Markets Unraveling

By on March 19, 2020

Stock CollapseCoronavirus fears have created a contagion of panic on Wall Street. Dow Futures tonight (2 am at 3/19/20) are at this moment down 707 points after a brutal past two weeks. I have a feeling we’re at the exhaustion point of the selling. This feeling comes from living through a few panics in my 61 years. I know margin calls when I see them.

A friend recently asked how companies (travel related mainly) could be on the brink of bankruptcy with the economy shutting down for a few weeks. In a nutshell, I explained that many companies (with board of directors approval) borrow money to pay their executives huge salaries and buy back stock so so-called executive’s options become more valuable. Therefore the problem of overleveraging and threat of unraveling when loans come due and can’t be repaid.

Current events are a combination of coronavirus lockdowns and overleverage.

Back to the stock market:

There are three closed-end funds that have caught my eye in this meltdown. I already own two of them (BCX and PEO). The third is ticker symbol IRR. These funds are trading at discounts to NAV greater than 30% and are in my beloved resources and commodities sector (which has kicked me in the financial balls). They don’t have onerous expense ratios so they fit my criteria of value.

I’ll make this simple because I’m exhausted from watching the market fall. I’ll be trying to sell my PEP and PFE today and purchase the three closed-end funds mentioned in the previous paragraph. I’m certain of one thing. This will not go smoothly.

Disclaimer: It is very challenging to outperform a buy and hold strategy. Historically, investors have found themselves well-served over the long-term by investing regularly in a diversified portfolio of stocks or low cost, broadly diversified indexed stock funds. Information presented is based on analysis of past data and assessments by the Tactical Timing System model. Future performance may not reflect past performance. Profitable trades are not guaranteed. No system or methodology ensures stock market profits. Although accuracy is strived for, no guarantee is made regarding the accuracy of data presented.

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