Coronavirus = Taking Profits

In one of my favourite films: 'Pump Up The Volume', there is a slogan sprayed on the wall of a high school: 'The Truth Is A Virus'.

Right now, the world is struggling with a virus, and that's the coronavirus. Never mind the fact that the mortality rate is actually low, or the fact that you could be having flu - or even just a bad hangover (in the UK someone was hospitalized for 3 days with suspected coronavirus until it was found out that he had imbibed too much a few days beforehand). 

The world is panicking, and the media's not helping. 

Look, it's not to say that anyone dying from a disease is a good - or funny -  thing. It wasn't back in the days with flu and polio reeked havoc, it wasn't when the AIDS virus destroyed many in the 1980s, and it still isn't when malaria-driven areas of Africa took account of over 400,000 people in 2018. I think that's why I resent people calling the virus the 'beer virus' (Corona-Virus', geddit?). 

But anyway. The way that the stock market is panicking (down 4% in two days at the time of writing), you would have thought it was the end of the world. 

There's a worry that the coronavirus - or worries thereof - will affect the way that the world works. Companies are worried that the Chinese purchaser won't go and buy its stuff (like Adidas, Nike and LVMH), while companies like Apple are worries not only Chinese people buying the iPhone 11 (I would recommend it, by the way!), but also the supply line. Heck, there are even worries that there will be a pharmaceutical shortage because half of the ingredients are, yes, made in China. 

Airline shares are getting thumped because the Chinese tourist is a major part of the airline industry - as well as panicking of the easy movement of it from one to the other. Airlines have said that they will give free refunds to anyone who doesn't want to travel on the Pacific routes because of their fear of disease (I don't think this will happen if John Doe decides he doesn't want to fly from Pittsburgh to Houston, sadly). Those lack of fees (airlines do extremely well out of cancellations as well as other 'ancillary issues' as well as lack of income from flights aren't going to be offset the fall in oil price, and therefore airline stocks are absolutely tanking at the moment. 

This will hit sporting events.  The top division in Italy - Serie A - has already cancelled games over worries about spreading of the virus, and don't be surprised if this becomes a 'norm' in Europe, too. We could see a delay or even the cancellation of the 2020 Olympics in Tokyo, and the delay or cancellation of the 2020 European Championships Football Tournament.

However, there was one thought that got in my head about the market getting shredded at the moment: It's what the market needed. 

For me, the last few days isn't so much about fear gripping the world and computers all over the banks going haywire and driving the stocks down, but the fact that the market needed a breather. A 'black swan' (the notion of an unpredictable event happening causing a chain of events that would otherwise not happen) like coronavirus has proved to be just that. Stocks are cheaper, although not much cheaper. 

Stocks are STILL overvalued at the moment. People might tell you how the economy's changed and the world's 'a different place', but when you read a lot of CEO's remarks, realise that they aren't exactly excited by the way the world is looking at the moment financially, and see how many companies missed estimates in the fourth quarter of the year, you can't pin this on a virus that only got into the news a month ago. Now, it's given a lot of companies a good reason for announcing that 2020 will be a 'slowdown', but in effect, the world economy was slowing down anyway. We know this because Japan, China, Europe and yes, even the United States of America, was showing growth.....but not that much growth in the least.

I know that the world's biggest economics expert in the world, Donald Trump- a man who had tweeted an awful lot about how his own excellent rule was reflected in the rise of the S&P 500 (his 48% return was actually outperformed by Barack Obama in his predecessor's two terms in government, but I digress) - said yesterday that the markets 'looking very good to me' (the Dow ended the day down more than 3% and nearly 1,000 points), but there's a nagging feeling that the markets will get worse. 

And it'll get worse not because of the coronavirus. 

Or by trade tarriffs between countries (which I expect to be completely off in the non-too-distant future soon as the USA tries desperately to reignite trade all over the world.

Or the fact that banks don't want to invest in projects that will destroy the environment (this is a good thing).

It'll be done because right now, people are suddenly realising what a bubble this market is, want to take some profit. 

That's what our portfolio has done (we are 30% in cash (not because of the virus, but because we put $30 bills rather than $100 bills on the gambling table), and we hope it'll survive OK (NOTE: We also have shares in LVMH, which has fallen 10% in 4 days) and buy. We also own gold, and well as American Water Works and some US-related companies which have no exposure to China whatsoever (on the other hand we own Apple, Adidas, Southwest Airlines and Visa (amongst others), which makes things a mixed bag).

But for me - if you have the cash - the thing that's most interesting are the pharmaceutical companies. 

Why? Because during something like this, the pharmaceutical companies will be racing to find the magic formula for slowing the virus if not solving it. Gilead was up 5% yesterday because it might have a drug that can battle the coronavirus (Note: It was down 4% because if it's successful, the Chinese government wants the patent), it can sell it all over the world. Johnson & Johnson and Glaxo are also developing. And they are moving fast. There will be others. And if one of them gets it, then others will jump up in 'sympathy', not only moving themselves, but moving the market in general. 

Also: Think about things like videogame companies,TV, phone and internet companies. 

Because when you're kept inside and have nothing else to do, what will you do? Probably watch a lot of TV and play some computer games. 

Anyway, I'm off to play Pac-Man.