical and fiscal crises we have encountered. I believe the green shoots listed above could be the sparks that fire things up.
Recently I was interviewed for an article and they asked me how I compared this to 2008. And my response was the ‘velocity & ferocity’ of the sell off now was the differentiator. That being said, during times likes these, everyone likes to quote Warren Buffett, but not everyone wants to act like him. Taking a page from his infamous 2008 Op-Ed in the NY Times: ‘Buy American, I am’; that is exactly what I am doing and excited to see some others doing as well. There are incredible companies on sale right now due to nothing more than fear. And that is what you are buying – companies, not stock, but companies.
Earlier this week I had the pleasure of attending a fantastic webinar hosted by Carl Richards & Jerry Colonna, in which Jerry cited a passage from Pema Chodron’s book Comfortable with Uncertainty:
In the Buddha’s first teaching – called the 4 noble truths – he talked about suffering.
The First noble truth says that it’s part of being human to feel discomfort. Nothing in it’s essence is one way or another. All around us, the wind, the fire, the earth, the water are always taking on different qualities; they are like magicians. We also change like the weather. We ebb and flow like the tides, we wax and wane like the moon. We fail to see that like the weather, we are fluid, not solid. And so we suffer.
The Second noble truth says that resistance is the fundamental operating mechanism of what we call ego, the resisting life causes suffering. Traditionally it’s said that the cause of suffering is clinging to our narrow view, which is to say, we are addicted to “me”. We resist that we change and flow like weather, that we have the same energy as all living things. When we resist, we dig in our heels. We make ourselves really solid. Resisting is what’s called ego.
The Third noble truth says that suffering ceases when we let go of trying to maintain the huge “me” at any cost. This is what we practice in meditation. When we let go of the story line, we’re left just sitting with the quality and energy of whatever particular “weather” we’ve been trying to resist.
The essence of the Fourth noble truth is that we can use everything we do to help us realize that we’re part of the energy that creates everything. If we learn to sit still like a mountain in a hurricane, unprotected from the truth and vividness and the immediacy of simply being part of life, then we are not this separate being who has to have things turn out our way. When we stop resisting and let the weather simply flow through us, we can live our lives completely. It’s up to us.
It is OK to be scared, but as we have said before, breathe! Fear and volatility are like a hurricane, and with you we are that mountain.
We’ve got this!