The Flight Path of a Lead Balloon

Mike Williams | 7th February 2020
Categories
Letter from America

Don't overreact…again.

The addictive nature of this headline-a-second, scrolling soundbites, and 280-character "life in a few lines" world can carry terrible financial consequences if you lose sight of the bigger picture.

For example, some 500 people have perished from the coronavirus, and that figure is likely far higher than already reported. 

But as the media boils the ocean on that tragic loss of life, the bigger picture reveals that a regular flu season in the US alone claims between 12,000 and 60,000 lives each year.

In the US alone!

History suggests that before this normal flu season is over, hundreds of thousands of cases will have been treated and (if we hit the average) some 20,000 to 30,000 will not exit the hospital alive. 

(It was far worse in years past.)  

Today, more medical problems than ever before have treatments available. Science, tech and medicine are all coming together at lightning speed to formulate even more productive solutions to all the things that ail us.  

And Generation Y will flood the market with kids, fresh out of school on their circa $300,000 educations, who are more than ready to click, search, analyse, test, program, and find even more solutions.

So, don’t overreact as most tend to when Coronavirus haunts the headlines, just as we peel our minds back to the scaremongering attributed to SARs, Bird Flu, Ebola, killer bees and so many other alleged world destroyers.

72 Hours

The markets have been emulating the flight path of a lead balloon of late.

Over the last three trade sessions, markets ended last week imitating the flight pattern of a lead balloon. 

That thud you heard on Friday of last week was the indices ending hundreds of points down on fears that the "outbreak" was going to consume the world, destroy the economy and drive us all into the streets to cook our food in trash cans on the corner.

Let the looting begin.

And there’s bound to be zombies arriving at some point. 

There are always zombies at the modern apocalypse.

Then (at the time of writing) earlier this week the indices basically rose back to where they were on Thursday of last week, (give or take a few points).  

So, after the mess of the first month of 2020, and the gyrations blazing a trail into the foggy future ahead in the first days of February, where does this stand so far?

Not as painful or as worrisome as one might imagine:

  • NYSE Composite     -0.36 
  • Dow Jones Industrials 0.94 
  • S&P 500 Index 2.07 
  • NASDAQ Composite 5.52 

Now, make no mistake that bumpy rides, sharp turns, enhanced volatility, and more than a few dizzying gyrations will see the tech world in the next 10 years overtake almost all we currently know.

Generation Y is tech. All tech. 

Think about: 

  • The decade has just begun, and I get a sense of fatigue already. No fret, but do know that the early 1980s were choppy as well as the Baby Boomers took the reins of the future. After a few choppy quarters, that generation drove GDP growth and wealth creation like no other generation before it.  
  • Generation Y and its technology-laden brainpower and expertise will make the Boomers look like they were walking in slow motion for decades to come.

So, hang on, buckle-up, tighten that belt, grab your popcorn (and your TUMS) and hold on for the ride.  

The game is just getting started and as we have seen in recent days it only takes a week or two of pause and red ink to terrify almost the entire audience.  

We Have a Choice…

We can participate in the fear-laced world of perceived ghosts and goblins (and zombies).

Or we can pay attention to our goals, our time, our pathway, our years of wealth-building ahead.

And that choice involves whether or not you decide to pay attention to things like this:

And they’re all driven by this:

Yep, that’s the 10-year "fear-trade" yield down at near 20-year lows again this past Friday.

You get the cycle, right?  

Bad headlines, doom-laced hype, scary sounding soundbites, a run from stocks into 65-times-earnings bonds - all causing rates to fall, saving money for more homeowners and corporate entities - then driving more jobs and more benefits.

And the beat goes on folks.

Stay focused, disciplined, patient.  Your pathway, your goals, your family's interests are all the indexes you need to plan for ahead.  

We have plenty of earnings left.

And then we get to face the political calendar all the way to the election.