Well, this is serious, people are dying, we are not able to move around as we were used to, and even the supermarkets are close to empty. This is certainly the worst scenario that the human kind faced through history. Things might change but let us put some of the recent events in perspective (just in the past century).
When you compare it, Wars are by far the worst incidents we have in taking human lives, (in numbers not in %) and in the past century we have dozens of this events (some of which I did not even heard about) with the worst being by far the II World War (more than 80 million deaths). In the year 1939 the world population should be around 2 billion people. This means that somewhere 3 and 4% of world population died just on this war.
Let us skip to the worst disease event ever, between 1346 and 1356 the “Black Dead” killed between 75 and 200 million people. The world population in 1346 is estimated to be 450 million. This means that somewhere 30 to 60% of the world died.
Some stats about Covid 19 so far worldwide (16 of March 2020):
175988 Infected
6717 Death
77871 Totally Recovered
Death Percentage 7%
Some Stats from China:
80880 Infected
3213 Death
67819 Totally Recovered
Death Percentage 5%
The purpose of comparing the world stats with China is to put it into perspective. As you can see in the stats above and the graph under, the new cases start to slow down after a month of the first detection happened. In a month (now that most of the world is infected one way or another), we expect to see the cases decreasing in a month (not even considering that someone discovers the vaccine). Even in the event of the worst case scenario, China’s Population is 1,386 Billion People. This means that 0,005 % of people get infected with Covid 19 and from those only 5% died.
So what is happening in the world and in the stock markets? The answer is quite simple: PANIC. There are some economic adjustments that will certainly happen, and some companies will bankrupt, but in the end the real effect on the economy is not really going to make a huge difference. The world GDP estimate for 2020 just have been updated from 2,9% to 2,4%.
As you can deduct the main responsible for stock markets crash is human behavior.
In my opinion there are companies that are already improving and adjusting their services (meaning firing a lot of people). Banks and a lot of other companies are advising to use digital ways to avoid human contact. This means that (again my opinion) there will be an increase in using the digital instead of going to the bank or to a supermarket (UBER eats and so on). This will accelerate a process of “Digitalization”, that, in my concern will optimize lots of tasks that so far were made by human interaction.
So far we reach a point where you can imagine that my opinion is not to sell any stocks. On the other hand, my advice is to keep buying them as much as you can. The main reason why is because “we” do not buy individual stocks, and this means one way or another the market always go up, is just a matter of when. Right now you can buy the same business you were buying 1 month ago with 30% discount. Do you think that the 500 biggest companies in the US are worth less 30% now than they were 1 month ago? Certainly not.
As everybody I am concerned about my loved ones, but in what concerns our strategy to reach Financial independence and creating wealth to our son, this event changes nothing. Well if we can buy more stocks we will certainly do it.
Hoping that everyone is in good health.
Mr. Fergus