February 24th 2020 Coronavirus update
History Lesson
Today is February 24, 2020, it is lunchtime, and the Dow has dropped over 1,000 points so far today because of the fear COVID-19, or what is more commonly referred to as Coronavirus is causing, around the world.
Numerous experts are claiming pandemic status, as the virus spreads through numerous countries all over the world, including our own. While everyone is trying to make some sense of how bad this is, how it could affect the markets, and how best to compare to other similar outbreaks of the last couple of decades; we think it is a good idea to learn first what this is, and how best to approach our next steps.
If you’re to busy to read the rest of this, or don’t want to, I will save you some time. Now would be a good time to invest, and later this summer/ early fall when the dust settles on the initial outbreak, the quarantines and the manufacturing delays, you might think about your 2020 RRSP deposits, I would put my money on another good buying opportunity.
Moving along…
I think the first thing to note about this virus is that it is not dissimilar to the common cold, a respiratory virus that shares most of it’s DNA with the COVID-2019 virus, both are coronaviruses, and share DNA with SARS (2003) and MERS (2013) both of which caused market fluctuations like we are seeing now.
The difference between this virus and say, SARS is that SARS was harder to catch, whereas COVID-2019 is spreading at a much faster rate. The mortality rate is also much lower at around 1-3% versus the 9%+ SARS had; so while the pundits and day traders try to compare the two and what they will do to your investment portfolio, I think we ought to use history as a guide and just keep doing what we are doing.
Here is some history for you:
If we are going to compare what happened 17 years ago, to what is happening now, we should expect a solid jump in the markets over the coming months. Wouldn’t you know it? Around late summer we see some market volatility and the markets went on a five-year run leading up to 2008.
Looking at a snapshot like this is misleading, so let’s compare long term:
Dow Jones
S&P 500
I get that day to day the media will cause a panic, it is how they make money. But it doesn’t mean you ought to panic… as you have heard Ian Stephens from IAG say at our events:
“If it bleeds, it leads!”
If you haven’t seen Ian Speak, come to our next event because he has all kinds of great info for us and frankly some of the best one-liners in the industry. Also, if you haven’t seen Ian speak, you haven’t been to a dinner in a while and to that I ask:
“what’s up with that?”
and will add:
“Come to the next one and bring some friends!”
To the point though, if you believe that this virus can cause the next global recession, history doesn’t agree with you. You might be right, but it is unlikely you are.
The actual reality of this situation is that we don’t know how bad this is going to be. I am not implying the common cold is comparable, but people do die from the everyday household cold.
“Coronaviruses 229E and OC43 cause the common cold; the serotypes NL63 and HUK1 have also been associated with the common cold.” – Source
To add more context to this, in my personal opinion, overinflated issue:
This chart is from the US alone, where vaccination rates are relatively high and stable on an annual basis.
I will float this context out there without downplaying the seriousness of the COVID-2019 virus:
Hundreds of thousands of people around the world will, in fact, die from the flu this season. The flu regularly rotates and mutates, and while is vaccine-preventable, will still kill a lot of people around the world.
This has a real and measurable economic impact, and yet we do not give it the credibility it deserves, we just take advantage of the steady stream of income these outbreaks provide through our global healthcare investing initiatives. The flu has indeed made you quite a bit of money over the years and I am now suggesting to you that COVID-2019 will as well, just as HIV/ AIDS, SARS, MERS, Influenza, Malaria, Tuberculosis, ZIKA Virus, Ebola, etc have in the past.
In no way am I trivializing the devastation these diseases have wrought upon the world, but from a non-emotional and financially objective standpoint, it is very likely you will earn positive returns from this virus. That like the other health calamities listed above, this hysteria will pass and if you have the will to invest now, you will do well to do so.
Unlike most sudden drops in the markets, we know exactly what is causing the immediate and medium-term issue: this virus. It is black and white and likely measurable.
We aren’t in a panic; neither should you be.
The 2020 RRSP season is wrapping up pretty quick, March 2nd 2020 to be exact… dad and I certainly suggest now is a good time for a tax break that comes with a great moment to buy low.
Shoot us an email if you agree!
Thank you for reading,
Darris Cameron,
President & COO
Financial Value Inc.