Market Timing

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“The idea that a bell rings to signal when investors should get into or out of the market is simply not credible. After nearly 50 years in this business, I do not know of anybody who has done it successfully and consistently. I don’t even know anybody who knows anybody who has done it successfully and consistently.” Jack Bogle

During the 2008 financial crisis and economic uncertainty, global financial markets were melting down and Lehman Brothers filed for bankruptcy protection.  The resulting economic recession and global slowdown brought unemployment rates in the U.S. as high as 10 percent.  And, the U.S. stock market lost trillion of dollars in value as the S&P 500 experienced a single day drop of 90.17 points, nearly 9.04 percent.

Americans, and specifically American investors, believed inherently that the global economy and financial markets were collapsing.  Fear and panic selling took hold worldwide.  Both professional and retail investors started to sell and it didn’t matter what they sold.  Yet, Warren Buffett was buying stocks that were rapidly falling in price when everyone else was panic selling and sprinting to cash.

“I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.” Warren Buffett

According to Buffett, “A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful,” he wrote in the NY Times.

Additionally, Buffett wrote in his 2018 shareholder letter.

“Seizing the opportunities when offered does not require great intelligence, a degree in economics or a familiarity with Wall Street jargon such as alpha and beta.  What investors then need instead is an ability to both disregard mob fears or enthusiasms and to focus on a few simple fundamentals. A willingness to look unimaginative for a sustained period — or even to look foolish — is also essential.”

There are several valuable lessons investors learned from the 2008 financial crisis that can be applied towards today pandemic driven crisis.  The lessons are based on the same principles that allowed Buffett to invest so effectively during the crisis. To sum them up:

  • Don’t panic and sell stocks simply because the market is crashing. When times get tough, Buffett is invariably a net buyer of stocks. For this reason, he keeps billions of dollars in cash on the sidelines — so he can take advantage during times of investors’ fear and panic selling.
  • Focus on best-in-breed companies trading at discounts. A great example was Buffett’s investment in Bank of America and Goldman-Sachs.
  • Don’t try to time the market. Just because the market has crashed doesn’t mean it can’t go down more. It certainly can. Instead of trying to invest at the absolute market bottom, focus on stocks you want to hold for the long term.
  • Understand that no stock or industry is completely immune. Back then, many investors had a disproportionate amount of their portfolio in financial stocks because they were thought to be safe.  Essentially, no stock or industry are safe.

Warren Buffett believes intrinsically that “it is a waste of time and hazardous to investment success trying to time the market”.  In a 1994 annual letter to shareholders, Buffett wrote:

“I never have an opinion about the market because it wouldn’t be any good and it might interfere with the opinions we have that are good.  If we’re right about a business, if we think a business is attractive, it would be very foolish for us to not take action on that because we thought something about what the market was going to do. … If you’re right about the businesses, you’ll end up doing fine.”


Bottom line: As long as investors keep a level head and maintain a long-term perspective as Buffett does, investors should come out of it just fine, if not stronger than they went in.

Sources:

  1. https://www.cnbc.com/2018/09/14/warren-buffetts-rule-for-investing-during-the-financial-crisis.html
  2. https://www.fool.com/investing/2018/09/23/10-years-later-warren-buffett-and-the-financial-cr.aspx
  3.  https://www.cnbc.com/2018/05/08/warren-buffett-says-he-never-tries-to-time-stocks-i-never-have-an-opinion-about-the-market.html
  4. https://www.cnbc.com/2018/02/24/highlights-from-warren-buffetts-annual-letter.html

Coronavirus disease (COVID-19) advice for the public: Myth busters | World Health Organization (WHO)

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COVID-19 virus can be transmitted in areas with hot and humid climates

From the evidence so far, the COVID-19 virus can be transmitted in ALL AREAS, including areas with hot and humid weather. Regardless of climate, adopt protective measures if you live in, or travel to an area reporting COVID-19.

The best way to protect yourself against COVID-19 is by frequently cleaning your hands. By doing this you eliminate viruses that may be on your hands and avoid infection that could occur by then touching your eyes, mouth, and nose.

Read more: https://www.who.int/emergencies/diseases/novel-coronavirus-2019/advice-for-public/myth-busters

Before coronavirus crash, many big corporations broke the No. 1 rule of personal finance | CNBC

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Updated: 3/19/2020 5:40 pm

A “rainy day” fund is a reserved amount of money to be used in times when regular sources of income (or cash flow) are disrupted in order for typical operations to continue.

  • Giant employers of lower-wage workers like McDonald’s and Starbucks spent and borrowed money for stock buybacks and dividends.
  • Now companies are trying to tap credit to manage cash, avoid layoffs.
  • Labor unions and experts say all that shareholder money could have gone to worker raises and to shore up the balance sheet during the bull market to better prepare for a financial downturn.
  • The tax cuts of 2017 are also now being scrutinized.

Kitchen-table finance begins with one simple rule:

Have several months’ worth of expenses on hand, in cash, in case something unexpectedly goes wrong.

Some of America’s biggest employers are beginning to discover the truth of this maxim as the coronavirus crisis catches them short of cash just as business crashes. Together, the restaurant, leisure and hospitality, and airline industries account for about 17 million U.S. jobs.

To read more: Coronavirus crash shows major corporations broke No. 1 rule of personal finance

Americans Advised to Avoid Congregating

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The Dow Jones dropped nearly 3,000 points Monday. For the Dow, the drop is its steepest decline as a result of the fear and panic created by the new coronavirus pandemic.

The decline reflects the fear that the emergency measures taken by the Federal Reserve may not be enough to ward off a coronavirus-induced U.S. recession and it underscores the level of worry among investors since the coronavirus pandemic escalated and disrupted supply chains, sidelined workers and infected tens of thousands of people outside China.

On Monday, the Trump Administration has advised Americans to self-quarantine and avoid congregating in groups larger than ten people in order to flatten the spread of the virus. Furthermore, the CDC recommended organizers to cancel or postpone in-person events that consist of 10 people or more throughout the United States for the next eight weeks. Examples of large events and mass gatherings include conferences, festivals, parades, concerts, sporting events, weddings, and other types of assemblies. These events can be planned not only by organizations and communities but also by individuals.

On Monday, Federal workers are urged to work from home and VP Pence this past weekend urged White House staff to wash hands, practice social distancing, avoid physical contact, clean and disinfect, and “Stay home if you’re sick!”

Pandemic compared to Seasonal Influenza

The seasonal influenza impacted 35 million Americans last year, causing over 490,000 hospitalizations and over 34,000 deaths according to the CDC. Without medicine or a vaccine, coronavirus has the potential to be more widespread and deadly than the flu.

Most individuals who contract COVID-19 will have mild to severe symptoms that resemble a cold or flu and will recover. However, a significant number will also require hospitalization. If these hospitalizations occur rapidly, it will overwhelm U.S. hospitals. For instance, emergency room visits for automobile accidents may be disrupted if our system is overcapacity. Therefore, it is imperative that we must limit the spread.

CDC Recommendations

The CDC has an aggressive response to identify potential cases of the new coronavirus and has activated its emergency operations center. The virus, known as COVID-19, is marked by respiratory problems that are usually mild but can be severe, especially in older adults and in people with underlying health conditions.

CDC guidance includes:

  • Get a flu shot.
  • Take flu antivirals if prescribed.
  • Take everyday preventive actions to stop the spread of germs.
  • Wash your hands often with soap and water for at least 20 seconds. An easy way to mark the time is to hum the “Happy Birthday” song from beginning to end twice while scrubbing.
  • Use an alcohol-based hand sanitizer that contains at least 60% alcohol.
  • Avoid touching your eyes, nose and mouth with unwashed hands.
  • Avoid close contact with people who are sick.
  • Stay home when you are sick or becoming sick.
  • Cover your cough or sneeze with a tissue (not your hands) and throw the tissue in the trash.
  • Clean and disinfect frequently touched objects and surfaces.

Additional practical precautions

  • Do not travel while sick.
  • Seek medical care right away if you have both symptoms of fever, cough and shortness of breath and have either recently returned from China or have direct exposure to others diagnosed with Novel Coronavirus Disease.
  • Before going to a doctor’s office or emergency room, call ahead and tell them about your recent travel and your symptoms.
  • If someone in your house has testified positive, keep the entire household at home. Do not go to work or school.
  • If you are elderly, stay home and away from other people.
  • If you have a serious underlying health condition, stay home and away from others.
  • Avoid eating or drinking in restaurants, bars and food courts. Use drive-through, pickup and delivery options.
  • Do not visit nursing homes or retirement or long-term care facilities unless to provide critical assistance.

Sources:

  1. https://www.usatoday.com/story/news/politics/2020/03/16/coronavirus-trump-says-social-distancing-may-needed-through-august/5061517002/
  2. https://www.cdc.gov/coronavirus/2019-ncov/community/guidance-business-response.html

New Coronavirus Global Spread | WSJ

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On Dec. 1, 2019, a patient in Wuhan, China, started showing symptoms of what doctors determined was a new coronavirus. Since then, the virus has spread to infect more than 100,000 people. Here’s how the virus grew to a global pandemic.

Source: Wall Street Journal

COVID-19 vs. Seasonal Influenza

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  • COVID-19 Status
    • Sustained community spread of respiratory illness caused by COVID-19 has been reported in many countries.
    • Older adults and travelers with underlying health issues should avoid situations that put them at increased risk for more severe disease. This entails avoiding crowded places, avoiding non-essential travel such as long plane trips, and especially avoiding embarking on cruise ships.

    Like many other viruses and influenza outbreaks, COVID-19 appears to spread more easily between people in close quarters. Person-to-person spread of COVID-19 is occurring across the globe and many countries are reporting both travel-related cases and community spread of the disease.

    Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, has conveyed that COVID-19 is deadlier than the flu. It’s deadlier for young adults. It’s deadlier for older adults. In China, early data shows that it was 10 times deadlier. This chart from Business Insider compares US flu deaths to deaths in China from COVID-19.

    The seasonal flu kills less than 1% of infected people who are over age 65. By comparison, Chinese authorities reported that COVID-19 has killed 8% of those infected who were 70-79 and almost 15% of those infected who were age 80 or older. That’s a statistically significant difference.

    Google’s Response to COVID-19

    Google is working on a website for coronavirus testing, according an announcement by President Donald Trump on Friday. During the press conference announcing a state of emergency Friday afternoon, President announced that Google has their engineers working on developing a screening website.

    The screening website from Google Verily will allow people to fill out a questionnaire and learn how they can get a test for the coronavirus. Americans will be able to learn from the websites more about risk factors and symptoms of coronavirus. It is anticipated that the U.S. would have 1.4 million coronavirus test kits available within a week and around 5 million kits within the next month.

    The triaging tool from Verily will help people find COVID-19 testing sites in the U.S. The company says this tool will target the San Francisco Bay Area, though they hope to expand coverage to more regions. The move is part of a public-private partnership to dispense COVID-19 testing to “millions of Americans” in the weeks ahead at places like Target, Walgreens, CVS, and Walmart parking lots, according to U.S. Vice President Mike Pence.

    Public health officials and authorities from effected countries have used AI as part of solutions to detect and fight COVID-19 since the novel coronavirus emerged in December 2019. Testing to confirm COVID-19 infection has been a critical part of response plans in other countries around the world.

    Preventing Spread

    It has become clear that people with underlying conditions such as heart disease, chronic lung disease, diabetes, and other conditions that cause suppression of immune system particularly among the older adults, are at a high risk of serious disease if infected with the novel coronavirus.

    To best protect these vulnerable individuals, we recommend that such individuals avoid situations that increase their risk of acquiring infections. This entails avoiding crowded places, avoiding non-essential travel such as long plane trips, and especially avoiding embarking on cruise ships.

    Sources:

    1. https://www.cnbc.com/2020/03/13/google-creating-coronavirus-site-to-help-find-testing.html
    2. https://www.businessinsider.com/we-have-to-stop-comparing-the-coronavirus-to-the-flu-2020-3?utm_source=facebook.com&utm_campaign=sf-bi-science&utm_medium=social
    3. https://venturebeat.com/2020/03/13/google-is-building-covid-19-screening-website-as-trump-declares-national-emergency/

    Common-sense investing insights we forget during stock-market panics | USAToday

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    Common-sense investing insights we forget during stock-market panics

    Many people seem to invest rationally, until the going gets tough. Then we often throw our reasoning out the window while making a mad dash for the exits.

    It shouldn’t be like that. Here are some common-sense reminders that are worth heeding during volatile stretches in the stock market like now, with coronavirus anxiety seemingly everywhere.

    You’re not going to lose everything

    During times of heightened market turbulence, how often have you heard someone voice the fear of “losing everything” or getting “wiped out?” Sure, that’s a possibility, albeit remote, with an individual stock if the company suddenly gets hit with massive lawsuits, spirals toward bankruptcy or faces other cataclysmic obstacles.

    But it’s not going to happen with broadly diversified mutual funds or exchange-traded funds, which have increasingly become investment mainstays. To lose everything in an index fund pegged to the Standard & Poor’s 500 index, for example, each of those 500 companies would need to go belly up for you to lose everything. That just isn’t going to happen.

    Read more: https://apple.news/ALqODekypQVOlpEk_S7kndQ

    Challenging Times During These Periods of Uncertainty

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    Still much we don’t know about this global coronavirus pandemic.

    These are challenging times as the world prepares for, and responds to, the worldwide novel coronavirus (COVID-19) pandemic.

    Pandemic of Fear

    Pandemic means sustained and continuous transmission of the disease, concurrently in more than three different geographical regions. Pandemic does not refer to the lethality of a virus but to its transmissibility and geographical extension.

    What we certainly have is a pandemic of fear and uncertainty. The prescribed cure for the pandemic of fear and panic is not to rush to your local Costco or neighborhood grocery store to purchase a year’s worth of toilet paper. Instead, it’s to step away away from your television and keep everything in prospective. Additionally, it’s important to comprehend that it’s going to get better.

    The health risks posed by COVID-19 are real and the short-term business impact has been significant. The economic and financial market consequences, however, are unlikely to be long term. In the short-term, we’re seeing the markets plummet as investors process that uncertainty and participate in panic selling.

    Prospective, Faith, Poise and Process

    Our thoughts go out to the people who have been affected by this unprecedented event and we appreciate the healthcare workers, local communities, and governments around the world who are on the proverbial tip of the spear working to contain this coronavirus.

    The COVID-19 virus has required all of us to be more mindful as we go through our regular activities. Daily, we must ensure that we follow guidance from the CDC and WHO on hygiene and social distancing. We must address a broad spectrum of viruses, including COVID-19, by handwashing hygiene and cleaning common surfaces in our environment.

    “This too will end” is a certainty. What is unknown is when this will end. And, as a results, fear and panic has assumed a death grip on the financial markets as well as on our daily lives. Many financial and health experts recommend taking a break from the television and constants dire news report.

    80% cases mild

    According to Chinese officials regarding the outbreak, about 80% of novel coronavirus cases are mild. Many of those effected experience only a fever or dry cough, while some show no symptoms at all. People who showed no symptoms or only mild symptoms may mean that many cases of the new coronavirus go unreported.

    Older adults and people who have severe chronic medical conditions, like heart, lung, kidney disease, or diabetes, may be at higher risk for severe illness from COVID-19. If you or a loved one are at increased risk of getting COVID-19, take action now:

    • Take care of your own health
    • Stay home as much as possible
    • Make a plan now in case you get sick
    • Pay attention to what’s happening locally

    https://bit.ly/2wM2X1m

    The U.S. Department of State recommends travelers, especially older adults and those with underlying health issues, defer all cruise ship travel worldwide. COVID-19, like many other viral respiratory illnesses, appears to spread more easily between people in close quarters. Recent reports of COVID-19 on cruise ships highlight the risk of infection to passengers and crew.

    See the newest travel advice: https://bit.ly/2TWsw7H

    References:

    1. https://theweek.com/articles/900400/coronavirus-really-black-swan-event

    Financial Goal Setting

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    “If you are bored with life, if you don’t get up every morning with a burning desire to do things – you don’t have enough goals.” Lou Holtz

    Research shows that our brains are a goal-seeking organism.  Whatever personal or financial goals we give our subconscious mind will allow it to work night and day to achieve them. However, one goal isn’t good enough for our subconscious minds.

    Some goals take longer to achieve than others, like buying a house or saving for retirement. If you spend years working toward only one objective, you’re likely to get discouraged when it doesn’t happen right away.

    But when you have multiple goals you’d like to achieve, goals that align with your values and beliefs, you have more to strive for, and more opportunities to check those goals off your list. And the accomplishment you feel every time you complete a goal will inspire you to accomplish even more of them

    Actions overcomes fear

    Jack Canfield, author of Chicken Soup for the Soul™, states categorically that “the biggest reason most people don’t achieve their goals and realize their dreams is that they don’t take action, and the number one reason people don’t take action is fear.”

    “There is a one thing that 99 percent of “failures” and “successful” folks have in common — they all hate doing the same things. The difference is successful people do them anyway.” Darren Hardy

    People whom achieve their goals versus those whom fail has everything to do with overcoming the paralysis of fear versus taking action. The people who achieve great success in life are the ones who are willing to take consistent action toward realizing their dreams. They consistently push through their fear and take steps to make their goals happen, no matter what others may think or say about it.

    Goal achievers make countless small decisions, they plan and they take deliberate actions every single day that keep them on target toward achieving their dreams. Because without deliberate action, your goals simply are not going to be achieved.

    No matter how ambitious the goals or how brilliant the plans, if you’re not prepared to take deliberate action to reach them, they’re not really goals at all—they’re just dreams.

    Start with goals you can achieve

    Every successful investing journey starts with a set of clear goals.

    Appropriate financial goals for an investor should be specific, measurable, attainable, reasonable and timed with a deadline (SMART). Successful achievement of goals should not depend upon unrealistic or outsize market returns or upon impractical saving or draconian spending requirements.

    Defining goals clearly and being realistic about ways to achieve them can help protect investors from common mistakes that often derail their progress. Here we show that:

    • Recognizing constraints, especially those that involve risk-taking, is essential to developing an investment plan.
    • A basic financial plan will include specific, attainable expectations about action steps and monitoring.
    • Discouraging results often come from not following a financial plan, chasing overall market returns, an unsound investment strategy that can seduce investors who lack well-grounded plans for achieving their goals.
    • Without a plan, investors can be tempted to build a portfolio based on transitory factors such as fund ratings—something that can amount to a “buy high, sell low” strategy.

    Life financial goals

    Make a list of financial goals you’d like to achieve in your life. Be as specific as possible. Include details such as when they will happen, where they will happen, how much you’ll make, what model you’ll buy, what size it will be, and so on.

    Keep your goals somewhere you can review them every morning. Put your goals on a poster or piece of paper where you read each night before you fall asleep.

    Keep goals at the top of mind, you’ll be more likely to make them a reality. Reaching your retirement savings goals starts with developing a retirement plan. Fidelity Investments has developed a set of retirement guidelines based on 4 key metrics:

    • Yearly savings rate,
    • Savings factor to help you see where you stand,
    • Income replacement rate, and
    • Potentially sustainable withdrawal rate.

    “Unsuccessful people carry their goals around in their head like marbles rattling around in a can, and we say goals that are not in writing are merely fantasies.” Darren Hardy

    Writing your goals down is the first step in turning your dreams into a reality. If you keep goals in your head you’re not likely to focus and work on them consistently. Thus, it is important to write down all your goals. Whether it’s short-term or long-term goals, it is essential to list every goal in writing.

    Writing it down will have a powerful effect on your subconscious mind to help you visualize and achieve your biggest dreams. Remember, a goal is a dream defined and written down.

    Make Goals Real by Writing Them Down

    Goals are a very effective way to build your self-belief because properly set goals require you to stretch a little outside of your comfort zone; causing you to expand your comfort zone as you achieve the goal.

    With clear and measurable goals, investors can create a realistic plan for achieving their objectives within a certain time frame. Make a list of your short-term and long-term savings goals.

    If you write down your goals, you’re more likely to achieve them. Think of them as a road map to where you want to go—and make them practical and attainable. Take a simple approach:

    1. Divide your financial goals into three categories: short term (less than one year); medium term (one to five years) and long term (more than five years).
    2. Attach a dollar amount to each goal. For instance, a short-term goal might be a family vacation. How much will it cost?
    3. The more specific you can be, the more motivated you’ll be to work toward that goal.

    Goal Attainment Requires Believing in Yourself

    Everything you have in your life is a result of your belief in yourself and the belief that all things are possible. According to Jack Canfield, the four most important steps to learning how to believe in yourself are:

    • Believe it’s possible. Believe that you can do it regardless of what anyone says or where you are in life.
    • Visualize it. Think about exactly what your life would look like if you had already achieved your dream.
    • Act as if. Always act in a way that is consistent with where you want to go.
    • Take action towards your goals. Do not let fear stop you, nothing happens in life until you take action.

    Incorporate and practice these four steps.

    Mistakes Investors Make

    One of the biggest mistakes investors regularly make when goals and a plan are absent is to confuse investing with stock picking. Ask many people how their money is invested and they quickly tell you the latest hot stock they’ve purchased and the investment thesis that explains why they think it’s going to take off.

    Saving for retirement and building an emergency fund should be the highest priorities, followed by other long-term financial goals, like college, travel, or a house. You can contribute a small amount to each goal or pick a couple to focus on first. Decide how much you need to save to reach those goals.

    Sources:

    1. https://www.jackcanfield.com/about-jack-canfield/
    2. https://www.fidelity.com/viewpoints/retirement/retirement-guidelines

    Keeping Financial Planning Simple

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    “The first step towards getting somewhere is to decide you’re not going to stay where you are.” J.P. Morgan

    The earlier you get started on your financial plan to save, invest and accumulate wealth, the more influence you can have on attaining the financial life you desire. Individuals at any stage of life will benefit from a plan that will allow them to take the wheel and get pointed in the right direction.

    The good news is that we have more control than most of us realize. All that matters is that you are ready for a positive change. And, that you take definitive systematic action to fulfill your financial and life goal.

    People need to plan their financial lives. Otherwise, they more likely to arrive at a financial destination that they neither expect or desire. And when people don’t plan, it becomes harder to achieve their goals, if they have goals, and more difficult to save, invest and accumulate wealth.

    Keep it simple

    There is a great value and benefit in simplicity. It is important to simplify your personal financial plan. Whatever your goals and desires are, you must reduce the often unnecessarily complicated and complex to something simple. The simple steps are to create a purpose statement, describe your vision of the future, determine your current situation and develop specific commitments to journey to the destination.

    Pursue big audacious goals and dream big, but keep it simple.

    Focus on the few things that matter most

    People need to focus on the few things and actions that actually make you more finally secure and improve your financial well-being. It is often the few little things that make the biggest difference.

    Focus on the most important thing–how could I save more money, invest more wisely and accumulate wealth.

    Master the fundamentals of the financial game

    Typically, the difference in scope between being successful versus being average or unsuccessful is often small infinitesimal.

    • About not spending more than we earn,
    • Saving what we can, and
    • Splurging occasionally and mindfully

    Desire is the key ingredient

    “Always bear in mind that your own resolution to succeed is more important than any other one thing.” Abraham Lincoln

    Desire is about wanting to win or succeed so badly they can’t stand it. Those who do win and succeed have unyielding desire and most successful people have two things, they set specific goals and devise a plan for achieving those goals.

    “Where there is a will, there is a way.” Never forget that life does not always gives you what you want, but it always gives you what you will accept.

    Believe in yourself

    It important to recognize the power of believing in yourself and your God given potential.

    Bottomline, if you have a plan, you know where you’re going and it’s easier to achieve your goals. The following adage still applies, “A failure to plan is a plan to fail.” 

    Sources:

    1. https://www.goodfinancialcents.com/financial-planning-basics/