7 Things You Should Do Instead of Panicking: Throwback Thursday
This is another post in our weekly ongoing Throwback Thursdays Series, where we share with you posts from the past blogs to bring you as much value as possible. In this episode, I’m sharing my recent thoughts on why the market was crashing in mid-March and what are the things you should do instead of panicking when markets crash.
This post was originally from March 2020.
Jason
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You may be wondering why I haven’t posted anything about the coronavirus and the market crash…
Sorry about that. My family and I left for a preplanned vacation/my father in laws services on March 11th and was mostly without internet until the 19th of March.
Two days before we left, things started getting crazy with the coronavirus and the market.
With all the craziness going on I’ve updated this article 4 times already.
Instead of continuing to do that – and probably never releasing it due to the constant influx of news lately – I’m going to release it as is…
Things will continue being crazy… Likely as it comes to the coronavirus situation today and the market, things are likely to continue getting worse in the short term.
For example, when my family and I flew to Puerto Rico on March 11th almost no one was wearing masks. And no one in the US was worried about the virus.
3 days later they declared martial law on the island of Puerto Rico, we were worried about making it home – we did, and entire states and countries worldwide are shutting down business.
I want to get this article out today even in its not up to the minute updated form because the lessons are necessary for the craziness we’re facing ahead.
Want to learn how to find, evaluate, value, and buy great stocks fast? Ones that have helped me produce average annual investment returns of 23.5% per year on average in the first 9 years of my career? Click here to learn more about our Value Investing Masterclass.
Prepare. Get ready.
Do what you can to improve you, your family, and your community’s situation.
But do not panic.
We’ll get through this like we always have up to this point in human history.
And we’ll get through this together…
Over the coming days, weeks, and maybe months I’ll have an enormous amount of content for you and what you should and shouldn’t be doing in this market and how this combines with the coronavirus.
I’ve also begun researching stocks again for the first time in more than 5 years because of how far the markets dropped in the last month.
So far, I’ve found 15 stocks that meet my strict criteria for a preliminary analysis.
Since we’re all likely to be at our homes a lot more in the coming weeks I’ll have free trainings, case studies, masterminds and more so we can all get better, learn, and hopefully buy some great stocks to buy.
Of course, these will also be to take our minds off things at home, in our communities, and on the news.
We could all use a break from the constant bad news right now.
I hope you’ll join us in doing some good for ourselves and our families during this time.
If you have any questions, comments, concerns or just want to talk, let me know in the comments below or via jasonrivera@valueinvestingjourney.com. Or reach out to me on social media.
Thanks so much for being here.
Always in your service,
Jason Rivera
Let’s get to today’s article…
You may have noticed that the stock market has been incredibly volatile in the last month.
Here are some of the major point increases and drops in the stock market last month…
This is extreme volatility.
How extreme?
The last time we saw this kind of sustained volatility, up and down. within a short period of time was during the Great Depression.
As of this writing on March 12th, 2020 the Dow Jones Industrial Average (DJIA AKA Mr. Market) is down to 21,200.62.
This is a 8,350.8 point loss and a 28.3% loss in the last 31 days from the markets all time high of 29,551.42 on February 12th, 2020.
An estimated $6 trillion has been wiped off markets worldwide. With the DJIA having lost an estimated $2+ trillion of that amount.
Again, in only the last 31 days.
I thought the market was rational #sarcasm
At first, the large drops and then gains were related to the Coronavirus’ continued spread around the globe.
People are worried about the short to medium-term global effects of people buying less and doing less… This leads to lower economic output and creates the potential for a recession.
This worry led the United States Federal Reserve to cutting interest rates by 50 basis points – 0.50% – from 1.75% to 1.25% on March 3rd, 2020 to stem the markets free fall.
It didn’t work.
The day the Fed announced this emergency rate cut, the stock market fell 785.91 points or 2.9% as shown above.
Why didn’t this rate cut work?
Because it led people to believe that things weren’t as good as they’re letting the public know… And, that things were expected to get even worse.
This fear led to Saudi Arabia, Russia, and other members of the Oil Cartel OPEC to begin fighting over the continued low price of oil on March 8th 2020[JR3] [JR4] . -(There’s no link in the doc)
This decision by Saudi Arabia caused oil prices to crash by as much as 34% in overnight trading on March 8th, 2020.
The coronavirus worry combined with the oil price war and oil prices and stocks cratering led to US 10-year Treasuries hitting an all-time low of 0.318% on March 9th, 2020.
To stem the tide of the crashing market and the world economy The United States Federal Reserve announced it was going to pump $1.5 trillion into the economy to stabilize things.
The market still had its largest all-time point loss in history after this announcement.
On March 12th the spread of the Coronavirus picked up around the world leading the United States to shut down travel from Europe for 30 days – at minimum.
The following professional sports leagues in the US shut down for the time being…
- NBA – basketball
- MLS – soccer
- NHL – hockey
- College Athletics
- MLB – baseball
- EPL – English Premier League Soccer
Schools are beginning to shut in the US. My kids are out until at least April 15th as of now.
New York state, California, Illinois, and New Jersey are on lockdown… With rumors of where I live in the Tampa Florida area going on lock down soon.
And this is just in the States…
Metro Manila in the Philippines with a population of 12+ million people has been put on quarantine.
Spain, Italy, Iran, and other countries are on lockdown.
Borders and travel are being closed or heavily restricted in most countries worldwide. Some to degrees we’ve never seen other than during World War 2… And in some areas like the US we’ve never seen lockdowns like this.
Athletes worldwide have begun testing positive for Coronavirus and entire seasons have been canceled.
In other words, the world and the economy is coming to a halt in the hopes of containing this virus.
These combined to lead the DJIA to its 2nd all-time largest day point loss of 2,013.76 on March 9th, 2020.
And its largest one-day point loss in history of 2,352.60 point loss on March 12th 2020… Or a total loss of 10%.
The market crash on March 12th is the 4th largest percentage loss in US stock market history. The only times that were bigger were during the Black Monday crash of 1987 and during the Great Depression.
People are panicking. Many in a similar way to the video clip from the United States TV show as shown below.
The Mainstream Media chief among them.
Here are some recent quotes and headlines from the mainstream media concerning the stock market:
For reference, the equivalent in today’s market would be like the market dropping from its high of 29,551.42 on February 12th to 22,872.80. Or a loss of 6,678.62 points. In one day.
- The Washington Post on March 9th, 2020 – “World Markets Spiral as Coronavirus Fears Unleashes Oil Price War.”
- ABC News on February 27th, 2020 – “Dow Jones Plunges Most Since 2008 on Coronavirus Fears.”
- Foreign Policy Blog on February 24th, 2020 – “Coronavirus Spread Means Crashing Markets and Empty Shelves.”
And these are some of the saner news headlines:
Here’s one of the crazy ones:
It got so crazy that both on March 9th and March 12th, 2020 the US stock markets briefly halted trading due to “hitting one of their intraday circuit breakers.”
These trigger and halt trading when markets fall a certain percent – this one triggered when the market fell 7% intraday – to stem huge one day crashes in the stock markets.
And these market stoppages have been constant over the last 10 days or so.
People are panicking. But you shouldn’t be…
Panic leads to emotional decisions.
And in the stock market emotional decisions lead to bad decisions and lost money.
Today, I’m going to tell you why you shouldn’t be panicking. And, what you should be doing instead of panicking.
Why You Shouldn’t Be Panicking
People are panicking for the following 5 main reasons…
- Coronavirus
- Oil Price War and Price Crash
- Treasury Yield Crash
- Market Crash
- Combination of These Factors
Let’s hit these one by one to see if you and your portfolio should be panicking…
Should You Panic Over The Coronavirus and Your Portfolio?
First up is the Novel Coronavirus – code names COVID-19.
This is the upper respiratory infection that has ground world supply chains and economic consumption and output to a halt.
As of this writing, this virus has sickened 134,558 people and killed 4,972.
The virus that started in the Wuhan area of China has now spread to 100+ countries.
To stem the infection rate of this virus the following steps have been enacted in countries worldwide.
- Shutting down of factories, offices, malls, etc, in China.
- Quarantine of Northern Italy – an area with 16 million people
- And then 1 day later a quarantine covering the entirety of Italy – country with almost 61 million people in it.
- Cancelled flights into and out of China, Italy, Japan, South Korea, and Iran.
- People having to remain docked in harbor/offshore in cruise ships where people have the virus.
- Depletion of the world’s hand sanitizer and sanitizer wipe supply.
Of course, there are many other things, but, as of this writing, these are some of the largest headlines.
Today, I want to focus only on how this and the other factors below could affect you and the stock market.
If you own stock your portfolio has been crushed.
Since the coronavirus outbreak began in China in January 2020 the Chinese stock market initially fell from 3,060.75 points on January 22nd to 2,746.61 points on February 3rd… Or a loss of 10.3%.
Since February 3rd, Chinese shares have rebounded to 2,943.29 on March 9th as new cases and deaths due to the Coronavirus in the country have fallen dramatically.
Japan’s stocks are down 15% from February 21st to March 9th as new cases and deaths spiked in the country.
South Korea’s stocks are down 12.6%, as of this writing, due to the large amount of cases in the country.
Italy’s stocks are down 29.8%, as of this writing, as Italy locks down the entire country after it became the new epicenter of the virus.
And the DJIA – the largest stock market in the world – is down 28.3% cited above.
If this virus continues making its way around the globe and affecting people at its current rate businesses, manufacturing offices, malls, restaurants could be closed for a long time in these countries.
Italy said the earliest it could lift the country wide quarantine is April 6th 2020… Or almost one month from the initial date of the quarantine.
And the United States has already begun closing many events and commerce as mentioned above.
This would lead to a complete crash in consumer spending – spending that drives 70% of the GDP of the United States. And much of the rest of the world GDP – although I couldn’t find exact statistics on these.
Crashes in these areas would lead to an even larger fall in the overall stock market because lowered or even negative consumer spending over even a short period of time can and probably will lead the world into a recession.
And this would cause a crash in the value of your portfolio.
As of this writing, economists estimate the coronavirus could lower global GDP in 2020 by 2.4%… World GDP in 2020 is estimated at around $90 trillion… So, this would mean losing $2.2 trillion in world economic output.
This is like wiping an economy the size of France – the 7th largest economy in the world – off world economic output .
And cases worldwide are still growing.
This is all bad, of course, and is likely to get worse in the short term… Especially as coronavirus cases look to be picking up worldwide.
But, will this virus alone cause major issues for your portfolio? In the short term, yes… Especially with the market crash and related fear.
In the long term, possibly, but only for stocks like airlines, hotels, restaurants, travel industry, into and around the most affected countries.
Do I think it is likely that this virus can cause a recession in the short term due to lower economic output and consumption? Yes, at this point its looks to be an almost certainty that the world’s economy is going to slip into a recession in large part due to the coronavirus.
Do I think this virus will have a major long-term impact on the world economy? No.
Over time, the market and worldwide economic output go up over
time because we become more productive with less, develop new technologies and
industries, and build and consume more as the Earth’s
population grows.
I don’t see this virus leading to an economic apocalypse… Rather, it would stir up the resilient quality of men to rebound for this 250+ year trend of the world’s GDP going straight up.
Yes, even if the coronavirus becomes a full-fledged pandemic that lasts for years. I still don’t see this happening in the incredibly unlikely case that this does become a pandemic.
Even if this does happen and the virus ends up killing hundreds of millions of people we will continue moving forward.
As of this writing, we’ve only got 4,972 confirmed deaths… We’re a long way away from a Spanish Flu type of situation with hundreds of millions of deaths… As of right now, the coronavirus getting to those levels looks astronomically far out.
Should You Panic Because Of The Oil Price War?
On March 8th, 2020, Saudi Arabia announced that it couldn’t come to an agreement with other OPEC cartel members on production cuts.
Specifically, Saudi Arabia is at issue with Russia.
Due to these disagreements, Saudi Arabia boosted production even higher. And the oil market has been in an oversupply position since 2009 when the United States figured out better ways to extract oil from rocks and other material in the so-called shale market.
This boost in production by Saudi Arabia from an estimated 9.7 million barrels per day to 12.3 million barrels per day when supply levels for oil are already high sent futures contracts on oil falling 30% in overnight trading on March 8th, 2020.
Why would Saudi Arabia do this? Won’t they be hurt by this too?
Yes. But it would take a while.
Saudi Arabia is the lowest cost producer of oil in the world at an estimated cost of $10 per barrel.
For example, United States based Oil companies are said to be “unprofitable below $30 per barrel . And as of November 2019, Russia’s estimated cost per barrel was around $43.
For what it’s worth, both Saudi Arabia and Russia say they can last years at $25 per barrel prices without issue.
While I doubt that, oil companies in those two (2) countries can certainly last longer than oil companies in the US at those prices, Saudi Arabia has a huge cost advantage, so they can quickly recover.
What are they trying to do?
What they are trying to do is make some other oil producers go bankrupt at these low and sometimes unprofitable levels.
The speculation is that they want US companies to go out of business – of course, along with harming their long-time international rival Iran.
They want to do this, to take some of the supply out of the market, so prices can rise.
They are hoping to inflict short term pain on their competitors and allies, with the hope that in the long term, this will jack up oil prices.
Is it likely to work? Yes.
Back in the 1890s and early 1900’s, John D. Rockefeller’s Standard Oil was the largest producer of oil.
Oil and gas is one industry prone to cyclicality in supply and demand.
On occasion, there will be a slump in production that will drive prices higher… And on the flip side, this goes the other way too, with too much supply driving prices lower.
This law of supply and demand has gone on in the oil industry for more than 100 years.
As the lowest cost producer, Saudi Arabia and Standard before it, can still earn profits or at least, break even, while competitors get more and more unprofitable.
Saudi Arabia is learning from Standard Oil’s playbook and trying to force its competitors to get out of business or go bankrupt.
And like I said above its likely to work… But, not to the degree that Rockefeller’s plan did.
There is far more competition today than there was in the 19th century when Standard was in power…
Oil barrels in 2019.
As of the end of 2019, total world oil production stood at an estimated 81 billion barrels per day.
Saudi Arabia ranked 2nd at an estimated 12 billion barrels per day – or 14.8% of the world’s total.
This is a far cry from the 88%+ in market share Rockefeller enjoyed in Standard’s heyday.
While Saudi Arabia has enormous power to hurt economies, companies, and countries with these price cuts… They don’t hold the enormous power Rockefeller enjoyed.
So, their strategy of cutting prices to bankrupt companies while likely to work… Won’t work to the degree that Rockefeller’s price cuts did. Not even close.
Also, if this price war continues, the individual countries who are most harmed – China, United States, Iran, Venezuela, just to name a few – will retaliate to some degree.
Whether this is by putting sanctions on Saudi Arabia or retaliating directly in economic terms by lowering trade, raising taxes and tariffs, or some combination of these things.
It’s one thing to mess with the world’s oil supply, so you can earn higher profits and bankrupt your competition. But, it’s another to destroy a major part of multiple countries’ economies.
I don’t see any of this price war as likely to last a long time.
I think it’s far likelier that the members of the Oil Cartel come to an agreement to cut production and boost prices sooner rather than later.
In the short term, this means lower gas prices for you. Which means more money in your pocket.
It also means that you may soon have the chance to buy oil and gas stocks, at a cheap price, before they go back up.
But again, what if a worst-case scenario plays out and this leads to a longer-term oil issue?
Oil companies will be hammered… OPEC companies will be hammered… Governments in OPEC countries will be hammered. And the general economy will take a hit.
Again, this is highly unlikely due to Saudi Arabia’s relatively small proportion of oil production market share.
Plus, if OPEC does go this route it will harm relationships with the two (2) largest importers of oil – and the two (2) largest economies in the world – The United States and China.
OPEC may think they can mess with one of these two (2) countries individually.
But, if they think they can mess with both at the same time, plus annoying their regional rivals by massively distorting world trade, this would lead to major economic problems for Saudi and potentially war.
Again, like with the coronavirus, I view this as a highly unlikely worst-case scenario.
Unless you own a ton of stock in oil and gas majors, and you own no other investable assets you shouldn’t worry about this at all.
Even if you do, I think it’s far likelier that this is more of a short-term issue than a long term one.
Should You Panic Because Of Historically Low United States Treasury Yields?
I could get wonky and into the weeds in this discussion but I’m going to work to avoid that… And avoid boring you to death.
Why is this important?
The United States government sells these bonds to investors to finance things like Social Security, government plans, etc.
The lower the yields on these mean the more perceived risk there is in the market…
US Treasuries are viewed by many government and institutional investors as a “safe haven investment.”
Governments and institutional investors around the world invest in these because they see no other safe place to put their money.
These bonds are widely viewed as the safest investment in the world… Not the best, not the highest returning, but the safest… As in the place you’re least likely to lose money if you invest in them compared to all other assets in the world.
With all 3 of these bonds selling below 1% for the first time in history it means investors are scared out of their minds and have no idea where to put their money… So, they buy the safest asset around.
And they keep doing this, which is why the interest rate keeps falling lower and lower.
At current interest rate yields the governments and institutions buying them are almost guaranteed to lose money over time after accounting for taxes, inflation, and transaction fees.
What this means is that these big-time investors are scared and that they don’t know what to do with their billions and trillions of dollars.
Shouldn’t this make me worry? If these guys are so smart and run so much money shouldn’t this worry me? And should I buy treasuries too?
No. and No.
I told you why you shouldn’t buy treasuries above – because at these rates these buyers are almost certain to lose money.
Plus, because these kinds of large investors run so much money, legally they must buy something… They can’t just let that money sit and do nothing.
If they’re scared, they buy US treasuries… That will reverse and more stocks will be bought when fear and uncertainty fall.
The biggest issue this shows for me though besides the fear is that no one in the world probably knows what the US government, the fed, and governments around the world will do when the next recession fully hits.
In the Great Recession governments around the world lowered interest rates to some of the lowest in recorded history… And governments like Japan and Germany even have interest rates that went negative.
Since the Great Recession this low or negative interest rate policy from governments and Federal Reserve’s worldwide has stayed intact.
So, what can the governments do in the next recession to fight it if interest rates are still so low?
No one knows.
This kind of sustained low and negative interest rate policy has never happened in the history of the modern world.
No one knows what the next recession will be like or how governments will fight it.
To me this is the scariest thing of anything on this list because again, it’s completely uncharted territory.
And its showing in the market…
Want to know the main reason the stock market crashed by 2,013 points on March 9th?
It wasn’t because of the Coronavirus.
Or because oil prices dropped 30% over night. Not because of US Treasury rates are at historic lows. Or even because of these things combined.
The market had its largest single day point drop in history because of fear and uncertainty.
Yes, the fear and uncertainty are in part caused by the news about the Coronavirus and the oil price war between Saudi Arabia, Russia, and other OPEC members.
Fear and uncertainty are the main reasons the market dropped so much.
Check this chart out…
This chart is of the CBOE Volatility Index (^VIX) – AKA the stock market fear index.
The higher this number goes the more investors and the market are afraid of what’s to come.
Notice the spike almost straight up starting on the 21st… This is when the volatility and the 500 to 1,000+ point swings in the daily stock market began.
As of this writing, on March 10th, 2020 the VIX is now at its highest level since the Great Recession began.
Does this mean we’re heading toward another major recession? Not necessarily… But when major fear and uncertainty are in the market you never know what’s going to happen.
People are generally afraid of the unknown… And we’re in completely uncharted territory here.
You can only lower interest rates, so low before people start wondering about what’s going to happen when the next recession hits.
Another reason this didn’t work was because it made people think that the global economy is in worse shape than any government or government agency is telling people.
So, should you panic about this?
Again, no.
You have no control over treasury yields, governments, or Federal Reserve’s worldwide.
None of us do… Not even people like President Trump, Warren Buffett, or Jeff Bezos.
Panicking over every decision these entities make would drive you crazy – because frankly they don’t even know what they’re doing most of the time to stem these kinds of crashes as you can see from the 2,000+ point drop on March 9th 2020.
Another example…
This all happened in 15 months from the people who are supposed to be in control of this kind of stuff… And they don’t look like they know what they’re doing.
I’m a huge believer in controlling what you can control… And you have no control over any of this.
So, what does this mean for you?
In the short term, this means that volatility is likely here to stay with some large up and down days.
Another interest rate cut is almost 100% certain to happen to keep the markets from crashing further.
And if anyone tells you they know for sure what is going to happen in the markets or with your portfolio they are lying, and you need to stay as far away as possible from them.
Should You Panic Because Of Market Crash?
If you’ve invested in the stock market for the last 11 years you’ve likely seen your stock portfolio go straight up.
If you’ve invested in the DJIA you’ve seen your shares go from 7,365.67 on February 20th, 2009 to 25,018.16, as of this writing, on March 10th, 2020. Or an increase in value of 240% in that time… Even after accounting for the massive drop on March 9th.
But, should you panic about your portfolio losing 18.9% of its value in the last 28 days?
Warren Buffett has a famous saying “If you’re in the stock market and you can’t handle a 50% drop in your shares, you shouldn’t be in the market.”
Worry, maybe.
Reassess your portfolio, definitely.
Panic, no.
Market valuations have been at or near or breaking new all-time highs for the better part of the last 6 years.
We’re now in the 11th year of the bull market’s run straight up since the Great Recession… The longest bull market in world history .
A correct of some kind – small or large – was going to happen at some point.
It was a 100% certainty.
The market can’t keep going straight up forever
And it’s been going straight up for the last 11 years – and may continue going straight up for a bit longer.
This is the longest bull market in history.
Valuation for the entire market on January 1st, 2020 was 31.23 according to the Shiller PE ratio – also known as the cyclically adjusted PE ratio or CAPE – the S&P 500.
Levels not seen not seen since the Great Recession and the late 90’s early 2000’s tech boom…
Before the crash and rebound then larger crash in the last month, valuation levels were at higher levels than even then before the Great Depression started.
Even after the crash over the last month, valuations have only been higher twice… During the Tech Boom, the Great Recession, and the Great Depression.
And after the fall of 18.9% fall in in the market in the last 28 days, valuations are still obscenely high at 26.08 as of March 9th, 2020.
The average CAPE over thee 100+ year period this ratio follows is 16.70… Meaning that even after the 18.9% fall over the last month, that on average the current stock market is overvalued by 36%.
In other words, stocks would have to fall another 36% just to get to the average CAPE over this period.
Things could get a lot worse from here still.
Or they could rebound, and the market could continue its march higher.
No one knows.
But you shouldn’t panic over this…
Yes, if you’ve kept all your gains from the last 11 years your highs on those shares have fallen – in some cases substantially.
But this was due to happen eventually.
You shouldn’t panic about something that was a 100% certainty to happen at some point… We were overdue for a correction.
Over time the market will continue going up. And your shares will continue to compound in value.
If you’re getting ready to retire within the next year, yes, this isn’t good. You don’t have the time to wait and let your portfolio compound for another 10 or 20 years.
For you this might mean you need to work another few years to make up the difference in the loss of your portfolio.
This isn’t ideal… And frankly for those getting ready to retire, it sucks.
But there’s nothing you can do about it now. Should you panic even in this situation, no?
Panicking does you no good.
Should You Panic Because of The Combination of These Things?
So now that we’ve talked about all of these on an individual level and found out you shouldn’t panic… What if we consider them all together?
Should we panic then?
Panic, no. Caution, diligence, discipline, yes.
Other than our personal space we can’t control coronavirus. And I don’t see it as likely to turn into a pandemic that kills a huge proportion of people.
The oil price war is likely a short-term event.
We have zero control over treasuries and interest rates so we shouldn’t panic about those.
The market has been overvalued for years and was due for a correction of some sort.
Individually these aren’t big major long-term economy crippling issues that I can see.
Combined, they may wreck major havoc in the short to medium term on your portfolios and the stock market.
I’m not going to lie to you.
In the short to medium term uncertainty and fear drive the market, not company or economy fundamentals.
“In the short run, the market is a voting machine but in the long run it is a weighing machine.” Benjamin Graham father of value investing and Warren Buffett’s teacher and mentor.
In the short term, this means that yes, you’re likely to continue seeing massive volatility, huge point swings, and probably, at least, a minor recession worldwide.
After that? No one on Earth knows. And even then, these are just my educated guesses based on my extensive 13+ year study of investing, business and financial history, economics, psychology, etc.
One thing I can say for certain is that you shouldn’t panic.
As mentioned at the intro to this piece… “People are panicking. But you shouldn’t be…
Panic leads to emotional decisions.
And in the stock market emotional decisions lead to bad decisions and lost money.
Today I’m going to tell you why you shouldn’t be panicking… And, what you should be doing instead of panicking.”
Prepare you and your family, yes.
Reassess your portfolio, yes.
Take precautions, yes.
Take the spread of this virus seriously, yes.
Panic, no.
Now that we’ve talked about the reasons for the market crash, why people are panicking, and why you shouldn’t, I’m going to tell you what you should do instead of panic.
What You Should Do Instead of Panicking?
1. Stop watching and reading the news
This is number 1 for a reason. Because it’s the most important and best thing you can do.
During a panic – or anytime for that matter – watching the financial news is bad for you and your investment returns.
The media is focused on bad news and the world is falling type of news stories.
Studies have shown these are the kinds of news stories that get the most views, so the news focuses on the bad… All the time.
Because of the 24/7 nature of today’s news media, something tiny like a slight miss of analyst expectations on a quarterly earnings call for large companies will sometimes lead the “horrible” news of the day and huge falls in the stock.
The news media must fill all this time with news so in many cases they will turn small things into even large things… Or at least try to.
When a convergence of bad things like the virus, oil price war, treasuries falling, and the 2,000+ point market crash this is like a perfect storm of horrible stuff for the media.
Stay away.
Their job is to keep you watching. And to do that they get excited, stressed, and emotional… Especially when something bad is going on like it is now.
Stay away from the financial news. Or both you and your portfolio will suffer.
2. If you feel yourself getting overwhelmed or emotional take a break from what you’re doing
Seriously. Do anything other than what you’re working on.
Take a walk.
Sing in the car.
Pet your pet.
Eat a snack.
Go fishing.
Write a book.
Work to improve your business.
Spend time with a loved one.
Do whatever takes your mind off the frustrating task.
Most of the time, the only thing that will help overcome your emotion is to take a break from whatever you’re doing.
Especially, if what you’re doing is going to end badly with the feelings of being overwhelmed by your emotions.
3. Reassess your portfolio
Take this time to reassess your portfolio and the companies you own.
If you own stock in a company, you should know the company intimately.
Check to see if the company has falling or declining revenue.
What about its margins? Are they up or down?
Are your investments balance sheets still strong?
If not, why not?
Is the company producing higher or lower levels of free cash flow?
Does the company still fit your original investment thesis?
Should you buy more of an investment? Sell any? Should you buy something else? Or Should you sit on the sidelines and wait?
These are all things – and of course more – that you need to figure out.
Doing these kinds of things is a far more productive use of your time than worrying and panicking.
4. But stop checking your portfolio every few minutes – or even every few days
Reassessing your portfolio means to reassess if you should be invested in an asset or not on a fundamental level.
Not that you should check your portfolio every few minutes, or even days.
I’ll go days or weeks – sometimes even months – without checking the prices of the stocks I own.
No, this doesn’t mean I stop paying attention completely.
I have Google Alerts set up for the stocks I own in the portfolios I manage.
And I check these when major news or new financials come out.
Other than that, I can’t even guess at what the actual current prices of the stocks I own are.
I’m too busy working on my businesses, helping people, analyzing investments and companies, and spending time with my family.
5. Read/learn/improve
Again, be productive.
Read a book.
Learn a new skill.
Improve a skill you have that you need to get better at.
This alone gives you unlimited time away from panicking and emotions when the market is volatile because there is always more to do, learn, and improve.
6. Anything other than panic
Panicking is the absolute worst thing you can do.
If you feel your emotions rising and that you’re getting frustrated when the market moves up and down, do something to take your mind off it.
Get away from the situation.
Force yourself to get away and take time to think before you make any rash decisions.
7. Stop watching and reading the news
Seriously… This is horrible not only for your mental health but also your physical health.
Yes, you need to be informed… But that doesn’t mean watching or checking the news constantly.
Studies have shown that the more news someone watched on TV the more stressed out and angry they are.
Stop watching and reading the news constantly… Be productive.
If you only do this on your list, you’ll become a much better investor faster. That’s how bad the news and financial news is for you.
Conclusion
Yes, I know things have gotten significantly worse in the last 10 days than the numbers and data shown above…
As of this writing the DJIA is now down to 18,173.98 in futures trading as of 8:40 PM EDT on March 22nd, 2020 after another circuit breaker market stoppage and another 1,000 point drop.
Or now a loss of almost 40% in the markets in the last 40 or so days.
The Fed is now set to pump “at least” $1.5 trillion into the US economy to keep it from crashing completely.
Reports out of The Fed now project unemployment to reach 30% in the US and that GDP could fall by 50%.
Numbers that would be worse than the Great Depression.
The world has stopped even more business and activity with many areas around the world being on complete lockdown.
Oil prices have fallen even further to just $21.35 a barrel in futures trading on the night of March 22nd.
Coronavirus stats are now as follows 336,075 cases and 14,613 deaths… And growing rapidly.
The next 3 to 6 months are likely to be either a complete halting of the economy worldwide or at worst what we’re seeing now with a massive slow down.
Things will get better though… This isn’t The Walking Dead… We’re not in the zombie apocalypse… At least as of this writing.
We’ll get through this together like we always do.
The lessons above are even more important now because people are panicking even more than they were 10 days ago when I first wrote this post
Above, I told you why you shouldn’t panic over any of the four (4) reasons for this market crash individually. And, even when considered as a combination of factors.
You also learned seven (7) things you can and should do instead of panicking that will help you.
If you don’t panic and do the 7 things above instead, your mental and physical health will improve… And your portfolio is likely to see higher returns in the future.
The more emotional and stressed out you get the more likely you are to make bad decisions.
Don’t do this…
Stay away from the media talking head trying to get you to be as nuts as they are.
Get away from the situation.
Take a breath.
Assess the situation.
Read, learn, and improve yourself.
Research stocks.
Take care of you, your family, and your community.
Take some time.
And then if you need to, decide when you can be rational.
If you can do this, you’ll not only have a massive advantage over average investors, but I can almost guarantee that you’ll earn far higher investment returns as well.
Stay rational out there.
Always in your service,
Jason Rivera
P.S. Our Free Live Weekly trainings have started again and now they are FREE to everyone. Go here to sign up to join our next weekly live training session for FREE. Our next session is Sunday May 3rd @ 9 AM United States Eastern Time. And in this training we’re going to analyze a company’s stock live.
P.P.S. Go here to get our brand new free guide titled – 7 Tips to Picking Great Stocks and 3 Times You Must Sell for free. In this guide, you’ll learn these things and more of my processes so you can begin evaluating companies better and faster, NOW.