My Thoughts on the Coronavirus Crisis [Video]
Hi folks, this is Dan Searles. I guess we're all wondering if we're in the middle of a zombie apocalypse here. I don't think we are.
The economy has gone through real problems like this before, really atomic hits if you will, with Kennedy being assassinated, the Vietnam War, the tech bubble bursting, the 21% interest rates under Carter.
The economy is going to react negatively when you get a negative stimulus, but we'll come back. The fundamentals are still good and, really, here's the thing. If you're a client of Medallion, you're set up so you have reliable income. That's why we use annuities in a lot of what we do. It's because we have that baseline of reliable income then, over that, you can have growth. That's where we need to take chances.
Now, within the growth models that we use, your monies that are not being used for income are going to react badly to the market because they're in stocks and they're in bonds. Right now, both are going down, which is not supposed to happen, but it does. It happens. It happened in 2008.
So, that money should be money you're spending 10 to 20 years from now, and it's okay to have it go up and down. We expect it to go up and down. So, within that, there are two types of strategies.
Sailing Strategies and Tactical Strategies
There are sailing strategies, which are going to move forward when the market's going forward, they're going to fall back when the market's going back.
There are also, within most of your portfolios, tactical strategies. The tactical strategy, to stick with the sailing analogy, is it's trying to tack with the wind. They tend to tack with the wind and they're trying to find ways to go forward in a negative environment, but having said that, it's going to go backwards. At times like this, it's almost designed to do that so that you can also go forward in the good times.
What could recovery look like?
My perspective on what's going on is when we find a vaccine, this will probably be a U-shaped recovery, in my opinion, rather than a V-shape.
A V shape is straight down, straight up. There are also W recoveries, up and down, up and down, but this I think will be more of a U shape. We'll hit the down, everybody'll digest to it, so we'll stay down a while, then we'll start going back up.
Long Term vs Short Term
Long term, if you're not investing for long term in stocks and bonds, you're probably wrong. If you have short term money or if you're investing with stocks and bonds in money that's for your necessary monthly checks, you're probably wrong there. As a matter of fact, you're playing Russian Roulette.
Are you lucky? Stock market keeps going up, in your early years you'll be fine, but if you're not and the stock market goes down in your early years, almost all of our polling strategies will show you that you're probably going to run out of money.
This too shall pass
So, again, as long as you've got your baselines covered with steady income streams and your stocks and bonds are in long-term growth models, you're fine. Just relax and stay home. We don't want you making your parents or your sick friends sick or worse. If you're older, stay home until this passes.
What's the saying from Proverbs? This too shall pass.
Y'all be good and stay safe. That's my thought for today.