To say the market seems jumpy is an understatement. Here’s the DJIA sometime in the middle of the day:
Since I took that snapshot, the markets have closed, with the DJIA just a smidgeon short of 10% down. I’m expecting a dead cat bounce tomorrow, but I won’t try to take advantage of it.
The current contretemps have been driven by the emergence of the Wuhan virus. Certainly, a few investors saw the early reports on the virus and decided to liquidate, so they’re relatively financially safe. For the rest of us, including me, it’s time to ride the rollercoaster. I believe it was Buffet who said, The wise investor, upon seeing panic in the financial streets, licks his lips and begins to plot.
Well, maybe not in so many words. But you get the gist.
However, as I mentioned in the prior post on this thread, politics also will play into the market. Our current President is a political amateur whose main gift is communicating with his base and reinforcing their grievances, with a secondary gift of using his base and the Republican Party structure to keep his Congressional allies in line. After that, he doesn’t appear to have any strengths.
That means, while the Wuhan virus is certainly the main driver of our current financial meltdown, the massive inefficiencies of the current Administration are magnifying the effect, or, in today’s case, purely driving a drop in value. Last night the President suddenly announced travel restrictions, and this is credited with driving the market over the cliff. For those investors who have been ignoring politics as either irrelevant or too painful, here are the factors that concern me:
- President Trump’s inclination to minimize the effects of the Wuhan virus. We’ve seen Trump declare the virus as good as beaten and not important, when professionals and the World Health Organization (WHO) have stated otherwise. We’ve also seen him and his allies use the Wuhan virus to attack political opponents. This is the lesson to be learned: this White House and its allies cannot be trusted to treat this health threat with honesty. Anything that comes out of Trump’s mouth should be disregarded; anything from members of his team with an overtly political role, such as VP Pence, also disregarded. And, yet, the fact that their words and actions, disparate as they may be, makes their words important. This is a hard time for the serious investor.
- President Trump’s crippling of our pandemic response capability. The firing and failure to replace the pandemic response team is merely the latest in a series of miscues and blunders by Trump and his team. But it remains important because it’s a signal of what the future may hold: more failures of competency. Trump’s defense of this failure holds the key: “And rather than spending the money — and I’m a business person — I don’t like having thousands of people around when you don’t need them. When we need them, we can get them back very quickly.” He thinks like a business leader, effective or not, not like a government leader. He’s had three+ years to learn differently, and has failed to remand himself. As an investor, I can hope that someone will pull a miracle out of their ass – but I have to expect that the minimum time of creating, validating, manufacturing, and distributing a vaccine is at least a year, more likely closer to two. And that has strong consequences for the market.
- President Trump’s mistaken belief that he has something important to say. Trump has engaged in the classic amateur’s behavior of believing he’s a professional and has a competent understanding of the material, and, for this investor, that means he may undertake actions and communications which are, at best, inaccurate, and, at worst, deleterious to the efforts of the professionals who should be in charge. Fumbling the effort makes the crisis last longer.
- President Trump has a big, loose mouth. Last night, President Trump announced some sort of travel ban – you’ll see why I phrase it that way in a moment – and today Viking and Princess, two cruise lines, announced they were closed for business until further notice, while Norwegian, an airline, laid off 50% of its employees. This I picked up just in passing; no doubt there’s more. Was this well-thought out? No. Reportedly, he surprised advisors with this announcement. And when he didn’t, he screwed up the message. For example, as Steve Benen notes, Trump went on to tell the public, “Earlier this week, I met with the leaders of health insurance industry who have agreed to waive all co-payments for coronavirus treatments, extend insurance coverage to these treatments, and to prevent surprise medical billing.” A spokesperson for America’s Health Insurance Plans (AHIP), the leading trade association for the nation’s private health insurers, soon after clarified to a Politico reporter that the president didn’t get this right, either: insurers waived co-pays for coronavirus testing, but “not for treatment.” Understandable when taken out of context, but in context, President Trump does this all the time – he can’t, or perhaps won’t, clearly communicate simple facts. For me, as an investor, bad information is the devil’s favorite tactic. My best counter-tactic? Ignore the font of bad information, and wait for the professionals to speak up. I understand that they are laboring under an idiot who’ll fire them if they make him look bad, so some interpretation is necessary.
This is going to be a rough patch, with a dip into recession, led by an Administration more concerned with reelection than with honest governance.
But, for me, the question isn’t how my 401K is doing, as my late conservative friend Jim once asked, but whether we’re going to come out of it with the least fortunate members of our society still relatively healthy, or if they’ll be broken: dead or so deeply into debt that they have no hope.
Good luck, folks, and always remember there’s someone else far worse off than yourself.
