It has been nearly six years since the Ebola scare in the fall of 2014. Recall that 1) early-mid October that year, we had a nasty panic driven sell-off in the markets and 2) we were all supposed to die from Ebola as it was destined to be the worst pandemic since the Black Plague. Instead, global medical risk management and health care advances prevented our worst fears from coming true. Doctors trumped the media. Losses from the market panic for Ebola were recouped by Halloween.
You can play microbiology Mad Libs and substitute: i) SARS ( a strain of Coronavirus) and 2003 or ii) H5N1 Avian (bird) Flu and 2006 or iii) MERS ( another Coronavirus strain) and 2012 or iv) H1N1 Swine Flu and 2009 or v) Zika and 2016; for Ebola and 2014 above.
You do not get the Coronavirus by drinking Corona beer ( some people actually believe so ). However, it does appear to be spread by the consumption of exotic animals – snakes, panda bears, bats,etc. Coronavirus emanated out of China. This time around, the PRC are getting in front of the outbreak by building makeshift hospitals and quarantining some cities. Here in the United States; where so far four cases of Coronavirus have been reported; we have excellent agencies to handle disease outbreaks – the Center for Disease Control (CDC) and Food and Drug Administration (FDA).
Also understand that only a small portion of Coronavirus infections have resulted in death. Many of those who died were elderly or in poor health. Compare this to, according to the CDC, so far through last week, in the 2019-20 flu season, there were 15-21 million cases of some sort of flu in the US of which 140,000 to 210,000 required hospitalization and 8,200 to 20,000 resulted in death. This all resulted despite a multitude of American citizens and residents being inoculated for the flu. In other words, you are more at risk from getting a more common version of the flu than contracting the Coronavirus which may not be as deadly. Then again, who am I to ruin a good panic?
I suggest not traveling to China or another nation with lower health and food standards. Also, if you are going to consume protein, stick to chicken, beef and non-crustacean fish. Better yet, eat kosher.
As for the markets, we were poised for a pullback. Clearly now, the reason for such a pullback was Coronavirus. I have to admit that I got caught on the wrong side of a China trade. I had begun to accumulate Lukin Coffee (LK) which was poised to seriously challenge Starbucks’ (SBUX) stranglehold on the Chinese market. All was going well till Coronavirus broke out. Now I have to risk manage LK without sacrificing my long term thesis on the company’s outlook. Since these viral panics tend to last two to three weeks, we will just have to take a few lumps while the panic runs its course.
Interestingly enough, this week is one of the most active one for tech earnings. We have eleven companies reporting results this week in the LakeView Asset Management Growth Strategy, including megacap stocks Apple (AAPL), Boeing (BA), Microsoft (MSFT) and Qualcomm (QCOM). In the fullness of time, earnings will trump Coronavirus. Also sharing the media spotlight this week will be the death of Kobe Bryant and the continuing trial in the US Senate.
So, strap on your football helmet and take a few tums because the market will be a bit topsy-turvey this week. My greatest concern is how and when those computerized algorithmic programs get triggered by headlines. Forecasting a pullback, I put some hedges on last Friday in the Index Strategy and lowered the risk profile last week in the Growth Strategy. Feet to the fire; we bottom sometime Tuesday or Wednesday of this week. Thus, you will have an opportunity to add fresh funds early this week to get deployed when the Coronavirus panic subsides.
Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView Asset Management, LLC was long MPC - although positions can change at any time.
Scott Rothbort is the President & Founder of LakeView Asset Management, LLC, (LVAM) an investment advisor representative, specializing in high net worth private wealth management. LVAM is affiliated with Kingswood Wealth Advisors Services, a registered investment advisor. For more information on investing with LakeView Asset Management, LLC call us at 888-9LAKEVIEW or request more information by clicking on the contact button on the top right-hand corner of the website. LakeView Management, LLC is a Nevada LLC, with its principal office located in Henderson, NV and branch office located in Millburn, NJ
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