Bear-ly Getting Over It: Seeking Sanity in a G-Force Stock Market




By Greg Fields
03/30/2020
Email: greg@gerberkawasaki.com
Twitter: AlphaUBet
LinkedIn: greg-fields-b76b294

What to make of recent histrionic headlines: “Stock market implodes in the most vertiginous percentage correction in history!” Then...one WEEK later(!): “Market pulls a fighter-pilot, g-force inducing pull-up; the best since 1931!” Huh??

Media headlines in a volatile stock market environment like this remind me of Monty Python’s version of Wuthering Heights performed via semaphore. You know something important is going on because some guy/girl is whipping around bright colored flags with a tremendous sense of urgency. But while signaling International Navigational Code flags gets across the most basic message, it’s a pretty weak medium for communicating context and meaning.

With respect to recent market events, I find a famous Buddhist parable to be more relevant:

A Chinese farmer was tilling the fields with his old horse. The animal suddenly bolted and disappeared into the hills. “Oh, bad luck” empathized his neighbors. “Maybe” replied the farmer. A few days later, his horse returned with an entire herd of wild horses. The neighbors congratulated him on his “good luck”. “Maybe”, replied the farmer. The farmer’s son then broke his leg riding one of the horses. “What bad luck!”, said the neighbors. “Maybe”, said the farmer. The next day, a warlord rode through town and conscripted all the able-bodied boys to fight in his army. The farmer’s son was not chosen because of his broken leg.

Take a tip from hip-hop’s Public Enemy: don’t believe the hype. If we link up our emotions to the market’s daily gyrations and allow that to dictate our decisions, we will always miscalculate. If we can’t predict the worst days of the market, then it logically follows that we cannot predict the best days either.

Let’s reframe. This month was a gift. Our financial system is not the brink of collapse as it was in 2008. We are merely in economic suspension due to a temporary event. The near future is difficult to predict, but the coronavirus’ effect on our economy is finite; it WILL have an exit. And the dire predictions some pundits are leveraging to create click-bait are pure speculation at this point.

Let’s go all semaphore (without the flags) for just a moment: Buying --- at --- low --- prices --- is --- good! Valuations for many blue-chip company stocks have been slashed as much as 25% in a matter of weeks. Shares of MGM Properties – landlord to the biggest casinos in Las Vegas and recent seller of the Bellagio for $4.25 billion, were down 50%(!) last week. Those are fire sale numbers. Is Las Vegas going out of business?? Did Congress suddenly pass a nationwide ban on gambling instead of a stimulus bill? Of course not.

This correction represents a tremendous opportunity for all of us. I’m not suggesting to go “all-in” all at once, but the stock market typically rises slower than it falls. That means we can pick our shots gradually over the coming months and come out the other side wealthier than before.

It’s simply impossible to interpret daily stock market shifts as either bad or good luck. But, we can make some tactical course corrections while sticking to the financial strategy we’ve created for each one of you. Our investment team recently adjusted all of your portfolios in preparation for an event like this and continues to do so during this correction.

All of us at GK are so grateful for the faith all of you have vested in us. We love what we do and cherish this opportunity to and step in and step up for all of you. We will work through these challenging times together.

Greg Fields is a Financial Advisor of Santa Monica, Calif-based Gerber Kawasaki Inc., an SEC-registered investment firm with approximately $1 billion in assets under management as of 01/20/20. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which course of action may be appropriate for you, consult your financial advisor. No strategy assures the success or protects against loss. Readers shouldn’t buy any investment without doing their own research to determine if the investments are suitable for their situation. “All investments involve risk and one should consult a financial advisor before making any investments. Past performance is not indicative of future results.”