My Message From Ground Zero: Invest Right Now
I never thought it could get worse than 9/11, but I was wrong.
This is much worse. New York City is empty.
Almost every store is closed, there’s no traffic in the streets, and the sidewalks are empty of people.
The coronavirus kicked New York right in the teeth.
We’re now at the epicenter of the coronavirus pandemic, with more than 3% of cases worldwide within the five boroughs.
There is a shortage of hospital beds, ventilators and testing kits. New York is the canary in the coal mine.
Unfortunately, what’s happening here is going to play out across the nation.
In reaction, the stock market has plunged. It had its quickest 30% drop since the Great Depression.
But no one that I know of has ever tried to value stocks based on no customers, sales or earnings.
While the situation looks bleak right now, keep in mind that this will not last. It will have an endpoint and life will carry on.
Us Americans, and especially us New Yorkers, are optimistic people. We’ll figure out a solution sooner rather than later. You can take that to the bank.
The stock market will work its way out of this and be materially higher in the foreseeable future.
So, do yourself a favor and stop worrying about the minute-by-minute market moves.
Instead, take care of your health and the health of your loved ones. That’s where your worry and concern should be focused on — not the stock market.
To hear more from ground zero, watch my video below:
So, is this a good time to invest in the stock market? My quick answer: Absolutely. Here’s why.
Let’s Set The Stage
Panic is in the air. No question about it.
The stock market unraveled in the past 30 days or so. It’s the fastest 30% sell-off ever. It took only 22 days for the stock market to fall 30% from a record high that it made on February 19.
This 30% drop is even faster than what happened during the Great Depression. It’s amazing.
The coronavirus pandemic hit the United States. New York is now the epicenter with 3% of all cases worldwide. New York City really is the canary in the coal mine. What happens here is going to happen in the rest of the country.
The U.S. economy is shut down. People are told to stay home. Consumerism has just dropped. No one is buying anything anywhere. And the economy is basically at a standstill.
Now, market pundits are talking about another big leg down, even greater than the magnitude that we just had with this first 30%.
So What Should You Do?
I’m going to share with you four things that you should do right now that, without a doubt, are going to make a big difference between how much money you have today and how much money you’ll have five years from now.
No. 1: Relax. The world is not ending.
This downturn and pandemic will have an endpoint. I’m almost sure we won’t be discussing this like we are now in the next two to three years. This too shall pass. The United States has a resilient economy. We have great industries and we have extremely resourceful people.
This will pass, and there will be an endpoint to it.
No. 2: Don’t panic.
Panic causes you to make wrong decisions. You don’t think clearly. When you panic, it short circuits your decision-making process in your brain and messes things up. That’s when you die here.
I’m not talking about dying — I’m just talking about making stupid mistakes. If you feel like selling your stocks or swearing never to invest again, take a second or two to think about it.
Don’t do something you’re going to regret later and derail your goals and your financial future.
No. 3: Remind yourself why you invested in stocks.
Look, let’s be real frank and simple about this. For the past 100 years, stocks have returned about 10% per annum … Government bonds, less than half that.
So why do stocks return higher? Simple … Because owning a stock requires you to accept uncertainty.
If you want certainty, go buy government bonds. You won’t lose money, and you could guarantee what you’re making … You just have to live with returns that are less than 1%.
In life, there’s always a tradeoff. If you can’t live with uncertainty, don’t invest in stocks. But if you can live with uncertainty, your payoff is going to be higher returns.
No. 4: Ignore the noise.
Keep in mind that a stock is really a piece of a business that trades in the public market. That’s all the stock is.
The underlying worth of that business doesn’t change hourly or moment-by-moment. Just because there’s a price every moment of the day doesn’t mean you have to do something.
You don’t have a ticker on your house, your car or your private business. But you do have some idea of what it’s worth. Same thing here.
The long-term value of a business is simple. It’s based on the stream of cash flow that this business will generate for the foreseeable future, discounted to present value. And that’s the stock price.
For many businesses, this hasn’t changed even through the last four weeks or so.
Now is a great time to invest. As prices fall, the trick is to look for businesses that are financially sound and will be able to survive this economic downturn — no matter how long it’ll be.
Think LONG Term: Examples
Facebook has $55 billion cash on their balance sheet. Google has $120 billion, Microsoft has $134 billion and Apple has a staggering $207 billion.
I am highly confident that these businesses will be materially higher five and 10 years from now. And right now, they can withstand the storm because they have huge, huge financial assets. Right now, their stocks are trading at great valuations.
In fact, we haven’t seen these kind of valuations in years. That’s why it makes sense now to be a buyer, not a seller.
If prices continue to go lower, so what? You’re a long-term holder of stocks. You should be happy.
As 1930s actress Mae West said, “Too much of a good thing can be wonderful.”
It’s always a good thing to buy great businesses as their prices go lower, because you will be rewarded in the foreseeable future.
So, if you’re starting your portfolio now, God bless you. Congratulations, you picked an outstanding time! In fact, you picked one of the best times in the past several years.
If you’re already invested, just one thing: Make sure that what you own is financially sound like the businesses I mentioned above — which all happen to be trading at really great valuations.
In conclusion, every seven to 10 years, the stock market shakes out the weak hands. This is just one of those times. Now is the time to take notice.
And you can do a few things…
You can sit on the sidelines and do nothing, you can panic and sell or you can take advantage of the opportunity. Because what you do now will greatly impact your net worth five years from now.
But the point is, the long-term investor who’s able to deal with uncertainty is the one that’s going to come out making money.
Editor, Alpha Investor Report