cancel
Showing results for 
Search instead for 
Did you mean: 
     
Highlighted
Explorer ○○○

Is it time to panic?

I don’t think so, but I think that the pandemic will be bad... the worst will be the number of deaths... the economy will decline much more (this will be the worst recession yet). 

I wish I could say how long this will last, but I have no idea.  The news is just changing too fast...

I will say this, though.  I have long thought that most investors should only be about 50% equities.  If you are fully invested in stocks, how much powder can you have when stocks go on sale?  If you are nearly 100% in equities, then you can’t do much but trade stocks and cry about your losses.

As the value of my equities have declined, I am using my cash to buy high yielding equities and preferred stocks.  In this low yield environment, you can now find equities yielding 10-20%.  Even assuming severe dividend cuts, they will give you a decent yield and great capital gains potential.

For example, you can buy EPRPRG today yielding about 12%.  EPR is a high quality REIT that will probably not have to cut its dividend a lot, but let’s say it did eliminate its equity dividend and not pay its preferred stock dividend.  By being cumulative, it has to pay up its missed preferred stock dividends before paying any future stock dividend.  The only way you lose on this investment is for EPR to go bankrupt. With the quality of its holdings, that doesn’t seem likely to me.

i bought some VTR yielding more than 15%... it holds leases on health care properties that should be just fine with so many people in need of their services.  I bought DIS, because I promised myself that I would if it was ever under )00 again.

This too shall pass!  It may take 3 months... it may take 2 years...  we don’t know how long, but it will pass!

Stay safe!  Follow the instructions of the health care professionals.

erryl

 

63 Replies
Highlighted
Participant ○○○

Re: Is it time to panic?

Hi Erryl,

Glad to see you here.  Thanks much for the balanced view, which is highly needed in this forum. 

When there is a seemingly bull, a lot here becomes cheerleaders, encouraging all to join.  Now it is a bear (and everybody knows), there are also some, like geniuses, dispensing more gloom and doom all the way to hell. 

Warm regards,

Henry II 

0 Kudos
Highlighted
Participant ○○○

Re: Is it time to panic?

Ditto, great to have you back, erryl.

Not sure I agree with your investment thesis on EPR. Seems like we been involved in social distancing for some time; Facebook, Netflix, Grub Hub, etc. It will be interesting to see what sticks from this current phase. In any case, it's a trend that will take a long time to play out, so enjoy all that great income from the preferred!

0 Kudos
Highlighted
Explorer ○○○

Re: Is it time to panic?

I am not sure I agree with my EPR thesis either.  That is why I bought the cumulative preferred stock vs the much higher yielding common stock.

I do think the REIT dividend will be hurt, but I can’t see them going bankrupt.  If they pay a nickel of dividend, the preferred stock holders have to be made whole first.

One thing that I think is true about these event inspired crashes is that the good, bad, and ugly are all taken to the wood shed.  Therefore, it is a lot easier to find value... you don’t have to look hard to find something that will do well in a recovery.  Will there be a recovery?   There always has been. 

Warren Buffett has been awfully quiet... I wonder what he will buy.  He has to think he is a kid in a candy store. Delta is a logical choice... Harley Davidson? ... 

Stay safe and healthy out there!

erryl

0 Kudos
Highlighted
Participant ○○○

Re: Is it time to panic?

erryl, sounds good.

These are "interesting times", and although It's scary, I'm more excited about investing than I've been in ages. 

0 Kudos
Highlighted
Participant ○

Re: Is it time to panic?


@DJANG0 wrote:

erryl, sounds good.

These are "interesting times", and although It's scary, I'm more excited about investing than I've been in ages. 


Well...be prepared for DOW 15000  and S&P 2000.......if not lower.

Gabe

0 Kudos
Highlighted
Valued Contributor

Re: Is it time to panic?

This is must read material LINK

"The lesson from Italy isn’t just that you have to act before your hospitals are overwhelmed. It’s that you have to take steps that appear in the moment to be an exceptional overreaction — because by the time it looks like the steps you’re taking are appropriate, it will have been too late."

Almost exactly what the WHO and CDC has been saying for a month.

"It means that the US and most European countries are seeing early coronavirus growth numbers that look like the ones from Italy. Our confirmed cases are increasing at about the rate theirs did. That gives us every reason to think our health systems will eventually be overwhelmed like theirs were, unless we take strong measures sooner than they did.

So far, we’ve taken some strong measures — which is good! But it’s not clear that we’re acting that much faster than Italy did — and remember, Italy wasn’t fast enough."

0 Kudos
Highlighted
Participant ○

Re: Is it time to panic?

To those in panic:   Maybe time to add a nice hedge to your holdings? In hindsight, would have been nice to have in place already, but if you are already losing sleep over your portfolio dropping like a rock......

SDS (2x inverse S&P 500) has helped me out, and it may be a useful tool over the short-term.   Just an idea, not necessarily a recommendation for all.   Could be of use to those who are panicking and don't want to sell their long positions. I think of it as a form of short-term insurance.  The tough part is 1) how much of this "insurance" to buy and 2) when to dump it.

Thoughts?

 

 

Highlighted
Explorer ○○

Re: Is it time to panic?

Erryl old investor friend,

I have made up my mind to go one of two ways:

1. Buy two cases of :Wild turkey: and still buy dividend stocks each month.

2. Buy three cases of Turkey and put all stocks on drip and turn computer off and say to he** with it.

I let you know how I come out! :)

Copie

Highlighted
Valued Contributor

Re: Is it time to panic?


@erryl wrote:

I don’t think so, but I think that the pandemic will be bad... the worst will be the number of deaths... the economy will decline much more (this will be the worst recession yet). 

I wish I could say how long this will last, but I have no idea.  The news is just changing too fast...

I will say this, though.  I have long thought that most investors should only be about 50% equities.  If you are fully invested in stocks, how much powder can you have when stocks go on sale?  If you are nearly 100% in equities, then you can’t do much but trade stocks and cry about your losses.

As the value of my equities have declined, I am using my cash to buy high yielding equities and preferred stocks.  In this low yield environment, you can now find equities yielding 10-20%.  Even assuming severe dividend cuts, they will give you a decent yield and great capital gains potential.

For example, you can buy EPRPRG today yielding about 12%.  EPR is a high quality REIT that will probably not have to cut its dividend a lot, but let’s say it did eliminate its equity dividend and not pay its preferred stock dividend.  By being cumulative, it has to pay up its missed preferred stock dividends before paying any future stock dividend.  The only way you lose on this investment is for EPR to go bankrupt. With the quality of its holdings, that doesn’t seem likely to me.

i bought some VTR yielding more than 15%... it holds leases on health care properties that should be just fine with so many people in need of their services.  I bought DIS, because I promised myself that I would if it was ever under )00 again.

This too shall pass!  It may take 3 months... it may take 2 years...  we don’t know how long, but it will pass!

Stay safe!  Follow the instructions of the health care professionals.

erryl

 


You do realize that under the IRC Reits are required to distribute At least 90% of their income each year so the only way reit dividends can be reduced is if dividend stream declines. 

i

Highlighted
Participant ○○○

Re: Is it time to panic?


@copie wrote:

Erryl old investor friend,

I have made up my mind to go one of two ways:

1. Buy two cases of :Wild turkey: and still buy dividend stocks each month.

2. Buy three cases of Turkey and put all stocks on drip and turn computer off and say to he** with it.

I let you know how I come out! :)

Copie


Haha. The liquor stores here in NYS are to remain open -- thankfully. I went today and stocked up in case that changes.

Panicking: I did absolutely nothing during '08. I didn't check my PF value or open my statements until sometime in '09, and by the end of 2010 I was back to ground zero. So for me it was like having a flat stock market for a year and a half.

I did check my PF value early last week, but won't again for some time. I'm at 30/70, so I know I haven't taken too big of a hit.

0 Kudos
Highlighted
Valued Contributor

Re: Is it time to panic?


@jadster33 wrote:

To those in panic:   Maybe time to add a nice hedge to your holdings? In hindsight, would have been nice to have in place already, but if you are already losing sleep over your portfolio dropping like a rock......

SDS (2x inverse S&P 500) has helped me out, and it may be a useful tool over the short-term.   Just an idea, not necessarily a recommendation for all.   Could be of use to those who are panicking and don't want to sell their long positions. I think of it as a form of short-term insurance.  The tough part is 1) how much of this "insurance" to buy and 2) when to dump it.

Thoughts?

 

 


I've been "panicking",  using a PIMCO fund, PSTIX, a fund designed to move the inverse of the stock market.  So far, doing good.  I will post on results sometime.

PSTIX is $1,000,000 minimum initial investment, but if  by chance you can't swing this, it is available having a Vanguard IRA, for $25,000.

Thanks erryl for input.

R48, posting from the Mar-a-Lago crowd in FL.

0 Kudos
Highlighted
Participant ○○○

Re: Is it time to panic?

Hi erryl,

I have been trying to wrap my head around the pandemic, so I just grabbed some data:

covid 19.jpg

And did a few calculations

Covid-19 Premise List.jpg

Maybe one of our healthcare professionals will check my logic.  If the arithmetic is sound, then we would need to estimate a rate of efficacy to predict the total number of cases, recoveries, and deaths. I am sure there are other important data that I don't have access to. Mostly the specific characteristics of the pool of people who are infected.

Is this how a infectious disease model is fleshed out?  My background is r/d and machinery.

As to the question of choosing panic or not, I would ask:   Would it help to panic? I am thinking that Prudence is a better choice in this case. Fact-based reasoned-probability.

Having read your posts for so many years erryl, I firmly know that you are in the reasoned probability camp.

Thank you,

Holiday

edit: @DrVenture 

0 Kudos
Highlighted
Participant ○

Re: Is it time to panic?

James Bullard and Mnuchin are confident that stimulus package will keep economy afloat until coronavirus passes..

But is three trillion enough?   If this stimulus package is voted in monday, the market will rally imo.

0 Kudos
Highlighted
Valued Contributor

Re: Is it time to panic?


@Holiday wrote:

Hi erryl,

I have been trying to wrap my head around the pandemic, so I just grabbed some data:

covid 19.jpg

And did a few calculations

Covid-19 Premise List.jpg

Maybe one of our healthcare professionals will check my logic.  If the arithmetic is sound, then we would need to estimate a rate of efficacy to predict the total number of cases, recoveries, and deaths. I am sure there are other important data that I don't have access to. Mostly the specific characteristics of the pool of people who are infected.

Is this how a infectious disease model is fleshed out?  My background is r/d and machinery.

As to the question of choosing panic or not, I would ask:   Would it help to panic? I am thinking that Prudence is a better choice in this case. Fact-based reasoned-probability.

Having read your posts for so many years erryl, I firmly know that you are in the reasoned probability camp.

Thank you,

Holiday

edit: @DrVenture 


Thanks Holiday. For the record I am not a healthcare professional. Moniker was chosen somewhat at random, not intended to deceive. I am in the camp that "panic" is never the solution to anything. I am on autoimmune suppressants at the moment, and have been diagnosed with asthma in just the past week, but I remain relatively calm.

My layman's presumption, drawn from expert opinions and experiences elsewhere, is that we do not have enough information to draw any conclusions statistically that might be meaningful. There is apparently significant variability in outcome from locale to locale based on societal factors.

"Today, South Korea records a minuscule death rate of less than 1%, according to World Health Organization figures, while Italy's reached over 14% on Friday," Population age, population density, technology and medicine, official response, timing...

Drawing conclusions from ill-fitting datasets as they apply to the USA or generalizing them to greater populations appears premature to me. Clearly if we apply the South Korean model, we get a whole different outcome than the Italian model. Just don't see us having enough info to be scalable. Even within the USA the model for NYC will not fit rural America.

A very long way of saying, I know nothing. My hope is that we indeed "flatten the curve" for humanitarian reasons. Every single person who says "just the flu" is making that more difficult.

 

Highlighted
Valued Contributor

Re: Is it time to panic?


@Spazatac wrote:

James Bullard and Mnuchin are confident that stimulus package will keep economy afloat until coronavirus passes..

But is three trillion enough?   If this stimulus package is voted in monday, the market will rally imo.


I may be utterly naive, but I am going back to a variation of "don't fight the FED", which is "don't fight the FED and a massive stimulus package". From an economic standpoint I am cautiously optimistic short term. I am a bit paranoid about the debt situation long term.

I think an approved package could rally the markets at this point, but it should not be rushed and this is not the time for pork. If it takes until Friday to get it right, so be it!

Highlighted
Participant ○○○

Re: Is it time to panic?

Dr. Venture,

Thank you for taking the time to write such a comprehensive response. I value your insights; they are usually innovative, astute, and cause me to think.

When it comes to predictive models, I think the largest and most representative sample is usually the best bet. In this case, all who are infected should include the naturally weighted gradient of those most susceptible through those who least are. So, this sample should be representative provided that it is large enough. Culture can change the arc of the infection curve, but I don't think it will change the mortality rate of those infected absent some unknown genetic immunity.

I read all your links, and the Taiwan article offered something new to the math and logic style arguments generally made in the other links. Their argument is that important cultural influences are evidenced by the quality of its leadership and the level of transparency.

A couple snips:

<snip>

There is undeniably a long tradition in East Asia of elevating scholars and experts to the highest levels of government, and that’s especially evident in today’s Taiwan: The country’s president Tsai Ingwen, boasts a PhD from the London School of Economics, and the vice president, Chen Chien-jen, is a highly regarded epidemiologist. (As Matthew Sommer, a historian of China at Stanford, told me via Facebook, “Taiwan actually has a functioning democratic government, run by sensible, well-educated people—the USA? Not so much.”)

<snip>

Taiwan’s commitment to transparency has also been critical. In the United States, the Trump administration ordered federal health authorities to treat high-level discussions on the coronavirus as classified material. In Taiwan, the government has gone to great lengths to keep citizens well informed on every aspect of the outbreak

<snip>

And instead of learning from history, US leaders actively ignore it, a truth for which there could be no better symbolic proof than the Trump administration’s dismantling of the National Security Council pandemic office created by the Obama administration in the wake of the Ebola outbreak. Finally, instead of seeking to keep the public informed to the best of our ability, some of our political leaders and media institutions have gone out of their way to muddy the waters. 

Let's hope for the best, but I don't think it is likely that we will replicate the Taiwan experience based on cultural differences. Our government is classifying information which makes it more valuable to the few who have it.  They can trade on it before it becomes widely known.

Thank you 

Holiday

Highlighted
Participant ○○○

Re: Is it time to panic?

Hi Spaz,

I hope $3T is enough.  It should be if it is invested properly. In my own case, I rebalanced twice so far which might turn out to be wasted capital because I acted too soon. I postponed my third round of rebalancing. Had I only waited ....

I guess it all boils down to the level of confidence that you have in our leadership.

Holiday

Highlighted
Valued Contributor

Re: Is it time to panic?


@Holiday wrote:

...

When it comes to predictive models, I think the largest and most representative sample is usually the best bet. In this case, all who are infected should include the naturally weighted gradient of those most susceptible through those who least are. So, this sample should be representative provided that it is large enough. Culture can change the arc of the infection curve, but I don't think it will change the mortality rate of those infected absent some unknown genetic immunity.

..

Thank you 

Holiday


I agree. My focus at this point is on flattening the curve and limiting the spread, so my comments are skewed in that direction. My biggest fear is overwhelming the health care system in the short term.

Like you, I have misgivings about averaging in, potentially too soon. In hindsight we should all be buying tomorrow. At some point, those who waited for obvious signs of recovery will have similar misgivings that they waited too long. It is the nature of those who learn from their mistakes to question their own actions. I consider that a positive.

0 Kudos
Highlighted
Contributor ○

Re: Is it time to panic?

"For example, you can buy EPRPRG today yielding about 12%. EPR is a high quality REIT that will probably not have to cut its dividend a lot, but let’s say it did eliminate its equity dividend and not pay its preferred stock dividend. By being cumulative, it has to pay up its missed preferred stock dividends before paying any future stock dividend. The only way you lose on this investment is for EPR to go bankrupt. With the quality of its holdings, that doesn’t seem likely to me."

The concern with REIT preferreds should be how their tenants will  fare as certain sectors will be hit much harder than others.

For example, preferreds issued by leisure or hotel/motel REITs have a far greater chance of being suspended than do those issued by, say, healthcare. Per EPRs web site:

"We focus on real estate venues which create value by facilitating out of home leisure and recreation experiences where consumers choose to spend their discretionary time and money. These are properties which make up the social infrastructure of society."

Wooops. This is not, right now, the place to be.

To be extra safe, I think I'd be looking in sectors like regulated or energy distribution utilities, where revenues should be fairly safe and would the preferred dividend. Here's some with current yields (Friday prices) above 7%

SCE-H

SRE-B

NI-B

AEP-B

BruceM

0 Kudos
Announcements

Morningstar is here to help you respond to the Coronavirus crisis.