Gregmal

Spek, that is kind of where I think the truth lies here. Most of us, and pretty much every media outlet, are chasing the wrong story and mistakenly equating the sell off to the virus. I think its mixed. I agree that perhaps "coronavirus" masked "warranted 5-10% pullback". Now because of the coronavirus=market selloff conflation, we've got a little extra juice behind the selling which is exacerbated by fear. Which simply leads us back to where everything begins and ends when investing, buy good quality companies at reasonable valuations. On a separate note, I just touched base with a lifelong friend. Lives in Pittsburgh and married a FOB Chinese girl who's entire family lives in Luoyang China. His direct words "her family and basically their entire community was on mandatory lockdown for a couple weeks. Everything was fine and they just got the go ahead to get back to work a couple weeks ago. Business as usual now". More anecdotal stuff, take it as you wish.

Ventured out into the wild today. The wife and I took the kids to Prudential Center to see the Jurassic Kingdom Dinosaur Show. I literally would have bet 10-15% of my portfolio on seeing dozens of folks wearing masks. Or signs of something. Shockingly, there was absolutely nothing. Full house. Not one single mask, which is odd because around the NJ/NYC area, you always see the random couple folks with masks, even when theres nothing going on. If I die in a couple days I'll let you guys know. Definitely time to short then. The idea that people are in Disney phase doesnt really seem to make sense to me. We live in an electronic world. Every single person has a cellphone/computer/tablet. Everyone is glued to their devices. Every place you turn this week, there is coverage, and an overwhelming amount. Does this mean this cant change? Of course not. It very easily could. But to act as if people just haven't gotten wind of it and when they do, the behaviors will change, at least to this point, isn't true, IMHO. Next up, on the subject of news flow and continued positive tests. Sure, I get it. But at the same time, how much of this is baked in? Do we(although I joke about it) really believe that the market just shed 12% because we have 70 cases here in the US and that the next 100 or 1000 incrementally take off a similar or greater amount? Or has this precipitous decline factored in some of the things folks like Viking have mentioned here about futures waves of further cases? How much? Where is the equilibrium point and where is the pendulum now? Also, I do think, after reviewing a lot of stuff this weekend, the stuff similar to what Liberty has posted is indeed, on a FACT BASED perspective, the most relevant and rational. Further, if it is true China knew about this in December and canned it so as not to disrupt the New Year and festivals, dont we have to look at the timelines? Mass exposure occurred first week of January. Chinese cases erupted 2-3 weeks later. The big whammy was all the folks who travelled through there and went back home. Maybe they left weeks 2-3 and now spread first/second week of February. If this is reasonable, the arent we kind of at the turning point of when these things should go ballistic? Massive surges? Except these massive surges are hundred and in a few cases, thousands of folks... "Oh but they arent testing everywhere" is at first sound. But eventually people and symptoms get to see the light of day in most countries. Surely, if there are thousands, or tens of thousands, we'd be starting to hear about them soon? Or, maybe the evidence Liberty linked is possibly a little more accurate than all the fear driven news feeds. Brings me to my next point. Both good and bad, there is SOOOO much misinformation going around its absurd. People arent drinking Corona beer. People are buying masks. People are supposedly afraid of catching it yet at the same time running to Costcos which are busier than during Thanksgiving week! Million dollar question to me, if this, on a results basis, is less than or equal to the regular or flu, is this warranted? What are the odds it gets there. Given this broke out in December and you literally had a government make the decision to let tens, maybe even hundreds of thousands of folks congregate and celebrate and gather, for the entire week! incubate the fuck out of this thing, and then go on their way, AND THEN take action, with the resulting fall out in the central location being 75k illnesses and 3k deaths? Do we really see any other nation approaching these numbers, with a multi week head start in terms of knowledge, and all this time to prepare? Again, I dont think so. Now joking...havent companies like Boeing already determined the cost of a life is like $200K? So right now we should be at like $600M but instead we've lost 6 trillion or whatever and tomorrow stacking up for another 1,000 points down because like two dozen people died over the weekend and the US added 6 cases....please. Fear, panic, chaos. Thats what this is. Is it warranted. Eventually we'll find out. To me, 2018 was significantly scarier because there was no real reason for the crash. I spoke to my brother who is a doctor. He basically said, use common sense. Wash your hands, use sanitizer, avoid close contact with strangers and especially sick people. From an internal perspective, the approach is basically similar to the flu. Funny also, a friend who does a lot of work in genetics basically said the same thing that was said earlier in the thread; no one with a promising career in biotech wants to work on antibiotics or vaccines...the financial incentives just dont make sense. But eventually someone will hang a big enough carrot whenever a large enough problem arises, and wouldn't you know, they figure stuff out.

By far the most level headed logical approach to this situation. Castanza, "Level headed" ? - Please look at the "/6" and read it again. Basically all countermeasures to contain this thing are now enabled. It's BS. Level headed as in not inducing panic. The facts we have are the facts we have. Speculation to the extreme doesn’t solve anything. I’m not saying this guy is 100% correct in his analysis. One thing I have learned in financial markets is that you want to panic before everyone else does. ??? Lol fair enough. But I would say being prepared is different than panicking. Well IDK, maybe I’m missing something, but one of the strongest, most resilient markets any of us have ever seen just fell 12% in 5 days. Seems to me like everyone panicked at the same time.

Viking, I dont disagree all in all. I am not "raging bull" bullish but rather probably what Id describe as cautiously optimistic that this is a market opportunity and economic overreaction in terms of how things just got hit. Often times, I like to play devils advocate or throw out contrarian perspectives because it helps even out +/-'s and its helpful to view responses and their validity against them. The news flow the past week has been horrendously negative and massively on the side of fear and irrationality. Even the WHO guy basically just said, people arent being rational: https://www.cnbc.com/2020/03/01/who-chief-on-coronavirus-global-markets-should-calm-down-see-reality.html I read a MS piece on range of outcomes https://www.yahoo.com/finance/news/3-scenarios-for-how-covid-19-plays-out-morgan-stanley-184343790.html All in all those of us that tread cautiously over the past few months are probably in decent shape. As you've said, the real question is when to hop. I think some of that "when" may be now. GOOG just shed $200 a share and trades at like 16x ex cash. Another 10% off? Im a buyer all day. BRK we dont even need to discuss. Cheap at 230? How bout $200 now? Stuff like that. The news flow or headline risk I just view as opportunity. I was thinking earlier this week, "hey, I haven't heard from Marc Faber or Nouriel Roubini lately, I wonder what those jackasses are up to". This weekend I found plenty of articles blasting Roubinis calls now for "30-40% declines" and its just like, well, thats how the sausage is made. When things are good you've got Bill Miller and Cathie Wood getting the mic, and when they are bad its guys like Roubini and Dennis Gartman. The trick Ive learned is to try to realize how this works and associate, at least based upon past outcomes, what side you want to be on when such figures and news flow is most prevalent.

A little more anecdotal stuff My sister and a bunch of friends had recently planned a trip to Spain. This weekend, she contacted me asking if her trip got cancelled if should would be able to fly up and visit me here in NJ. Curiously I asked why it was cancelled. She said it wasn't actually cancelled but her friends were debating moving it back a month or two from the original mid March date. Why? Not because they were scared of getting the virus, but because they didn't want to risk dealing with any quarantine. Most of them, if the consensus is to cancel and reschedule a couple months out, have decided to make alternative domestic travel plans that week. Following this, I tell my wife she may be visiting, and the response immediately was, "if she goes to Spain she cant come here".... I internally LOL'd. Both sides of the coin there. One, not a worry, the other, just likes to worry. But nonetheless real to both of them. Definitely an impact on peoples lives, but at the same time, people still arent going to just sit around and do nothing. They adapt. I made a point to track attendance at some sporting events this weekend. Nothing in the numbers yet that tells me people arent going out.

Two takeaways 1) How can this be? Driving and fuel consumption during past crisis periods indicate that people still got on with their lives! They just find other ways to get around 2) The travel industry definitely got hit a lot worse with 9/11 and then SARS a back to back double whammy. And still recovered. Triple whammy if you want to include the market bubble bursting in 2000.

Good general info on past "issues". https://www.marketwatch.com/story/heres-how-the-stock-market-has-performed-during-past-viral-outbreaks-as-chinas-coronavirus-spreads-2020-01-22 Seems like we get one of these every few years. Also seems to have been blown hugely out of proportion due to the unfortunate timing of the Chinese New Year and all travel surrounding that, coupled with the fact that reports are the Chinese government knew about this in December and tried covering it up to prevent hysteria around the festivities. There would also IMO, be a race amongst all drug companies to come up with something for no reason other than to showcase the necessity for their pricing models as they fund R&D necessary to save the world....or so the pitch Id imagine would go.

The key problem for investors right now is ‘headline risk’. Fundamentals are not going to matter for a while. Everything i am reading right now tells me the US is failing badly in how it is handling this developing crisis. And the key factor in how severe the outbreak gets is how it is handled in the initial stages. This tells me the ‘headlines’ are going to get much worse in the US. And political leadership are going to make it even worse. We may ge at the early stages of a slow moving train wreck.... Equity investors are going to see their resolve severely tested as we see 1,000 point swings (both ways) in the coming weeks and months. True, but is this not one of, if not the biggest argument in favor of active managers and astute capital allocators outperforming? The saying "fundamentals dont matter" is valid on the way up and on the way down if you are rationalizing cash yielding zilch. But on the way down, how is people not caring about fundamentals not a huge advantage? The worst thing that can happen, when people dont care and fundamentals dont matter, is multiple contraction, however history has plainly shown us that this only really sticks to things that deserved it. IE who suffered long term from 08? Probably only the financials. Everything else went back to normal and received healthy multiples. Here? Its probably retail and travel stuff. Except retail already carries a shitty multiple, unlike say, financials did in 06. I think if we talk about bias, the big one here is a lot of people who have thought valuations where out of line for a long time see the market crashing and think "I was right, and its about time" and then anchor to that in assessing how much more it "should" go down. But the two are totally unrelated. I mean theres people in that crowd who have thought valuations where out of line since 2013.... Its similar in thought to what I experienced in YE 2018. Everyone I talked to about why the market crash there made sense, at least the ones with semi intelligent rationalizations, gave some kind of derivative spiel about "the Feds been propping things up and oh we were in a bubble all this time", but at the end of the day the market didn't just wake up in November 2018 and go "shit, today we're going to abandon everything thats mattered for the last decade or so and now only consider "this"...thats just not how it works. Further, as far as spread goes, I am curious to see how many cases are found in warmer weather regions. Typically these are much lower. Which could create opportunities in those areas. Particularly places like Florida and Texas. And then for the rest of us, Spring is 3 weeks away, which may bring on some weather related relief, but who knows. Its not hard to see, if say containment is successful at least until warmer weather, there being a vaccine by October/November of next year. Thats often more time than it takes to generate one for the annual flu.

First US death https://www.nytimes.com/2020/02/29/world/coronavirus-news.html Should take another 1,000 off the futures when they open tomorrow.

As always, good stuff Cigarbutt. Thanks

Interesting, but the more interesting tweet I found was a couple below posting a link to this. https://www.stlouisfed.org/~/media/files/pdfs/community-development/research-reports/pandemic_flu_report.pdf Guess what happened next in the 20's? But again, I can see how it is human and market nature to always assume the worst and then work backwards. As a historian myself, my application of understanding in situations like this, has always been to bet against the worst case scenario. If nothing else, you have the entire populations of politicians and bankers and experts working on your side. Similarly, how many people, even in a scenario like 2008, bet on failure and ended up losing? Getting squeezed out of shorts. Having insolvent counter parties? Seeing the Fed take actions that wiped out their bets? People like Peter Schiff who "called it" and still lost 80% that year. People who bought at the highs in 2007 and held tight in fact, did better than most of the doomsdayers. The other arm of analysis, is, how far should this drag things down. People have mentioned a liquidity crisis, but as long as the Fed is where it is, I dont see that. Further, company profitability is not being zapped to 0, so couple this with the insanely low rates, and that debt markets certainly arent "closing". Demand in fact, should increase for issues from qualified borrowers, especially if the bond guys deem an economic seize up to be temporary. Basically just a bridge loan. If you are a shitty E&P or mining company, sure, but I'd gander 95% of S&P companies would have zero problem issuing debt. So if we can eliminate liquidity induced plummet, then we have what? Just a recession to worry about. Is it possible we see Great Depression type stuff. I suppose, but probably not. Quantify what a temporary recession should do to the broader market... maybe comparable to something in the 70's or early 90s... but, most of those were greatly enhanced by energy/oil related issues and inflation, neither of which are really on the horizon here. https://en.wikipedia.org/wiki/List_of_stock_market_crashes_and_bear_markets Which one prior haven't we recovered from? Most were really just temporary shocks, similar to this, and exacerbated by program trading. Further, at least here, plenty of investors prior to February, were cautious or paring down their exposure because of "valuation" concerns... in November, December, January, etc. We can call the recent rise a "blow off top", but I think thats silly considering that a 10% rise over a half year stretch isn't really a blow off top, nor did it take us anywhere that extreme compared to market levels back in 2018 or 2019. From late 2017 S&P ~2650. So from that point to today that "market" has blown off a whopping 5% annually? An 8% return would take us back to roughly were we were in January. Just because people have been crying about valuation for a long time doesnt mean it was true. Generally speaking, the "broader markets" are relatively efficient. I myself have had plenty of stocks where Ive pounded the table and said the valuation didn't make sense, but was ultimately just WRONG. Same can be said here. The biggest issue I see right now is that the smart guys cant really calculate/model the impacts here so they're just throwing everything away. Still yet, I haven't really seen any of the fear driven people say where exactly the market should crash to or what levels it should now trade at. In fact, dare I say the value guys now just sound like momentum investors because "the trend is down". Again indicative of the above, and that fear is blinding.

We're at the "cant avoid it" phase where every time you go to a website. pick up a paper or turn on the news it is in your face and that is scary(notice ever since Trump has made the remarks about the media using it to bring him down, CNNs website is reformatted and Corona is the overwhelming topic blasted everywhere? I found that funny). But at some point people should become practical again just like with Ebola a half decade or so ago. Or H1N1. Every 2000 cases or whatever cant translate to 10% selloffs for the market, otherwise we'll be at zero pretty soon with people still alive and an economy that is still producing things and all of a sudden the machine trading will reverse and we'll notice companies with buybacks and dividends are still there and oh yea, maybe even some of the shitty ones too considering they can borrow at low single digit rates. If you're scared use your brain to find some easy money shorts if your fears play out. PRTY, STNG, AAL, CBL, MAC, LYV, RCL, and others. Except, oh, these things are all down 20-50% already because of this, and you cant say you arent aware of the snapback potential because we've got a decade plus of instances to fall back on where that happens to be the end result, just about every time. I am starting to agree with some of the Democrats though. I think there should be some sort of lifelines established for small businesses. The real coronavirus effects will obviously be on travel and retail. Its a key cog to the economy, but at the same time, not in theory all that different in terms of deriving an assistance program, than what we saw in agriculture during the trade war.

HTL- pre released FY 2019 numbers were outstanding and held an investor day the week. This is a gem PCYO- currently building out last real developmental area in Denver MSA. Own all the water to service that area. No debt, valuation still doesnt factor in much more than it did a couple years ago. Their only assets are in this area. FRPH- why are we at $45 again? Who cares. Disciplined capital allocators and great select group of assets here. Also think GRBK is grown into a real solid company here. Mainly sunbelt real estate developer. Sure, economic constraints could hurt housing, but I dont think so. Mortgage rates are extremely low and you dont even need money or job to get a mortgage anymore. Greenbrick also exercises quite a bit of discipline with respect to where and how they build. Comcast- just cheap and not going anywhere. These types of businesses arent going to 0. AYR Strategies- just delivered strong results and probably would have been up 30-40% if the market wasn't getting obliterated. They basically own the pot markets in MA and Nevada Yup, Im talking my book.

So, just to understand where people are coming from, and despite the internet muting my tone Ill say in advance that I am not being sarcastic or rhetorical, but... we have a pandemic that may temporarily dislodge tons of very significant economic variables. We just had, arguably one of the most hellacious and sudden market declines in decades, and both a President, who clear as day can not be deemed reliable, nor a media that can be trusted; people are surprised that the Fed is stepping up and willing to take action? Isn't this what they have continually demonstrated that they will do? In who's interest, besides that of greedy investors, is it to have everything implode? And again, as I said before, if we are talking valuations, we have a 1.2 10 year. Where should stocks be trading? Lets say you have a 30% cut to corporate earnings this year like some are modeling, ands then a 30-50% rebound the year after, should we be gapping down to 15x? Or is 20-25x depending on the business at least justifiable?

Whisky and perhaps something to smoke(old habits...). What a fucking week. Felt like I grabbed a lot of good stuff. Just have to get all the shards of glass out of my hands.

Glenfiddich Fire & Cane best bottle under $100 Ive ever had. So I buy them all when I see them at the store given its a limited release. Very similar to, and smoky like the Lagavulin.

a few FRPH as well. Couldn't help it. Stocks are expensive!

Here we go. Who's ready for the last 2 hours of trading? Any guesses where this goes into the weekend? -1500 seems about right

Lot of misinformation and stupidity out there https://nypost.com/2020/02/27/americans-are-avoiding-corona-beer-amid-coronavirus-outbreak-survey-finds/

BRK, little bit of PCYO although volume is low, and starter in long time favorite that Ive never actually pulled the trigger on, INFO.

I too hope you are wrong. I will say, on the other side of the argument: COVID 19 does not change the underlying cause of high asset prices: very low interest rates globally. It may hurt the productivity side of the equation - low activity, low top and bottom lines. But (if things work out for human society - an optimistic view) this is a temporary problem until normal activity resumes. It has historically paid better to be on the optimistic side of human progress. The alternative is we hole up in bunkers with canned foods and burn worthless paper certificates for heat. I am hoping we somehow make it through this - globally. That is essentially it. Who knows where it finds calm, but at the end of the day, theres a bunch of cheap stocks right now and theres a bunch of still expensive ones. "The market" as in the S&P is currently trading a few percent over 2018 levels. Obviously, "the market" consists of different things and some dont make a whole lot of sense. But the baby is getting thrown out with the bathwater. Income Realty for instance, which basically tracks with bonds, off 8% today. Its indiscriminate. Amazing how a week ago everyone(generally speaking) loved stocks, and today everyone hates them(although again, after basically 3, separate 1000 point drops in 4 days, its understandable). But rates are low and only getting lower. People will recoup from the PTSD, and then be faced with a dilemma of where to put their money. As has been the case prior, with every market meltdown Ive ever witnessed, people find a way to figure shit out. And if not, the government fixes the problem with stimulus or backstops. Its incompatible that people will put their money in negative rate instruments or bonds yielding 1%, but they won't touch stocks with significantly greater profiles because the next 6-12 months might get disrupted before it goes back to normal. Whatever the fear is, its more likely than not temporary, especially given the fact that China is already heading back to normal. I think the market just got out of hand the past few months, and as ERICOPOLY stated, just needed a reason to adjust. Good assets will remain such unless its armageddon. In which case there are definitely better doomsday kamikaze trades out there to make a fortune betting on failure. Its really just panic. As I wrote this Dow futures just dropped 200 points....

I will give you some props. Your reasoning in a thread not long ago(maybe a few months) actually helped me quite a bit with the decision to part ways with some GOOG and a few other holdings not too long ago. Stuff originally stubborn me convinced myself were never sell items because gee buy and hold is where the real compounding/returns are! Your timing was pretty friggin good on DD sale too...

Now would be a pretty darn sneaky time to snap up an airline.

Well, futures are already down about 1%, so looks like we keep on rolling, tomorrow into the weekend. At some point, rates will definitely get cut. Perhaps some more QE. And hey, maybe Berkshire makes some moves! Anyway, we've seen this movie before. No need to scream for the 1000th time when the scary guy in the mask pops out.

Well thank god for stop loses! Fun finish to the day...