Coronavirus Correction

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Look, the market reacts to fear and tries to price in uncertainty. The problem is that there are magnifiers, and most often the market OVER reacts to new information. And COVID breaking out is new information -- so overcorrection in March (stampede for the exit), wild volatility until we know how our government and the people will react -- then slow stability as normalcy returns (with corrections as new information is exposed).

People have been asking me investment advice or tips. The basics is you’re trying to time the market, you’re betting on "when is peak fear"? (Not peak impact of the virus, but when everyone is done over-reacting). That depends on how the government and people react, where the peak virus is, and how quickly we can learn to cope with the new reality (and fear of a virus).

How bad is it?

We have some positives right now both Israel and America have some vaccine trials and treatments ready to go, and because of China’s under-reporting (both intentionally and accidentally), the lethality rate is way over-stated. So this is highly contagious, but not significantly more lethal than the regular flu (maybe 2x), and we've been pretty on-top of it, both with trying to control/slow/contain, and with potential treatments coming quickly. Thus this is likely to go pandemic (and jump efforts to contain), as we’re seeing with communal transfers (where they don’t know the source)... but a lot of people having a bad Flu isn't exactly end of days. We just need to control the rate of surge, and learn to accept that we don't have control over everything, and we'll get through hit.

Inc[1] points out the politically incorrect reality that while you don't want a pandemic or people to die -- this kind of scare event tends to shake the scaredy-cats out of the market and causes a minor correction... which sort of immunized the market against much bigger corrections or recession based pullback. So from a business point of view, this 10-20% could save us from a 30-40% event that causes a much longer recovery time, or government over-reaction (like the 2008 Real-Estate / Obama recession).


📚 References

The Coronavirus is named after the fact that under a microscope it looks like the surface of the sun, with lots of little protrusions and bumps. These are series of diseases, but the one everyone is talking about for now, is the Chinese (Wuhan COVID-19 for COrona VIrus Disease circa 2019, or SARS-CoV-2) that's going pandemic. While the CDC, WHO and FDA all blew their response, we've never seen a more effective response to a pandemic, and the U.S. outperformed most of the world in objective metrics. But as to be expected, partisan Democrats and their media never let an opportunity go to waste: to politicize, polarize, divide and undermine the American economy and people.

Written by: Ari Sabouni 2020.03.01