FUD on the dance floor

CORONAVIRUS!!!

Well, if that didn't send you reeling into a blind panic then I would guess that you are probably taking a somewhat level headed approach to the recent nCOV outbreak.

There is a lot of doom and fear mongering from the Fake News Media at the moment and until the episode plays out we might not get a realistic understanding as to what the real lasting effects will be... are we indeed witnessing a 12 Monkeys type of scenario here? or will it be a flash in the pan? We don't know. However, the fact remains that since the discovery of Patient-0 to the time of writing this - heart disease will have killed more worldwide than nCOV.

At a more "eye-level" perspective though, I do have a serious sympathy for the lives that the virus has effected both through infection or through the upheaval of quarantines or emergency preparation. From this view we must continue our research compassionately and with level heads. There are yet still many unknowns regarding the reality of the spread and perhaps this is one of the most fearsome parts of the story. Since we are relying on "computer modelling" to predict the spread no-one can seriously say with clarity where the chips will fall (think climate change computer models and the lack of insight that gives us).

It could be mere coincidence that Bill Gates III, a major stakeholder in the company which recently gained patents on the pathogen, not 2 years ago claimed that we must prepare for an outbreak that could kill tens of millions like we prepare for war. It could be happenstance that the epicentre of outbreak is within spitting distance of a level-4 pathogen "research laboratory" (read bio-weapon laboratory).... or it could be.... bat meat....

All this notwithstanding, there are effects being felt in the stock markets globally. It's been a roller-coaster ride over the past few weeks with the indices worldwide seeing major corrections. Travel suspensions, the likes of Starbucks (SBUX) closing its doors across infected areas and the timing coinciding with, what would have been, a big month in retail for China have all taken their toll. The Dow Jones (DJ50) dropped around 1000 points over about 6 days. The China A50 and Hong Kong 50 caught the most damage with continuous drops A50 seeing aroung 3000 points knocked off over the same period.

I'm a firm believer that the markets can tell you much about the state of play in any given situation, because people will eventually put their money where their mouth is. During the recent "crisis" in Iran, where the Dinosaur Media (mis)led people to believe that World War 3 was being triggered because of the targeted death of terrorist Quasim Sulemani indices and stocks stayed relatively unchanged. I saw this as instant confirmation that there was nothing going to come of that, especially when defence contractor companies didn't even pump...

What can we learn then, from price action, concerning the Coronavirus outbreak? And how does one trade these times?

So first of all, I shorted the China A50 just after news of nCOV "went viral" I personally saw this as a safe play for a quick profit. As we saw play out, this drop took the rest of the indices with it, especially those from countries where there were identified cases such as German DAX and Japanese JPN225 or countries with co-dependant economies with China as with the American DJ30 and SPX500. With many "experts" around this time trashing the Trump administration's hugely positive economy as a bubble or unsustainable there has been much talk of more doom in the form of an impending major market correction or out and out depression. What we've actually seen cold be called a correction but therein lays the opportunity to BOED (buy on every dip). So here's the consensus and the tactics: with Q4 earning reports flowing in and tech doing rather well (especially AAPL, MSFT, TSLA) it points to upward looking market and strong economy. The fear obviously took hold of some, prompting sell-offs and profit taking. However, the opportunity this presents is, at least for me, to buy the dip (DJ30) and ride the rise to 32000 points as has been predicted. What of the CoronaVirus pandemic? Well, at the time of writing the WHO has declared it a public health emergency of international concern. My view is: forget the FUD.... wash your hands regularly, cover your mouth when you cough or sneeze, wear a mask if you live in a metropolitan area and stay hygienic - prevention rather than cure will help everyone!