QUINN ON THE CORONAVIRUS: I HOPE SOMEBODY GETS REALLY RICH FROM THIS CRISIS

3/19/20

Given the non-stop coverage the covid-19 outbreak has received, it’s difficult to come up with something original to say on this topic.   However, I feel it would be a disservice to my readers to opine on other things right now without offering a few comments on the biggest story in a long, long time.

First, yours truly is normally the ultimate nay-sayer, always quick to decry the latest warning about some natural disaster, weather disturbance, impending economic dyspepsia, or even looming epidemic as yet another manifestation of the typical media alarmism.   As the old saying goes, if it bleeds, it leads, and one can always count on the media to cry wolf.   So when we are told that we are sure to face disaster because a tornado, or worse, is on its way, I like to sit out on the front porch and watch things blow by.   This deep-seated insatiable desire to downplay such warnings to the point of ridicule lies deep in my psyche and is highly unlikely to change.

Even I, however, who would just love to eviscerate the handwringing media as a pack of alarmists seeking to inflate their own importance, terrify the populace, and/or merely improve their ratings, have to admit that the malady we currently face is really serious.   In fact, it is hard to imagine how it could be more serious.   So we are doing everything we have been advised/instructed to do…hunkering down, rarely leaving the house, keeping our distance, socially isolating, etc.   As much as I hate to face it, I am in the group, the (ouch!) elderly, that is most susceptible to the virus and also among the most likely to face serious consequences if I do contract covid-19.   So we are being more than careful and urge everybody to do the same.   This is not the usual media and politician hand-wringing for power and profit; this is real and it’s serious.

Second, we will all be amazed at how quickly a cure and/or vaccine will become available if we allow the inventor and developer of said cure/vaccine to become filthy rich or, more likely, even richer than s/he/they currently is or are. 

 When I hear politicians, and you know who the most salient of these jackals is, ranting and raving about “profiteering” and “the greed of the pharmaceutical industry” during this time of crisis, I cringe.   If we are counting on the noble of heart to come up with the cure, whatever form it might take, we are severely restricting the pool of brain power devoting itself to this urgent task.   When we rely on the profit motive, and thus count on people’s self-interest, to come up with the cure, we do not restrict the talent pool in the least because every one of us is, to a greater or lesser degree, self-interested.   As much as the economically illiterate and politically prominent love to dismiss it, the invisible hand is as strong today as it was in 1776 and we ought to put it to work at all times, but especially when the stakes are so high.  If a government subsidy is required to get the cure and/or vaccine into the systems of those who need it, which will probably be all of us, so be it; that is often the way health care works and, while regrettable, is not nearly as harmful as price controls and the like.

Even those of us of a more libertarian bent have no problem with a prominent role for government in times of crisis.   After all, the word is “libertarian,” not “anarchist.”  But even those who have never had a libertarian impulse in their lives should be aware of the potential for politicians to make a bad situation worse and to impede progress.   (Ironically, that potential lies most strongly in those politicians who insist on calling themselves “progressives,” but I digress.)   This is one of those times.  If the pols don’t let the companies or people who help solve this problem make a lot of money doing so, the problem is less likely to be solved.   Fortunately, judging from the performances, at least relative to the overall market, of the stocks of, say, Roche and Regeneron, this danger may be distant. But never underestimate the propensity for politicians to trumpet their “compassion” and their concern for the “working person,” regardless of the cost to the working person…and everybody else, except, of course, for the poltroonish politicians themselves.

Third, one of my former (and “former” only because it is no longer produced) guilty pleasures was Beavis and Butthead, which was, despite being in incredibly poor taste at times, not only hysterical but also uncannily prescient.   We are currently being treated to an example of that prescience when we see the Spring breakers, St. Patrick’s Day celebrants, and other errant members of the millennial generation exposing themselves, and everyone with whom they come into contact, to the coronavirus because, after all, this is their Spring break, or “St. Paddy’s Day” only comes once a year, and they are entitled to a good time regardless of  the consequences for their clearly invulnerable selves or anybody else.   Are these people incredibly selfish or indescribably stupid?   Probably quite a bit of both, but to the extent that the latter is a factor, they are merely confirming the prescience of the creators of Mike Judge, the creator of Beavis and Butthead.

A qualifier for that third and final point…

I am not castigating an entire generation; I have kids, nieces, nephews, students, and friends of my kids who are responsible, intelligent, caring people.   At the expense of sounding like a composer of questions for the ACT, not all millennials are behaving irresponsibly in this crisis, but most of the people behaving irresponsibly are millennials.  Thank you.

THE MARKET: DON’T JUST DO SOMETHING…STAND THERE!

3/9/20

Over the last few weeks, I have heard from plenty of old friends asking me what they should do in this turbulent stock market.   When they hear my answer, their reply is something like “I thought that’s what you’d say.”   Still, I’m glad they call or e-mail because, being not quite the curmudgeon I’m cracked up to be, I enjoy hearing from people, especially people I like.   So I suppose if one is looking for positives in these lousy markets, the opportunity to reconnect with friends would be one of them, though, like seeing old friends at funerals, one wishes the circumstances for renewing old acquaintances were different, but I digress.

The answer yours truly gives to those who ask for advice regarding what to do in markets like these is, of course, to do nothing.    Doing nothing extends beyond not selling.   It includes two other courses of action, or non-action.   First, don’t look at your accounts.   Once a quarter is more than enough.   Looking more often just feeds into one’s emotions and provides further inducement to sell low and buy high, which is not a winning investment strategy.   Second, don’t alter your overall plan, which should be based on risk tolerance and investment goals, not on one’s, or one’s hired investment guru’s, prognostications regarding the direction of the market.  By the way, the more certain your “investment advisor” is of his or her ability to call the market, the faster should be the pace at which you run away from him or her.  

If one feels compelled to do something in such turbulent times and one has money to invest, one should take advantage of the opportunity to put more, but not, at one time, all of your available investable, money into the market.    While neither I, nor anybody, can assure buyers into down markets that markets will quickly turn around, at least those buyers can invest with the assurance that they are buying at lower prices than they could the day before.

Most of you are doubtless tired of hearing this advice; after all, most of the people in the financial media and/or the financial business dispense the same counsel.  But they do so because it makes sense.  After all, the only thing we can predict about the overall stock market is that it will go up in the long run. Further, if you’ll notice, the older the person is who is dispensing advice, the more likely s/he is to offer this admonition toward sloth.   There is a reason behind this high correlation between one’s age and one’s likelihood to counsel people to calm down.   Yours truly, back when he was in his thirties and still knew everything, also had problems with this tired old notion that markets go up in the long run and was determined that he knew better.  This time, it was different.    After all, society was going to hell in a handbasket, the government, the markets, and most of corporate America, were in the hands of morons, and the average investor was not all the bright either.  But my opinion regarding such things, or at least regarding the direction of the market, has changed for a number of reasons.

The first reason I have become such a convert to the financial gospel of inertia is experience.  Back in mid to late 2007 (And, no, I was not in my thirties in 2007; I should have known better.), I was convinced that there would soon be hell to pay in the markets.   I sold most of my stocks, bought a boatload of reverse ETFs and purchased pile of put options.  I had my best year or so ever.  I thought I was a genius and, as those of you who know me are doubtless aware, that was not the first time this thought occurred to me.   But I didn’t get back in quickly enough; my gradual re-entry into the market and a toward a bullish orientation in the options markets was far too gradual.   After the ensuing five or so years, it became apparent that I would have done just as well had I stayed in the market, rode out the storm, sat tight, etc.  Risk adjusted, of course, I did better than a 100% stock position because, for most of that time, most of my portfolio was in bonds, cash, and the like.   But time mitigates risk, and, from a non-risk adjusted total return standpoint, I would have done just as well to do nothing.  And doing so would have been less anxiety inducing…less fun, to be sure, but less anxiety inducing.

The second reason I prefer to relax and let the market do my work for me is logic fortified by visual cues.   When one of my friends gets panicky, I show him or her a fifteen, twenty, or fifty-year chart of the S&P 500 and defy him or her to find the 10% drops.   And when my advisee exhibits enough visual acuity to do so, which is rare, I ask how s/he would fee had she sold into those 10% drops given the direction and magnitude of the market’s moves after that drop.  Admittedly, we are now in one of those times when the drops are apparent even on a long-term chart, as we were back in 2007-08.    But the second part of that admonition still holds true in what look like gargantuan drops; one would feel really left out if one had abandoned the markets at the time.

The third reason for taking a breather during these tumultuous times is logic combined of a sense of perspective and knowledge regarding what the markets reflect in the long run.   The equity markets reflect the long-term earning power of corporations.   The overall earning power of corporations is reflective of long-term economic growth.   Therefore, for the markets to go down and stay down for the long term, we would have to assume economic growth would take a long, perhaps permanent, hiatus.   If the economy were to stop growing, we would have a lot more to fear than the condition of our portfolios.   And, in such a case, the optimal portfolio would consist of bottled water, beef jerky, and ammunition.

If one is not prepared to accept the dystopia outlined in the prior paragraph, one could supplement a slightly less dark scenario with simple logic.  If one abandons the stock market, the logical alternative is the bond market.   As I write this, the 10-year treasury yields 54 basis points (i.e., 0.54%) and the 30-year treasury yields 100 basis points (i.e., 1.00%).   Yours truly, for one, is not willing to condemn himself to the dreary fate of earning 1% for the next 30 years, which is what one is doing if one buys 30-year treasuries at 1%, unless one is counting on the greater fool theory to redeem one from a very poor investment decision.   Of course, one could also park one’s money in a three-month treasury and earn 35 basis points (i.e., 0.35%) and emerge in a few months to put one’s money to work in an even more pathetic stock market.   Good luck with that; if one is afraid of the market now, would one be willing to invest when it is even lower?   To ask that question is to answer it.   And that is why, at the expense of sounding trite, those who know what they are talking about warn investors that getting out with the notion of getting back in at a better time involves not one but two, or more, really difficult decisions.   Better to sit tight, close one’s eyes, and let the market perform its magic.  

Full disclosure:   What is yours truly doing with his money now?   Mostly nothing.   To the extent I, or my kids, have investable money, I am investing small amounts of it (in index funds, of course) as the market drops.    As I said before, when I buy into a miserable day, I don’t know if the market will go up soon, but at least I know I’m buying at lower prices than I could the day before.   However, since I’m fully invested most of the time, the numbers involved here are almost laughably small.   And even more laughably small is my activity in the options markets.   I’ve played these markets for over 30 years now, and now I do it for the same reasons I do crossword puzzles, i.e., to entertain myself and to keep myself sharp.   Trading options also engages me in the shorter run machinations of the markets, and that makes me a better finance instructor, a more engaging conversationalist, and a more valuable friend.   Further, the amounts I trade in the options markets (One does not invest in the options markets; one trades in the options markets, unless one is hedging.   And I contend that many, if not most, hedgers, or at least most of those hedging equity positions, are trading rather than investing.   But that is a longer conversation that is irrelevant to the major subject matter of this piece.)  are comparable to those I spend working crossword puzzles, i.e., about the cost of a daily newspaper.  

So to the extent I am doing anything, I am gradually buying into these down markets when cash levels allow.   I sure as hell (Some would prefer to say “heck” here, but think about it; “heck” is a far worse word than “hell” because “heck,” much like “shucks,” combines two bad words.   But I digress; at least I do so parenthetically.) am not selling…and neither should you.   If this is the “big one” that substantially and nearly permanently debilitates the equity markets worldwide, and certainly in the United States, your portfolio will be the least of your concerns, far behind maintaining your caloric intake and improving your aim.

THE SOUTH CAROLINA PRIMARY AND THE ENSUING MAD DASH FOR THE EXITS: ARE THE DEMOCRATS GOING TO WAKE UP AND SAY “I DID WHAT?”?

3/2/20

What a difference a few days makes!  Here are a few thoughts/questions in the post-South Carolina Democratic world:

• ·         The Democrats have left themselves with four weak candidates.  

o   Bernie Sanders’ lunatic views are incapable of being seriously considered by anybody over the age of 25 who does not pour (or whatever one does to serve such current fascinations) trendy, expensive coffee or spout nonsense on a college campus for a living.

o   Only a few days ago, people were seriously, and legitimately, questioning Joe Biden’s grasp on reality as he appeared to fancy himself as a challenger to Donald Trump in some sort of bizarre contest to see who could utter the most, and most outrageous, malapropisms.   Whether forgetting what state he was in, calling civilians on the campaign trail “lying dog-faced pony soldier"s, forgetting what office he was running for, or failing to recall that it was the Obama/Biden, not the Biden/Obama, administration in which he served, Mr. Biden seemed endlessly capable of making people shake their heads in astonishment at the effects age seemed to be having on him.

o   Only a few weeks ago, people were writing off Michael Bloomberg after a debate appearance that could only be described as a disaster.   (See   THE 2/19/20 DEMOCRATIC DEBATE: “HEY (MIKE), DID YOU GET THE LICENSE NUMBER?”  “LICENSE NUMBER?”  “YEAH, THE LICENSE NUMBER OF THE TRUCK THAT HIT YOU.”)   Mr. Bloomberg showed all the warmth of a Norge and all the empathy of Marie Antoinette in that debate and was mildly acclaimed in the next only because he managed to avoid repeating his performance as the human equivalent of the Hindenburg.   Remember, too, that, as of this writing, as he sits as one of two alternatives to the self-proclaimed socialist Bernie Sanders for the Democratic nomination, Mr. Bloomberg has yet to appear on any primary ballot or to have garnered one official primary vote.

o   Yours truly has described Elizabeth Warren as “human vinegar” in a nod to her likeability quotient.   Elizabeth Warren presents no alternative to Bernie Sanders, other than her gender, which, judging from the primary results so far, means little to the Democrats.  And how often does a pale imitation beat the real thing?   

o   All four candidates are in their 70s; the men are all in their late 70s.   Yours truly, along with many of you, can vividly remember 1980, when the 69-year-old Ronald Reagan, seeking his first term as president. was widely considered far too old to be president.  Some, especially among the very Democrats who have limited their 2020 choices to four septuagenarians, think that Mr. Reagan, or at least his second term, proved that judgment correct. 

o   And, before anybody says it, the chances of a deus ex machina candidate emerging from a brokered convention to lead a divided party to victory in a general election are, shall we say, small.

• ·         Why did Pete Buttigieg and Amy Klobuchar decide to fold up their tents one day before Super Tuesday?   Virtually all the money that was going to be spent on the primaries tomorrow has already been spent.   Why not stick around for one day and see if you can catch lightning in a bottle?  Admittedly, yours truly doesn’t know the politics game, but it seems to defy common sense to quit when continuing for a day would seem to cost little or nothing.   Joe Biden couldn’t have promised the vice-presidency to both of them.  Or could he?   See the first sub-bullet point in the prior bullet point.

·         I will make this argument again, and now there will be no way to prove me wrong:  If Amy Klobuchar would have become the Democratic standard-bearer this year, the general election would have been over before it started and we would see our first woman president.   See the first bullet point in the now seminal PRESIDENT TRUMP CANNOT WIN, BUT THE DEMOCRATS CAN LOSE, IN 2020, 1/9/20.  Therefore, anything that was bad for Amy Klobuchar in the primaries was good for Donald Trump.   Therefore, South Carolina, and a very poor and hasty decision made by Ms. Klobuchar in its immediate wake, was very good for President Trump.

·         Yes, Mr. Biden’s victory in South Carolina was impressive, but it was South Carolina.   South Carolina is a beautiful state brimming with wonderful and smart people, I am sure, but it is small, very southern, and, after all, sure to go Republican in November.   Yet, it appears that this small, relatively inconsequential state that is firmly in the pocket of the opposition has resulted in the Dems, if anything I have written above or in previous posts is true, having all but conceded November to President Trump.  But this should not surprise my readers; see, again, PRESIDENT TRUMP CANNOT WIN, BUT THE DEMOCRATS CAN LOSE, IN 2020, 1/9/20.