Bear Comments from Roubini, Jim Chanos, Jim Rogers and James A. Kostohryz
Don’t Be That Guy in Denial!
Just like people who are in denial and don’t wear gloves and masks, many investors are in denial, arguing about whether the bottom in the stock market is in, or very close. They say they’ve seen this before (2009) and this time there is no way in hell, they’re going to miss the coming big bounce back to 30,000.
The problem – is no one has ever seen anything like this. We are far from the end, and things could end badly and then create a truly once in a lifetime buying opportunity. We agree there will be another bounce, but ‘trading’ the bounces is far beyond our capabilities.
There is no panic seen in this market – yet. We hear uncomfort and trepidation from investors – mixed with FOMO the ‘big bounce’ as the most common temperature reading.
Most times markets bottom without reaching panic levels (PE ratio under 10), but with all the economic devastation going on, we think panic will set the bottom for this market. Right now all we hear from a lot of 401k friends and family is, “Well I should have listened to you earlier, but it’s TOO late now.”
The previous two S&P 500 bears were some of the most severe in history. The 2000 tech bust took out 49% of the S&P 500 over a grueling 929 days. And the S&P 500 plunged nearly 57% over 517 days starting in October 2007 until finding its footing in 2009 following the financial crisis.
We heard the “it’s too late now” from investors who bought Amazon in 2000 at $100 after it fell to $50 – only to later say “get me out, this is a big scam” at $5.00. Needless to say, they weren’t around for the eventual rebound back to $100 five years later in 2008. On the other hand, $5.00 to $100 was a 20-fold gain, for those who waited for a real panic.
Moral of the story, it’s never too late! Git while the gitting is good. You can always come back another day to play.
While we’ve never been able to predict a panic, we certainly know what it feels like to be in one. And while there may be panic amongst the social distancers, this does not feel like panic on Wall Street.
When you instead start hearing “I don’t care how much I’m down, get me out now, this market is never coming back” then unleash your true buying power.
Currently, it appears that many investors with a 401k which dropped from $1 million to $600k in the first quarter, somehow feel the 401k is ‘inherently’ still worth $1 million. Because that is what it was once worth, and they are convinced it will go back. They just have to be patient, just like they say on TV. “If you miss the 10 best days in each decade, total returns would be just 91%, significantly below the 14,962% return for investors who held steady through the downturns.” Like how could anyone be so unlucky to miss the ten best days lol?
So “No way,” the thinking is, are they going to be panicked out now, only to see the Dow back near 30,000 and their 401k back near $1 million in a couple of years. They’re patient, they can wait for the recovery.
Which admittedly sounds logical (and comforting), for someone who’s only been in the market for 15 years. And after all that’s what the experts suggest to do.
But with the same 401k possibly valued at $450k in the not so distant future (say around Dow 16,000) – questions of being able to comfortably retire will set in – and that’s when a thought comes like “OMG I made a huge mistake I should have gotten out at 20,000. What if the market does go back to the 6,000 low like in 2009 – I’ll be wiped out? Sell…”
In our opinion, the forthcoming financial crisis will make the Financial Crisis of 2007-2009 look like child’s play. If we have to guess, the ‘next leg down’ will follow a rally (we’re in one now) or two. The most difficult thing if you’re a trader is getting in for the big rallies and then getting, out – once they start to turn down. Plus it’s stressful and the CoronaVirus feeds on stress.
So we suggest to stand down (hold off buying broadly), except for Gold. We’ve been waiting five years for a sustainable gold bull market. Chuckle if you want, but we see a potential for $10,000 in Gold via FOMO panic buying. It’s finally here. Unlike ever before, investors can mouse click to sell stock ETF and click to buy a gold ETF. Even Grandma can do it.
Again as mentioned a few weeks ago, our market opinion is related to large-caps and large-cap funds and ETF’s. If you find a small company whose shares have been market-related ravaged and they are weeks or months away from something like news from the FDA, load up. You should be able to acquire meaningful stakes from scared sellers in unprecedented size.
Or as another example news like from Immunomedics (IMMU) today (which we originally added to the Watch List @$3.00 a few years back) which is up 118% jumping from $9.40 to $19.40, a gain of $2 billion in one day – as in like ‘what bear market!” Immunomedics is one of our “5 Pack of Biotech Stocks we Expect to Double in 2020” with a price idea of $45. And here we go!
PRESS RELEASE: IMMUNOMEDICS ANNOUNCES ASCENT STUDY TO BE STOPPED FOR COMPELLING EFFICACY
Oh and Yes, on occasion we’re better than Goldman Sachs who slapped a sell on Immunomedics in early April with a $5 price target. How pissed would you be? Guess nobody’s perfect. Which is why we never (okay, rarely) say buy or sell!
Imagine a portfolio manager with a $40 million position who sold. Goldman didn’t say ‘hold’ they said ‘sell.’ What does the portfolio manager tell his or her investment committee? “Nah, it’s just Goldman – ignore them.” How pissed would you be?
Guess nobody’s perfect.
We also have an upcoming great idea on the calendar. Another MedTech incubator selling for around $2.00 whose lead product is a liquid solution that goes into the eyeball (ewe) for patients who undergo vitreous hemorrhage eye surgery. Most diabetics eventually will need this surgery, so a big market.
Regardless of what the market does (we really have no idea), creme always does and always will rise to the top, and great fortunes can (will) be made. Like Amazon in 2002.
We’re putting together numerous model portfolios including the ‘Game Over Portfolio,’ the ‘It’s Not Game Over Portfolio‘ and 4-5 Gold portfolios.
RELATED: Biotech 5 Pack. 5 Biotech Stocks We Expect to Double in 2020.
Bear Comments from Roubini, Jim Chanos, Jim Rogers and James A. Kostohryz
Nouriel Roubini, New York University’s Stern School of Business: A Greater Depression? “In other words, every component of aggregate demand – consumption, capital spending, exports – is in unprecedented free fall.” (3/24)
Economic Damage is ‘Worse Even Than the Great Depression’ (3/24)
“People are not Going to Have Money to buy Food” (3/18/20)
V-Shaped Virus Recovery Are Delusional (2/26)
“Dr. Doom” Roubini : “99 Percent of Cryptocurrencies are Worth Zero”
CNBC’s full interview with legendary short seller Jim Chanos.
Jim Rogers: Quantum Fund founder warns of the ‘worst bear market of my lifetime.’
James A. Kostohryz – Investor Acumen
The financial crisis of 2007-2009 – which had been the most severe financial crisis since the Great Depression – was mainly caused by defaults in just one segment of the credit market, namely residential mortgages. The forthcoming financial crisis will involve massive defaults on debt obligations from virtually every single industry in the US economy.
Furthermore, massive defaults on commercial leases will have a devastating impact on the highly leveraged real estate sector and the financial entities that finance them. In the course of the forthcoming financial crisis, the common equity shares of many banks and financial companies will become worthless, while virtually all common equity shareholders of financial companies that provide credit will be subject to massive dilution in forthcoming restructurings and recapitalizations.
Therefore, it’s reasonable to infer that the bear market associated with the current and forthcoming economic crisis will be more severe than any bear market since the Great Depression.
Read more: The Next Leg Down: Another Massive Decline Is Coming
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“Stand Down” Archive of “be careful, it’s a jungle out there!”
