"How you can make a lot of money on Post-Coronavirus Stock Markets"
Edward Eel
2020, April 18
Introduction and Core Arguments
Stocks are down across the globe, save for a select few who directly profit from an unprecedented global pandemic. AMZN ($2369.00) is currently surging at the time of writing, while the greater s&p is highly volatile. It is clear to some that we are on the very cusp of a Great Recession, similar to that of 2008 but unprecedented in scale. Many stocks can be bought for a very low price at this time, and some will survive (or even thrive, like Amzn) and many may lead to massive profits for the long term investor.
If you bought before the 2008 financial crisis, you would have experienced tremendous short term losses. Many people panic sold their assets because they needed the cash.
You should try to remember that the stock markets are always a gamble.
Never gamble anything that you are not 100% willing to lose.
If you had held on to your assets, however, you would have experienced massive gains in the years to come. If you had invested in NASDAQ right before the crash, you would still be up 20%. Don't attempt to time the market at a time like this, you are only increasing your risk significantly, and stand to lose more in opportunity cost than you might gain from acting now. Understand that this virus has triggered widespread sell offs in the market. People are starting to liquidate their portfolio, either for insurance purposes, or because they need the cash now.
This is a deeply worrying global trend towards a recession of unprecedented scale.
The opportunity proposed
It is my opinion that it is possible to predict with a reasonable degree of accuracy, which companies will survive the implications of this recession. The only variable that should influence your portfolio holdings and decisions should remain your risk-tolerance relationship. If you are the risk adverse type, please do not follow the advice below. How the markets will react, or which companies will survive massive short term losses, is anyone's guess right now. Nobody giving you financial advice can predict the future, as there is always an element of risk in investments. Again do not gamble anything you are not 100% willing to lose if your investment goes unfavorably.
It is clear that there are currently a lot of buying opportunities in certain sectors that are effectively “on sale” at the time of writing. Various organizations in Canada’s Oil Industry, which have recently been granted money by the Canadian Government to weather both Covid-19, and the greater state of the current canadian oil economy, can still look dire to investors.
Not all will survive, but there are many that will. It is important that you decide for yourself which organization’s shares you will invest in. Do your own research on which companies are most likely to weather the current situation. Consider its lasting impact on a global economy which already had 3x more debt than it’s global gdp well before the pandemic triggered the recession it is now due. Many investors argued that this was imminent long before the pandemic shuttered doors, and led to the lay off of incalculable millions.
The global response
Countries appear to be taking widely-varying stances on their exchanges, and there is a great deal of uncertainty as to whether or not their efforts will be beneficial in the long run. France, Greece, Belgium, Spain, and Austria are all part of a greater european movement to ban the short selling of it’s stocks in the hopes of maintaining their value. Others, like the United States are taking a more aggressive approach. In 2008 the US Government spent $831 billion bailing out big banks, businesses, and the american consumer.
The rules have changed since then regarding bailouts, and just how far the US Government is willing to go in order to maintain their own equity. If anything they have gotten more relaxed, and there is much skepticism over the concern that certain big players have become all too familiar with the bailout process. While the legal and political ramifications over the ethics of the bailout process are important to highlight how the rich actually do get richer, they are of little concern to someone looking to invest right now. The damage the US Government has done, if any, has already been done. They are not likely to stop printing money and handing out bailouts to big businesses.
The impact of endlessly printing money
It is all too familiar to some, to witness the degree to which the US Government is" handling" this crisis's impact on its markets. If you paid attention in 2008, now is the time to apply that knowledge today. Hindsight is 2020, yet here you have an opportunity to take advantage of this huge upside potential, already equipped with the knowledge gained from close attention paid in 2008, and the following recession.
If you are considering withdrawing from the market at this time, remember that the consensus among financial advisers was that if you had held assets before the 2008 financial crisis, and held through the following recession, you would still likely experience massive long-term gains.
Pick which stocks you want to invest in, if and only if you plan to hold them through the recession and are comfortable with the risk involved.
Nobody knows how or when the recession will end, or what implications it will have on the greater global economy. Nobody knows how long the lock-down orders will last, or if there will be a second wave affecting certain countries perhaps relaxing social-distancing restrictions too early.
Nevertheless, there are buying opportunities for savvy investors who wish to benefit from the long-term holding of their assets, assuming that the world doesn't end in its entirety, and that the short-term bailouts by the US Government can weather the dip or disappearance of revenue for some organizations for the foreseeable future and beyond.
Vary your investments and strategy, and don’t put all your eggs in one basket. In a bull market you might get lucky and win big, but in today's volatile bear market you are essentially playing the lottery betting on one specific industry, sector, or company. Don't do that. Diversify your assets over a selection of sectors posed to survive the ensuing Post-Covid Recession.
Vary your investments and strategy, and don’t put all your eggs in one basket. In a bull market you might get lucky and win big, but in today's volatile bear market you are essentially playing the lottery betting on one specific industry, sector, or company. Don't do that. Diversify your assets over a selection of sectors posed to survive the ensuing Post-Covid Recession.
It will be a recession of massive unprecedented scale, a Great Recession of the decades to come in the information age for all to experience globally in real time. We are currently enduring a situation making history, and will be widely revered as an explanation to the world's massive over-extension of credit, improper and greedy over-leveraging of assets, and a multitude of various lessons that the ensuing recession will highlight for decades.
How to win more than you lose
Smart money is made over time, with relative ease. Buying dividend paying shares while they’re down so low in some cases, over 60-90% ; This can mean a lot of passive income for a long term investor. There is also profit to be made on the simple price drop of some stocks which were admittedly over-inflated, but still are currently massively undervalued.
The buy and hold strategy will prove incredibly profitable after the pandemic is lessened, and the recession runs its course. It will take indeterminate time, and along the way may lose significant value before recovering. It is also worth mentioning there is not much value attempting to time the market while it's low. The often touted saying comes to mind, that nobody ever goes broke while turning a profit.
Even if the market suddenly crashes the day after purchasing an asset, time has proved that these investments saw massive gains the next decade.
Conclusion and the Great Recession of 20-21
If you take any lesson away from my thoughts on our current state of affairs, let it be to never sell when you're down unless there is a really good reason to. Don't invest anything you can't afford to lose, but if you suddenly find yourself seriously cash strapped, it might make sense to liquidate rather than be evicted.
If you can afford to lose in the short-term, and are prepared to hold through the recession, it is possible you stand to profit a great deal from the market's response to Covid-19.
Nobody can say for certain what the future holds for the world. It is most likely that this recession-to-come will be catastrophically large in scale. The most recent examples of great economic recession in today's economy are what we are expecting this upcoming recession to look like. The ways in which the market reacts are similar but the situation is vastly different and can't be compared in complete parallel.
The variables are very much not the same, but the underlying behavior both from the people affected, the businesses in need, and the governments printing endless cash are similar by nature. They serve as prime examples of human behavior, and global government's efforts to curb societal collapse.
They may offer valuable insight into how the market will react to the ensuing recession. It is up to you whether or not you would like to participate in the highly volatile, high risk markets of today. If you do decide to buy and hold, make sure you are prepared to hold for the long term even when times get tough. There are no gains unless realized, and the inverse holds truth as well.
Do not deposit anything you need to withdraw in the near future.
Disclaimer: This is not financial advice
I am not a financial adviser.
I am not a financial adviser, and will not tell you which stocks to pick. There are no individual share recommendations in this writing, and it is purely general speculative discussion based on my own personal opinion, and I do not recommend that anybody follows the advice given above as the result of having read the above. The conclusion in this writing is that of my own opinion and does not represent actual financial advice. The general advice given above is by an individual with no prior qualifications, or professional experience. Do not attempt anything listed above unless you are 100% comfortable with the inherent risk. Never gamble with money you are not absolutely willing to lose. Never leverage your personal assets over the advice of a stranger on the internet. Never borrow against yourself in hopes to make it all back on the stock market. If you are struggling with personal debt, your best investment is in sorting out your finances before the recession forces you to. If you are receiving stimulus cheques from your government, they should be spent on essentials, bills, groceries, and health and sanitation supplies. Do not take any of the general advice provided above without doing proper individual research, and never without considering the implied volatile risk that investing at the cusp of a recession invokes. The sentiments expressed above are presented as is, and represent solely the personal opinion of the author. Do not attempt to repeat anything mentioned above. If you should attempt to act on the advice represented above, it will be of your own individual volition, and it is your own responsibility to discern how and where to invest your money. I am not a financial adviser and this is not financial advice.
