In our last letter, I tried to convey a sense of urgency while remaining calm and hopeful during this difficult time. However, I have found that sustaining that positive mental state is easier said than done for me personally. Some clients have told me they are struggling as well. Below are some thoughts I wrote for them on maintaining equanimity and hope, both for their investment portfolio and for their health. I hope it is valuable.
I have been encouraging clients to "close their eyes" as it were. Watching the value of one's portfolio fluctuate up or down by 10% every day will cause a lot of needless suffering. No question, things are really bad in the markets right now, and everyone's portfolio is hurting. We're managing as best as we can, which admittedly is not as well as we had hoped.
Though things appear grim, this too shall pass. It is important that investors not abandon their investment discipline when the market takes a sharp turn for the worse, or they will not benefit from the rebound when it comes.
During times like these, the vast majority of investors need to sell assets to raise cash. This depresses asset prices. Further, because of all the volatility and uncertainty, in some cases the proverbial baby has been thrown out with the bathwater. Great businesses with strong balance sheets who we think should emerge from the crisis relatively unscathed can be bought for very cheap.
This has created very attractive investment opportunities -- better than we've seen in many years -- for the few who do have spare cash to profitably put it to work. We hope to be able to stay calm and take advantage of any opportunities that are caused by the panic selling and short-sightedness of others. As such, we are encouraging clients who have cash on the sidelines to consider investing it today.
Re public and mental health
Unfortunately, the headline numbers are going to get much worse. The virus has been spreading unimpeded for weeks, and we've only just begun to take the social distancing steps necessary to slow the infection rate. Therefore, tens of thousands of people are already infected.
Those infections haven't shown up in the official numbers yet because of the dearth of testing and the long, asymptomatic incubation period. We are finally catching up on testing, however. NY state is now processing 7,500 tests per day by itself. That's significantly more than the entire country was doing just a few days ago.
Therefore, we are going to find tens of thousands of "new" cases over the next few weeks. This might all sound negative, but it isn't. We already knew those cases existed! This isn't incremental bad news. Actually, it is good news: every new case we find will help us properly care for those who are sick, trace their contacts, and keep them from infecting others.
I'm hoping to bring this attitude to my daily life. Every time I hear of a jump in cases, rather than thinking, "Oh no, more people are sick!" I'm going to try to think to myself, "Good, we found where this thing is hiding. Now we can treat and eradicate it." Maybe that attitude can help us all deal with what is sure to be a steady drumbeat of negative headlines.
We can also take some solace from the experiences of other countries. China reported no new local infections for the first time. South Korea, which was finding about 800 new cases per day, is now finding less than 100. These countries are past the peak.
Now admittedly, those two countries are different than ours. South Korea was much more rigorous about testing and containment than the US was initially. China implemented a much more draconian lockdown than we'll ever be able to do in the US. So it's unclear how many weeks we are behind those countries. But, eventually, we will get there too.
There's also good reason to hope that a vaccine or effective treatment will be found in the future. The whole world is focusing its attention on this disease. I have deep faith in the ability of humanity to solve any problem it puts its collective mind to. There's even hope that existing drugs may help ameliorate the effects of COVID-19. For example, chloroquine is promising, not to mention cheap and widely available.
My friend works for the meditation app company 10% Happier. They are doing a free daily live webcast specifically designed to help people deal with the stress of this difficult time. I haven't tried it yet, but it may be helpful.
All the best,
Bireme Capital LLC is an SEC Registered Investment Advisor. Registration does not constitute an endorsement of the firm nor does it indicate that the advisor has attained a particular level of skill or ability. This piece is for informational purposes only. If not specified, quarter end values are used to calculate returns. While Bireme believes the sources of its information to be reliable, it makes no assurances to that effect. Bireme is also under no obligation to update this post should circumstances change. Nothing in this post should be construed as investment advice, and it is not an offer to sell or buy any security. Bireme clients may (and usually do) have positions in the securities mentioned.