The name Bill Bonner might be familiar to you if you’ve read my notes for some time.
We used to appear in the same publication — The Daily Reckoning.
Here’s why I bring him up. Bill had the same advice from the year 2000 to 2008.
It was pretty simple: ‘Sell stocks on rallies. Buy gold on dips.’
That’s not a bad way to think about the world right now.
Don’t get fooled into thinking a bit of market green over the last couple of days means this carnage is over.
I’ll tell you why…
ASX shutdown screams be cautious
Shutdowns across Australia are extending further…
Companies all over the market are withdrawing their previous guidance.
That’s not all…
Mining companies and explorers are downing tools. That means they’re stopping work completely!
Here’s an example from a mob called Heron Resources yesterday:
‘Heron Resources advises that due to recent travel and other restrictions imposed by Australian and State Governments in response to the Covid-19 pandemic, along with related health and safety concerns for site personnel, operations at Woodlawn will be ramped down and suspended.’
Other companies are emphasising that they have debt facilities to keep them operating while the disruption goes on.
That’s good for survival. But we don’t enter the share market to help companies survive.
We want them to grow and thrive!
That’s not going to happen for many anytime soon.
Profit Watch doesn’t see any reason to do anything except watch stocks get cheaper for now.
That’s not to say you can’t attempt to profit from this.
You could consider the range of ‘short’ ETFs available. These go up in value as the ASX 200 or S&P 500 falls.
However, tread carefully. There are risks involved in betting on a falling market. The market is whipsawing all over the place and swinging in huge percentage gains.
You could have gone short last week…only to see the market surge over 11% in a day. That’s what the Dow Jones did earlier this week.
In general, now is a great time to knuckle down and go over businesses that have a bright future on the other side of this. Get to know them.
See how they respond. Then put a price on where you might enter…and see if the bear market takes you there.
The news out of Australia and the US is likely to get worse in terms of virus numbers…
A memory of the recession Australia ‘had to have’
Take a look at Spain right now. Their number of dead now exceeds that of China. That’s a worry for me. I have family over there.
It was only a few weeks ago they were dismissing the virus as ‘Italy’s problem’.
Rarely has the recent past felt so distant. One wonders what other problems are going to spur from this.
I have a friend already depressed from the isolation.
She lives alone. Her usual comfort was sitting in busy cafés or shopping centres. Those are mostly closed to her now…or devoid of life anyway.
Rates of anxiety were already skyrocketing in Australia before COVID-19 came along. They could be at unimaginable levels soon.
It does make me think of one thing…
I had another friend that told me that his father ran a clothing business during the recession Australia ‘had to have’ in 1991.
To their surprise…sales went up!
They discovered that women were buying small treats for themselves to ease the general gloom.
Which business out there now catches this kind of emotional buying?
Here in Melbourne you can’t gamble at the casino. There’s no sport to see. You can’t go to the pub or gather friends around.
There’s a lot of pent-up demand that will find an outlet somewhere. Send your ideas in if you have any.
I’m still interested in stocks that have no correlation to the general economy.
For example, there are companies doing drug trials. They don’t have revenue from these even when the economy is normal.
The concern here, however, is they rely on investors to keep funding them.
It’s not clear yet how willing those in the market will be to step up to plate as this current environment goes on — or what price they’ll demand to stump up cash.
Continue to tread carefully in this market.
PS: Learn why these three heavily discounted stocks are deemed to be ‘pandemic survivors’ and could potentially skyrocket as the market recovers. Click here to download your free report.