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The Cow Jumped Over The Moon

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Hey, diddle, diddle,

The cat and the fiddle,

The cow jumped over the moon;

The little dog laughed

To see such sport,

And the dish ran away with the spoon.

– Mother Goose

There are a number of ways that you could characterize our current situation, both medically and in the financial markets. My thoughts about this have strayed in many directions and I kept coming back to memories from my childhood. Sometimes the common sense and the non-complex observations, from our earliest days, make all the sense in the world when evaluating current events.

Therefore, I would say, “The cow has jumped over the moon.” No one in their right mind, to say nothing of their left mind, could have ever imagined that we would find ourselves overtaken by a medical crisis that has caused a financial crisis the likes of which no one has ever seen before. You cannot compare our present state of affairs to the 87 crash or the 2008/2009 financial debacle or even to the Great Depression as those comparisons, in my view, are a stretch. Different causations produce different results.

The first consideration, in investing, these days is what I call the “Timeline.” Today we are “here” and eventually we’ll get “there” and the length of time to get to the final stages is critically important for institutions and people, alike. “There,” in my view, is going to be defined by one of two events. The first is some methodology that keeps people alive even if they do catch the coronavirus. The second, and best option, of course, is some vaccine that cures the virus but my friends, in the medical profession, think that is still some time out.

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The “timeline” issue also requires some thought as to cash. It isn’t that “Cash is King” but it is that you have to have enough of the stuff to get from “here” to “there” without impairing your business or your life. Any excess money, then, can be invested to take advantage of the cow’s jump and buy stuff at lower prices and, for funds or bonds, at higher yields.

I make note here that the 10 year Treasury is at 0.59%, as I write my piece this morning, and that yields are quite unlikely to go materially higher as the country can’t afford it and as the Fed, for a very lengthy time, in my view, will keep yields at very low levels. The mold has been shattered and anyone that thinks that yields are going much higher has run off in the wrong direction.

I am a very cautious investor and so I come at investing from a different angle. I do not start with what I like, but what I don’t like. After I eliminate these sectors then I turn my gaze onto what looks promising. For me, at the moment, I have no interest in hotels, restaurants, the travel industry, the shipping industry, property and casualty companies, the auto sector, airlines, retail shops, shopping malls, overleveraged companies of any sort, and the list goes on.

I am also not interested in “Hail Mary” passes, betting the farm or impairing the cash available for the “timeline.” Slowly, slowly, nibble, nibble, is the best strategy now for putting money back into the markets, in my estimation. April Fool’s Day just passed. No sense in emulating the moniker for the rest of the year.

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Next, you look at what you currently own. What makes sense to buy more of at lower prices and reduce your average cost and perhaps increase your yield. The bounce, when it comes, will get to your new reduced price long before it gets to the old price and the old yield. “Averaging down” is a sane and safe way to approach our markets, these days.

These are some ways of “achieving Alpha” as the methodology is often as important as any selections. We are in lockdown, lockout and are being forced to live our lives in ways that no one could have ever imagined. Having said that, the markets, and our economy, are under a strain that no one could have ever imagined.

I remind you all again, that when the cow jumps, and the dish runs away with the spoon, that we are not only impaired but that opportunities are presenting themselves that will not probably be seen again in your lifetimes. I know those are strong words but that is exactly, and precisely, what I mean. Panic is never the answer to crisis.

I leave you today with one of the greatest market commentaries of all time. It was 1972 and I had the honor of having brunch with one of the shrewdest women that I have ever met. If there was a beat that was missing, I can assure you that she didn’t miss it. Her comment, below, about the markets, of course, should be enshrined in all of your memories.

“One and one is two, and two and two is four, and five will get you ten if you know how to work it.”

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– Mae West

Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.

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