August-December 2020 Edition of Corona Crash or Everything Bubble Pop?

I created this series to serve as a set of living artifacts. This is the 3rd post in the series. I’m striving to capture major current events and financial market action from the lens of a retail investor in the US. It’s essential to understand how one feels and behaves during times of economic uncertainty and market volatility. What better way to do that then keeping a log here to reference in the future? This is not investment advice!!!

20182019

2020

February-March


April-May


June-July


August

August 1
Saturday. It’s the weekend so most markets are resting. Crypto is showing some signs of life though. The combined market cap just crossed $330B for the first time in over a year.

I toyed around with the free trial for Simply Wall St. It’s pretty cool and I wish Koyfin combined forces with them for their stock analysis report.

The $600 unemployment benefit expired, and a new package still hasn’t been agreed on yet. It’ll be interesting to see how long it takes to wrap it up and what it’ll look like. It sounds like it could take at least one more week. Next Jobless Aid Bill Could Decide Path of U.S. Economic Rebound.

I wrapped up my June-July edition of Corona Crash or Everything Bubble Pop? I’ll continue with the series for the rest of the year, but I’ll probably decrease my frequency from daily to just a few days a week.

We’re supposedly getting hit by a tropical storm or hurricane here in Florida today, which would be our first since moving last year. The weather has been beautiful so far all day, though, so we’ll see what happens.

India reported its highest daily case increase to date– a total of 57,118 cases.

Japan saw their third day in a row of record new COVID cases.

August 3
Monday. All green. The Russell 2k and Nasdaq closed +1.5%, Dow +.9%, and S&P 500 +.7%. Tech led, closing +2.5%. Gold and Silver were both relatively flat.

Todays edition of COVID-Bankruptcy-Mayhem features the parent company of Men’s Wearhouse and Jos. A. Bank. “Tailored Brands is gradually returning to normal operations after the coronavirus temporarily shut its doors. It re-opened just under half of its stores as of June 5, according to a statement. All of them, as well as e-commerce distribution centers in the U.S. and Canada, were temporarily closed in the first quarter.”

UPS Readies Freezer Farms to Ship Virus Vaccine — If We Get One. “The facilities, under construction in Louisville, Kentucky, and the Netherlands, near UPS air hubs, will house a total of 600 deep-freezers that can each hold 48,000 vials of vaccine at temperatures as low as -80 Celsius (-112 Fahrenheit). That’s on par with some of the coldest temperatures in Antarctica. Distributing a Covid-19 vaccine — if one is approved for use — will be the second huge logistical challenge spawned by the pandemic for delivery giants UPS and FedEx Corp., which earlier this year mobilized to airlift thousands of tons of protective gear across the world for health-care workers.”

This story is heartbreaking: Georgia teen loses parents to coronavirus four days apart. Donate here.

August 4
Tuesday. More green. The Russell 2k led, closing +.7%, followed by the Dow +.62%, and the Nasdaq and S&P 500 +.35%. $GLD increased 2% and $SLV flew 6.6%. Spot gold hit $2,000/oz for the first time.

Still no signs that stimulus discussions are nearing an end.

Tropical storm Isaias completely missed us in South Florida but caused some damage up north after making landfall yesterday in North Carolina.

August 5
Wednesday. Green everywhere. Seriously. Why wouldn’t it be? Everything is fine and dandy. The Russell 2k led again, closing +1.7%. The Dow closed +1.3%, S&P 500 +.64%, and Nasdaq +.5%. Gold is up over 1.6%, and Silver is up nearly 4%. As for my portfolio, I shifted my 401k to be significantly more conservative than it already was. I also bought a little more $KRMD on today’s 13% dip. We’re up ~15% overall YTD, and we’re now allocated over 41% to cash & alts. I’m happy to secure gains and miss out on a little upside if the rally continues. I value my ability to sleep and can’t do that without being positioned securely.

Now that gold as topped $2,000/oz, folks are calling for $3,000.

An ADP jobs report today was bleak. “ADP said companies added 167,000 jobs in July, far short of the 1.2 million economists polled by FactSet expected. That follows bigger gains in June and May, when employers added a total of 7.6 million jobs.”

Howard Marks & Oaktree published Time for Thinking, his first since mid-June. This one is a reflection on the health crisis, the failure to fix it, the non-cyclical nature of this situation, the shape of the recovery, the Fed, and a bull case. Excerpts:

  • Not a Cycle: “My main response is that the developments of the last five months are non-cyclical in nature, and thus not subject to the usual cycle analysis… I’m convinced cycles will continue to occur over time, highlighted by excessive movements away from “normal” and toward extremes – both high and low – that are later followed by corrections back toward normalcy, and through it to excesses in the opposite direction. But that’s not to say that every event in the economy or markets is cyclical. The pandemic is not.
  • What Shape Are We In?: “Fast down and slow up: to me, that’s no V. I prefer to think of it as a checkmark.”
  • The Markets and the Fed: “…These are the traditional concerns with regard to monetary expansion. Modern Monetary Theory (“MMT”) stands ready to refute them. The actual outcome is unknowable. But does it really make sense that bank reserves, the Fed balance sheet and the federal deficit can be increased ad infinitum without negative effects? My answer is the usual: we’ll see… “
  • Bottom Line: “That leads me to end with a great bit of wisdom from Charlie Munger concerning the process of unlocking the mysteries of the markets: ‘It’s not supposed to be easy. Anyone who finds it easy is stupid.'”

Eric Cinnamond at Palm Valley Capital Management published Believers. I always enjoy his writing style. “Conviction is one of the most important attributes of a successful investor… Investing with conviction isn’t easy. The future is unknowable, making it difficult to invest with certainty and according to plan… Facing uncertainty can be particularly challenging when standing apart from the crowd, or as a contrarian… Investing differently and fighting the seductiveness of the crowd is extremely difficult—significant conviction is required… While we believe investing with conviction has never been more difficult, we also feel it’s never been more important… Every cycle is different, but in our eyes, the fundamentals of investing have not changed—prices matter, cycles revert, and risk may hide for extended periods, but it never disappears and should not be underestimated.”

There was a terrible explosion in Beirut yesterday.

The trend in cases is looking promising.

August 6
Thursday. The Nasdaq closed +1%, Dow +.68%, S&P 500 +.6%, and the Russell 2k lagged a bit, closing -.1%. $GLD rose another 1.3% to $193 and $SLV flew another 7.3% to nearly $27– the highest since 2013.

Jobless claims rose another 1.186M. The total since mid-late March is ~55M. For context, the entire GFC of 08-09 saw just over 37M. This was the first weekly decline in almost a month and the lowest claim count since the pandemic rocked life as we knew it.

A model from the University of Washington is predicting 295,000 COVID deaths in the US by December.

Covid Tracking Project published their weekly post and titled it, The Last Thing We Need Is Fewer Tests. “For the first time since early March, the number of people tested in the United States went down. This week’s tests were 9.1 percent lower than last week’s national peak of 5.7 million tests… As testing declines in many US regions, K-12 schools, colleges, and universities have begun to reopen for in-person classes in many US states, we have already begun to see on-campus and residential outbreaks that mirror those we’ve seen from summer camps. In Hong Kong and Israel, where the pandemic was under greater control than it remains in the United States, school reopenings were followed by spiking outbreaks.”

August 7
Friday. A little more red than we’re used to these days. The Russell 2k closed +1.6%, Dow +.17%, and S&P 500 +.6%. The Nasdaq closed -.87%, gold dropped -1.3%, and silver dropped -.8%. I suppose it’s reasonable for them to cool off a bit given their recent rise. Here’s a weekly:

Little progress is being made on a new stimulus package apparently.

I start a new job next week so I published joining Wise.

MarketWatch published 55% of coronavirus patients still have neurological problems three months later: study. “Now a study of 60 COVID-19 patients published in Lancet this week finds that 55% of them were still displaying such neurological symptoms during follow-up visits three months later. And when doctors compared brain scans of these 60 COVID patients with those of a control group who had not been infected, they found that the brains of the COVID patients showed structural changes that correlated with memory loss and smell loss.”

August 9
Sunday.

NPR published States Are Broke And Many Are Eyeing Massive Cuts. Here’s How Yours Is Doing. “Record-high unemployment has wreaked havoc on personal income taxes and sales taxes, two of the biggest sources of revenue for states.”

Ben Carlson wrote about how this is The Most Counterintuitive Recession Ever. “It’s possible all of this government spending is a one-off because of the nature of this downturn. This was the first recession in history where everyone knew the exact moment it began. The telegraphed nature and shutdowns forced government officials into action. But it’s hard to believe voters won’t push for politicians to enact further fiscal rescue packages in the future. If the government can stop a depression in its tracks, why wouldn’t they do so during future recessions?2 No one knows the unintended consequences of these types of policies moving forward but it sure feels like 2020 is going to mark a turning point in the way we look at the response to economic crises in the future. And regardless of the policy implications, this will go down as the strangest recession ever.”

We struggled to find anything great on Netflix or Prime this weekend. Good thing Shark Week starts tonight!

Here’s an updated shot of the COVID death situation globally from FT.com:

The US crossed 5 million cases.

August 15
Saturday. This is my first update in a week which is the longest break I’ve taken between posts since starting this series back in March. I started a new (awesome) job last week and have been focusing the majority of my attention on that. I like to get as up to speed as possible, as fast as possible.

Looks like it was a relatively flat week for the indexes and both Gold and Silver dropped a bit. The S&P 500 actually reached a new high for a brief moment, passing its February high. Here’s a look at the weekly:

Joe Biden chose Senator Kamala Harris as his running mate.

The COVID Tracking Project published its weekly report, Tests, Cases, and Hospitalizations Keep Dropping. “The falls in cases, hospitalizations, and deaths should be good news, and in reality, they likely do reflect an improving reality on the ground. But tests are also dropping, nearly as much as cases are. In an ideal world where the Sunbelt surge is genuinely easing, we’d see increased testing combined with falling case counts.”

August 20
Thursday. The Nasdaq led, closing +1% followed by the S&P 500 +.3%, Dow +.2%, and the Russell 2k which dropped -.5%. Silver is up 1.1% and Gold is up .6%. Tesla crossed $2,000/share. Here’s what the week looks like so far:

Jobless claims rose another 1.106M. The total since mid-late March is ~57M. For context, the entire GFC of 08-09 saw just over 37M. This was the first increase in 3 weeks.

Wildfires are raging throughout California. “More than 50,000 residents have been evacuated as blazes rage across the state, burning over 500,000 acres… Beyond the fires burning north of San Francisco, blazes are forcing evacuations in Santa Cruz and San Mateo counties to the south, along with Santa Clara near Silicon Valley. Smoke has blanketed the Bay Area, with San Franciscans finding cars covered in ash and a city that smelled like a camp fire.”

AP photographer Noah Berger captures the LNU Lightning Complex fires in Napa Valley

August 29
Saturday. Two more trading days left in the month. Here’s how August looks so far:

I recently switched jobs so I’m in the process of rolling my 401k into my IRAs. The check’s in the mail. I don’t think there could be a better time than now to do a rollover– zero concerns given the height of the markets.

Bloomberg published Job Cuts at MGM, Coca-Cola, Boeing Herald Economic Pain Ahead. “Global corporations have announced more than 200,000 job cuts or buyouts in recent weeks, a worrying sign that more losses will come as furloughs implemented early in the pandemic turn into permanent layoffs.”

College students across the country have made their way back to campus in recent weeks. CNN published Coronavirus outbreaks identified at 4 sororities at Kansas State University. “More than 60 US universities and colleges in at least 36 states have reported positive cases of Covid-19, and some have returned to remote learning to try to stem the spread. More than 8,700 infections among American college students and staff were reported through Friday, as the nation approaches 6 million confirmed cases.”

The week’s blog post from COVID Tracking Project is encouraging: Testing Looks Shaky But National Progress Continues. “Though testing across the US can’t seem to regain the peak of late July, we believe conditions on the ground are improving across the country—and that the data states report is, by and large, trustworthy.”


September

Sept 5
Saturday. Labor Day weekend. Equities dropped Thursday and into Friday. The Nasdaq dropped nearly 5% on Thursday. The mild drop doesn’t bother me because I have a check in the mail for a 401k rollover, and I’ve been waiting for a much bigger drop than this to deploy the rest of the cash in my portfolio back into the market. Of course, it doesn’t look so bad when you zoom out a bit, even just by looking at the week:

Jobless claims rose another 881k. The total since mid-late March is ~59M. For context, the entire GFC of 08-09 saw just over 37M. This was the first increase in 3 weeks.

I started watching Hard Knocks. I don’t really care about sports, but I always enjoy this show… maybe because I’m a closet reality TV fan. There, I said it. Anyway, the first episode will serve as a good history lesson in the future. It clearly demonstrates the extent to which COVID has disrupted norms.

New Covid-19 Death Forecast Sees Big Cold-Weather Boost in Cases summarizes new projections from the Institute for Health Metrics and Evaluation at the University of Washington’s School of Medicine. “Covid-19 deaths could rise to 410,451 by the end of 2020. In a worst-case scenario, there could be 620,029 fatalities, according to the estimates.”

Dr. Fauci issued a pre-Labor Day warning to 7 states who are specifically at risk of seeing cases surge: North Dakota, South Dakota, Iowa, Arkansas, Missouri, Indiana, Illinois.

Pandemic holiday weekends require doing things like this:

The COVID Tracking Project launched The Long-Term Care COVID Tracker.

Sept 12
Saturday. Here’s a look at markets this past week:

Howard Marks was interviewed on CNBC on Wednesday: “I think we’ve developed a real dichotomy between the things that are obviously successful but expensive, and the things that look low-priced but are challenged in terms of business. And big money will be made by buying the latter which works in my opinion…”

Eric Cinnamond at Palm Valley Capital Management published Daddy Ball. As usual, it doesn’t disappoint. “And finally, Young Families and Future Generations, Disciplined Value Investors, and Free Markets and Price Discovery were also benched. Despite their well-known shortcomings in previous seasons, Coach Powell was favoring Here and Now, Growth Investors and Robinhood Traders, and Coach’s new favorite rookie, his son, The Powell Put!… While the intention of daddy ball is usually to help, it can be quite harmful. Players handed positions without working for them are less likely to practice or play hard. As a result, beneficiaries of daddy ball may develop into less talented and less competitive players. Daddy ball can also be counterproductive for the team and is typically unsustainable… Whether it’s this season or next, we believe parents (grown-ups) will revolt, Coach Powell will lose control, and the team’s fair-weather fans will be deeply disappointed. And for the talented players sitting on the bench who are frustrated and confused: Keep your chin up, continue to work hard, and be patient—your time will come!”

Recent quarantine entertainment in our household has been dominated by Rectify.

Wildfires are ripping through parts of the West Coast, resulting in many miles of the worst air quality in the world.

Sept 19
Saturday. Here’s a look at markets this past week:

And zooming out to YTD:

Wknd notes by Eric Peters returned after taking a summer break. This weeks post is titled Until Inflation Returns… “When economy-wide debt reaches levels where each incremental dollar yields very little real economic growth, either cascading defaults will accompany a recession, or government fiscal and monetary policy coordination is applied to obfuscate the problem and eventually inflate it away. The US and by extension the developed world have chosen the latter, having no appetite whatsoever for the former. Neither path is right or wrong, just different. Each carries profound risks, though unique. And on each, heightened volatility is inevitable. That is my bias… Because the conditions of the late 1930s and today bear numerous similarities. Which suggests a tumultuous decade ahead, as we discover whether we’ve developed the wisdom and humility to respect nature – that which surrounds us, and that within us.”

Supreme Court Justice Ruth Bader Ginsburg passed away yesterday at 87 years old. In 2002 she said, “I had the good fortune to be alive and a lawyer in the late 1960s when, for the first time in the history of the United States, it became possible to urge before courts, successfully, that society would benefit enormously if women were regarded as persons equal in stature to men.” Saira Rahman shared:

As if poor air quality wasn’t bad enough, residents in Southern California had a 4.5 magnitude earthquake last night, 10 miles from LA.

Here’s an updated shot of the global COVID death toll from FT.com:

Last 90 days according to the COVID Tracking Project:


October

Oct 20
Tuesday. I haven’t bought anything recently except for a tiny bit of $SCHL and $DJCO. Basically just to scratch the buying itch. We still have over 40% of our portfolio allocated to cash + alts. Here’s a look at the MTD:

I looked closely at some of my March buys that are up ridiculously. Unfortunately, I was just dipping my toes and didn’t buy many shares, so the profits aren’t meaningful to me. $PTON +620%, $TWST +213%, $KMX +142% are a few that are up more than 100%. I’m not sure what the lesson here is, and I don’t think I can know for another few years. As of now, I’m still pleased with my overall defensive allocation. It helps me sleep well at night. I still think there’s a good chance of a painful downturn.

Howard Marks & Oaktree published Coming into Focus. “The stock market is back near the high reached in February and selling at an above average valuation (as described earlier). The only things that appear to be low-priced are the ones that appear fundamentally most risky, such as oil & gas, retailers and retail real estate, office buildings and hotels, and low-rated tranches of structured credit. As I said earlier, everything appears to be fairly priced relative to everything else, but nothing is cheap thanks to the low base interest rate. Thus, after a brief foray into bargain-land in March, we’re back to a low-return world. But since most investors haven’t reduced their required or targeted returns, they have to engage in elevated risk in order to pursue them…. Thus the odds aren’t on the investor’s side, and the market is vulnerable to negative surprises. This is how I described the prior years, and I’m back to saying it again. The case isn’t extreme – prices aren’t grievously high (assuming interest rates stay low, which they’re likely to do for several years). But it’s hard in this context to find anything mouth-watering.”

Tomorrow – Oct x


Back to the start of 2020


Advice

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