Chris’ note: It’s a time of unprecedented turbulence in global markets. Meanwhile, a global pandemic is threatening lives and livelihoods.
It’s natural to be worried at a time like this. But as you’ll learn below from Teeka Tiwari of our Palm Beach Research Group division, the best thing you can do right now is sit still and resist the urge to panic sell.
And if you’re looking to take advantage of this uncertainty, there’s a rare opportunity in cryptos. Apart from recommending more conservative strategies, Teeka is a world-renowned crypto investor. And he says five little-known cryptos could make you a fortune in roughly 50 days. Go here to learn more and register for his free event this Wednesday, March 18, at 8 p.m. ET.
Then, read on to learn why now is NOT the time to make panicky moves with your 401(k)… and why Teeka’s confident we’ll see new highs for stocks within the next 18 months.
Friends, I want to talk to you today about the monstrous volatility ripping through global markets.
I’m not going to insult your intelligence and sing kumbaya in your ear.
Make no mistake: We investors are getting brutalized.
What you do next could be the difference between retiring on time or working an extra five to seven years.
That’s why this could be the most important essay you read this year.
Here is the ugly truth: The coronavirus is NOT like the flu.
It’s anywhere from 10x to 40x more lethal than the flu.
If you’re young and healthy… chances are, you’ll be fine.
But for the over-60 set – and folks with certain preexisting health conditions – the mortality rate skyrockets.
The virus has infected over 190,000 people in more than 150 countries. And the World Health Organization has declared the outbreak a pandemic.
It’s estimated we won’t have a vaccine for 12 to 18 months. In that time frame, hundreds of thousands of people – perhaps millions – could die from COVID-19.
So I want you to take this very seriously. But I don’t want you to be paralyzed by fear.
Absolutely follow the CDC’s recommendations. Wash your hands frequently for at least 20 seconds. Stop shaking hands, and do a fist bump instead. Avoid crowds, and cancel your travel plans.
I traveled over 192 days last year… And I just got back from 18 days of travel, for a total of 53 days of travel within the last 90 days.
I’ve upset a lot of people by refusing to travel now. But if I can do it… so can you. I want you to be safe.
So this is our current reality. Make no mistake: It will slow the global economy.
Here is the key message I want to share with you: The economic slowdown from the coronavirus will be temporary.
Humans have been dealing with pandemics since the dawn of civilization. But somehow the wheels of global commerce continue to grind on.
What we’ll experience is a one-time demand shock to the global economy. Corporate earnings will crater… People will lose their jobs… Economic growth will stall.
There is no doubt about that.
Wall Street knows this. It’s readjusting stock prices accordingly. But it’s nothing to fear, because it’s temporary.
Let me repeat that: The earnings and economic slowdowns from the coronavirus are temporary.
So from an investment standpoint, we have an opportunity to buy stocks that are correctly priced for the short term, but woefully underpriced for the long term.
I have millions in the market, and I’m losing hundreds of thousands of dollars every week.
Have I sold? Have I traded out of equities and into bonds to hide out from the volatility?
No. I’ve done none of those things.
Instead, I’ve been buying. And I want to explain why…
I learned long ago not to confuse my trading account with my long-term account.
In my long-term account, I buy blue chips and index funds… and leave them the heck alone.
Friends, if you’re buying blue chips and indexes and you’re not using margin [borrowed money]… you never, ever have to worry about volatility.
The market can fall 50% tomorrow, and you shouldn’t lose one wink of sleep over it.
That isn’t just some textbook platitude. Hard data backs it up.
Let me show you how amazing the stock market is…
Imagine it’s 2007, and you sold your business for $5 million. Now, assume you have the worst timing imaginable and put your money into the S&P 500 at the pre-2008 crisis peak of 1,565 points on October 9, 2007.
By March 2009, your $5 million account would’ve dropped nearly 58% to about $2.2 million.
That’s a devastating loss – if you sold… if you tried to trade around it… or if you tried to get cute.
The right action to take back then is still the right action to take now: SIT STILL.
Your job was not to figure out how to fix the loss. Your only job was to enjoy your family and live your life.
Here’s why…
I want you to internalize this important truth: The stock market is self-healing.
I say that because, as of this year’s peak in the S&P 500, your initial $5 million (from the example above) would’ve been worth $14.1 million. That’s an 8.7% compounded annual return (with dividends reinvested).
Imagine going from a $2.8 million loss to a $9.1 million gain. That’s the power of the stock market.
[And even after all the coronavirus panic selling, the S&P 500 is up 6% from October 9, 2007.]
But it works only if you buy quality stocks and indexes… and SIT STILL.
When it comes to your long-term investments, activity is your enemy. But time and patience are your best friends.
That’s why I don’t sweat my current losses. That’s why I’m continuing to commit hundreds of thousands of dollars to index funds and select blue chips.
Have I been a little bit early? Sure, I have… But so what?
If you’re a long-term investor, you can see that time repairs all stock market wounds.
So I implore you to leave your long-term investments alone. If you try to get “smart” with your long-term money, you’ll fritter away your capital. And you’ll likely cause yourself an extra five to seven years of work just to recoup your losses.
Hear me when I tell you this: The best action to take in your long-term account is to do nothing.
Keep your trading confined to your trading account. Leave your long-term money alone.
Again, what we are experiencing is temporary.
Remember the lessons of 2007-09. Please do not make long-term decisions based on short-term facts. And the fact is, while the economic and human fallouts from the coronavirus are very serious… they are temporary.
If you’re looking to buy into this market weakness, my favorite long-term exchange-traded fund (ETF) is the Vanguard Total Stock Market ETF (VTI).
Let me be clear: I am not calling a bottom here. I learned that lesson in 2008. What I am calling is that this sell-off is temporary.
The bet I’m making with stacks of my own money is: We’ll either be at or have exceeded the old highs within 18 months.
I picked 18 months for a reason. By then, we’ll have a vaccine, and people will start traveling and going out again.
Remember, the market is a discounting mechanism. It won’t wait for a vaccine. It’ll start to move higher as soon as it gets visibility on a firm date of an available vaccine.
So by the time a vaccine is available, markets will likely be at or above the old highs.
Let the Game Come to You!
Regards,
Teeka Tiwari
Editor, The Palm Beach Letter
P.S. If you’re looking to take advantage of the current global chaos, confusion, and misinformation, forget the stock market. You need to be looking at the crypto market.
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