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Short-term short covering. Maybe a V-shaped recovery? Maybe.

Short-term short covering. Hard to believe it’s a V-shaped recovery in stocks when 25% of the U.S. economy is shut down; there is so much devastation in key industries — travel, real estate, retail, restaurants, small business  — and vast swaths of manufacturing are still closed.

The “conventional wisdom” is that the stock market tells us what will happen nine months from now; With huge gains of today and yesterday, it’s perhaps signaling in nine months we’ll have a cure and a vaccine, we’ll all be back at work and things will be humming along as if nothing happened. Just nine months from now!

Here’s this year showing Dow, Nasdaq and the S&P, including this morning. It shows the bounce.

No one can predict this. And I’ve been super dumb trying.

Thinking it was dropping through the floor, I bought some triple short ETFs — SPXS and SPXU. I was wrong. I got creamed. So far.

There’s another theory, according to a tweet from Mark Minervini this morning,

  “It’s easy to get lured into the market on big up days and place undisciplined FOMO (Fear Of Missing Out) trades. But keep in mind the biggest rally days occur during bear markets. Sustained bull markets have very few +3% up days. Bear markets are dominated by them, but at the expense of volatility.”

I return to the words I published last week: I ran a piece by James B. Stewart, a long-time financial writer with the New York Times.  The article was called  “How not to invest during a pandemic.

Stewart’s piece contained these key paragraphs:

  This week I described my recent investing struggles to Frank Murtha, a managing partner of the consulting firm MarketPysch and an expert in behavioral finance. He said nothing I told him was unusual, even among seasoned investors.

  My reluctance to look at my portfolio was common, he said. “Watching yourself have less money is painful,” he said. “It’s not just that you’re poorer. You also feel ashamed, foolish, like you screwed up. One of the toughest things is to separate your money from your ego and identity.”

  He gave me credit for gathering the courage to face reality and then to buy. “Nothing relieves anxiety more than taking action,” he said. “You can take small actions that address the emotional need to do something without putting your finances at undue risk.”

   Stocks are one of the few assets that psychologically become harder to buy as they become cheaper. “Every decision to buy is met with negative reinforcement,” Mr. Murtha said. Even he missed the great buying opportunity in March 2009. “I was too scared,” he said.

  At least I didn’t commit what Mr. Murtha considers the most serious error, which is to sell into a steep decline. “That’s where people really get hurt,” he said. “Once you’re out, the emotional leverage works against you. Either the market drops further, which confirms your fear. Or it goes up, and you don’t want to buy after you just sold. Then it gets further and further away from you. People don’t realize how hard it is to get back in.”

 I have agonized: My cash is not king. King is being invested in equities. And despite the gloomy predictions about the upcoming 32% unemployment and “the second leg down” in the market, I should be more invested.

In fact, it’s insane to sell into a downdraft — no matter how bad your declining paper wealth makes you feel. (I felt really bad.) You’ll always sell at the bottom. Trust me. That’s Murphy’s Law.

Own good stocks. Dump bad ones — like retailers, airlines, energy companies and cruise lines (though fortunately I have never owned airlines, energy companies or cruise lines). Hold the good ones.

I will buy more stay-at-home stocks, like Zoom Video, Teladoc, DocuSign, Slack (WORK),  the online shoppers Amazon and  Chewy. And the online entertainers — ROKU and Netflix.

And I’ll keep away from obvious disasters — like energy, airlines, cruise lines, etc.

Maybe that’s a good long-term strategy?

What should our goals be today? 

First, not to catch it, and

Second, to have enough cash money to last for two years.

Not catching it is key — for two reasons. You have no idea how it will affect you — you may shrug it off or you may die. Or you may end up on a ventilator. They’re truly awful. To read more on the agonies of ventilators, click here.  Check out Google’s images on intubation. They paralyze you to put you on a ventilator. Read the story of New Jersey’s first Covid patient (he survived). It’s not a pleasant story. Click here.

You don’t want to catch this thing. Have you seen the photos of what it does to your lungs and how difficult t is to then to breath — hence the ventilator.

You really  need to be manic about washing, face masks, ten foot of separation and getting plenty of exercise and rest.

Fear not. It’s all been foretold.

The New York Time wrote a fascinating piece:

  The Apocalypse as an `Unveiling’: What Religion Teaches Us About the End Times
  For people of many faiths, and even none at all, it can feel lately like the end of the world is near.

The article begins:

  For people of many faiths, and even none at all, it can feel lately like the end of the world is near. Not only is there a plague, but hundreds of billions of locusts are swarming East AfricaWildfires have ravaged Australia, killing an untold number of animals. A recent earthquake in Utah even shook the Salt Lake Temple to the top of its iconic spire, causing the golden trumpet to fall from the angel Moroni’s right hand.

  But the story of apocalypse is an old one, one of the oldest humans tell. In ancient religious traditions beyond Christianity — including Judaism, Islam and Buddhism — it is a common narrative that arises in moments of social and political crisis, as people try to process unprecedented or shocking events.

The article continues:

  About 44 percent of likely voters in the United States see the coronavirus pandemic and economic meltdown as either a wake-up call to faith, a sign of God’s coming judgment or both, according to a poll commissioned by the Joshua Fund, an evangelical group run by Joel C. Rosenberg, who writes about the end of the world, and conducted last week by McLaughlin & Associates, pollsters for President Trump and other Republicans.

  David Jeremiah, a pastor who has been one of President Trump’s informal evangelical advisers, asked in a sermon recently if the coronavirus was biblical prophecy, and called the pandemic “the most apocalyptic thing that has ever happened to us.” …

  Among Christians, one of the most well-known apocalyptic narratives is the Book of Revelation in the New Testament, which tells the story of the defeat of an evil beast, a final divine judgment and the coming of a New Jerusalem.

  While many biblical scholars read the book as a story about the destruction of corrupt political systems, many evangelical Christians believe it describes the rapture, Jesus’ return to save believers from a period of tribulation.

  Joshua Johnson, 46, in Keller, Texas, spends time reading the story and interpreting its symbols, written nearly 2,000 years ago, in modern terms. He looks for the rise of what the story calls the “mark of the beast,” a demonic mark all people will be forced to bear.

He wonders if Jesus will return by 2028, 10 years after Mr. Trump moved the U.S. embassy in Israel to Jerusalem, which he saw as a prophetic sign. “I tell my children, I think we are that generation,” said Mr. Johnson, who attends Gateway Church, one of the country’s most prominent evangelical churches.

Read the full story. Click here.

The joys of working at home

My tennis partner, Mark Johnson, found this sunning itself inside his house on a window sill.

Meantime, I’m fighting a mice infestation in my car. And I’m learning new things. From Google:

  Each mice litter typically consists of five or six mouse pups, though it’s not rare to see as many as 12 in a litter. A typical female mouse can birth between five and 10 litters per year. She can mate immediately after giving birth, meaning mice can birth a second litter in as little as 25 days after the first.

I baited my car. During the night, they ate the cheese, but didn’t set off the Victor traps. Yesterday I bought “the better mousetrap” from Intruder and baited it with peanut butter. They ate the peanut butter but didn’t set off the traps. Cunning little critters.

Thoughts for today

Now, for the best sales pitch of the season

The savvy old man

An old man in Louisiana owned a large farm, with a large pond in the back.

It was properly shaped for swimming, so he fixed it up nice with picnic tables, horseshoe courts, and some apple, and peach trees.

One evening the old farmer decided to go down to the pond.

He grabbed a five-gallon bucket to bring back some fruit.

As he neared the pond, he heard voices shouting and laughing with glee.

As he came closer, he saw it was a bunch of young women skinny-dipping in his pond.

He made the women aware of his presence. They all went to the deep end.

One of the women shouted, ‘We’re not coming out until you leave!’

The old man frowned, ‘I didn’t come down here to watch you ladies swim naked or make you get out of the pond naked.’

Holding the bucket up he said, ‘I’m here to feed the alligator.

Sunset in Columbia County last night

Photo by Mark Johnson.

There are some games I can play — tennis. There are some games I find very difficult — figuring where the market is going.

Do the opposite of what I recommend and you’ll be OK.

See you tomorrow — Harry Newton

  • Scooter

    I’ve been buying in small numbers, Boeing, ROM, GE, AAPL, GOOG with trailing stops of 10%. But now the question is whether we will dip back down when earnings projections come out. Depends on how long the USA is shut down. If this goes beyond April, we are in deep trouble. Despite the alarmist Dr. Fauci wanting to keep us shutdown until a virus is available I think Trump understands the consequences of extending the lockdown.

  • Tom

    I’m using the MAGA (no relation) strategy: MSFT AMZN GOOG AAPL. I think that the worse the economy gets the more these companies stand to grow. Their technologies help pivot legacy business into tech savvy new economy businesses with a generation of runway ahead of them. So let the current economic disruption shake the tree hard. In three years my MAGA might be worth double.

  • Lucky

    To catch the mice before they set-off the trap…tie the bait close to the trap with wire so the little buggers have to walk on the trigger.
    Cruise lines are having fairly heavy bookings for 2021. I no longer cruise nor buy stock…just looks like a good bet for long term. When this is all over people are going to travel.

  • Mike Nash

    Harry, there’s an article written by a doctor urging that people not play tennis claiming it’s an easy way to contract the virus. I would not be playing tennis.

  • TomFromVa

    Glad that you are still playing – I think it is reasonable to do so providing you use a little sense. To avoid the one thing that could transfer virus, the ball, we all put plastic gloves on our left (ie non-racquet) hands. To me this seems like a better thing to do than taking a walk. On the court you will be in the relative proximity of 1 (singles) or 3 (doubles) people. Taking a walk (at least around here) you will pass 30 – 40 people.

    I have never had much luck at trying to time the market, but I do agree that the time to buy is when there is blood in the streets. I bought some ETF shares back during the panic a couple weeks ago, and I will do so again if there are more big declines, which I consider likely as the ripples of the unemployment situation spread over the next several months.