Moment of Truth

March 16, 2020
min. read

As I write this tonight, the Dow Jones closed at 20,188; down 3,000 points or 13% in what was the worst percentage day since 1987. The S&P 500 dropped 12% closing at 2,386.

Selling was so extreme, the New York Stock Exchange was halted for 15 minutes...the third time this week this circuit breaker was triggered.

"It’s nearly impossible to keep things in perspective"- Market Pundit

Today marked another milestone – we closed today with a VIX of 82.69 which marks the highest close in recorded history of the market’s “fear gauge.” The VIX close today was even higher than the peak of the 2008 financial crisis and solidly states that investors are in complete and total fear.  

It's the moment of truth: Panic out of a well-designed long-term portfolio based on your life goals or…stay the course.

This decision is one that you will tell your kids and grandkids about in years to come.

The moment of truth is not a call for market bottom and doesn’t mean tomorrow or the next day will bring one either, but it is the time that you make a firm decision and go forward with confidence in your plan and your portfolio or panic and cash out.

Like Warren Buffett we firmly believe that market timing is impossible and that now, more than ever, this time is not different. LIke all others before it:

This will prove to be a terrifying, yet temporary event and a generational opportunity for those willing to see it.

Fears about the long-term prosperity of our nation’s best businesses make no sense.

These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.

The consistent theme from our discussions over the last few weeks is an overwhelming urge to just do something.

Many want to get out now, wait until things are better and then get back in since the market downdraft has no end in sight and is obvious to everyone it will be lower every day until, well, it isn’t.

While avoiding drastic action in your portfolio is critical during these volatile times, doing nothing brings about feelings of helplessness. This only grows with each market decline.

We continue to focus on what we can do right now and how we can best channel our energies to help you through this difficult time.

Your Portfolio

The key determinant for any portfolio action is absolutely related to the timeframe for the money, not the emotion of the market. We are firmly entrenched in a bear market and unless funds are needed in the next three months, we would highly advise against selling during this time.

If you need funds and do not have other sources, then we will look for options to create some additional cushion.

If you do not need any cash for the next three months, and your time frame has not changed, our advice remains the same.

The key during this time is to act small and be extremely purposeful with respect to your decisions.

Investing is not supposed to be easy. If it was, everyone would make millions. It’s not the portfolio itself that makes you wealthy, but rather your behavior around portfolio.

Discipline is extremely difficult during these times, yet absolutely critical.

What to Expect From Here

While we are not there yet, we are making substantial progress.We can also be sure that headlines will get scarier this week and probably next week, too.

It’s critical during this time to avoid only considering extreme viewpoints.

Bottom line, we just don’t know what is going to happen, but that's ok.

This is in no way diminishing the seriousness of the current situation.

If you take nothing else from this writing is that, without a doubt, the news will get worse from here, but it's ability to shock us will diminish. What is critical is that you must be fully prepared for more scary headlines.

But as bad as the news will be, it's ability to shock us will diminish.

The shocks, and there are many shocks still to come, will continue. But our reaction to them cannot remain at current intensity forever.

The current "crisis" may sound like a reason to sell, but it’s not. Stocks typically rise starting 3–6 months before a recovery, and we’re likely already in that window.

Those who sell now will surely regret it.

A loss of faith in the future and conceding that “this time is different” is going to take you to a place of no return, literally.

While that may feel good today or tomorrow, in five or 10 years from now, your future self and your family will not feel the same way. ‍

Action Creates Change

Our goal is to communicate clearly and efficiently to provide you relevant and helpful information to help make informed and thoughtful decisions.

Communicating actions to take and highlight positive messages of progress, ideas and opportunities to help you and others during this time.

Helping us better understand the fear and take positive actions to make a real difference in the lives of our families and our community will help us not only get through this, but come out better than before.

If there’s one thing the history of America – and that of the world – has proven time and again, it’s that times like these are temporary and will make us all better in the long run. Hang in there.

This too shall pass.