Prophecies and Profits During Coronavirus

Published by Graham on

True story: many years ago a client of my office called in and said she had a dream that the stock market was going to crash and that we should sell everything in her portfolio immediately, which we did. She called on October 16th, 1987 – the Friday before the single worst day in stock market history, Black Monday.

Due to her prophetic powers, she didn’t need the help of a stupid financial advisor.  Her account eventually left our books but her ex-husband, who had a nearly identical portfolio both in size and in holdings, ended that year down about 2%. 

She left our firm and her former husband on good terms, so we occasionally got updates on how she was doing in life. Expecting to hear tales of how amazingly rich she must have made herself by now I have to admit, it was terribly anticlimactic to hear that even by the summer of 1990 (yes, THREE YEARS LATER!) she was still waiting for her entry point to get back in! Meanwhile, her former partner had turned roughly $300,000 into $387,000, INCLUDING the crash of Black Monday.

I know it’s surprising, but she would have had an extra $87k in just three years’ time had she focused her efforts elsewhere and ignored her portfolio completely.

If you are sitting in cash, or partly in cash right now, I realize that you are afraid to get in too early and catch another leg down. And you’re right, this thing could get much worse before it gets better, but your chances of getting out at exactly the right time and getting back in at the exact right time are slim to none. Those odds are for gamblers only.

And besides, what if you do get in a little to early and catch some more of the downside? If your analysis dictates that prices are cheap then by George prices are cheap!  And what do we do when things go on sale?  That’s right, we buy them!

“Be fearful when others are greedy and greedy when others are fearful”

  • Warren Buffett

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