The coronavirus and your investments.

Ever since I’ve been investing, an old saying has been, “when Wall Street sneezes, Australia gets influenza.” So far this week the Australian market is down 9.7%. The last time we experienced greater weekly losses was during the Global Financial Crisis.

Markets always fear the unknown, and right now, I can’t think of a bigger unknown than the impact of coronavirus. So far, the number of deaths is estimated to be between 3,000 and 10,000, depending on the news source. This compares to 650,000 deaths worldwide as a result of the flu last year. So why the fear? The flu infects up to 45 million Americans per season; however, there are only an estimated 61,000 deaths (a mortality rate of 0.14%). No one knows the mortality rate of coronavirus, but it could be anywhere between 1.2% and 5.6% — in other words, it could be 40 times as deadly as the flu. The Spanish flu pandemic in 1918 infected an estimated 500 million people worldwide and resulted in 20 to 50 million deaths. I pray that like sars, the coronavirus is quickly contained.

Baron Rothschild is credited with saying, “the time to buy is when there’s blood in the streets.” So, the question becomes who is buying the stocks that the panic-stricken are selling off like unwanted relatives? Are they fools, or are they smart? One of the few who had money during the Global Financial Crisis was the world’s greatest investor, Warren Buffet, and we know that he bought. Last week he commented that he couldn’t find anything of value to buy. Berkshire Hathaway has $128 billion in cash, and my guess is that at some time during this scare, Warren Buffet will be buying. Don’t take that to the bank … I’m just guessing.

Staying on Warren Buffet, one of his sayings is, “it’s only when the tide goes out that you can see who’s swimming naked.” Besides the airlines, companies engaged in travel, casinos, hotels etc. the businesses most impacted by the coronavirus will be those carrying large amounts of debt or, as Buffet would say, those “swimming naked.” Another Buffet saying is, “if you don’t feel comfortable owning a stock for 10 years, you shouldn’t own it for 10 minutes.” If you owned stock in a well-managed, profitable, cashed-up, debt-free company last week, why would you panic and sell your holding this week? If you answered the coronavirus, you must believe that the buyers are fools. Only time will tell.

On a cheerier note, the shares in small Australian company Zoono Group Ltd. have increased from 6 cents last August to $1.90 today. It made the following announcement about laboratory tests to the Australian Stock Exchange today. “The results show that Zoono’s Z-71 Microbe Shield (the same Zoono technology used in Zoono hand sanitiser) is >99.99% effective against COVOID-19.” Even at the worst of times there are winners.

The foregoing should not be read as investment advice. It is general commentary. For investment advice please consult your financial adviser.
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3 months ago  ·  

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