Viking

What did Buffett buy in the Financial Crisis? Infrastructure: a railroad. Now only if something like MidAmerican was available for cheap...

Hard disagree. There are pockets of "interesting". But the most obvious ones, financials and energy, have material risk. Good stocks are still selling at a premium. Booking.com is going to see revenue freefall this year to COVID, but it outperformed the indices today. This correction is not about COVID. What I think people are missing is that corrections are normal. Covid is not material for most companies. True. Life will return to normal in 12-18 months. But SPY was up 30% last year. The value of SPY didn't increase 30% in one year. There was enormous complacency built into valuations. Covid is just the trigger for a necessary correction. I raised a bit of cash today. Hoping to raise a bit more tomorrow. I am still expecting a few more pockets of opportunity. The virus has not hit the US yet. At least in people’s minds. Testing is still not being done in large numbers, especially in hot zones like Washington. So the reported numbers are low and everyone feels good. Think of where Italy was about 2 weeks ago. Think about where their stock market was and what people were saying. Look at what is going on now... big change. What a surprise!

BRK, BCE.TO, FTS.TO, TRP.TO, ENB, WMB, RSI.TO, WFT.TO Still 90% cash. Today was an oil shock. Expect Coronavirus news to get much worse in the US. Expect more downside. Wild cards are what government/fed does. If they announce they will buy corporates and stocks in volume the markets will pop. Trump is very aligned with this solution :-)

orthopa, I see lots of people getting stuck in the weeds debating this theoretical detail or that detail. Sometimes it is useful to look at the big picture. And the real world. So what is actually going on in other parts of the world? Not sure if you have watched this video. It is an example (Wuhan, China) of what happens when a government does not take this virus seriously, does not test and lets the virus rapidly spread in the first couple of weeks... Similar thing in South Korea. Similar thing in Iran. Similar thing in Northern Italy. FYI, people in these countries are not stupid. - So let's have an intelligent discussion. What exactly is it the government in Wuhan should have done after the outbreak had happened? They chose lock down and a bunch of other draconian measures. Your solution (after hundreds of thouands of cases have already happened)?

Perhaps we will see capitulation in energy shares if we see oil fall to the low 30’s. i have owned Suncor in the past and will continue to follow. Canadian $ futures are trading down 1%... Is shale an important part of the American economy? Need to brush up on what happened in 2014-2016... Saudi Arabia flooding market with oil, prompting predictions of further decline Monday - https://www.washingtonpost.com/business/2020/03/08/saudi-arabia-flooding-market-with-oil-prompting-predictions-further-decline-monday/ Saudi Arabia is making a 180 degree turn and moving to flood a market depressed by the coronavirus with hundreds of thousands of barrels of additional oil per day. And it is offering steep discounts to refineries around the world. It’s the beginning of an oil price war between the Saudis and Russia – but it’s going to put a tight squeeze on American shale oil producers, as prices are expected to head sharply downward. While it lasts, of course, that’s good news for oil consumers but a concern in areas of the country that rely on jobs in the energy sector. West Texas International crude, one of the industry’s price benchmarks, fell 10 percent Friday before the Saudi announcement, closing at $41.28 a barrel. Analysts expect it to fall into the $30’s – perhaps deeply into the $30’s – when markets open Monday. The last time West Texas Intermediate fell below $40 was in August 2016.

Is this where the world is headed? Countries ban their people from leaving their country so they don’t spread the virus? China does not want the virus to be brought back into the country by visitors... look at what they are doing. Look at what nations are doing to Iran travellers (they are revoking Iranian planes landing rights). If you want to understand what will be happening in the US in the coming weeks look at the rest of the world for insight. Remember they are a few weeks ahead. You can predict (with a little haziness) the unknowable future if you look hard enough. As Wayne Gretzky famously said, skate to where the puck is going not where it has been. Czech Prime Minister says Italy should bar its citizens from traveling in Europe - https://www.washingtonpost.com/world/2020/03/08/coronavirus-live-updates/ LONDON — The prime minister of the Czech Republic Sunday said Italy should bar all its citizens from traveling to other countries in Europe to contain the coronavirus. “Italy should ban all its citizens from traveling to Europe, because we are not able to order such a thing within Schengen,” Czech Prime Minister Andrej Babis told Czech Television Sunday. “Schengen” is shorthand for the 26 countries in Europe where 420 million citizens of the member-states can travel freely across each other’s borders without passport control. Most Schengen countries are members of the European Union, but the free travel area also includes non-EU members Iceland, Norway and Switzerland.

It is very difficult to understand the economic impact to a region when it goes to lock down. Especially the small businesses. Yes, cash flow will be key. Another good reason do everything you can to not have to do that (lockdown).

Spek, thanks for sharing. Do you have a perspective of what is going on in the bond market? Specifically US government bonds? Yields are at historic lows and could possibly move into negative territory. Is it a panic overreation by this group? Stocks meanwhile have sold off a little and are trading at levels last seen 4.5 months ago in October 2019. I am trying to square what the US bond market is saying (recession is coming) with what the stock market is saying (slowdown coming with v-shaped recovery). Or am i way off base?

Sports leagues in the US are starting to think about what to do in a Coronavirus world. As sports leagues cancel games what will people do with all their free time? President Trump, when asked today, confirmed he would continue to hold tremendous rallies. I never thought of this... what a clever plot... the country shuts down... no school, work or play. That will make everyone available for the one activity still available: a Trump rally :-) This guy is practically a genius! Coronavirus Outbreak Could Prompt Alarming Ripple Effect Across Sports - https://www.si.com/nba/2020/03/08/coronavirus-sports-job-losses-sponsorship-lawsuits “On Friday, the NBA sent a memo to teams indicating that they should prepare for the possibility of playing games without fans in attendance. These preparations, the memo reportedly notes, include “the possibility of implementing temperature checks on players, team staff, referees, and anyone else who is essential to conducting such a game in the team’s arena.” Earlier in the week, the NBA encouraged players to avoid contact with pens, balls, jerseys and other objects presented by fans for autographs. The league advised players to refrain from shaking hands or high-fiving fans, suggesting fist-bumps instead.”

For those who think I have been taking Coronavirus thing too seriously... First, I should say that I do not entirely believe that this video is real (even as a drill). The rational part of my brain is telling me that it is a fake (why would you do a drill like this?). It looks like a Monty Python skit. You can make up your own mind. If it is real I am starting to understand the effort China is making to control the outbreak. And scroll down and read a few of the comments... 'gallows humour' at its best. -

You are expecting Fairfax to suddenly play fair? Don't hold your breath. I'm not a big fan of the short-and-distort crowd that made the short attack on FFH in '03 and '04, but they were actually right about one thing. When FFH holdco was cashflow challenged, Prem engineered an ingenious move whereby FFH bought a slug of ORH shares from an institutional holder by issuing convertible notes to that holder that convertible back into the ORH shares. Effectively, Prem "borrowed" the ORH shares from the institutional holder to enable FFH's holding to pop above 80%. At that point ORH was consolidated into FFH's financial statements for income tax purposes. This allowed FFH to use hundreds of millions of dollars of tax loss carry-forwards from TIG and C&F that would otherwise fall off the table. ORH made the tax payments to FFH, and then FFH offset them against the loss-carryforwards, which gave the holdco an enormous shot of cash. Was it legal? The IRS said it was legal. Was it ethical to pretend that you owned 80% of ORH when the reality was that the shares were borrowed? Well, I'll leave that one for you to decide. The moral of all of these stories is that Prem is very clever and very self-interested. SJ Stubble, thanks for the trip down memory lane... great summary of many things i had long forgotten (although i do still remember the day the ORH deal was announced... it was my biggest one day gain ever :-)

This will be fascinating to watch. It's relatively easy for a despotic country like China to impose travel limitations and quarantines. Italy seems to be on the cusp of announcing a large scale quarantine. But what about the culture? Is it even possible to control 10 or 15 million Italians? Heavens, go to an airport, subway or any other place where order is required and watch the behaviour of southern Europeans. While Canadians and Americans will politely queue up in an airport or virtually anywhere else, southern Europe is a different world! They seem to hold the view that rules are made to be broken! Even in Canada or the US, I am unconvinced that a large scale quarantine could even be enforced. At least in Canada there's the advantage of distance and limited transportation routes between some communities. But, I could quite well imagine people telling the government F-U, and just driving around any road blocks (it's hard to seal off every road). I guess time will tell how well this will work in a modern liberal democracy.... SJ My wife is Italian heritage; parents are from northern Italy. She Has been in touch with family there and has been told it is an ‘overreaction’ on the part of the government (this was a couple of days ago). :-)

What can we learn from other parts of the world where a serious outbreak hit (like what we are seeing in Washington State)? Wuhan, China is one example. Another, example is northern Italy. Please note, their outbreak is 2 weeks old. Here is a question. If the US had to resort to the measures below would it affect the current valuation of the stock market? Perhaps the virus that is in the US is different. Or perhaps the US will manage the outbreak better than other regions of the world and not have to resort to such drastic measures. Or perhaps not. So far i think we can all agree what is going on in Washington State is not what one would call best practice (testing is usually a core part of what would be considered a good response). Please note, i am not trying to be critical of the health care providers etc. They are in a gun fight and they have been handed a plastic knife by leadership. Here is an update from Italy: Italy is considering drastic new steps to lock down northern area at center of outbreak - https://www.washingtonpost.com/world/2020/03/07/coronavirus-live-updates/#link-B6OGGHNBUNDVPGZ3TACWB7AXW4 ROME — The draft of a new government decree, reviewed by several Italian media outlets, suggests Italy is on the verge of dramatically expanding its no-entry zone to include a broad northern area that includes all of the Lombardy region. The changes, which could be adopted as early as Saturday night, according to the newspapers, would mark the most serious step taken anywhere outside of China to contain the coronavirus outbreak. The measures would at least temporarily transform the nation, locking off much of the northern part of the country, with people allowed to exit or enter Lombardy and 11 northern provinces only for emergency reasons, according to the decree. Such changes would cut off the daily high-speed rail connections between Milan and Rome; bring an absolute halt to tourism in Venice; and essentially bring Italy’s economic heartland to a standstill. In the two weeks since the coronavirus crisis erupted in Italy, 11 small towns have been so far put under lockdown — restrictions that have stopped the movement of 50,000 people. If the government approves the new decree, those restrictions would apply to roughly 15 million people. Italy’s government has been racing to combat the crisis as it has accelerated in recent days. The number of active cases in the country has soared beyond 5,000, with 1,000 new cases confirmed on Saturday alone. Of those cases, more than 2,700 are in the Lombardy region, which includes Milan. According to the Corriere della Sera newspaper, the restrictions would remain in place until at least April 3. Schools would remain closed during that time, and public events would be halted.

It is very hard to understand this specific virus as it has not been seen before. But because it started in China in late December and spread from there to Asia and Europe we are very somewhat fortunate here in North America because we can see how this virus progresses with a couple of weeks lag. The extra couple of weeks are critical to slow it down. Now that it has hit Kirkland, Washington we have more information. Here is a link to the website of one of the local Seattle TV stations (Komo). The article is from today and if you read through it you will be able to learn about and better understand the complexity of the issues that communities will be facing (especially if it goes undetected). Washington State is about 10 days into its response; things are moving very quickly. - https://komonews.com/news/coronavirus/washington-reports-16-deaths-from-covid-19-as-officials-scramble-to-contain

I agree with everything you have said, except I would like to add that I believe there are many wild cards. Agreed :-) in the current situation it is much easier to identify the possible negative outcomes than the possible positive. This is what makes investing (and life) so difficult to predict.

Politicians will do what they have to do. As the pot gets closer to boiling the unthinkable will likely quickly become what is being done. I am sure no one in the Chinese government was thinking they would lock down Wuhan even a week before the decision was made. Look at what Washington State is already doing and they are at the end of week 1 of actually dealing with this issue.

There is enough information out there on this virus for rational people to understand what is going on and where this outbreak is likely to go. Lots of other countries are a few weeks ahead of North America and each have handled it in very different ways (some very good and some very bad) and are seeing very different results for populations and economies. What are the learnings? A different and interesting way to look at this outbreak is is to look at this thread in week snapshots. Go back 7 days and look at what the posting was. That is not very long ago. Go back 7 more days (14 from today) and look at the discussion. Go back 7 more days (21 from today) and so on. What are the learnings? Now think forward. What will the discussion on this site be like in 7 days? And in 14 days? I have learned managing people over the years very few people can actually do this exercise very well. My view is most people in the population in North America (perhaps not on this site) are still in the Disney phase (lots of people living in Kirkland, Washington would be one exception). And that is because reported cases in the US are still very low. As of today (12:33PM PST March 7), the US is at 401 confirmed cases. No big deal. That is what everyone is focussed on. Classic rear view mirror but on steroids (because we know current cases are way underreported in the US due to lack of testing). The President and his leadership group say the virus is ‘not a problem’ and that the problem is ‘contained’; for the average citizen the virus continues to be a big nothingburger. Reported cases also looks to be how the Federal Government is ratcheting up its response; they can’t move quicker because of Trump (their departments response can’t be off message from the President who deals ruthlessly with trouble makers who are off message). What will case count be in 7 more days? People can’t do the math. And when they read estimates from people who can do the match they discount it or do not believe it (trust of science and media reporting is at an all time low). People want preciseness and because that is not possible With future numbers they default to reported numbers to inform their analysis. And just like the case count the news flow will also start to ramp up and get progressively worse. My view is investors are in the slow boil phase right now. Similar to the general population, they are waiting for the economic impact to get announced on the nightly news or by press releases (from companies) before deciding what to do with their portfolio. They are not rationally looking at the current situation and most importantly projecting forward 1 month, 6 month and 1 year. This requires an open, learning, analytical mind, independent decision making and conviction (ability to act). Not able to calculate a precise future number they wait to be informed by what gets announced by governments and companies today. Please note. I am not suggesting people sell their stocks. Buy and hold is a solid strategy and as Buffett says stocks will likely be up lots in the next 10 and 20 years as US GDP grows. He also says long term investors should be prepared for a 30 or 40 or 50% decline. Again, i am not suggesting we will see even a 20% decline. I have no idea. Everyone simply needs to execute an investment strategy that fits their intellect and emotional make up. Lots of people get the intellectual part right and the emotional part wrong and that is unfortunate. What we do know is in 7 days time we WILL know more. And in about 2 or 3 more weeks the pot will be boiling. Good luck :-) PS: the wild card is if a treatment for the virus is discovered. This obviously would change the game.

I work in healthcare. The only advances that we have come up with in that time that are effective against this are 1) hand washing, 2) contact isolation, 3) mechanical ventilation (but by this point it is already way too late). Also, we severely lack # of ICU beds and resources which will become apparent soon. It is already apparent we lack resources if you look at how testing for this has rolled out. Can someone help me reconcile dalal's (and some others' I've read, including healthcare professionals) view that we haven't really made advances in fighting this stuff and this headline today from Gilead / Seeking alpha. how should one handicap this? Gilead up 3% ahead of expected COVID-19 drug data readout Mar. 6, 2020 1:56 PM ET|About: Gilead Sciences, Inc. (GILD)|By: Douglas W. House, SA News Editor Evercore ISI's Umer Raffat says that preliminary data from a China-based study of Gilead Sciences' (GILD +3.4%) remdesivir for the potential treatment of COVID-19 could be available this month, ahead of the expected release in April. The study began in early February at Wuhan's Jinyintan Hospital, in the epicenter of the outbreak. Health experts believe that the antiviral will show sufficient efficacy to warrant widespread deployment in an effort to corral the outbreak. A little over a month ago, the first confirmed case in the U.S., a man in Seattle, responded well to treatment. All symptoms, except his cough, resolved within a week. Remdesivir (GS-5734), a nucleotide prodrug that blocks a key enzyme needed for viral replication, is also being developed for Ebola virus infection. This, of course, would be a game changer (and stocks will rock if it provides a cure and can be deployed quickly). I have no idea how accurate it is but we can only hope. The potential for this was also briefly mentioned in Liberty’s recent sensationalism post.

Here is some more sensationalism reporting: - The 10 year bond has fallen from 1.88% (Jan 1) to 0.72% (today). - oil is at $41.59 (down 9.4% on the day) - credit spreads are starting to widen Nothing to see here. Move along :-)

I agree. Hard to pull the trigger on airlines right now. An airport (BIAL)? Need more information.

My view, with respect to a virus, is it constitutes all the available resources of a country that can be harnessed to ensure it is managed as well as possible: you do whatever it takes as a nation to avoid the red coloured curve in Liberty’s chart. King County is now buying motels to house the surge of people who need to be quarantined. That motel is now part of the health care system. Creative solutions will be found.

+1; a picture is worth a thousand words. Now we just need to get this picture out to the politicians.

I continue to believe that people are way underestimating the economic impact of this virus. I have no idea scientifically accurate the article below is; my take away is we are starting to get calls for more radical solutions to try and slow the virus. My guess is some will be implemented in the coming week. Listening to the business experts on TV many are quoting flu stats (saying this virus is similar so financial markets are overeacting) and predicting a v-shape recovery. We will see. Travel restrictions merely delayed spread of coronavirus, new study finds https://www.washingtonpost.com/world/2020/03/06/coronavirus-live-updates/#link-AC43S5WUW5E7HEMHNUMXXADAV4 A new study released Friday in the journal Science finds that the travel restrictions China implemented domestically, once the scope of the outbreak of a novel coronavirus in Wuhan became apparent, likely only delayed the spread of the illness by three to five days. In addition, the international travel restrictions, including ones the Trump administration imposed starting in late January and continues to tout as its most effective policies to combat the virus, significantly delayed, but did not prevent, the spread of the virus abroad. The study, which simulated the spread of the disease using travel data and epidemic modeling, found that the combination of an extended, stringent set of travel restrictions with policies to cut transmission of the disease within the United States will be needed to gain control of this outbreak. “Moving forward we expect that travel restrictions to COVID-19 affected areas will have modest effects,” the study states. “And that transmission-reduction interventions will provide the greatest benefit to mitigate the epidemic.” https://science.sciencemag.org/content/early/2020/03/05/science.aba9757

For people who think this virus is just a bad flu read news article below. I am not posting to sensationalize the issue. Or to bash any politician. But to educate. If the virus is not aggressively controlled this same situation could play out again and again. There is a reason China handled the outbreak the way they did. https://komonews.com/news/coronavirus/the-disease-is-running-rampant-families-at-center-of-virus-scare-share-their-despair Thursday March 5: KIRKLAND, Wash. - Confusion, misinformation, apathetic officials, fear, panic, death ... Those are just some of the many hardships faced by families of residents at Life Care Center in Kirkland - the epicenter of the coronavirus outbreak in the Puget Sound - as the disease sickens and kills off greater numbers of their loved ones each day. Meanwhile, the families say they wait for answers that never come, help that never arrives. "We have no options, except to sit and wait for a phone call," said one family member, Kevin Connley, whose father is a Life Care resident. "The response by our government is laughable. ... We want our loved ones moved to a safer place immediately." At a hastily called news Thursday conference, relatives of residents at the facility met with reporters and described overworked Life Care staff who are receiving little or no help from the Centers for Disease Control or local health departments as they deal with an impossible situation.

So much as we will complain about the US handling, what is Canada doing? We refuse to close our borders because we don't want to make knee-jerk reactions? So fine, we test and that should be done, but shouldn't we be stopping traffic from infected areas? Or for those who are so upset about US handling, how do you rationalize what Canada is doing. We will continue to let people in and spread the infection but it's all okay because we are testing once people become sick. So at least we will be able to watch more in real-time as this infection spreads through the country. You make great points. As i have been saying for the past week there is so much we do not know. We will find out in 6 months or a year how well individual countries have handled the outbreak. There will be lots of lessons. Personally, i would like to see Canada do everything it can do to slow the virus down and give the health care system a chance. Do i trust Trudeau? A little; but i find he can be naive and craves popularity too much. We will see.