If there is any silver lining at this point in this global Coronavirus pandemic it's that it has put a reality check on a false American obsession: "The only place to make money is in the stock markets."
First, regarding our own Fidelity investment portfolios, keep in mind that as of 10 days ago, most of our primary retirement accounts are 55-70% in money market cash.
Also more important than the stock markets, for the health and safety of all global citizens, let's pray the Coronovirus pandemic will be contained sooner rather than later.
Yet from an economic perspective, the Covid-19 pandemic is creating a serious global "supply chain" disruption, which means the products and goods we are used to having as consumers may be either delayed or eventually not available.
This Coronavirus market disruption also means companies will see their 2020 profits and earnings either lowered or put off for who knows how long.
The "supply chain" concerns are the primary reason stocks are being sold - because stock company earnings and their respective stock price valuations are now considered too high given what may unfold for at least the next couple of quarters.
There is a time for scientists and carefully vetted facts and a time for charlatan politicians and media cons who tell the public that everything is great, nothing to see here.
It’s clearly a time for the former and less delusional chatter from the latter.
The latest magical thinking is that the out of touch central bank governors can announce rate cuts or more fiscal stimulus to keep the global consumer-driven economies from stalling out and that stock markets will quickly recover and continue its ascent and prevent global GDP from contracting.
Unfortunately, in the US, the current political cabal, the central bank and U.S. Treasury are still fighting the last war - the financial crisis of 2008 - when multiple interest rate cuts were enough to buoy spirits on Wall Street and fiscal spending buoyed economic growth.
But interest rates are already hovering at or near historic lows in the US much of the developed world. Further cuts would likely be akin to “pushing on a string.”
The Covid-19 pandemic is a brandnew economic war where U.S. consumers, who represent more than two-thirds of GDP in the country, are disincentivized to consume because almost every venue of consumption represents a potential threat to their health and the health of their families.
To protect oneself from the coronavirus COVID-19, the World Health Organization recommends “social distancing” that is, maintaining “at least 1 meter (3 feet) distance between yourself and anyone who is coughing or sneezing.” Other scientists recommend a distance of 6 feet.
That’s impossible to do on airplanes, in crowded grocery stores, in movie theaters, on cruise ships, in restaurants, in department stores and many other places where consumers spend their money and help the economy grow.
The Red Cross recommends disinfecting “doorknobs, switches, handles, computers, telephones, bedside tables, bathroom sinks, toilets, counters, toys and other surfaces that are commonly touched around the home or workplace.”
That recommendation is because scientists do not yet know just how long the coronavirus lasts on surfaces.
That’s another incentive for consumers to avoid places like hotels and resorts.
The only way to restore consumer confidence and re-incentivize the consumer to spend is to get the coronavirus under control.
Unless all of the central bankers around the world are replaced with infectious disease scientists, they’re not going to be of much use in this crisis. And yes, it’s a crisis, regardless of what Fox News, the Q Network, and other conspiracy theorists who are in denial.
Economic “string pushing”
As stated earlier, what the central bankers would be doing by cutting interest rates and buying bonds is called “pushing on a string.”
You can examine economic stimulus “pushing on a string” this way:
“If the core demand doesn’t exist to induce people to part with their money, it can’t be forced through monetary policy. Core demand on the part of the consumer is further aggravated right now because workers (who are also consumers) correctly fear layoffs or job losses and want to save for that potentiality.
Economic sectors and industries in the U.S. are experiencing revenue and earnings slowdowns because the coronavirus has separated them from their customers.
- Four major U.S. airlines lost $22 billion in market value in the prior seven trading sessions.
- Retail stores were already experiencing financial difficulties and announcing store closings before the coronavirus hit and the virus outbreak will only exacerbate job losses.
- Hotels are being hurt not only by vacationers reluctance to travel but by businesses cancelling trips and using teleconferencing instead.
Because of Trump’s incompetent Covid-19 denial until this past Friday and the inexplicable lack of tests kits from the CDC since the first case in the U.S. was diagnosed back in January (and the CDC’s preposterous restrictions for over a month on when patients could be tested), that agency cannot be trusted to take the lead in this grave risk to national health.
Clearly, the real Covid-19 problem-solving leadership in America has been the the US Governors and mayors of select states and cities, not our “stock market as a re-election indicator” obsessed President.
The Emperor has no clothes
In addition to global supply chain issues, what is also eroding positive stock market sentiment is that institutional smart money investors are realizing that incompetent national leadership (and too much mindless ideological deregulation) magnifies worry that a dysfunctional US economy will be unable to solve it's problems when the nation is confronted with a crisis.
As the Presidential election approaches, Wall Street et al is becoming increasingly aware that the American economy and its “consumer citizenry” is not in capable hands.
After over three years of Trump institutional investors are waking up to the economic reality that all Trump has really accomplished during his tenure so far is to push the Obama corporate bailout stock market recovery even higher, which really only benefits the finances of less than 50% of Americans.
Additionally, as it relates to Covid-19, Tump's ideological lobby-money financed deregulation agenda has deeply gutted our national public health and public safety budgets, the affects of which we are seeing now with our lack of national preparedness dealing with Coronavirus testing.
Hence the smarter big Wall Street investors are admitting the truth: That in a serious crisis, Trump and his lobbyist-controlled privatization-obsessed Cabinet and administration are for the most part hapless cronies who have difficulty problem-solvingbtheir way out of an elevator stuck mid-floor.
Revising Our Future Portfolio Holdings
Whenever we see times like these, I try to review and re-evaluate the pros and cons of our evolving yet always improving investment strategies.
Going forward (and once the global Covid-29 fears subsides) I believe we will be more successful by investing in fewer ETF or fund holdings with slightly larger position sizes.
For example, a 15% allocation in one ETF instead of a 10% allocation, etc.. With larger allocations, it also simplifies our buy and sell strategy by limiting the number of investment holdings that must be monitored and bought or sold.
We are also increasingly seeing in the investment world a majority of country and sector stock indices being dominated by fewer and fewer stocks, making ETFs and mutual funds more vulnerable to the lack of diversification from being over-invested in a minority of large company stocks.
To reduce this "modern" investment risk going forward, we will make a more concerted effort to take positions in ETFs or mutual funds that are more "equally weighted" - i.e.the stocks held in the ETF or fund have similar size positions in terms of percentage allocations.
Second, here in the United States, it seems a majority of Americans have come to believe the stock market is the most accurate measure of domestic macro-economic success.
I can assure you it is not.
Yes, a bull market in stocks does enhance the perception of increasing national wealth. In reality, however, the stock market actually benefits fewer than 50% of American citizens.
In truth, there is one simple time-tested policy for us tonget back to a balanced US economy that benefits the largest majority of Americans:
"We need to see higher wages and salaries paid to American workers"
Everything else is simply political and economic BS.
Systematically paid higher wages and salaries, which creates "healthy inflation," leads to higher "managed" interest rates, which leads to more attractive bond prices and investment yields, offering retired investors like us sound balanced retirement income portfolios.
For our benefit, inflation-adjusted higher interest rates will again allow us to invest retirement money in "old school" maturity-laddered bond portfolios that pay solid dividend yields with very little risk, as long as we hold the bonds to maturity.
See, Inflation is not bad. In fact, the most politically sound economic policies can only involve creating manageable inflation through higher livable wages to all American workers who want that opportunity to be productive and to see work as rewarding.
It is not rocket science.
Simple higher salaries and wages for all working Americans would create more disposable income for the American middle and lower working class, reduce consumer debt, foster healthy inflation, and ultimately allow YOU (retired investors) to create livable retirement income without the increasingly unmanageability of tiresome stock market volatility.
Stated more specifically, having 30% to 35% of our overall IRA retirement nest egg invested in attractive yielding, maturity-laddered bond portfolios would (1);lower investment risk, (2);generate attractive retirement income, and (3) lower the advisor fees you pay professionals like Yours Truly.
Unfortunately, our "legally corrupted" two-party political system is so shamelessly controlled and manipulated by the big lobby money corporate elites who are also the primary beneficiaries of higher stock prices.
How does that work? By keeping American worker wages and salaries low, these stock compensated corporate elites minimize company expensed, making stock prices go up, and their executive stock-compensation payouts are huge financial rewards.
Meanwhile American workers go more and more into debt while being forced to shop at Amazon, Wal-Mart and Dollar General. It is the "owner" greed formula that promulgates in increasingly untenable wealth gap.
Time to stop being gullible sheep
Sadly, today's dysfunctional American voters now think like a cult: They foolishly keep voting against their own interests - based on the never changing delusion that by voting rich business people into political office they are looking out for their best financial interests.
Hey Billy Joe Bob: The rich don't care about your finances. You are not part of their club. And you never will be.
Such repetitive foolish electoral action is simply self-destructive personal behavior, regardless of political or religious leanings. It ultimately destroys families, creates addictions to substances and dysfunctional behavior, and fosters scapegoating anger, even hate, towards the "Other?"
In 2016 we witnessed this exact national low self-esteem voter folly In the Presidential election - when the Republicans selected an emotionally sick conman as their candidate. Simultaneously, the lobby money owned Wall Street Democrats forced an "entitled elitist" to run against him.
In fact, the 2016 US Presidential election was the most blatant example of two-party political immolation that I have witnessed in my lifetime. And it is proof that the American voting population definitely needs their own national 12-Step program to protect themselves from low self-esteem self-destructive voter behavior.
Unfortunately, it now appears we may be repeating the same 2016 addictive pattern again in 2020.
If our current Federal "policies" continue unabated, we will be paying our hard earned tax dollars to a gutted, meaningless Federal government "Gerontocracy" controlled and operated by out of touch American oligarchs disguised as government leaders who simply steal our tax revenues for their own economic benefit.
We see this national theft every day as the Nation's tax coffers are plifered daily by the Trump-Kushner-DeVos privatization kleptocracy, directly profiting Trump's narcissism brand and his real estate properties, while at the same time enriching the for-profit global enterprises of Jared and Ivanka (as well as the two Trump sons - Uday and Qusay).
For real: The Trump-Kushner tax theft cabal makes Hunter Biden's Ukraine salary look like a child's front yard lemonade stand..
Sadly, when voter "addicts" don't care about the incompetence and blatant corruption of who they voted for, they cannot claim that their sham politicians are victims of a "witch-hunt" when sane "rule of law" critics call them out for their embarrassing behavior.
Americans need to admit to our self-destruction voter addiction and commit to get "sober" - back to caring about competent government leadership and the Constitutional rule of law we once somewhat respected.
Until then, Covid-19 will only be first loud shot off the bow.
Be wise and believe the scientists; not the US oligarch lobbyists pretending to be our elected Federal government.