Among the event cancellations and quarantines, it is challenging to estimate economic directions and what will happen in a volatile market.
As we navigate through this pandemic and the anxiety that comes with it, there is no shortage of news coverage… perhaps there is too much. Opinions are also abundant. Perhaps overly abundant. But by the time this blog is published, we may have more answers. For now, I’m looking to history (Black Monday), ancient philosophy (yin and yang), and the three quotes I use most often:
- “The four most expensive words in the English language are THIS TIME IT’S DIFFERENT” –John Templeton
- “If you have to eat a frog, don’t look at it too long” –Zig Ziglar
- “Only a fool learns from his own mistakes. The wise man learns from the mistakes of others” –Otto Von Bismarck
Learning from the 1987 stock market crash, AKA Black Monday
The challenge presented by the COVID-19 virus as it applies to investments is remembering what I’ve learned over 34 years in the investment business. I think back to Friday, October 16 and Monday October 19, 1987 — also known as Black Monday. At that time, a 100-point move in the Dow Jones Industrial average was a big deal. On October 19th the DOW saw more than a 500-point drop. At the time, this represented about a 22% decrease. The causes for this have been written about many times. While there was no mention of a virus as a cause, there is much to be learned from this and every other market decline as it relates to today’s crisis. (For example: the trading curbs established during the 1987 crash were first used during the largely virus-related crash of 2020 that is affecting us as I write this.)
Yin and yang, or opportunity and adversity
Another concept we can look to: the philosophical concept of yin and yang. The symbol of dualism used to represent it (negative/positive, dark/light, etc.) describes how things that are seemingly opposite may in fact be interconnected — and even complimentary. It has also been referred to as adversity and opportunity. And it is particularly relevant in this scenario.
While we may know that adversity often creates opportunity, it is difficult to see opportunity through clouds of stress and emotion. Let’s consider this in the context of investments. Even good companies have seen stock prices decline. This is the obvious adversity. How about opportunity?
I’m a fan of companies that pay a sustainable dividend; by this I mean companies that consistently pay and increase dividends. They are not typically the highest dividends, but the reward is longer term growth and rising dividends. Among this group, let’s look at companies with a balance sheet that is strong enough, and the company philosophy is such that they will continue to pay employees for 30 days even if they are not yet able to return to work due to the pandemic. This is an expensive proposition for corporations: an adversity. I contend that it is also a tremendous opportunity to create loyalty for employees and customers as well as do good for humanity.
And some simple wisdom
While I can’t make specific recommendations here, feel free to call me if you would like to discuss further. In the meantime, I would encourage the following:
- Take time to look at historical information; you may realize it’s not so different this time after all.
- Don’t “stare at the frog” too long,
- Finally, don’t make the mistakes of others — learn from them, and you will see this through.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. No strategy assures success or protects against loss. Investing involves risk including loss of principal. The payment of dividends is not guaranteed. Companies may reduce or eliminate the payment of dividends at any given time.