Coronovirus Panic

COVID-19 (SARS-CoV-2) was first first recorded in China in December 2019. In a few short months, the world is in turmoil. There is panic in the streets and this coronavirus epidemic is likely to be an exceptionally serious global problem with many fatalities. Slack Investor couldn’t buy toilet paper last week. That’s when this problem got the attention of my small brain!

It is a good thing that governments are acting decisevely to try and stem the spread of this virus. No one really knows how this pandemic will play out. It is a fact that the world GDP will suffer – but the extent will depend on whether the pandemic is mild, moderate or severe. A good snapshot of how things are going can be found at the World Health Organisation (WHO) Dashboard which keeps a world wide tally of confirmed COVID-19 cases and tracks the drift of concern towards Europe.

Based on current knowledge, the case fatality risk for COVID-19 is higher than observed for seasonal influenza virus, which has a fatality risk of about 0.1%. Annually, seasonal influenza virus is estimated to cause up to 290,000 deaths globally.

From Coronovirus: The Conversation

The latest WHO data on COVID-19 have the death rate (currently over 5000) from confirmed cases at 3.7% – but this is likely to decline as testing is rolled out and the number of confirmed cases more adequately reflect the actual number of those with the virus. This is a major health problem and will impact the world economies for the immediate future – but is unlikely to have a long-term effect.

The important thing from the chart above is that even though COVID-19 is a significant challenge for the world. The world MSCI Index always recovers from viral epidemics – It just takes a bit of time.

The way things are going, Slack Investor will probably sell his remaining Index funds (US S&P500 and ASX 200) at the end of this month if they are below their stop loss level – as this is system that I am running with my Index funds.

For the individual companies that make up over 95% of the Slack Portfolio, I am not selling into a panicked market. Again, I tap into the wisdom of Warren Buffet. Rapidly falling markets are a test for every investor. Buffett says that investors should treat their stocks like a house – what matters is the 10, 20 and 30-year outlook of each company, not the latest newspaper headlines. To paraphrase Mr Buffet, If you bought a house for $500 000 and a month after someone offers you $350 000, you probably wouldn’t take it – You would have your own idea of the house value and hopefully wait until you are offered a more suitable price. Slack Investor feels the same way about his carefully selected shares in a growing companies with good prospects – the sell-off is probably over done.

In the meantime, while lamenting that I have no spare cash for the inevitable upturn. Slack Investor will be washing his hands a lot and trying to avoid close contact with those with flu-like symptoms, and trying not to touch his well-worn face.