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Will the Market Behave Differently This Time?

How will we navigate these troubled waters when surrounded by fear and uncertainty?

It’s early afternoon, March 16, 2020 and, to date, I’ve written nothing on Mammon. Mammon is my favorite term for all things relating to investment and personal finance. With all that has happened in the markets, I have decided I might as well just dive in and share my experiences and feelings over the past few weeks. I was on the internet researching the exact date in mid-February when the DJIA (Dow Jones Industrial Average) hit its peak when my phone rang. My husband was calling to tell me about today’s drop. I’d been busy and hadn’t checked.

Largest day’s drop in the history of the market!

I signed in to my brokerage’s website and found an article from Reuters (7 minutes ago) by Caroline Valetkevitch:

“It’s a market adrift with nothing to hold on to. There’s nothing that can really give us a sense of when the full extent of the virus’ impact will be known,” said Jeffrey Kleintop, chief global investment strategist at Charles Schwab.

The Dow Jones Industrial Average fell 2,997.1 points, or 12.93%, to 20,188.52, the S&P 500 lost 324.89 points, or 11.98%, to 2,386.13 and the Nasdaq Composite dropped 970.28 points, or 12.32%, to 6,904.59.

Since the panic in the market began, this is the largest daily decrease yet….

Market corrections are part of the cycle. When and how much?

Everyone who can get out of bed in the morning knew the bull market was going to suffer a downward move. Trees do not grow to the sky. In December I didn’t sell my reserves. I knew in January we were living on borrowed time. But I was hanging on a while longer with the natural disinclination to sell when the bull is still running.

The details of my investment history since 2002 are being gathered for my book, still in outline form. The quick overview of my current practices is that I keep one or two year’s cash requirements for our MRD (minimum required distributions) in a “safe haven” FCONX (Fidelity Conservative Income Bond Fund). When the new year arrived, I was a bit short of the MRD for 2020 and was becoming concerned so I felt I needed two year’s MRD set aside.

When the market and our portfolio hit highs on February 19, 2020, I decided we needed to do two things: pull out the MRD and do some quiet stock-piling.

We need to do something – but what?

My husband and I are not hoarders but generally have one or two of those large packages of paper towels, toilet paper, and other paper goods in the pantry. He shops for most of those items at BJ’s or Costco and it made sense to increase our normal supply a bit. We sat at the breakfast table and made a thorough list of everything we believed we would wish we’d purchased if the COVID-19 spread in the US and we were directly impacted. Both of us use a mail order service for our long-term medications so we made sure our refills were current.

We made a grocery list of things that had a longer shelf life in the event our normal grocery shopping habits were altered. My husband made a few shopping trips and we provisioned for a possible four to six weeks of discomfort. We didn’t advertise our actions but I did bring up my concern to a close friend who laughed at me, then frowned and said she knew I was correct. “I don’t want to be forced to go shopping when I don’t really need to,” she protested. “Where would I store it?” Fortunately, she heeded my advice and went to the store the next day. Two weeks later, the run on toilet paper, hand sanitizer and peanut butter had left the shelves bare.

“You can see the people in the other aisle through the shelves,” my daughter exclaimed on the phone two weeks later. A member of a private Facebook group for authors posted a video taken in a supermarket in Australia. It was truly a toilet paper apocalypse.

It wasn’t hard to see we needed to brace for the worst.

So, while the virus spread and the market was hitting all-time highs, my husband went shopping and I sold enough of our balanced funds to carry us for two years.

Then the market started going down in earnest. During the week of February 24 through February 28 its records were well-documented in the headlines. On March 2, it bounced upward and the question, “Is it time to buy again?” was spattered across the papers. I posted to Facebook with one of my favorite market terms – Dead Cat Bounce. That pattern is as old as the witch with her “come along with me, children” finger.

It’s not wrong to want to buy right back in after a steep decline; it’s human nature. But human nature isn’t always a good guide. In fact, I have learned that some of the best decisions we may make in the market are counterintuitive. But greed quickly raises its ugly head and whistles for us to follow.

Meet the VIX – the Volatility Index monster.

I am sitting back and watching the VIX knowing this has all happened before. I’m not exactly sanguine but I am following my convictions, which I will explain at another time, and trying to be steadfast and true to basic precepts that I believe rule the markets over the long term. BTW, the VIX, according to Wikipedia, “is the ticker symbol and the popular name for the Chicago Board Options Exchange’s CBOE Volatility Index, a popular measure of the stock market’s expectation of volatility based on S&P 500 index options.”

I think of the VIX during tumultuous times as that queasy feeling you get just before your stomach tosses back your last meal. Maybe it’s more like a ride at Universal Studios with the exception that at the theme park you can see the end of the track.

I was not feeling sanguine on March 9th, when headlines declared the biggest one-day drop since 1987. I was feeling more like the end of the roller coaster was not in sight and maybe my confidence in the market as a whole was misplaced. You know the old saying when disaster strikes, “None of the old truths will hold. It’s different this time.”

Where do we go from here?

Over this past weekend, based on age and underlying medical conditions, my husband and I committed to self-isolation and even considered the stock market might settle down during the forthcoming week. (I should edit that word ‘considered’ and replace it with ‘hoped’.)

It’s after 5pm now (March 16) and I’m going to take a look for key commentary after the bell and get back to finishing this post.

I just went online and grabbed the first colorful headline I found:

Published on Monday, March 16, 2020 by Common Dreams

‘Coronavirus Collapse’: Dow Drops Record-Smashing 3,000 Points as Outbreak Panics Markets

“The market is at the mercy of the virus.” By Eoin Higgins, staff writer

This cratering of the indices will sorely test our convictions and common sense.

This is beyond a stomach-churning roller coaster ride. This is beyond a gut punch. This drop will panic many who are unprepared and test the resolve of those who are.

Back in 2002 I spent a year researching and studying investment principles and practices and built a set of rules and guidelines to help me make good decisions as I undertook to manage our retirement portfolio. I made a lot of good decisions over the years and I made some big mistakes. Even during the 2008-2009 financial meltdown, I didn’t waver. Let’s see how well we all fare during this frightening time.

Engraved in my brain is the image of the market graph as depicted above, with its “upward bias”. I show this reassuring image of how markets behave over the long term because I do not want to embrace fear. I want to believe that history will repeat itself and the market will recover. “Will the old truths hold, or will it be different this time?”

Cluck! Cluck!

Thank you to MACROTRENDS for the S&P Chart

See MAMMON – Personal Money & Investment


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