A House of Cards --- Pt. 2 (Debt - The Gift & The Curse)

First, I wanted to apologize to a reader. When I was asked in my last post whether I thought the system is built like a house of cards --- I said I wouldn't use those words. But in fact, I actually did  just that during the financial crisis of 2009. See here: A House of Cards Pt. 1  🎴

Sorry Bill Maher, it was my very rare attempt at trying to be politically correct but I got caught so I thank the readers for keeping me honest. I recently spent some time reading my own posts from late 2007 into 2010 to remind myself of what we lived through in the last crisis. There were the market highs I wrote about in 2007 which were peppered with my incessant rants about the housing market being eerily over inflated. My saving grace was the Lord blessing me ☝ with an opportunity to be in town while my sister was house hunting for her first home. While I applauded her for getting a newly built home for a great price, I kept giving her grief for moving to the boondocks --- yep right across from cornfields. I soon began my path to homeownership and then stopped. My sister made more money than I did but somehow I was pre-approved for a loan almost double her amount. It didn't add up so I told myself back in 2005 something doesn't feel right. But what's the saying if you build it they will come. And of boy did they ever -- the city continued to extend and while some cornfields are still there, I see less and less as the years pass. I guess that's the perfect picture of the America dream, the big home -- but who is going to stop you when you can't afford it. My accounting background saved me I guess.

While I would love to get back to what I'm buying and selling, my goal right now honestly is on educating people about risk. I'm blessed to be able to sit back and write a blog because I have a rainy day fund built to withstand this disease and economic fallout still to come. I de-risked by moving my retirement fund to cash --- because it's purpose is just for that...RETIREMENT. And I'm blessed with a pot of funds I've saved over the years to take risks at a time when many are unfortunately being squeezed. These are pillars that you can implement to ensure you're built to last. And what I hope will stay with you is I did it the old-fashioned way --- I saved day after day reminding myself I grew up po' middle class and I'm not in a HURRY to go back. With 2 cars both going on 15+ years of age means, our cars are paid off (one less bill to fret about). Yes, they are showing their age and one is in the shop but that repair bill is looking better and better that getting a fancy new car in an environment like this. When my wife was my then girlfriend, she would jokingly introduce me as the guy who bought a new home but got his coach off of Craigslist. Yup that was me, but I shop well and it was Macy's higher end furniture and I helped a couple who needed it gone because they had to leave for Australia. But on my financial terms and that coach is sitting in my second home and still complimented to this day. 

When I think about this crisis, I wonder how much pain it will inflict physically from the disease, economically to the country, financially to all of us, but emotionally to most of us who did not or unfortunately cannot save enough to weather the storm to make rent or the mortgage or the car bill or the utilities. It makes me wonder how many lives could have been saved if the country did not need to remain "Open for Business" because of the curse of debt. I stand in awe at stimulus package after package that is thrown at this crisis and think about the gift it will provide to many to reflate the economy. I hurt thinking the richest nation does not have enough equipment to battle the viruses newest target --- the great people of New York, especially New York City. Two people to a respirator was an update I heard today and I was in disbelief --- mainly because I had spent over a month watching Eunice Yoon, a CNBC reporter from China day by day paint a vivid picture of how a bustling nation like China was slowly ground to a halt. Wuhan in lockdown, then further cities like Beijing take stringent precautions. Bleaching of streets and temperature readers shown on TV and then she would narrate about the strict restrictions just to get into her building which included ID and temperature checks. If this was in January and Wall Street and I were digesting this information you would assume we were preparing for what was to come. CNBC is a channel I'm positive many in the White House had turned on just as I did each morning. So hopefully you understand where I was coming firm almost a month ago when I was frantically asking for things to be locked down. My goal is not to ruin the dream, just a reminder than lives were at stake.

-------------------------------------------Debt - A Gift?-------------------------------------------------------------

A quick story of the gift and curse of debt. This a Bloomberg story on my buddy Tilman Feritta. I have a nice stake in Ceasar's which I think Tilman does as well so I wanted to highlight how debt is used to lever up to be a rock star. He is feeling some pain but it's a quick insight into how those more fortunate will not suffer like many others will. My next posts will show you the other side. 

Tilman Fertitta:

• Personal fortune of over $5 billion before the crisis.
• Most of his wealth is in the travel and leisure industry:
• Casinos -- Golden Nugget 🎲
• Restaurants -- The Landry’s Inc. portfolio includes Del Frisco’s steakhouse and Bubba Gump Shrimp 😋
• Sports Franchises - Houston Rockets🏀

Tilman has worked hard but he used an amazing amount of DEBT 💰💰(financial leverage) to amass his empire. How you ask:

• Well, leverage of course. He took an outstanding amount of debt out against all the companies he owned. To the tune of roughly $5 billion against Golden Nugget the parent company for his restaurants and casinos. So there is a big risk he could lose this part of his empire due to the crisis. 

How might this play out for Tilman, maybe coin flip odds in my view:

• Heads -- Confident the company will have access to enough cash to weather the storm
• Tails -- Fertitta said: "This year, his restaurants and casinos were expected to generate well over $700 million of cash, more than enough to pay $250 million to service the debt and invest as much as $200 million in new projects, he said." "That leaves you with around $300 million of free cash flow,” he points out. “I don’t think it’s a bad business model.”  

Heads would definitely require a sizable bailout and the economy being jump started within a few months. Tails if feels like he acknowledges I built the thing on steroids 💪 and if he loses he went out like a true Texas cowboy.

No worries on how this story plays out because the Houston Rockets, his bankroll, and other properties he owns are not tied up in his highly levered businesses. Great risk management Tilman but how many folks on main street will have an outcome with odds like this. 🤔 I hope we all have heads or tails outcomes like this as we learn more about how our economy works.

Source: Bloomberg Davide Scigliuzzo

The Government Makes It Rain --- Stimulus To the Rescue

Coronavirus Update – Shutdown Has Finally Started

Thanks to the great leadership exhibited from New York, California, and Chicago the nation is slowly shutting down city by city --- and state by state. While unbelievable, this is very necessary to starve the virus. There will be debates on how long and I remind people to look to China’s recovery and the timeline they used. For example, Wuhan the epicenter of this crisis will remove the lockdown on April 8th. SO the reality is the longer the better for the hotspots. Why I demanded leadership --- one voice, one plan. Providing risk consultation to large corporations puts you in a position to see some amazing dynamics. People will not do thing unless they know the order has come from the top…it appears countries are no different. The shutdown should be federal because if we all go into shelter at the same time, you hope we can plan to exit strategically around the same time. Let me give you an example, if you have a missing child, technology (like the Amber Alert) has allowed for us to receive notification all at the same time rather than piecemeal.  This speeds up the likelihood of finding the child much better than sending it to one police department at a time. If the coronavirus shutdown does not come from the top, when one state recovers my question is: “Does that state allow you to travel or accept visitors from states that did not shutdown at all or that shutdown much later than your state did. Essentially this recovery could drag on longer than needed if we cannot move in a cohesive manner as a country. There could be a lack of trust in the air which is why I believe countries like Italy, China, S. Korea and others when into lockdowns all at once. Make It Rain – Last Resort to Inflate the Economy I am hoping for better coordination so we can begin to recover quicker and get the economy going.  The importance of the pillars we work on so hard here is to help you during these exact moments. If you have savings, you have some cushion during these bad times. See these articles, ripped from the news headlines: “Many Americans Biggest Worry is April 1st Rent and Mortgage Payments”  -- Washington Post “Real Estate Billionaire Barrack says Commercial Mortgages on a brink of Collapse” – Bloomberg “Jobless Claims Soar Past 3 Million to Record High” -- CNBC  “Mortgage Rates Surge to Highest Level Since January” – Marketwatch “2 Trillion Dollar Stimulus Package” --- See below These are just a few of the necessary reasons why the Federal Reserve is making it rain. It’s basically a blank check to shore up the economy until we can get a handle on the COVID-19.  Like in 2008, the market has responded with a rally since a “handshake deal” was announced just a few days ago. This rally will likely continue into the actual signing of the bill. Use this an opportune time to trade in the relief rally that is not uncommon. But when the dust settles, I am still not risking my individual retirement account funds at the moment because we know there is more to come. Mortgages need to be paid, the rent is due, businesses are asking for a bailout and jobs are being shuttered. Hopefully all this is temporary but it is a big risk. I don’t see an all clear sign, just yet. Urb Lesson of the Day:  Account Diversification · Savings Accounts – Gets you through the rough patches in life · Investment Accounts – Allows you to take risks when others are NOT – like today · Individual Retirement Accounts – This is truly for your future, why NOT wait for a sign that the recovery is strong

Individual Retirement Accounts - Being The Boss of Your Retirement

Investing In Yourself – Using Pillars to Build Your Core	https://urbanomics.blogspot.com/2015/04/urbanomics-pillars-path-set-for.html
Setting Budgets + Saving for Black Swans	https://urbanomics.blogspot.com/2013/02/personal-finance-budget-101-free-credit.html
	https://urbanomics.blogspot.com/2019/11/hey-henry-high-earner-not-yet-rich.html
How to Open My First Brokerage Account	https://urbanomics.blogspot.com/2015/04/personal-finance-101-starting.html
Diversify your Life (Mind, Body, Soul, + Investments)	Search My Blog

Coronavirus Update – Do You Think They Are Listening To Your Plan?

I’ll make 2 quick assessments.  I’m of the belief that we are moving too slow and in a fragmented manner. Tone at the top, is when the highest leader of an organization sets the direction and PLAN which gives everyone instructions on what to do.  Assessment  1 -The tone from our leaders has been slow --- despite the rumors people are spreading--- there is no “National Holiday” that has been declared. Something like this would have to come from our President and federal government.  So what does that mean, you need to be listening and looking to your local city and state leadership for direction because each and every city will deliver their own instructions. This is fragmented and leads me to believe that the handling of this outbreak will take longer than may be needed.  We’ve gone from different messages: a) go about your daily lives, b) social distances, to c) hunker down??  Very early on you saw that I’ve called for a national holiday. This approach goes further than social distancing because it tells everyone to stay home but reassures the masses that they can pay bills if they cannot work from home. You identify the sick, give them help outside of our fragile hospital system, don’t expose others, and try to assist the stores and restaurants with supply chain and safety measures for shoppers. For example, set limits against hoarding and push people to order ahead and people of means can continue ordering from restaurants thru delivery if done safely.  Assessment  2 -  I called for testing --- this reduces the panic in the air. The truth is if you show any symptoms of any type of sickness you need to isolate yourself, remember there is no cure. But testing helps to comfort us and know what we are dealing with. Thanks to companies like Roche Diagnostics stepping up, they are producing over 400K testing kits each week to now assist the country.  The elderly and vulnerable need to seek help first and if you think your symptoms are progressing then you should seek assistance. So currently, I know some people are still physically going to work and I can attest not everyone is an essential employee. I know some schools are still open. This uncoordinated approach IMO delays stopping the spread.

What Comes Next?

Well let’s think about what I’ve laid out above.  A fragmented approach is leading to companies and schools closing on their own terms. By not doing it in coordination you will now have a fragmented and unclear approach to layoffs, furloughs, and how employees get paid. Even if you can work from home, what decisions will your company take if their sales/productions/revenues dip?  Remember this is NOT just in America but across the world. So my math leads me to believe that things will get worse before they get better and yes that means Recession signals.  I’m mentally planning for a Recession and making minor adjustments.  1st Budget and Save à  If the government does NOT help out you and me (main street) you need to build and rely on your saving to ride through the rough patch.   2nd Renegotiate Bills à Call everyone but the Water/Sewer, Gas, Electric Cos.  If you pay for cable, internet, cell phone, and mortgages now is the time to determine if you need that service and IF they value your business. For example, sorry Sports Fans – if all sports is canceled do you really need the Sports Cable Package?? 3rd Refinance à Because of poor leadership, the markets are panicked. For example, you’re not crazy if you got a response from a bank last week quoting you pretty bad rates. I learned that the market which buys mortgage products seized up. Good news is call back, the Federal Reserve last night indicated they will directly begin buying mortgage products so RATES SHOULD START going back down. Don’t settle Me personally, I can’t watch the NBA, English Premier League, or March Madness right now so it’s time for cable to go. My refinance is in progress and I’ll keep you posted on my savings.

What About My Retirement?

Once you have your budget in-line, the savings will slowly start to roll in. Then it’s time to think about your individual retirement account (IRA). I don’t like to advise people on what to buy and do because we all think differently. If you read what I posted above, my thesis is the actions NOT being taken by our leadership will prolong this crisis. If my thesis is correct, the market will fall further and we may technically reach recessionary levels.  The reason I like to invest is you can tell the real from the fake. Many people like to give you their opinion, but would they place their own $$ on what they are telling you. To mess with people, I often ask them would they be willing to bet on it…and that’s when they get quiet. If you have done the work, the rest is to follow your instinct.  I have a savings account that allows me ride this store out no matter what happens. That allows my IRA to truly be just that…a retirement accounts.  So for my real ballers, think about this concept. If you believe the markets are NOT going to do well for awhile --- why stick around. I call it my Sandlot Move à I take my ball and leave, like Jay Z said “I don’t need the NFL, the NFL needs me”.  If you don’t know what he’s talking about here --- keep working on the pillars we lay out here and you soon will. I make moves when I say so and in this environment, I don’t need to put my retirement account at risk because some guy in an ivory tower tells me wait it out. So what if I miss some of the rebound, I’m still good. I’ll catch the markets when I can go to an NBA game again --- or maybe an NFL game Jay J

Urb Lesson of the Day – Individual Retirement Accounts (IRA) are not something to be taken lightly. First diversify your IRA. My buddy told me something that I thought was no longer widely practiced after the days of Worldcom and Enron going out of business. He mentioned he had most or all of his 401K retirement account in his company stock.  It’s great to be a believer in your company but you must be diversified.  Before Enron: Many companies matched 401K funds in Company stock. Employees were often required to hold the stock until retirement or closure of the account. That IS NO LONGER THE CASE. You're more than welcome in leaving in all company stock but know you are gambling and not investing. You could win BIG or go BUST.   My advice is even if you work at Apple, ensure that your entire 401K is not in company stock AND if your match is in company stock --- elect to have it go cash (Stable Value Fund) or something like the S&P 500. Then later when you evaluate your account (each month or quarter) you can CHOOSE to have some of it going to company stock. Never let someone choose for you. Boss move

Coronavirus / Bear Markets --- What to Do With My Investments?

Investing In Yourself – Using Pillars to Build Your Core	https://urbanomics.blogspot.com/2015/04/urbanomics-pillars-path-set-for.html
Setting Budgets + Saving for Black Swans	https://urbanomics.blogspot.com/2013/02/personal-finance-budget-101-free-credit.html
	https://urbanomics.blogspot.com/2019/11/hey-henry-high-earner-not-yet-rich.html
How to Open My First Brokerage Account	https://urbanomics.blogspot.com/2015/04/personal-finance-101-starting.html
Diversify your Life (Mind, Body, Soul, + Investments)	Search My Blog

Thanks for tuning in. I've heard from so many people so these discussions will frame my upcoming blog posts. For example, I raised the discussion of what to do with your retirement accounts so I'll be addressing that soon. This week, I fielded multiple questions on should I start buying. I will try and address all of these items but not in a frantic manner --- remember we were built for these moments. We've been investing in ourselves, setting our budgets, saving for black swan events, diversifying our portfolios and strengthening our core for these very moments.

People and Safety First

First things first ☝ always remember that people...yes I said people and safety always come first. That is why I was so passionate about what the next steps should be for this country during an outbreak like this. As a risk manager, this is the number 1 rule and it must not be forgotten.  If this were my favorite show "Heroes" you would hear the phrase 'Save the Girl' --- well my response to the administration is 'People First Profits Will Come'.  Sometimes we all need that subtle reminder. 👂

Stick 2 Da Script

If this is your first time get familiar with my pillars above. If you've been here before don't forget them because this is a life-long journey of having the tools you need when things are GOOD and when they are BAD. Again I've received a lot of questions this week and I assume people will take their time to read through my blog before firing off their questions but that isn't always the case. The most common questions I get are:

• Is it a Good Time to Buy?
• What Stock(s) Should I Buy?

These are solid questions if you are a seasoned investor, who invests in the markets often. However, I want to start a new trend --- where people are comfortable talking about how much they got in savings first!  You tell me what car you drive, where you work, your favorite drink, damn some people even rattle off their credit score BUT people get real quiet about their savings.  So I'm here to remind you of my Rules above...because the first investment you should be asking me or anyone about is How Can I Invest In Myself.  And here is my answer:

Set a Budget  Every winter its 2 things -- cuffing season 💑(if you're single) and budget cutting season ✂. I revisit my budget and guess what I found out -- It goes UP, DOWN, or stays the same. It rarely ever stays the same so I challenge everything that goes up.

Mortgage - Have you refinanced?

Insurance - Have you asked for lower rates or called a new competitor for quotes?

Bills - Can't fight these much but do you need that super cable -- when you work 5/7 days a week a least? Can you phone a friend for that Netflix account?

Urb Lesson of the Day - Being a boss means doing the dirty work, and having tough conversations. This week alone, I had CEO discussions with my banks and what they need to do to keep my business --- remember they work for you.

Start Saving 💰 - Real savings IMO is the money saved up AFTER you have no outstanding debts in your household. So set your budget to get on a plan to begin saving for your future and future BLACK SWAN events. Before the coronavirus crisis, I've talked about black swan events being the one thing we are always on the look out for.  Well that event is here and a deep savings account helps ease those of us panicking if schools are closed, your company shuts down temporarily, you unfortunately get laid off, medical bills surface, etc. Remember the government shutdown, H1N1, 2008 financial crash make sure you're not a part of this statistical group:  Roughly 70-80% of American workers live paycheck to paycheck. (Source: 2017 Careerbuilder Report)

This is why I was passionate about putting money in hands of the American people. I predicted state and national shutdowns would be required to slow down a contagious disease (note: China, Italy, S. Korea all showed why this is necessary). That finally happened here in the US.  Why was the response so slow? Well, they are scared to shut the system down --- because the capital machine has most people living paycheck to paycheck. So work can never stop (for those who cannot telework/work from home), I guess even when your health may be at stake.  I applaud this gent for keeping it real on national TV, he acknowledged its a big problem when most Americans live paycheck to paycheck:

Urb Lesson of the Day - I live to save because there will always be black swans, moments that shock you and your family --- weddings, deaths, travel, layoffs, medical bills --- you want to have the savings to get you through these moments. I know the rent, bills, and food has to be paid but the long-term plan is we need a healthy you to be a provider for yourself and family for years to come. Use these markers to benchmark how much you need to save for a rainy day:

2 Weeks Pay --- Rookie

1 Month Pay --- Rising Star

3 Months Pay --- Honorable Mention

6 Months Pay --- Veteran

12 - 24 Months Pay --- All Star (Cue Biggie: "I'm not only a client, I'm the player president")

 

I personally have moved to cash in my individual retirement portfolio because you have to sit down and map out what happens next: businesses slow down, layoffs will rise, and earnings from corporations will be bad for the next few quarters. My retirement money is just that a second savings account I can afford to be very careful with.  Your primary savings account is a cushion for whatever is to come. Stay tuned for more, I will address what to do with your individual retirement accounts and for those aggressive people trying to gain an edge in the market --- YES we'll discuss stocks to buy.

Investing in a Coronavirus Epidemic ---- No Testing Time to Move to the Sidelines

So 10 days ago, I wrote the following article: https://urbanomics.blogspot.com/2020/03/the-virus-goes-viral-why-stocks-are-in.html

Viral + Misinformation
I needed you all to truly understand in the age of social media, 24x7 news media, and poor governance from some world leaders -- the virus has truly gone viral.  The virus is NOT a FINANCIAL ISSUE it is a biological disease. A viral pandemic will NOT be cured by pouring money back into our economy.  The fact that our leaders have NOT provided a clear message is evidenced in my conversations over text, e-mail, and chat with family, friends, and co-workers. For example, a question came into my local public radio station. The question was: What type of antibiotic can be proscribed to combat the coronvirus?

Answer - This is NOT bacterial, antibiotics is not a solution to protect us. The fact is I wrote here weeks back, that a few companies have JUST started research on this virus in search for a vaccine and companies like Gilead, Moderna, and others are possibly over a year away from finding a cure and mass producing a vaccine. 

Stop Worrying About Perception
Crisis is managed by LEADERSHIP, constant factual messaging, and preventative and detective measures. I used to work with a guy years ago that bragged, boasted and used dumb ass phrases like 'epic fail', to put down everything and everyone in an attempt for him to look great. Well, this becomes an issue when you do and say these things all time. When a real crisis finally comes, he looks like the epic failure because he cried foul so long no one could distinguish the real crisis from the minor issues he used to rant about. The reality is his leadership was an 'epic fail' and that reminds me of what I am seeing today.  I get paid to manage risk and everyone knows the two primary methods of risk management are Preventative measures and Detective measures.

         Our leaders have dropped the ball on Preventative and Detective Measures. 
My colleague used the word perception and I thank him for that. My favorite term is optics as many of my colleagues and clients know. People drastically underestimate the optics of a situation and I believe its made me a fairly strong businessperson.

Perception 1 - In the US, we cannot and should not restrict people from travel, social gatherings and events, and work. It's draconian, un-American, because we're too sophisticated to adjust our way of lives.

Preventative Solution - Okay, to start...don't use the word quarantine (it's like socialism here in America just won't fly). But you should restrict travel, social and work gatherings, etc. To prevent a contagious disease spread by touching and coughing, you have to limit travel and close interactions. We know you want to keep the economy booming and the stock market up BUT this is the right next step. Like the loser who uses 'epic fail' many have dissed China for their draconian measures but their infection numbers are dropping, work is resuming, and confidence will slowly come back when you restrict or quarantine the nation.  Imagine that --- So Italy and the National Basketball (NBA) should be applauded for the courage to put people before profits because they would have been creating an environment to spread the disease if they did not quarantine their country and stop games, respectively.  If we are waiting for a message from every school, employer, and city to determine their own shutdown we are creating an environment of panic. This should be a message from the highest level, shutdown, so we are all on the same page. We call this setting the tone from the top. Don't leave it up to my elementary school, National Hockey League, Baseball, Golf, cities, states, and companies to make this call alone.

#2 or 3 weeks of profit pain help this disease go away

Perception 2 -  The greatest country in the world cannot develop enough testing kits to address this issue.

Detective Solution - We don't know how bad the situation is --- WHY because we DON'T HAVE ENOUGH TESTING KITS?  That seems more like someone doesn't want the real number to come out.  We talked about preventative measures, let's move over to detective. To detect the virus you need a kit. If you restrict people's travel period, then you can calmly share with people what the symptoms are, identify sick people, and test or DETECT whether they truly have the virus. We all know if the real numbers come out people will panic, but people are already panicking because they don't trust the current numbers being posted today. 

We freak out when an NBA player, or a guy on a jet, or symptoms show up in our local school --- I guess I wonder why people begin buying $100 dollar bottles of Purrell.  Tell the truth, most people have been exposed just like we all are exposed to the flu every year. Get us testing kits and let people know they will survive it JUST like you survive from the flu each year. We are all at risk --- risk is everywhere everyday --- but the people at high risk are the elderly and people with compromised immune systems. They need to be protected.

Restrict Travel and Movement - 2 to 3 week of pain could mean we get a handle on this

Get More Testing Kits - Yes testing reveals the true number and will burst everyone's bubble that many people around us are infected. But guess what, we stay home, treat ourselves, and get better

Ramp Up Protection For Elderly and Sickly - These are our most vulnerable population. Its time to give hospitals, nursing homes, and high risk people all of the resources they need. This includes make-shift hospitals just for the virus. Why because the last place I want to send someone with symptoms IS to a hospital FULL of people with compromised immune symptions.

Step Up and Pay for Time off and Healthcare - People sick or not will continue to go to work, in FEAR of losing their job. Pay for time off and for the fact that many people DO NOT have healthcare. If you ensure that panic dies down.

Loans to Affected Cities/States - Put in place the items I shared above. Every company and city will need a loan soon if you don't limit the spread further. So I don't love this idea b/c Cruise ships, retail, food, sports companies all will be hit --- are you going to bail them out. Bail people out first and companies will be saved. You do that and maybe it lessens the impact to business

# 2 or 3 weeks of profit pain helps this disease go away

Bad Ideas:

Payroll Tax Cut - Stop the optics of politics. This is a also a way to NOT fund Medicare and Medicaid. Just send me a check and ensure I have a job and health until the crisis is over.

So unfortunately since 2008, I have not had to make a call like this but I truly believe we are at this point. Until I hear the governance of our leaders changing, I will be personally moving my retirement portfolio to cash and safe assets. I have lost faith in the message coming from our leaders, the data being presented, and the actions -- or lack of actions being taken.

No Testing means I don't trust the data. If we don't implement the steps above then unfortunately my indicators say we are headed for a recession. I plan to move my retirement vehicles to cash, but I will keep my personal portfolio in stocks, I have some protection from the VIX, Gold, etc but it's not helping that much.

The Virus Goes Viral --- Why Stocks are in a Bear Market

Investing In Yourself – Using Pillars to Build Your Core	https://urbanomics.blogspot.com/2015/04/urbanomics-pillars-path-set-for.html
Setting Budgets + Saving for Black Swans	https://urbanomics.blogspot.com/2013/02/personal-finance-budget-101-free-credit.html
	https://urbanomics.blogspot.com/2019/11/hey-henry-high-earner-not-yet-rich.html
How to Open My First Brokerage Account	https://urbanomics.blogspot.com/2015/04/personal-finance-101-starting.html
Diversify your Life (Mind, Body, Soul, + Investments)	Search My Blog

The Virus Goes Viral

This week the stock market was rocked by round the clock news of a SARS like coronavirus, COVID-19. The Dow fell 12 percent this week alone, which I believe is the biggest one week drop since the dreaded financial crisis. With over 3 Trillion Dollars worth of value erased in US Stocks, I get asked what in the world do I think is going on and what am I doing during a period like this. This very topic came up today when I spoke with my dear friend who happens to be one of the biggest mortgage brokers in the country.

When asked for my thoughts -- I told him plainly the Virus has gone Viral. And what I meant by this is, in today's hyperconnected world we are getting peppered with news updates, pictures, and opinions all day. I truly believe the virus has gone viral and we are seeing the market reacting to real-time tweets, posts, and texts as news comes out instantly. Gone are the days where we all had to tune into CNN or wait until our local news came on to try and decipher what was happening a world away. Over the past few weeks, I've seen constant pictures of cruise ships (not able to dock), masked people in coffee shops, and empty streets and restaurants. So my mind instantly goes to my favorite End of the World shows like the "The Last Ship" or "The Walking Dead" which similarly displayed quarantined ships and empty streets, respectively. The fact is as a county and world we may be more worried and nervous that ever before (thanks to Ring doorbells) and a polarized political environment. That uneasiness and mistrust, today more than ever, may be causing this natural response that this is the Big One. I am NOT arguing for less information but our futures will be scarier when you can watch a live counter of people getting sick and dying across the world.  

First, we should be amazed at how rapidly people now move across the world. When we had SARS back in 2003, the world was less mobile and while that virus hit with a fury -- it impacted less people. COVID-19 is a similar genetic strain to SARS but is clearly more powerful (virulent) and contagious. In a more mobile world, when one part catches a cold the rest of the world will catch that cold or at least sneeze. Similar to the flu and cold season, those most at risk clearly appear to be the elderly and people with underlying health conditions. 

So people need to hear from those in charge to ensure that a plan is in place for their health and well-being. This is a critical response to all those real-time updates we get and the apocalypse shows I watch. If I got a real-time update of flu infections and deaths each season, I would never leave the house (let alone a homicide update for most metro cities).  I wasn't paying attention back then  -- but does anyone know what we did as a country when SARS or Avian (Bird) flu impacted the world?  I don't so my point is don't panic.  Hospitals already restrict youth during flu season so our next best steps are: a) protecting our elderly    b) reducing close contact    c) washing our hands   d) hoping for warmer weather

With markets being at ALL TIME highs, it is a very rationale to be scared but don't panic and definitely don't SELL everything.

What Should Be Sold ---

Segments of the markets involving in travel, leisure, hospitality, dining, and retail. In addition, businesses with significant exposure to Chinese customers or China's supply chain. They will be sold off because we just don't know how long this disease will last. Also, due to today's hyperconnected world, NO ONE wants to be the company that didn't close its doors soon enough, cancel flights fast enough, or take the necessary precautions to keep customers safe. So businesses in this segment will take a hit.

What Should Be NOT BE SOLD ---

I think your healthcare, internet, gold and gold mining stocks should not be sold. I also think you need to try and protect your portfolio. Protect Protect Protect - you'll see that's why I've own gold related stocks like Novagold since 2008-9. Oddly enough that was the same time I advised my mortgage broker to add Gold to his retirement portfolio. I recently wrote about a healthcare stock: Gilead, a company helping to develop a vaccine for COVID-19. And I want to share with you an investment vehicle called the Volatility Index. Known as the VIX, this offers some protection when the stock market gets very volatile. I bought shares in the 4th quarter of 2019 (a little early) when I thought the market was getting to high -- I purchased shares around the $15 a share range. I'm glad to have insurance protection when the market feels like it is falling off of a cliff.

I own VIXY which is a volatility index fund. When things seem too good to be true, BE FEARFUL, and buy protection. Roughly 10% of my portfolio is being offset by VIXY which gives me some piece of mind on down days.

Try and protect yourself in advance of market downturns and then during the downturns we go bargain hunting. I picked up the following stocks in the last two days:

• Facebook (internet) 
• Match Group Inc (internet) - Owners of dating sites: Match, Tinder, PlentyOfFish, Meetic, OkCupid, Pairs, Twoo, OurTime, BlackPeopleMeet, and LoveScout24
• Teladoc (healthcare) - Virtual/Video conferencing healthcare services with your doctor and the future of a simple doctor's visit
• Uber - While ridership will decline, Uber Eats may pick up, I think it will be temporary and for a stock that fell from $42 to $29... an opportunity exists

My assumption is most people will be swiping right, wanting an expert doctor opinion or eating in. Me, I'll be #investandchill

Gilead Sciences Inc (GILD) -- A Possible Solution To Coronavirus

Investing In Yourself – Using Pillars to Build Your Core	https://urbanomics.blogspot.com/2015/04/urbanomics-pillars-path-set-for.html
Setting Budgets + Saving for Black Swans	https://urbanomics.blogspot.com/2013/02/personal-finance-budget-101-free-credit.html
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How Are You Feeling -- It's Lit!
This month, I'm still riding high as Symantec/Norton LifeLock and Sprint have me toasting for more good luck to come.  Norton Lifelock offered shareholders a special dividend of $12 this month so you guessed it...we goin' to Disneyland just like Patrick Mahomes said after winning the Superbowl MVP. If you're not good at math well here goes -- if you owned 100 shares you got a $1200 deposit in your and let's say you owned 1000 shares, well you guessed it -- you'd be getting $12,000 for betting on a stodgy OLD cybersecurity company. Sprint and T-Mobile have just announced the deal will likely close by April 1st so in my world of Risk Management...there are NOT many more obstacles to overcome this deal closing as one of my biggest investments in my life closes. I hold Sprint in both my retirement and personal account and Norton Lifelock just contributed only to my retirement account.

Stop Reinventing the Wheel -- Learn From the Greats
I often joke with people that by speaking positive vibes into the world -- you can speak things into existence.  So one of the biggest lessons I've learned over time is to read and research how other greats have walked. I call it the Lexus philosophy. I recall a Lexus executive speaking at a roundtable series in college and I thought the building blocks of the company were simple and smart.  They knew who did what well. By this I mean, he noted that: German's had great engineering, American's dominated in design, and the Japanese were dominant in manufacturing without significant defects. So when Lexus set out they simply decided to borrow best practices from the best companies in the business. I use this philosophy everyday -- don't overthink it...reuse it.

Black History Moment
George Washington Carver - Some called him a botanist or an a pioneer agronomist. He developed amazing uses for plants - peanuts, soybeans, and sweet potatoes. Being born a slave didn't stop Carver, he went on to obtain his undergraduate degree from Iowa State and then he accepted a job at the Tuskegee Institute where he invented and reinvented products -- more than 300 way to use peanuts to may products like soap, skin lotion, and paint. Wow - Witness Greatness
Gilead (GILD) - Repurposing Drugs for the Next Virus
Gilead Sciences is a value stock that's right up my alley. I've owned the shares for a few years and it hasn't done a whole lot. But in life, sometimes you have to be patient with just like Carver was with his crops. They had a blockbuster Hepatitis C drug that was no longer protected by patents so they enjoying the legacy riches from that investment and moving on to others. To speed up the process they invest in Kite Pharma in 2017 to bolster their pipeline. But I'm highlighting Gilead today because like Carver, I find in fascinating that firms repurpose things to create new products. In this case Gilead is using an existing HIV drug to fight a new battle against the Coronavirus. Gilead is developing an experimental drug called remdesivir and based on the numbers that continue to come out of the region, I hope the containment measures and drugs of tomorrow can assist to limit the impact of this virus going forward. The options market appears to be betting on Gilead moving higher and I could see it move towards the $80-85 range.