%20(500%20%C3%97%20150%20px)%20(600%20%C3%97%20150%20px).png)
Across the country, mounting fear due to the panic selling caused by the coronavirus, or COVID-19, has created a system-wide correction across all sectors this week.
In Hawaii, a notice from the Department of Health two days ago to be prepared for the coronavirus has also caused panic and hysteria seen at the big box stores like Costco and Sam’s Club, just like it happens every year during hurricane season – all the toilet paper is gone from the shelves.
The stock market is acting irrationally at this point, where individuals as well as individuals controlling large amounts of institutional money are buying into their own fears and selling sometimes all their holdings and staying in cash. A similar effect can be seen with toilet paper at the stores – once more people get to the store to buy essentials all the while building a sense of nervousness during the drive over, and then see that those very items are becoming more and more scarce, fear starts up causing those same people to decide to buy more than what they originally set out to because they don’t want to be the ones who didn’t get what they thought they needed while they had the chance. This happens time and time again during hurricane season, not just with toilet paper, but with water bottles as well.
What happens once the fear subsides? Those same people who bought into the chaos, navigated the crowds, and did what they thought was rational at the time, end up with much more toilet paper and water bottles then they need – sometimes so much that they don’t have to buy anymore until the next hurricane season. The same will happen to those who are pulling out of the market. They will end up with way more cash than they need, maintaining a level of uncertainty of getting back into the market they just exited, resulting in missing out on considerable gains to follow in the days and weeks ahead.
What about the virus? Infection rates are already slowing in China, while recovery rates are increasing exponentially (https://www.worldometers.info/coronavirus/coronavirus-cases/). Fun fact – coronaviruses are one of two virus types (the other type being rhinovirus) that cause what’s known as the “common cold”, with the coronaviruses typically causing more respiratory issues and pneumonia for some. Most deaths from COVID-19 have been occurring in the elderly and those with pre-existing conditions. Medical staff who have died have most likely been cross infected through multiple viruses while treating patients, including influenza, and having an already taxed immune system from being overworked at their hospitals. Does the media focus on those who have recovered and their experiences? How about the percentage of infected in China compared to its total population (approx. ~1.386 billion people)? Of course not, because that’s not exciting.
In Hawaii, there have already been reports of tourists that have passed through the islands that end up being diagnosed back in January & early February. According to reports, incubation periods can be over 2 weeks – remember getting sick early this year? Was is the coronavirus, or something else? Who wants to go and get tested if you’re feeling better already? Who wants to be the “first case” and go to Pearl Harbor and get quarantined and get on the news? This whole situation is a media feeding frenzy cashing in on deep set primal fears. Every year an estimated 290,000 to 650,000 people die in the world due to seasonal influenza (the flu), to put things in perspective.
We are not selling anything, nor rebalancing at this point so as not to lock in any losses caused by this unique event. We are buying though! Be “Fearful when others are greedy and greedy when others are fearful.” – Warren Buffett. The market is down, which means that everything is on sale. If you have available cash to put to work, now is the time. During the next few days as the market begins to rebound, account performances can be enhanced as investments are made throughout times like this.
