Hold on & Hunker down
Maybe stop watching (the falling value of markets). We need this virus to run its course, and I’m not talking about Covid19. I’m referring to the virus of global panic. Yesterday we heard our Governments fiscal package and now we’ll see how our market responds…
Markets are falling because they’ve been infected with fear, but while many have taken flight (about the only thing that is flying at the moment), there are a good number of tenacious investors who’ve decided that now is the time to fight.
Share Markets are the place where people gather (fortunately, without having to actually gather), to exchange "Shares". When more sellers are selling, fewer buyers will offer less and less to buy what’s on sale. As the crescendo of that particular symphony reaches its dramatic height, fewer sellers arrive in the marketplace, because it's just not rational to sell anymore. Only those who haven't stored a few coins away for a rainy day, will still need to sell into such a black hole.
So, in the very same marketplace, we have extremely happy buyers who turn up each day and see only sunshine and opportunity, as the deals of their lifetime unfold. They’ve secured bargain basement prices on quality assets they intend to sell back to the very same people who capitulated just months earlier, but you can be sure the new sale price will be twice as high. Sounds a bit too easy… Here’s how easy: Five companies that have been sold for between 30% & 50% less than their 2019 heights in just the last few days: Auckland International Airport, Westpac, Summerset Group, Deere & Co and Apple… and I’m just scratching the surface.
So, a very simple question becomes: "Will these businesses exist in a year’s time? What about in two years, in three, five, ten...??” If the answer is "Yes", then we could be missing out on some wonderful bargains because, right now we're buyers (we have the cash ready to deploy); but we've not yet made any bid!? We're sidelined, waiting for more stability. Or, said another way, we're waiting for prices to go back up (because we're still fearful they may fall further). We don’t want to be sellers, not unless we’re absolutely sure the market won’t recover, that it's “game over!” I know we've tucked away some of your coins for that rainy day, so we will never be forced sellers.
While the real virus is out there, real people will continue to extrapolate the impact of the pandemic well into the future. Yes, there will be an impact. Yes, it may take away much value through 2020. But will we be battling this virus into 2021, 2022, 2023 and beyond? The Spanish Influenza pandemic lasted two years 1919/1920, we had no antibiotics - no modern medical science or methods to deal with the fallout. I'm no expert, but I don't see this lasting two years, and what followed that global disaster was a period of plenty, the Roaring Twenties.
The fiscal response of Governments around the world is going to be massive and when we see the virus contained, confidence will return. When we see those green shoots emerging, hang onto your seat because the price surge in Financial Markets will be the biggest in history...promise! If we’re not in that market, we’ll miss the biggest gains and that will cause our recovery to take longer.
As you'll no doubt hear on the telly, on the radio and read in the newspaper… every single reliable expert is saying: Hold. Use weakness as a buying opportunity. Look long-term. Don’t panic. (Of course, there will also be those who’ll say, they saw it coming and they were smart enough to get out, but ask them to actually open their books and you may find a different picture! Anyway…). Hold! Don’t look. I’m looking. I’m doing everything that 35 years of Financial Markets experience has trained me to do. There was no playbook in 1987, 1991, 1994, 1997, 1998, 2000, 2001-2003, 2007-2010... We got through those “events” & we’re going to get through this one too.
In closing - Yes, the markets may go lower. If you don’t need to sell, if you still have in mind the long-term, then simply be invested long-term. I will continue to look for buying opportunities and truly, I see plenty already. So, it is not a case of “if” … it is simply a case of “when”.
Tony Munro | CFPCM, Post Grad Dip. Bus.Studies (PFP), AFA, FSP 5501