Dazed and Confused

Is that what you’re feeling about the world right about now? I can’t blame you. Just a few days ago I was planning to attend a business meeting in New Orleans next month. I was going to go a few days early so I could take my granddaughter and we could attend the Bourbon Street Festival. It was to be her 18th birthday and high school graduation gift. We changed plans when she found out her Senior Prom was that same weekend. Since then my business meeting has been cancelled, the festival has been cancelled and her Prom has been cancelled.

When someone comes in to my office now I just say “hello.” We don’t shake hands.

Life has changed in a major way in only a few days. Officials are discussing a trillion dollar stimulus package because of what they believe could be an economic slowdown so bad that the unemployment rate could spike to 20%. That could send us, and indeed the world, into a major recession, and possibly a depression.

I honestly did not see the enormity of this problem coming. In fact, I sort of made fun of it a few weeks ago on my radio program. But as the market started falling I got more serious about it. The Dow reached a peak on February 12th at 29551. Even though there had been a 600 point drop on the last day of January, it quickly recovered the next week. There it hovered above 29000 until the 21st. The first 1000 point drop happened on February 24th. It dropped almost 900 points the next day. The economy still looked good. The unemployment numbers came in and showed a much larger than expected new job creation report. Everything was happening as if the virus didn’t exist.

But why was the market dropping so fast? Our primary managed accounts were in the market until I sold off half of our securities at the end of February. Our research was telling us to stay in the market. We sold another 25% on March 9th and the final 25% on March 10th. The Dow dropped more than 4500 points before we finally and totally exited the market with those accounts. Since then, it has dropped another 4900. The question now is when do we plan to re-enter the market?

By every normal valuation we use, stocks seem to be pretty cheap right now. I would think that in most cases I would start streaming assets back into the market. But this isn’t most cases. This case is unlike any we have ever seen. This is America. When was the last time you were told you couldn’t go to church? In China they’re told that all the time. But in America? NEVER!! When was the last time you couldn’t go out to a restaurant because the state had shut their dining areas down? Never. When was the last time you couldn’t go to see a movie? Never. Ferrari is shutting down their car manufacturing to make respirators. Ford, General Motors and Chrysler are closing their factories. Malls are closing and their workers are being laid off.

So even though stocks are seemingly cheap at this time, I may be wrong, but I don’t think the carnage is over. The Dow has already dipped into the 19,000’s. I believe it could fall into the 15,000’s before this Caronavirus is on its way out of town and things start to return to normal. When we see that, no matter where the market is at the time, that’s when we’ll begin to feather the assets we manage back into equities.

I, and the entire staff here at ProVest, appreciate you so much. We are so grateful for your belief in us and in what we are doing. Our goal is to exceed your expectations in service and performance. We are so grateful the Lord has blessed us with your friendship and your business.

Stay with us. As long as this siege is with us, I will often send out communications to let you know what we are doing. You don’t have to read them all, but I want you to know that we remain here, ready to reply to any requests we get and to let you know what we are doing. And please call me if you have any comments or questions. As ET said, “I’ll be right here.”