Wait 'till the sun shines Nellie

Over the past few weeks the American population has witnessed an enormous amount of fear surface socially and financially as a result of the corona virus. This fear has manifested itself in the form of social distancing and a selloff in financial markets not witnessed, by some accounts, as far back as the great depression.

As someone who has spent the last 28 years of my professional life associated with the financial markets, I have witnessed numerous periods of economic stress and turmoil. I began my career of the floor of the NYSE as a specialist clerk in 1988 just after the “crash” of 1987. Gained my market making education under fire during the nineties and the dot com bubble and bust, followed by the tragic events of 9/11. Before leaving the floor in 2011 to start a capital markets consulting firm, I managed a designated market making firm through the “great recession”.

Now this!

I had little time, during those periods, to watch the news as I was focused on maintaining fair and orderly markets and managing the financial risk of my firm. I, like millions of Americans, have been working remotely and practicing social distancing. Because it’s in my blood I usually tune in quietly to a well-known financial channel in the background just to keep an eye on what’s happening in the markets and have to admit I find much of what I hear troubling.

At the end of last week, one of the financial channels interviewed a well-known hedge fund manager to get his view of the turmoil in the markets. To my amazement, he began to offer his opinion of the impact of the virus on society. He actually went so far as to say that it wasn’t completely unrealistic to estimate 1 million lives could be lost. While I’m sure he has access to health professionals and detailed information, as a former trader I couldn’t help but wonder why, when the market was already down 25% would he be stoking the fear? Was he short? Was he attempting to drive prices lower so he could enter positions at lower prices?Keep in mind this is the same individual that a week later was back on air explaining he made a $2.3 bill bullish bet on a recovery?? He has also played this game in the past, using the media to influence a reaction which would benefit his positions. I found his commentary completely irresponsible.

Just a month ago the market was at an all time high. Based on the fact that interest rates and inflation were low, corporate balance sheets and profits were strong, unemployment was at a historic low, it seemed as if it wasn’t a matter of if we would hit 30,000, but when. If you were to tune into the financial channels you would find most market pundits voicing their opinions that stocks were headed higher. The economy was strong! Tune in today and I hear the same pundits trying to figure out whether they would be buyers at these levels. 

Really?

In my mind, this is a generational opportunity. It is an opportunity for those who “missed” the market move of the past decade, it is an opportunity for young adults to build wealth through stock ownership and a chance to potentially bridge the wealth gap. Panic has always bred opportunity--just ask Warren Buffett who arguably is the greatest investor of all time. He waits for market panic and accumulates positions at severely depressed prices and holds on for the long term. While no one can pick a bottom and there’s been a great deal of financial pain over the past few weeks, in my opinion there should be more focus on optimism and the opportunity to participate in our recovery through these times. We have experienced difficult periods in our past and have always come out stronger on the other side. History has proven that we as a nation are the most resilient, innovative and prosperous in the world.  

Invest in the U.S.A. --the clouds will part and the sun will shine—this too shall pass!