Lion of the Blogosphere

Wuhan virus: sell sell sell

Stock market at all-time high while the Wuhan virus is about to crush global demand and wreak havoc on global supply chains? The market was already in bubble territory before this.

Up until yesterday I was lulled into thinking that the Wuhan virus was no big deal, that it would go way just like viruses had in the past, like SARS and Ebola. I now realize that this time it’s different. China is not able to contain the virus to Wuhan or the Hubei province, the entire country is going to be infected. We know little about what’s going on in China because the totalitarian government has locked down the flow of information, but it appears that this virus is way worse than seasonal flu. Much deadlier and more contagious. Even if this is only a Chinese thing, it’s going to cause a global recession, but there’s no confidence that it’s only going to stay in China. The virus has shown up all over the world and who knows if it’s gotten loose somewhere and is spreading in another country?

So I’ve sold all of my stocks. Which I already had been woefully under-invested in because I failed to heed the lesson that you can’t predict the market. Except when there’s an external force that’s going to tank the market. You see, professional Wall Street people know way more about what other Wall Street people are going to be doing, and the market is a big herd mentality. But Wall Street people know jack shit about viruses. Here’s the one chance to know more than they do.

Written by Lion of the Blogosphere

February 6, 2020 at 9:49 AM

30 Responses

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  1. Probably smart. I don’t own any stocks but I think you’re right.

    It’s contagious like flu but is more deadly. 2% doesn’t sound that high, but it’s much higher than flu, that is about .05% rate.

    I’ve checked that number from two sources. One just gave the percentage, the other said that in this flu so far, 19,000,000 have contracted it with 10,000 deaths.

    The problem comes if the person develops pneumonia and requires oxygen. Apparently it is this scenario that’s causing China to build hospitals very quickly. They are likely just designed to treat the pneumonia cases.

    There is still a lot unknown about 2019-nCoV (its current official name). But the Chinese reaction to it says a lot.

    Latest from CDC

    https://www.cdc.gov/coronavirus/2019-nCoV/summary.html#anchor_1580079137454

    Frau Katze

    February 6, 2020 at 10:18 AM

    • The 2% death rate is for treated cases. If there are people who are asymptomatic or the conditions are mild enough that they are not seeking treatment, then the overall death rate will be less than 2%. The 2% figure is a worst case number and the actual number is probably much smaller.

      Stilicho

      February 6, 2020 at 11:41 AM

      • Bottom line: we don’t know what it is.

        Frau Katze

        February 6, 2020 at 3:13 PM

      • Still, have you ever heard of quick build hospitals going up anywhere? There must more than they can handle. Mind you, their hospitals are probably insufficient for the population.

        OTOH, There’d be a big problem here in Canada if there was surge in pneumonia cases that required oxygen. The hospitals are adequate, with waiting lists for non-emergency conditions.

        Mobile units might be a better solution. But time is not on our side here.

        Frau Katze

        February 6, 2020 at 3:19 PM

      • Where do you get 2%? I get 0.2% based on official numbers, but I suspect that the total number of cases is higher than reported, which would put this in the same category as swine flu.

        MoreSigmasThanYou

        February 7, 2020 at 2:07 AM

  2. I went the other way.
    Or we are going to die, in which I don’t care about stocks, or the virus scare is an excellent time to buy 🙂

    יואב

    February 6, 2020 at 10:48 AM

    • “or the virus scare is an excellent time to buy”

      What scare? None in the markets, stocks are at all time highs.

      Lion of the Blogosphere

      February 6, 2020 at 10:53 AM

      • the markets were down a week ago on virus fears but have since rebounded.

        You do have an interesting thesis though- I wonder how the market reacted to SARS 10 years ago

        Lion of the Turambar

        February 6, 2020 at 1:51 PM

      • SARS was pretty much a non-market-moving event. But this time it’s different.

        Lion of the Blogosphere

        February 6, 2020 at 1:59 PM

      • SARS involved a lot fewer people. No one was thinking, global pandemic.

        Frau Katze

        February 6, 2020 at 3:14 PM

  3. People who try to time the market never learn. “I tried to time the market last time and failed but this time i know more about the market”
    You don’t. If you’d dollar cost averaged into vfiax over the last 20 years, you’d have a nice investment egg.

    everybodyhatesscott

    February 6, 2020 at 11:09 AM

    • Who’s that commenter here who’s always saying that index investing is going to be the downfall of our economy and you have no business investing if you don’t know how to read a balance sheet?

      Hermes

      February 6, 2020 at 1:59 PM

      • That’s me. And it’s as true now as ever. Official central bank policy is now to never let the stock market go down more than a few percent since EVERYONE is now tied to the markets.

        Andrew E.

        February 6, 2020 at 3:20 PM

      • To properly diversify by myself, I’d have to read 100’s of 10-ks and 10-Q’s. That’s a full time job. And you’d have to look at the balance sheet, p&l, cash flow AND read all the notes. I’ll stick with my index funds for the time being and I’m a CPA

        everybodyhatesscott

        February 6, 2020 at 5:12 PM

      • Tens of millions of people handing over their annual surpluses year after year to someone they don’t know to put it into something they don’t understand. What could go wrong? Anyone with a non-trivial 401K or portfolio of mutual funds and etf’s that they check in on once a month have no basis to complain about CEO pay or the outsized power of corporations. Wall Street gets its absurd power and influence from middle Americans who hand over to them all their wealth.

        Andrew E.

        February 6, 2020 at 9:15 PM

  4. From a Chinese-American physician in Shenzhen:

    “The risk here (concerning the coronavirus) is very low,” said Sheng Chen, a pathologist at Memorial Medical Center and a member of the Chinese Bible Church. “From a medical perspective, we want people to be alert, to take precaution, but not be unnecessarily panicked. You need a balance. You don’t want to do unreasonable, unnecessary things, but we need to be cautious because this is a contagious disease.”

    Both Wang and Chen support President Donald Trump’s latest move: banning foreign nationals who have traveled to China from entering the U.S. amid the outbreak. U.S. citizens who have traveled to China will need to undergo health screening when they enter the country and will be asked to self-quarantine for 14 days, the incubation period of the virus. Both took effect Sunday.

    “It’s the right thing to do,” Wang said.

    ….

    How about flu vs. coronavirus?

    The flu has sickened an estimated 19 million people in the U.S. this season, while coronavirus has sickened 11.

    A national comparison

    The CDC estimates flu has caused 19 million illnesses, 180,000 hospitalizations and 10,000 deaths nationwide this season, as of Jan. 25. In comparison, coronavirus has sickened 11 in the U.S. with 82 pending tests, as of Feb. 3.

    Every state but Hawaii reported widespread flu activity for the week ending Jan. 25, while coronavirus has been confirmed in five states (Arizona, California, Illinois, Massachusetts and Washington), as of Feb. 3.

    There have been 68 pediatric flu deaths for the 2019-20 season as of Jan. 25. There have been no coronavirus-related deaths in the U.S. as of Feb. 3. Early research suggests young children are less susceptible to the contagious coronavirus than adults, according to a study in the New England Journal of Medicine.

    A global comparison

    From Jan. 6 to Jan. 19, National Influenza Centres and other laboratories from 111 countries or territories found 33,190 specimens were positive for influenza viruses, according to the World Health Organization.

    From Dec. 12 to Feb. 4, there have been 20,704 coronavirus cases confirmed in 28 countries or territories. Coronavirus cases continue to rise quickly, with a jump of nearly 16,000 between Jan. 28 and Feb. 4.

    ….

    Of course, past performance does not guarantee future results, but so far, at least in the USA, influenza is a much larger threat than coronavirus. As spring approaches, viral infections tend to wane, so the whole corona thing may be much ado about, well, not exactly nothing, but very little.

    Black Death

    February 6, 2020 at 12:00 PM

  5. Not all stocks are in all time high. Coal stocks are dirty cheap. Everybody is thinking that coal is ultimate evil and pensions funds are dumping them because they don’t want to own evil stocks. Time to buy.

    rtwkk

    February 6, 2020 at 12:44 PM

    • You think they’re going to come back? Coal is on the way out forever, if Bernie Sanders and AOC get their way.

      Hermes

      February 6, 2020 at 7:14 PM

      • Coal is still producing more than quater of worlds energy. This not going to change quickly and meanwhile the coal stocks will pay nice dividends. And if US wants to turn of the lights, coal can be imported elsewhere and not all coal mines in the world are in US anyway.

        rtwkl

        February 7, 2020 at 2:58 AM

      • Coal won’t go out until alternate power sources are available. People are not going to turn out the lights, even if they’re running on coal.

        Frau Katze

        February 7, 2020 at 6:50 AM

  6. If Corona virus mostly kills the elderly, Buttigieg could end up becoming the President by default.

    prolier than thou

    February 6, 2020 at 12:52 PM

    • That seems intuitive but in some rare conditions the youth are at higher risk. There was some kind of hantavirus on a reservation in the US some years ago. The body mounted a response to the virus that was so strong that killed a number of people in their twenties.

      It was not human-to-human transmissible. Spread by mice in their droppings. A local person here died of it cleaning out a summer cabin. Pretty rare though.

      Frau Katze

      February 6, 2020 at 3:27 PM

  7. The best way to invest in both stock and real estate is to never sell. Enjoy the long term appreciation and tax benefits while receiving inflation adjusted dividends and rents. If one were upper class, one would already know this. Fear based selling of equities is prole, so to speak.

    B.T.D.T.

    February 6, 2020 at 1:12 PM

  8. I won’t take you seriously until you post a photo of yourself wearing a face mask out in public.

    Brendan

    February 6, 2020 at 3:06 PM

    • It’s not necessary to do that, plus it’s probably better to wear gloves because virus transmission is more likely to happen from touching an infected surface.

      Lion of the Blogosphere

      February 6, 2020 at 3:58 PM

  9. Lion is not taking into account another possibility: Where it hits China a couple of other countries really hard but leaves North America and most of Europe relatively unscathed. In that case a flight to quality will ensue and US companies will benefit as they did after 2008. Moreover, now no one thinks it crazy to diversify their production portfolio away from China even if China remains their prime source in the future. This will also benefit US business. In that case the stock market will have been right to hit a high. Only a catastrophic worldwide pandemic or one that shut down most sources of trade substantially would hurt the US market over the longer term. A sensible non-professional investor who isn’t trading on a regular and successful basis probably should always have a 60-40 stock bond portfolio built around ETFs which he dollar cost averages into all his life.

    karolwizc

    February 6, 2020 at 3:22 PM

    • This could be bad news for the Chinese economy and outside companies tied to a Chinese supply chain, but it will benefit non-Chinese manufacturing, and will strengthen Trump’s position in trade talks.

      Mike Street Station

      February 8, 2020 at 8:32 AM

  10. Always surprised how Stocks are not your cup of tea (i’d expect they would be for someone as brilliant as yourself).

    For most people the Wuhan Virus is no worse than a bad cold and will perish in the coming Chinese summer.

    Abe

    February 7, 2020 at 7:34 AM

  11. […] UPDATE: According to commenter GrassMudHorse, at 4:01 PM, exactly a minute after the U.S. stock market trading closed for the weekend, the New York Times suddenly put up a lead article on the home page “Coronavirus Cases in U.S., Iran and South Korea Raise Fear of Global Spread.” Did they time that to prevent a stock market crash? To give people in the know time to get out? Well you, my readers, have been in the know for two weeks but you’ve mocked me for it. On February 6th, I first warned you about the virus and advised you to sell your stocks. […]

  12. […] that the market futures are down again this morning. I predicted this back on February 6th. I said sell sell sell. I took a lot of shit for this. Commenter said crap like “you cant time the markets,” “just […]


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