Ian Wyatt 4:24
Yeah, yeah. I saw this last night on CNN, CNN. And the headline was, you know, CDC recommends no gatherings of more than 50 people, except for schools or businesses. I thought, you know, how is it that, you know, gatherings of 50 people in a bar or a club or a movie theater are bad, but if they’re at school or working, it’s perfectly safe. It seemed a little bit crazy to me. So, you know, my kids are homeschooled right now. We’ve essentially shut down our office. All of my team members at y at research are working remotely. And you know, we’re sort of the laying low but continuing businesses usual. And so, you know, after this podcast I get to be the PE teacher for for my four kids, we’re gonna go outside and play, play a little scrimmage game of soccer in the yard. So these are certainly interesting times. And, you know, I believe that, you know, this is a once in a century type of event actually started journaling about my experience here with my kids, because I think my kids and grandkids will someday perhaps appreciate a few insights from what life was like during the Great pandemic of 2020.
Jeremy Weisz 5:37
So before we get into the economy, how are you navigating the kids stuff now that you have all the kids who are home and educated now?
Ian Wyatt 5:47
Yeah, you know, my wife, my wife, spent most of the weekend putting together an educational plan for them for the week. So that’s underway and she’s leading that and I’m trying to be holed up in the office here and hopefully, we will hear any kids in the background or dogs barking. But if we do hope you’ll excuse us. So, you know, think things are good here on the home front. And, you know, I think it really is important that younger, healthier people, like us do our part to avoid the community transmission of coronavirus and avoid contributing to impact for other people because it’s not people like me and you who are going to be affected by this as folks who are older and at risk demographics. And, you know, I think it’s a small part that we can play and responsibly that we have. We have as a society.
Jeremy Weisz 6:32
So I was reading your email this morning. Attention, President Trump closed down America. Do you want to just talk about that for a second?
Ian Wyatt 6:42
Yeah, yeah. So you know, I think that, you know, the situation here in the United States is becoming more and more dire, you know, by the, by the day and you know, when you look at the numbers, in terms of coronavirus cases here in the united The numbers are surging, the number doubled between Friday and today. So we are certainly ramping up. I think that the official number is right around 3800 cases here in the United States as of the recording of this podcast, and you know, it’s March 16, I guess Monday, March 16. So 3800. And you know, I saw an interview with Dr. From leading leading health professional from Johns Hopkins, who says he thinks right now today in America, there’s somewhere between 25,000 and a half million cases of Cova 19. We just haven’t tested enough. And you know, when you look at what other countries where they’ve been successful and continuous, there are two examples. The first is China, and the second is South Korea. The two countries each took a different route to try to stop this. In China. They essentially, you know, instituted martial law shut down the entire economy would not let people leave their houses for four to six weeks. And essentially they’ve they’ve crushed it coronavirus, their cases there but it’s not spreading and things are under control. South Korea took a different approach. They haven’t gone into lockdown like they’ve done in China, and like they’re doing right now in Italy, Spain and France. And instead what South Koreans decided to do was aggressively test for Cova 19. And so, you know, in, in South Korea, the numbers are, are just crazy. I’m trying to pull them up right here, but I think they’ve tested over 200,000 people in South Korea for this so that they can identify who has coronavirus. They can isolate them and keep them away from other people. And so when we think about where they are, they’re aggressively testing. But let’s put this in context. As of last week, South Korea tested about 200,000 people The United States and tested 2000 people, okay, we’re a much bigger country. So we’re behind. We’re behind on both the testing, which hasn’t happened, and we’re behind on the containment, which also isn’t happy. So, in my letter to President Trump, I recommended that the US step it up on both fronts that, you know, we need to ramp up the testing, there have been promises of millions of tests being made available, there supposed to be 4 million tests available last week, I guarantee you that didn’t happen. We’re just not testing enough. And you know, I think this is getting this is much worse than most people believe right now. And if you want to see signs that the American people are starting to panic, just try to go to a Costco or go to your grocery store and try to buy bread or toilet paper, you’ll be hard pressed to secure either of those items. So, you know, I think the situation is bad. And you know, my recommendation is that the US really should move into full lockdown today. We should do it now. We shouldn’t wait. We know If we look at the cases in Italy, France, Spain, the writing’s on the wall, and the US is going to have to shut down the economy. What that means is no interstate travel, no airlines, every bar restaurant, some hair salon, every service business 100% closed. And I think that’s where things are moving very quickly. I was supposed to have a routine doctor’s appointment this afternoon, at the hospital, you know, the doctor’s offices at the hospital, supposed to go and I got a call from them this morning saying, Do you have a health emergency? If not, don’t come to the hospital. We don’t want you to come in, stay at home. Things are changing very, very rapidly. And we’ve never seen anything like this before.
Jeremy Weisz 10:49
Yeah. So what do you think is going to be the impact and we could talk about specifically stocks and other things later, but on the economy, and what the government’s going to have to do because, you know, as you know, like small businesses or businesses may only have 60 days of cash flow 30 days, two weeks for payroll. And same thing with, with people in general, they may people are living paycheck to paycheck, if they are getting laid off, they’re not being able to work. Because of this, um, what do you think the repercussions are going to be? Or what do you think, you know, the government is gonna have to do?
Ian Wyatt 11:30
Yeah, you know, I think, to answer the first part of that question, you know, I think the United States is heading towards the recession. Without a doubt, the first quarter GDP numbers will show you know, slower growth than last year, but I expect in the second quarter and third quarters of this year, you’re gonna have negative GDP growth. And, you know, that’s, that’s certainly gonna reflect the decrease in activity. You know, how deep it’ll be, I think is really a determination of have, you know how long do things grind to a halt here in the United States? Is it two weeks? Is it a month? Is it two months? How long? And how bad does this get? And it’s really hard to model that. But I would expect that we’re going to see negative GDP growth. I think the small businesses are going to be the most hard hit with this because as you said, you know, if you’re running a bakery, or a restaurant or a hair salon, you don’t have huge cash reserves. You don’t have a ton of money on the balance sheet. You don’t have deep pocketed investors. And it’s gonna be tough. And, you know, the government certainly wants to help. I think both Democrats and Republicans want to help the small business owner. I just wonder if they’re gonna be able to react fast enough because it you know, I don’t see how the federal government is going to be able to help small businesses cover their payroll in two or four weeks, totally. So people are going to be Filing front employment I know here in Vermont and other states are already starting to change the unemployment, you know, sort of regulations to make it easier for people to get unemployment. But I think it’s going to be I think it’ll be big. It really big. I think the US government is going to do their best with the small businesses. I think, you know, after what we saw in 2008 2009, I think the federal government will do what it needs to save, you know, the larger companies, airlines cruise lines, I think the government’s gonna bail out anybody who needs it in terms of big companies, the feds already stepped up, you know, lowering interest rates and, you know, buying up over $700 billion of treasuries and, and, you know, mortgage backed securities, but, you know, this isn’t, this isn’t a Fed, this isn’t a monetary This is a medical issue. This is a this is a health crisis, and lower interest rates don’t solve the fact that people are scared to leave their houses. is unwilling to travel events are being canceled and things are, you know, grinding to a halt. The Federal Reserve can’t fix that. What fixes that is addressing the the underlying issue, which is a health crisis. And I think that, you know, whether you’re Democrat or Republican, it really doesn’t matter. I think the the leadership that we’ve seen out of Washington has fallen short of expectations. And that’s why the markets doing so poorly and you know, the fact that the Federal Reserve is cutting interest rates and coming into the market and buying up securities, every time that you’ve done that the market crashes, okay. You know, the market moves lower is because people are saying, Holy moly, if interest rates are being cut, and if the Fed is doing this, things must be worse than we expected. Okay, they’re worse than we expected. So Holy moly, you know, so that it’s certainly not helping matters.
Jeremy Weisz 14:56
So for people who don’t haven’t been Find what’s going on with the interest rates. take just a minute and tell people in how you think that will affect things.
Ian Wyatt 15:08
Yeah, I mean, you know, I think interest, lower interest rates certainly will help things. You know, and it certainly help if you want to refinance your home or borrow money. But, you know, again, that’s not what’s gonna solve things here in the economy. In the near term, I think that investors are rightfully worried that the market is weak. You know, I’m, you know, right now, you know, the s&p 500 is trading around 20 2500 or so, as we record this. You know, I believe that we could see the market move lower by another 20%. From this level, I think we could see a range of 2000 to 2100 on the s&p 500. By the time it bottoms out, probably within a couple of weeks. And, you know, the basis for that projection is, you know, I think corporate earnings are going to take a big hit. And we’ll see you know, earnings for the index around $145 versus the price right now of 2500. So, you know, my projection is based on a 14 to 15 price earnings multiple on the index, which is a historic norm. And again, this could go lower depending on how earnings come in and you know, how much appetite investors have to own own stocks during this downturn. So you know, I think right now, you know, I would be selling into market strength not being a not bargain buying right now, you know, the market is falling like a knife. You don’t want to try to catch a falling knife. Okay. Lauren bounce off. Which brings me to an interesting anecdote. I was talking last Friday with a friend of mine who’s a financial advisor, and we’re talking and he shared with me that for one of his clients, told him he wanted to protect his portfolio. So, instead of selling his stocks and realizing capital gains and getting a big tax bill, he decided, he simply short sell the s&p 500 index, right? SP y, which is, you know, the biggest ETF in the world. And so he he’s short sold, he was trying to short sell the s&p 500. But he couldn’t do it. And the reason is that if you want to short sell a stock, right, which is a bet that the stock price is going to go down, you actually have to borrow it from someone else. You have to borrow the shares from someone else in your brokerage account when you sell them into the market, and then you buy them back later, ideally at a lower price. But what that tells me is and again, this is he’s a, he’s a financial advisor at one of the biggest independent firms in the United States. Okay, this isn’t a small firm, he couldn’t find the shares. There were no shares available, which means 100% of s&p 500 was short sold on Thursday. Okay, which means they’re huge bets against the market. And so when we saw Friday’s trading activity, this is what happened on Friday. You’ll remember Mark was up two or 3% for most of the day, and then the last hour of trading, the market search to be up about 9% by the close. And, you know, my theory on this is that essentially all of the short sellers have made a killing last week and the week before, decided that going into the weekend, it wasn’t worth it to have the trade on. No, because if the market continues, news improved, you know, Federal Reserve does something if the government Congress says something, socks could continue moving higher, they didn’t want to have the risk going through the weekend. So they covered all their shorts, which is why the stock market roared higher at the end of the day Friday. But you know what, it’s Monday morning, and mark is back to normal and the stocks are down another 9%. So all those gains that we got on Friday are now gone, yet we’re back to where we were. So my point is just that, you know, I think that markets can be really volatile, and we’re gonna see some real aberrations like this. You know, typical trading, you might see a one or 2% move in a day for the s&p 500. That’d be a big day. 1% move for the s&p 500 is a huge day. Okay, but we’re seeing lots Today’s with 3% 5%, five percents become the norm. 10% is Like who? Holy moly, that’s a big move. So volatility is way, way up. And, you know, reminds me of the saying that, you know, the stock market takes the stairs up, but it takes the elevator down. And that’s certainly true. You know, we’re giving up years of gains in a few short days. So these are certainly challenging times for investors, and certainly patients, of investors who are in the market for the long term.
Jeremy Weisz 19:29
So I want to talk about, you know, what, what should people do, and I wonder if we should group them into different categories of maybe there’s someone right now who’s literally ready to retire, retire, and all their money is tied up and just hit a, you know, huge decrease, and then maybe there’s someone who’s, you know, at a certain age range where, you know, they’re maybe looking at more longer term things in the market, however you want to break it up, but what should you know immediately Like volatile times, what should people do and maybe in different different segments that we’re looking at?
Ian Wyatt 20:06
Yeah, you know, I think that for for people who are younger, you know, you’re you’re, let’s say you’re in your 40s you still have, you know, 25 years of working or more, you’re going to be just fine. The coronavirus is going to come it’s going to go and you know, life will return to normal and sock prices will to you know, this is a temporary setback on a row on your path towards, you know, building wealth over the long term. For folks who are well, let’s let’s stick on that for a second. So 40 is there anything they should do? Should they just not do anything? Should they be buying things selling things? What should they be doing right now? Yeah. So they don’t freak out.
Jeremy Weisz 20:49
Like they maybe are?
Ian Wyatt 20:51
Yeah, you know, I think that I think that in the near term, there’s going to be more downside than upside. I think the market continues to have asymmetrical risk. There’s greater opportunity for downside loss than there is upside potential. If more losses are going to give you financial concern, make it so that you can’t sleep at night and you’re worried, then, you know, I would, I would suggest folks could take money off the table by moving money from stocks into fixed income or cash. Now, you know, again, everybody’s situation is different, right? And resource tolerance is different. And I’m not a financial advisor. I can’t give any personalized investment advice for folks under any circumstance, especially if I have no idea what their situation is. But, you know, I think that you know, for people running a balanced portfolio meaning is split between stocks and bonds, you know, bonds provide some balance during times of uncertainty and so, you know, what I would like to do in that situation would be to sell bonds once we get closer to a bottom, those are buying socks and increase my exposure to the equity markets. So You know, folks could look at doing that. And, you know, personally, you know, I’ve taken money off the table in my taxable investment accounts. I’ve also moved to cash in my retirement account, okay, did both those moves a couple weeks ago, started getting really defensive feeling like the market was on very shaky ground. You know, there are no tax consequences of doing so in a 401k or, you know, any type of retirement account. Obviously, if you have capital gains in your equity account, you’re going to pay a tax bill, if you’re, you know, selling winners to raise cash. So, you know, the decision is a little bit harder with taxable account. But, you know, I think that we’re going to see the market bottom here, probably sooner rather than later. And we know that when it does, there will be you know, once in a decade opportunities for investors to buy investments that are trading at a deep deep discount. The The key thing is to make sure that you have the cash available and the willingness The appetite to step up when things seem uncertain, you know, you got to remember that the market will lead the economy. Okay, so the stock market isn’t basing its price today based on the news today and stock markets anticipating where coronavirus ends up. It’s probably factoring in the fact that, you know, millions of Americans will get this. Hundreds of thousands will die. And the US economy will take a big hit. I’m in a recession. Oil prices are also anticipating the same thing. You look at oil prices. You know, I was reading data that showed you know, in the first two months of the year 2.5 million barrels less of demand for oil globally than last year, two and a half million barrels a day. Okay. Oil went plunging from you know what $45 to under 30. No more than that. You know, it’s You know, under $30 a barrel so oil is getting crushed. Saudi Arabia, you know, and so on top of all this coronavirus stuff, we have oil price getting crushed. And Russia and Saudi Arabia decided to get into an oil war for Saudi Arabia is essentially trying to put Russia out of business and put the US fracking companies out of business. So we could do a whole nother show about how the recession and this bust in the oil price could spark a whole debt crisis in the United States. That’s akin to what we saw in 2008 2009. It’s just instead of, instead of individuals and homeowners, it’s going to be corporations that have loaded up on debt for the last 10 years. So we can do a separate show on that and dig into that at greater length because I think that you’re gonna see a huge, huge downgrade in the debt markets have a lot of big companies like Verizon and General Electric, you know, tons of companies seeing their debt downgraded and, you know, that could be sort of the next wave down with this. This bear market.
Jeremy Weisz 25:00
So for someone in their 40s, who’s You know, every situation is different. You’re saying to not trying to catch a falling knife situation?
Ian Wyatt 25:11
Yeah, I wouldn’t, I wouldn’t step up and be buying socks right now. You know, I think though, I think what we want to do, as an investor, I want to see things I want to see a little bit more pain in the market. You know, I haven’t seen enough capitulation on the part of investors, you know, just throwing their hands up and saying I quit. Typically, that’s when the market bottoms is when you’re seeing and, you know, you’ll notice it’s just talking with friends, they’ll say, I’m out of the market. You know, I got out of the market I’m 100% in cash. I mean, you know, I’m buying gold, you know, or just sort of giving up you know, have you checked your socks? I’m not even looking at when when that happens when you see people saying, I’m not even when you when you hang out with someone, although nobody’s having dinner parties. Nobody’s hanging out. Friends these days, but when you hear people saying things like, you know, I’ve just given up, I’m not checking my account savings. I’m not logging into my account that shows capitulation, which is when things will bottom. I think we’re a little ways away. I think the I think the news flow on this is going to get worse and quite a bit worse in the coming days. And I think, you know, I think most Americans aren’t yet out. I don’t know this is changing very rapidly. As of last week, most Americans didn’t think was going to be that bad. Today, folks are waking up to the fact that this is gonna be real bad. And they’re starting to realize that this is going to dramatically change their way of life for the coming weeks. And we’re not used to that. We’re not used to the government saying you can’t go to a restaurant. You got to stay home. You can’t get your hair cut. You know, we’re not used to it. And that’s where we’re headed. It’s
Jeremy Weisz 26:55
unprecedented. You know, we’ve never experienced something like this. I have a friend In another state who there one of the teachers was tested positive Kronos, so they quarantined. I mean, this is before they shut down the schools now they’ve shut down the schools, but this is before they did quarantine every single child, you know, send them home. And then also because the parents were exposed quarantine the whole family, you know, so literally can’t go out if they wanted to.
Ian Wyatt 27:24
Yeah, I mean, we haven’t seen something like this since the Spanish influenza in 1918. So we it’s been over 100 years. We probably won’t see anything like this again, in our lifetimes, thankfully. But um, you know, you know, it really is unprecedented now, you know, so, so we’ve been sharing a lot of doom and gloom. So, you know, I guess there can be a little bit of good news here. And the good news is that once the United States has this contained, things will start to improve with the financial markets. And so, you know, one of the things that I was looking at was what’s happened in China. And what we see is that the Chinese stock market dipped dramatically during the phase when, you know, the number of cases in China were skyrocketing. And when this was clearly out of control. We saw, you know, you know, the stock market was crashing. And as soon as China got this contained, meaning no community spread the numbers instead of going up by thousands a day we’re going up by five or 10 cases a day. What happened was the stock market rebounded within a matter of days and went right back to where it was before the market crash essentially almost all the way to new all time highs and you know, since then the the Shanghai index is sold off again, along with all everybody else because clearly this isn’t just a shiny China story. This is a global story. So you know, the market sold back off a little bit, but what i think that that shows is that, you know, investors in the market will view this as a black swan event once once in a century event. And, you know, the market is going to be volatile and fall in the near term. But once this gets under control, the markets should come back to where they were before. And, you know, I think, you know, relative, you know, speed too. So, you know, I’m not suggesting there’s going to be a, you know, a V shaped recovery, mini crash all the way down and then soar back up in 10, trading sessions or anything like that. I think it will be more like a U shaped decline. So it’s going to take a little bit of time, but, you know, I think that will the markets will be trading decidedly higher than these levels. 12 months from now, I think will be you know, higher, much higher than these levels. And, again, investors who have cash will be well positioned to take advantage of the situation.
Jeremy Weisz 30:00
So right now, you know, no one could determine, I guess the exact time that people let’s say someone has an abundance of cash and they want to capitalize on this opportunity. What segments? I know you’ve been doing a lot of research on, you know, different segments or things that people should look at that are going to that they should look at, I guess investing in or?
Ian Wyatt 30:23
Yeah, you know, I think a couple ideas. You know, we’ve been doing a lot of research into the biotech space and biotechnology stocks. We’ve seen some of these stocks, you know, going up 2030 40%. These are small, small and mid cap companies that are working on Corona virus vaccines. So there’s been a lot of excitement their biotech sector as a whole has held up better than the overall market. There certainly are some bright spots and companies there that we’re looking at. So biotech is one area that I think is very interesting right now and you know, the the market for a vaccine is going to be absolutely huge. So, you know, I think that’s, that’s one area of excitement. Another area that I think will do well is gold, you know, we have gold trading near, you know, what, six, seven year highs of this level. Again, it’s sold off a little bit in the last week, but, you know, people have sold everything now, the good, the bad and the ugly, everything sold off in the last week. Because there’s been, you know, a race to find liquidity and you know, when people are looking to raise cash, they sell anything that you can get rid of. So, you know, I think that we’ve seen, you know, a lot of uptick in interest in gold. And gold mining stocks are particularly interesting. The sector has been bruised and beaten up for the last decade really and you know, it’s probably it’s gold is probably overdue to outperform anyways, but in times when the government is printing money, which is what’s happening right now, and there’s fear, fear is, you know, is everywhere People look for safety and security. And let me tell you something, when people are looking for safety and security, they don’t go and buy aetherium or Bitcoin, okay? They want to buy gold, okay? Or they want to hold us dollars or they want to hold US Treasuries, even though the 10 year will pay you under 1%. So, you know, I think that you know, if you think about the places where you can make money in, in during a prolonged period of uncertainty, cash is king bonds are rallying and, you know, gold is the number one safe haven in the entire world. So, you know, I think that gold and gold stocks are, are a place that, you know, most most most people are under allocated, you know, they they either are no gold or maybe a token, you know, they have a couple thousand dollars in a gold ETF like GLD you know, historically though people have 510 percent of their portfolio in gold or gold stocks. So, you know, I think that that’s a trade that We’ll see people moving into and, you know, one other thing related to gold is that, you know, gold is it takes a lot of energy to run mining operations. And oil prices just got knocked down, cut in half. So, you know, the cost of operating a gold company also just fell dramatically. So, we think there’s some opportunities there.
Jeremy Weisz 33:22
There’s two other categories. You know, the left hand we talked in is e commerce and we were talking about Amazon stock and this was I think, we were talking in November or even before then of what would happen with Amazon stock. And in actually before this whole Corona virus thing had you what you would what your research has shown was exactly on point. You know, so people had bought it when we had talked they would have it rose exactly to the point where where you said it was from the research Where do you see things like Amazon or other e commerce companies going now? that people are basically staying home and they’re homebound?
Ian Wyatt 34:07
Yeah, yeah, I mean, I think that companies like Amazon can continue to thrive in this environment. I think more and more people are buying things online. You know, you I don’t know about you, but I ordered some soccer balls for my kids for our, you know, afternoon gym classes, or for you know, we have one soccer ball, but I was like, I need to get for my Oh, I bought four new ones. And, you know, Amazon Prime here is normally two day delivery, four days. Okay, Amazon saying we’re not going to deliver it in two days, we can’t. So they’re just getting flooded with orders. They can’t keep up. Okay. But one of the things to remember is that we’re simply probably shifting behavior, right. So, you know, people are going to the grocery store and they’re loading up there. They’re filling the cart now and filling the pantry filling the freezer, but they’re not going to buy later because they’re going to use that stuff. They’re just they’re just buying it up front. And so I think the same thing is probably happening in e commerce. And we’re probably seeing a shift, which means we’ll have better results in the first quarter of the year and worse results in second quarter. So, you know, but if you look at stocks that have held up well, you know, stocks, like, you know, like Costco have been doing phenomenally well. You know, two weeks ago, my wife and I went to Costco. This is two weeks ago to stock up our pantry and freezer, knowing that this was coming, and at the time, I asked the people at Costco, I said, I said, how’s business been? They said, it’s been crazy. Been nuts for the last week. I spoke with my parents who tried to go last week. They said, they pulled in, they got they walked in the store. The line was from the front of the store to the back of the store. And so they left they didn’t even go in, they’re like, forget about this, we’ll do something else. So you know, companies like Costco I think are gonna have a great quarter the stock is holding up remarkably well. I mean, cost goes down. You know what 5% from From all time highs, so, you know, I think, you know, I think some companies are going to survive and do quite well. Others you know, Costco may is probably seeing a shift. You know, I sort of wonder, though with with companies like Amazon if the federal government closes things down, lock things down. Will Amazon be shut down? Is Amazon gonna deliver? Is Amazon gonna take your orders and his ups or our UPS and FedEx? Are they gonna keep delivering packages? I don’t know. I mean, a week ago, I would have told you Yeah, I don’t know. Um, you know, we know that in places like Italy, Spain, and in France, you know, grocery stores and pharmacies are remaining open during these, you know, central government lock downs. You know, in China, it was much more strict, but again, you know, the Chinese government has an iron fist. They’ll do whatever they want. I don’t know if the same, you know, locking people in their houses under military threat is going to fly here in the United States. You know, I guess we’ll see. But these are certainly uncertain times. And, you know, I think that, you know, obviously some some companies are going to thrive, I think, you know, in terms of a portfolio, you know, I look for companies that can deliver their services or products or take orders online. Look for companies that have a lot of cash on their balance sheets. Companies like Warren Buffett’s Berkshire Hathaway should be uniquely positioned for this. Warren Buffett has about 60% of his entire portfolio in cash. They’re ready to invest. They’re open for business. And Warren Buffett says, you know, Berkshire Hathaway will be a lender and investor of last resort for companies that need capital. And, you know, Berkshire Hathaway was there in 2008 2009 when nobody else had the cash or the conviction or willingness to write a check. Warren Buffett Did you know and really helped helped a lot of American companies weather that storm and I know is Personally, I’m a Berkshire Hathaway shareholder. And you know, I think Berkshire is uniquely positioned to weather the storm. This is this is when Warren Buffett does does the best. And this is when Berkshire thrives. So as a Berkshire shareholder, you know, I’m expecting that we’ll see some pretty decent gains here in the in the coming couple years,
Jeremy Weisz 38:20
as he put out his advice in this situation.
Ian Wyatt 38:24
Yeah. You know, I mean, you know, Warren Buffett, you know, he he’ll always tell you, you know, stocks for the long term, America’s great and the economy will come back and you know, he’s right, you know, you look it over periods of, you know, 1020 years, America has been a unique experiment with capitalism. And you know, the invest investors here have done incredibly well over the long term that’s going to continue after coronavirus and after we’ve all forgotten about this and thought, wow, that whole Cova 19 thing wasn’t that really weird for like a few months we were locked in our house isn’t gonna be like that. So odd and Warren Buffett’s right? You know, I think the the challenge is that, you know, even if you understand that, you know, there’s a lot of pain in the near term. So, you know, Warren Buffett will always, always tell you he’s bullish on America, stocks are going higher the markets gonna be good for you just be a long term investor. And he’s right. But if you really want to know, what Buffett thinks about the market, what he thinks about stock prices, what you have to do is you have to look at what he’s doing. Okay, you have to look at his behavior. Now, you know, when at the end of last year, Berkshire Hathaway has something like 60% of its entire investment portfolio in cash, okay? Not bonds, cash, US dollars. What that tells you is, Buffett thought socks were overvalued. And he was waiting for an opportunity to buy stocks at the right price. And this is what Berkshire Hathaway has been waiting for. I would expect that we’ll see some big deals with Buffett Come out of this. We know that Berkshire Hathaway likes the airline industry and has been long airlines. We know that he likes the big banks in the financial sector. So I wouldn’t be surprised to see Berkshire Hathaway step up in the airline business with the financial sector, perhaps even cruise lines. Eventually people will forget about this and start going on cruise cruises again, so things will go back to business as usual. It’s not going to happen overnight. But you know, I think Berkshire Hathaway will will be a winner coming out of this.
Jeremy Weisz 40:33
So in what about for, you know, again, we this scenario of bad timing, someone is getting ready to retire. And they just took a huge hit on their nest egg.
Ian Wyatt 40:47
Yeah, yeah. So I think that um, you know, if you’re just retired or getting ready to retire and you’ve just taken a big hit on your nest egg, well, you know, hopefully someone in that situation wasn’t 100% invested in stocks. Because that would have been an irresponsible way to structure a portfolio if you’re getting ready to retire. So let’s hope that they were, you know, least 60% stocks, 40% bonds, so the bonds are providing some, some cushion here for the blow to equities. You know, at that point, you know, you haven’t really realized the loss until you sell. So, you know, selling now, I think would be a big mistake. You know, we were warning our clients early in this process as early as February 27, that we saw a lot of pain on the horizon and it saw prices moving lower, not higher, and Brace for impact. And so, you know, folks who got out on February 27 probably accepted a 15% decline, which, you know, nobody likes that, but it’s a lot better than 30% or, you know, I don’t know where we are right now. 30% down from the high so they’ve been able to protect themselves a bit. And, but you know, I think if you haven’t sold anything and you’re retired, think about retiring yourself. Future, I think, ride this out, you know, selling into this right now I think would be a mistake. And at this point, you know, it’s really hard to predict where the market is going in the short term. It’s a coin flip. I don’t know if stocks are going higher tomorrow or lower. I don’t know exactly where the markets going in the near term. I think Mark, the market will move lower before it bottoms out. But again, you know, if I’m wrong in socks, you know, bounce back and this is the low you probably, you know, if you cash out now, what are you going to jump back in? Are you gonna jump back in after they go up? 20%? I don’t know. So, you know, I think I think sort of staying the course is key. And you know, one other final piece of advice for someone in that situation is, just because you’re retired doesn’t mean that you need 100% of the capital. You know, it’s not like you retire and then you say, Okay, give me all the cash in my 401k and eat it all tomorrow. Now, that’s not how it works. You know your most most people draw out a small percentage of their retirement savings. throughout the duration of the retirement, so while you’re balanced, maybe showing a lower number now than it was two or four weeks ago, you know, I think you gotta remember, if you’re 65 years old and your life expectancy is 85, you got another 20 years to make that money work, you have 20 years during which the market is going to continue to rise and, you know, stay the course don’t don’t let this derail you in the near term, and, and I think, have confidence that, you know, America has been through a lot in the world has been through a lot. World Wars, revolutions, oils, shocks, you know, numerous crises, the great, great recession, the Great Depression, you know, and we’ve come out on the other side, you know, stronger and, and better able to deal with what the future is going to bring us. So, you know, I think, I think now, you know, I think it is important to keep that frame of reference. This is Not only crisis, the market space is not the only crisis the economy is faced. We have the smartest people working on testing and working on vaccines and a solution to this. This too will pass and it’s going to be painful in the near term. But, you know, six months a year from now, I think things are going to be looking decidedly different. And investors to move 100% of the sidelines, stop following the market stock, stop being involved, are going to suffer. This is exactly what happened after 2008 2009. The people who lost the most were those who sold at the low points, they sold out of the low points. And then they didn’t return to the markets until 2015 2016. They waited 568 years 10 years to return to the market and start buying again, missing out on all the gains. So I think that’s that’s a bigger mistake to me is if you go 100% to the sidelines, when you get back in and are you going This app
Jeremy Weisz 45:01
so you want to point people towards daily profit comm check out other episodes also why at research comm for your you know, they could subscribe and get your free e newsletter any any other final words that we should talk about with the economy coronavirus or anything else?
Ian Wyatt 45:21
No, you know, I think we’ve covered a lot of ground related to the recession and where we are with market and where we think stocks are going in the near term versus in the long term. And you know, for most people listening, you’re a long term investor, you’re not a short term investors. So let’s focus on the long term. And, you know, stay the course Don’t let this throw off your plan. And, you know, I want you to be comfortable. I want you to get through this and know that you know, we’re going to face some challenges and negative headlines in the near term. But in the long term know America has the greatest economy in the world. We have the most innovative companies in the world. We have Some of the hardest working people in the world and some of the best education systems in the world and we’re gonna get through this too. So stay positive, even though we’re all locked up at home, trying to weather the storm.
Jeremy Weisz 46:11
I’ll ask you in three days and you’re likely with four kids. How positive here No thanks, Ian. I appreciate it. Dude here.