“The Art of Media’s Fear Mongering” Vista Partners Daily Market Recap – February 27, 2020

Fear seems to be feeding fear in the markets this week and the media seems to be thriving in it.  On my flight back from three Tribe Public events that were held in Florida this week for Hecla Mining Company (NYSE: HL) where I met with a number of other investors that were portfolio managers, family offices, RIA’s and accredited investors, I watched CNBC and watched the art of their fear-mongering on full display. They were shouting to high heaven and back about the coronavirus, the declining yield curve and the point and percentage drop as though they had made it happen or predicted it and/or giving people the feeling that maybe they should sell. CNBC has also dubbed the “crisis” “Market Selloff” not unlike their market “Cliff” rendition they sang back in 2008.  Here are today’s CNBC tag lines that they placed in big red banners with large white bold font in ALL CAPS no less while they had them scrolling every few seconds as their entertainers spewed all kinds of bigger than life statements that were intended to excite if not downright scare the best of us into selling indiscriminately:

• MAJOR AVERAGES CLOSE DOWN BY MORE THAN 4%
• S&P 500 WORST % DROP SINCE AUG 2011
• DOW CLOSES DOWN 1,190
• DOW, S&P DOWN 11% THIS WEEK
• WORST POINT DROP FOR DOW, S&P 500 IN HISTORY
• DOW DROPS 3,200+ THIS WEEK

Hopefully, you are not shaking in your boots,  but if this is the case I would suggest you turn CNBC off and concentrate on the investments you have and remember why you own them and continue to do your own research and reconfirm that your thesis for owning is still intact. It may be if you can control the emotion that CNBC and others are stirring up. I take solace in the fact that in my experience and many others before me know that nothing is constant except change and that things are rarely as bad or good as they seem.  I suspect we may catch a bottom over the next week or so and that we may see a “v” shaped move higher that may be as aggressive as what we have seen on the way down. the psychology of the markets can never be estimated.

Today the S&P 500 closed down  -4.4%, the Dow Jones Industrial Average lost -4.4%, the Nasdaq Composite lost -4.6%, & the  Russell 2000 lost -3.5%.  The Velocity Shares Daily 2x VIX Short-Term ETN (TVIX) closed at $97.05/share +32.82%. 

Treasury yields continue to drop. The 2-yr yield dropped another 5 basis points ending at 1.10%, & the 10-yr yield dropped another basis point to end at 1.30%. The U.S. Dollar Index weakened today subtracting -.5% ending at 99.13. 

Oil prices also dropped another -3% to $47.24/bbl. 

Gold closed at $ 1,644.40/oz up .12% and silver prices closed at $17.59/oz down -.85%.

A few bright spots came in the form of economic data:

• The January durable goods orders report showed a drop of -.2% and when you exclude transportation, the durable goods orders moved up by +.9% 
• The Initial claims report for the week ending February 22 confirmed an increase of 8k to 219k while continuing claims for the week ending February 15 showed a decline of 9k to 1.724M still at a historically low level.
• The second estimate for Q4 GDP stayed at 2.1% & the GDP Price Deflator was revised down to 1.3%.
• The Pending Home Sales report confirmed a nice increase of +5.2% in January.

Economic Reports

On Monday, we did not receive any significant macroeconomic data.

On Tuesday, we received the Conference Board’s Consumer Confidence Index which moved up to 130.7 in February The S&P Case-Shiller Home Price Index moved up by +2.9% in December. The FHFA Housing Price Index moved up by +.6% in December.

On Wednesday, the New home sales report rose +7.9% month/month in January to a seasonally adjusted annual rate of 764k units. New home sales on a y-o-y basis are up +18.6%. The weekly MBA Mortgage Applications Index report confirmed move higher by +1.5%.

On Thursday, we received the January durable goods orders report showed a drop of -.2% and when you exclude transportation, the durable goods orders moved up by +.9%. The Initial claims report for the week ending February 22 confirmed an increase of 8k to 219k while continuing claims for the week ending February 15 showed a decline of 9k to 1.724M still at a historically low level. The second estimate for Q4 GDP stayed at 2.1% & the GDP Price Deflator was revised down to 1.3%. The Pending Home Sales report confirmed a nice increase of +5.2% in January.

Investing & Inspiration

“The riskiest thing we can do is just maintain the status quo.
I get up at 4:30 in the morning, seven days a week, no matter where I am in the world.
I think it is important for people who are given leadership roles to assume that role immediately.
What I’ve really learned over time is that optimism is a very, very important part of leadership.” Bob Iger, Ceo of Disney

“There are old traders and there are bold traders, but there are very few old, bold traders.”-Ed Seykota

“Let this scenario play out on its own, in its own fashion. As you watch it unfold, you will soon be grateful that you choose the peaceful path. Remember — those who live by the sword, die by the sword.”

“As long as you enjoy investing, you’ll be willing to do the homework and stay in the game.” -Jim Cramer

“I rarely think the market is right. I believe non-dividend stocks aren’t much more than baseball cards. They are worth what you can convince someone to pay for it.” -Mark Cuban

“Michael Marcus taught me one other thing that is absolutely critical: You have to be willing to make mistakes regularly; there is nothing wrong with it. Michael taught me about making your best judgment, being wrong, making your next best judgment, being wrong, making your third best judgment, and then doubling your money.” -Bruce Kovner

“The policy of being too cautious is the greatest risk of all.” -Jawaharlal Nehru

“The only true test of whether a stock is “cheap” or “high” is not its current price in relation to some former price, no matter how accustomed we may have become to that former price, but whether the company’s fundamentals are significantly more or less favorable than the current financial-community appraisal of that stock.” -Philip Fisher

“I learned to avoid trying to catch up or double up to recoup losses. I also learned that a certain amount of loss will affect your judgment, so you have to put some time between that loss and the next trade.” -Richard Dennis

“The four most dangerous words in investing are: ‘this time it’s different.” -Sir John Templeton

“Money doesn’t make you happy. I now have $50 million but I was just as happy when I had $48 million.” -Arnold Schwarzenegger

Tomorrow

Tomorrow’s significant economic data report schedule will include the following:

• Personal Income and Spending reports for January

• PCE Prices for January

• The revised University of Michigan Index of Consumer Sentiment for February

• The Advance reports for International Trade in Goods, Retail Inventories, and Wholesale Inventories