Trade The Journey

Trade The Journey

Something like this could never happen!

Welcome to the New World!

I’ll remove the word “Order” and leave that to the conspiracy theorist. I’m sure that during these times, your mind might conjure up thoughts of 1984 by George Orwell.

There’s no doubt that the stock market collapse, Coronavirus, and pending economic Crisis will live in the memories of all who are here. The volatility in the market caught most everyone by surprise. The lack of traditional hedges like Gold and, to a lesser extent, Bitcoin to hold value showed just how severe the Coronavirus crisis is.

Countries around the world have ceased production, and if we didn’t face a Global Recession before, we certainly do now. It’s easy to point to the Virus and identify it as the leading cause of the peril we face today.

 

However, that isn’t the case.

The more realistic perspective is that the Coronavirus was the weight too heavy for the world economy to bear. Before, our economy, in particular, could lend its way out of any problem. We, as the United States, hold the confidence of the world in repaying our debt, so our currency holds value.

Leverage is the hidden cause of many crises; the ability to create four additional dollars to the one issued initially is alluring. The inability to pay the loans or creditors back signals the beginning to an end.

Throughout the world, early bankers and financiers often killed people for attempting to create a currency not backed by Gold. They thought that by using Leverage, the economy would become overleveraged, overjoyed and thus uncontrollable.

It’s not hard to see that consumers love credit. Credit had been rising in households and companies alongside the never-ending rising stock market. Companies saw the availability of cheap credit, and they remained a going-concern.

The catastrophic event holds the attention of the people, and we focus on it, not as the final straw but the immediate cause. The Coronavirus is a black swan event, meaning this type of Crisis may happen once in someone’s life. However, an author pointed out that black swan events happen more often than we think.

 

The 2008 financial crisis was only twelve years ago, and we thought only the best years were ahead of us.

A couple of months ago, I remember looking at my trading platform and noticing that every stock was close to its year high. Most of the stocks in my portfolio were doing quite well. In these times, it’s not hard to conclude that every stock selection was a stroke of genius.

Fortunately, I realized that something was wrong with the prevalence of this ten-year bull run, and it could be coming to an end. However, I did nothing; I like most watched as the stocks I owned continued to retreat from their highs. I kept thinking that I’d sell on the bounce back up; unfortunately, the stocks just slid further away from my entry point.

I fell into the trap of not setting a stop and becoming a victim of “Hope.” Hope is a dangerous attribute to have when participating in the bloodsport of trading. When the edge disappears, so should your position in the company.

In a strong bull market, everyone’s a winner, so the edge may only show when the market slows down.

 

– A lesson learned


In every type of market, there is money to be made. Only the skilled can make money and keep money in this volatile market.

Usually, I leave politics for sites more able to discuss the subject, but the way the Virus has been handled by the government and fellow citizens is egregious. It saddens me, too see how lightly we have taken the warnings of this Virus.

Yesterday I saw people playing basketball, walking their dogs, and talking as if the Pandemic might skip the shores of the United States. Unfortunately, the leadership of the country shows little competence in their handling of this Crisis.

I must admit its hard to remain in the house every day, but I believe it to be necessary. In Italy, they are facing a crisis much worse than China. They have little supplies, resources, and beds to deal with the totality of the viruses and must make life-altering decisions.

Be aware that we lost two weeks of action due to a lack of preparation and acknowledgment of the Coronavirus. This means that we have to take extraordinary measures in containment if the Virus continues to worsen.

 

Within every Crisis is Opportunity.

Office work settings will change, the financial environment will change, and the durability of the economy will be tested. Experienced investors are purchasing stocks selling far below their real value, ensuring there is a margin of safety.

Carl Ichan purchased Hertz selling close to $5 a share. Hertz is one of the many companies either drawing upon its credit line or asking for relief from its creditors. At $5, the stock would have to fall to zero for a complete loss. Think about the potential value of the stock and where it sold before the Crisis, which was close to $20.

 

What is the probability of the stock falling close to zero versus rising as the economic Crisis stabilizes and people begin traveling again?

 

It takes special skill to identify a strong company, and it begins with financial statements. In these times of self-quarantine, I would encourage you to develop a system for identifying companies you’d like to invest in. Learning how to read financial statements will help you understand the language of business. Cryptic messages in the news regarding companies’ true value will appear clear to you once you understand the language of business, Accounting.

 

Week In Review:

Considering the circumstances, I’ve done quite well, although I have been at home most of the time. This past week, I’ll give myself a “C” to symbolize the consistent effort.

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