How Jim Rogers Might Play COVID-19

COVID-19 WHO declares a global pandemic

Only 62 people were infected and two dead from the coronavirus. That was the state of the world on 20 January.

That was it…

It was small, and no one cared.

‘It’s just the flu’, some said.

This ‘flu’ has now stopped the world. Today, cases have jumped to over 242,000 worldwide. And death tolls have risen sharply.

There are bailouts, then there’re bail-outs

0% interest rates and bailouts are here.

It was always likely that  governments were going to ‘save us’ from this.

None of them want a recession on their watch.

I floated this idea with you back in February, here.

Take a read below, if you missed it.

These days, governments are hell-bent on saving us. Of course, this my opinion.

Maybe you agree here? I know Michael Every does…he’s a senior Asia-Pacific strategist at Rabobank.

This is what he said:

‘“The underlying market hope is clear: central banks will save us, not just from the business cycle, and not just from climate change, but now from global pandemic too[.]”

Now we’re seeing this all roll out.

China pounced early to save their economy…

Within days, other countries had developed plans to protect their economies…

Including Japan, Singapore, South Korea and parts of the EU.

Billions of dollars are being thrown into the system.

And now we have the US.

Trump wants to send every single American $2,000.

And rumours suggest that the Trump administration is calling for stimulus that will be in excess of US$2 trillion.

Yes, US$2 trillion.

The Aussie government has only mustered up around $17.6 billion so far. There’s more coming. How big will it be by the end of this?

The RBA makes history

Things are changing at such a fast pace.

The RBA dropped rates to record lows on Thursday. They’re now at 0.25%.

What comes next is unknown.

I’m watching our tourism sector.

It’s taken a beating over the last few weeks.

Qantas has now stood down workers temporarily, and suspended all international flights.

They’ve also canned hundreds of domestic flights.

You might remember a chart I showed you on 10 February.

I called it the ‘tourism’ index.

Take a look at it…

This index looks horrid!

Source: Optuma

[Click to open in a new window]

What a hammering.

Is there an end in sight?

Let me explain what you’re looking at…

The chart is a custom market-weighted index. It’s using daily data.

It’s made up of Crown Resorts, Flight Centre, Apollo Tourism, SeaLink Travel, Corporate Travel Management, Webjet, and Helloworld Travel.

It’s calculated by multiplying each stock against each other, then dividing it by the number of stocks in the custom index.

It gives us a clear indication of the overall trend of the stocks in the index.

One thing is clear, right now tourism stocks are taking a beating. Just look at any major headline to see that…

However, there could be opportunity amongst all this carnage. I happened to watch a video of Jim Rogers yesterday.

One of his favourite ideas right now is to go over these kind of firms (admittedly, he was looking in China, not Australia, but the principle is the same).

Jim’s built a lucrative career buying companies near bankruptcy…and where the government might step in to provide support. He did it with Lockheed Martin in the 1970s.

He reasoned that the US government would simply not allow an important defense firm to go broke. Soon, Lockheed was on the end of lucrative government contracts.

We have no way of knowing if the same playbook will work this time. But it bears thinking about, don’t you think?

Until next time,

Jonathan Evans Signature

Jonathan Evans,
Analyst, Profit Watch

PS: Our publication Profit Watch is a fantastic place to start your investment journey. We talk about the big trends driving the most innovative stocks on the ASX. Learn all about it here.