Happiness is good health and a bad memory.
                                -       Ingrid Bergman

Given the risk to people across the world from the spread of the Coronavirus, it is important for every individual to take care of their own health. In this context, health is considered physical well being. Related to physical well being is one’s state of mind, and financial health is crucial as well. The current situation is putting tremendous strains across the world on all of these kinds of health. The individual who goes out in public for a brief shopping trip puts themselves at risk of contagion. One of the difficult parts of this virus is one could be infected and not show symptoms for up 14 days. In the meantime, the person believes they healthy, and comes into contact with others, potentially infecting them. It is why the virus has spread exponentially. It also is part of the the reason for the public quarantines in many parts of the country. The other difficulty is the lack of medical professionals and facilities available to treat those who become ill. It is making things quite difficult for people across the world. How does one approach this tough predicament?

From my perspective, the next few months are going to be spent taking care of yours and your closest families health. Most likely, you will have minimal social contact, eat well, exercise at home, get a good night sleep, and try to reduce stress levels with normal routines. If you are fortunate enough to work at home, then you are all set. If you have to go into work, extra care with cleaning one’s hands, sanitary wipes, and social distancing are all rules one must pay very close attention to. So, the focus is navigating the current environment with one’s health preserved.

With respect to the current financial situation, it is clearly a very uncertain time. With markets down 25%, even after a nice rally this week, the next few months will focus on the corona virus to see if there is any kind of improvement in terms of the number of people infected, mortality rates, and when the country can start the process of reopening the economy. The financial pain for many individuals is just starting, a direct result of shutting down economic activity. Let’s take a look at the gruesome numbers.

Last week, unemployment claims totaled 3.3 million, the largest jump in history. The prior record was 695,000 in 1982. Yesterday, the President signed a massive, 2 Trillion dollar spending bill that was passed after a week’s worth of the usual nonsense in Congress. Given that the crisis is at it’s outset, there is much concern that a few months of shutting down activity will cripple many businesses and individuals. Approximately 70% of total US GDP is based on the service economy. Nearly 15% is related to travel, leisure, lodging, and food and beverage. With all of these industries effectively shut down, most analysts see any kind of recovery to pre-Corona levels taking at least a year. Not the most encouraging news, and there is all kinds of uncertainty in those predictions. If one looks at China as a guidepost, after a strict quarantine, economic activity has improved. Of course, there is little certainty on whether or not the virus will break out in China again.

As many readers know, I grew up and live in Las Vegas. The city has been dramatically impacted by our governor’s order to shut all non essential businesses for a month. 200 thousand casino workers are employed by the casinos, and many have been furloughed and laid off. Plenty of pain here in Sin City. Another industry which is in crisis is energy, specifically the oil and gas sector.

In what some are calling unprecedented demand destruction, it is believed that potentially 20 million barrels (on a base of 100 million barrels per day) has been vanquished. The spring and summer driving season in the US will see some pickup, but until the virus issue is handled, jet fuel consumption is pretty much wiped out. With airlines cutting flight routes by 90% internationally and dramatic chops to domestic trips, oil demand will take time to recover, let’s call it through the end of the year at minimum.

ot helping matters is the tussle between Saudi Arabia and Russia about production cuts. All OPEC producers are dependent on higher oil prices for the vast majority of their countries revenues, so $30 dollar per barrel oil is not a sustainable economic environment. It also does not work for our domestic shale producers. Many have higher extraction costs, ranging in the $50-60 per barrel level. The shale industry is shutting down rigs and laying off workers by the thousands. Not good. So you can see, the next quarter, maybe two, possibly three or more, are going to be, ahem, challenging, at least in the energy patch. For those companies that survive, the ability to consolidate the weaker entities will provide plenty of possibilities.

If we are long term investors (we are), difficult economic environments bring low stock prices. Beaten down stocks for long term investors are what you wait many years for. The market has been incredibly volatile, and there is reason to anticipate they will remain so. Last week, markets saw a significant bounce. They may retreat back to the prior low, or even below that point. Many high profile investors see this as an unprecedented chance to put money to work (Ackman, Cooperman, Rogers). My thinking remains the same as it has been. Focus on the companies you want to buy and understand why you are buying them. Know what price you think is a good one, and be patient. Make sure it fits into your portfolio. Chances are you will get your opportunity. Remember, if you are committed to having market exposure for longer than a twelve or eighteen months, the short term is not your priority.

A few other things I thought I would comment on. First, one of the world’s scourges, Mr. Putin, showed his true colors by comparing autocratic Russia to the free western countries as a way to highlight Russia’s strength in handling the Corona Virus issue. It will be fascinating to see how this plays out, but make no mistake, Mr. Putin and Russia will remain a thorn in the world’s side as long as he is on the global stage. Next, given the challenges our country faces with the virus issue, now is a time for the supposed leaders to show what they are made of. Throughout history, when the United States has faced serious challenges, the spirit of the country has shown through. We are seeing the same thing today, as many individuals, businesses, and government leaders are working together in a constructive way. The rest of the year will be a serious challenge for all involved. I am sure our country will meet it head on. Stay healthy.