My good friend Ron Hiebert retired as a financial advisor from ScotiaWealth in the fall of 2019.
Fortunately, he has not lost his passion for all things financial. He continues as a financial commentator on CFCW 840 AM radio, with two Making Money Minutes mini-editorials a day, at 8:05 a.m. and 5:05 p.m. Those thoughts are amplified in financial podcasts with retired radio legend Gord Whitehead at the website letsmakemoney.ca.
In these turbulent financial times, I asked Ron if he would provide financial insight into just what’s happening out there. He happily responded with two guest columns for Hicksonbiz.com.
Here’s the first.
Investing In A Pandemic
By RON HIEBERT
The one question on every investors mind, at this point in late March, 2020, is when will the Coronavirus be contained?
Knowing this will determine how long this bear market could last and when to start investing again.
Best Case Scenario - The world mobilizes effectively against the Coronavirus as per the examples of Singapore and Taiwan. The infection is contained within a few months.
We know the virus started in Wuhan, China right around Christmas 2019. Things are now normalizing in Wuhan. China has said the city’s lockdown will be lifted on April 8th, 2020.
If North America is as successful in controlling the virus’s spread as China, it means we have about three months of hard slogging ahead. The pandemic would be under control by early July.
Worst Case Scenario - The world reacts like Italy, with measures too little too late. If cases continue to double every 3.5 days, the rate of global expansion looks like this:
Current cases at the end of March, 2020- 375,000
In One Week - 1,500,000
In Two Weeks - 6,000,000
In Three Weeks - 24,000,000
In Four Weeks - 96,000,000
Viruses seem to run a natural course where they eventually lose their potency. The Spanish Flu of 1918 ran for 18 months and infected 500 million people. If the COVID-19 virus follows the same pattern it won’t be exhausted until the summer of 2021.
Some experts say that Coronavirus could affect 70% of the world population. Of those who now become infected: 80% have mild flu-like symptoms, 14 - 20% need hospital care and the mortality rate is 3.5%.
Most Likely Scenario – The reality of past epidemics like SARS, MERS, H1N1, Ebola and AIDS was never as bad as the Doomsday predictions. If the most likely scenario for COVID-19 is between the worst and best case, it will result in a global recession and it could take two years to turn the economy around.
If it is a short/medium recession (i.e. a ‘V’ shaped recovery), make a list of all those wonderful companies you have wanted to own, but have always considered too expensive. MasterCard, Visa, Google, Microsoft, Waste Management, Disney, Starbucks, Amazon, Costco and Honeywell are a few of the names on my own watch list. When a stock on your list reaches your value target - buy it.
If it is a long recession (a ‘U’ shaped recovery), the companies to buy are those unaffected by a sluggish economy, in some cases thriving on such sluggishness.
Some sectors to keep an eye on.
Health care: Companies that make vaccines or produce/distribute medical supplies like saline, rubber gloves and masks. Those that are in biotechnology, or produce applicable drugs are worth keeping an eye on.
Water utilities: No matter what happens, we need to drink, cook and bathe. Maybe water utilities will get cheaper in a pullback, but they are still currently very expensive.
Pawn Shops: During the 2007-2009 recession, pawn shops were one of the best-performing categories in the economy. People pawned their valuables to pay the rent and to put food on the table.
E- Commerce: If people can’t leave their homes, they will buy on line.
Telecoms: People phone, text, email or tweet one another more frequently during times of trouble.
Dollar Stores: To make scarce cash go further, people shop more often at discount stores.
Gold: The U.S. Government has approved a 2-trillion-dollar bailout/loan package for business, and a $1000 per person cheque for everyone in the country. Other countries are initiating similar plans. Very few governments have the financial resources to pull this off. Most will have to borrow and/or print massive amounts of money to make this happen. Eventually this will be inflationary. Gold is usually an excellent investment in inflationary times.
If things get really tough economically, i.e. a long recession and a U-shaped recovery, some kinds of companies will fare better than most.
If the pandemic’s bark is worse than its bite, i.e. a short recession and a V-shaped recovery, start buying stocks off your wish/watch list over the next few months.
(This article is for information purposes only. For investment advise, consult a qualified financial advisor.)
Ron Hiebert can be contacted at email@example.com
TOMORROW IN HICKSBIZ - Coronavirus Is an Economic Game Changer, by Ron HIEBERT