by Scott Ronalds
I surveyed the room and found an empty seat among the semi-circle of plastic chairs, which were placed six feet apart with military precision. Something felt off about this place. Nonetheless, I sheepishly introduced myself to the rest of the group. “My name is Scott ... and this is my first pandemic.” In unison, the 20 or so people in the group acknowledged me, “Welcome, Scott. There’s no judgement here.”
I felt a surge of anxiety and decided this wasn’t for me. As I got up and made a bee-line for the exit, the moderator called over, “Don’t forget your free barrel of oil.” Huh? Sure enough, there were two dozen blue barrels stacked four high by the door. How did I miss that when I came in? As my mind started spinning, I felt a wet grasp on my shoulder. I turned around and was locked eye-to-eye with a giant penguin wearing red and pink Fluevogs. I tried to run, but the penguin blocked me and triggered back its beak for what I assumed was going to be a painful peck to my head. I braced for impact. And then I woke up.
Turns out, I’m not the only one having twisted dreams these days. The heightened stress and quarantining brought on by the coronavirus is taking our REM cycles to some strange places (Freud would be having a field day). And it’s testing our patience like never before, as husbands, wives, parents, siblings, friends, colleagues, neighbours, shoppers, outdoor enthusiasts, dinner party goers, and of course, investors. Did I miss anything?
The initial days of the market pullback were dizzying. I’ve never seen anything like it in over 20 years in the business. Daily moves of 6%, 7%, 8% became the norm. It was the fastest bear market in history (defined as a 20%+ drop in stocks). To say that patience was a virtue in the month of March is a gross understatement. Anecdotally, though, I heard few stories of investors blowing up their portfolios and didn’t see any clients do it at our firm. Perhaps the saving grace was that people were preoccupied with more pressing matters and had little time to react to the selloff. Stocks have since seen a decent rebound.
But the coming economic numbers and corporate earnings will be grim, and investors are well-advised to tap into some of that patience in the months ahead. Markets will break through February’s highs again at some point, but the journey could be frustrating — like everything about this pandemic.
Value investors have had to be even more patient. This style of investing, which favours owning companies with lower valuations, underpriced assets, and slower rates of growth, has underperformed growth investing for the better part of the past decade (even though its long-term record is better). Fast-growing businesses like Amazon, Apple, Netflix, and Shopify have left ‘old-economy’ companies like banks, oil, media, and heavy industrials in the dust.
In a downturn, lower-valued stocks have historically held up better because they’re cheaper to begin with, but this hasn’t been the case. Amazon, Shopify, and Netflix are reaching new highs, while stocks like Costco and Clorox are benefiting from the stockpiling going on. Value stocks, on the other hand, have been among the hardest hit in the pandemic, and the ‘value will again see its day in the sun’ story is getting long in the tooth (which, contrarians would argue, makes the strategy even more compelling now).
While I’m hoping we’ve seen the bottom of the market, I’m making room in my “patience tank” for further volatility and potential distress ahead. Evidently, clearing space for this in my head has meant I have less room for patience in other aspects of daily quarantine life. Tell me if you can relate.
After 15 days of home cooking, I went out the other week to pick up some take-out at one of our favourite restaurants (it’s crucial to support small businesses these days) and felt somebody sidling up behind me, a little too close. I turned around and barked, “Don’t you know what 6 feet is?!”
- We had a problem with our cable, so I had to call our provider’s 1-800 number and was told the wait could be up to 60 minutes. Couldn’t do it. It’s now Netflix or nothing in our house.
- We’ve been using Microsoft Teams for work meetings and I’ve found myself yelling at the screen, “You’re on mute!” and “frozen again? ... you gotta be %$#@ing kidding me” on more than one occasion.
- In desperate need for some exercise, I went out for a run last weekend but spent the whole time jumping on and off the sidewalk trying to maintain a reasonable distance and dodge passers-by. The whole thing felt like a big game of Frogger. I may or may not have yelled at someone who got too close to me again.
- In setting up my home office, I’ve had to intrude on my wife’s space (who works from home) and displace my dog’s favourite spot for a nap. A wagging tail and a morning wink have turned into the stink eye from both of them. I’ve become pretty good at returning it.
Of course, there are much bigger problems in the world right now, so I’ve tried to put everything into perspective and discover more productive ways to maintain my sanity and expand my patience tank. Taking a cue from Pluto the talking dog, here are a few other tips to help you survive these unnerving times.
1). On those down days, look at a long-term chart of the stock market. The longer, the better.
2). Read a book. It can transport you to another world or time. A few suggestions (business and non-fiction) that I’ve recently enjoyed: Say Nothing, That Will Never Work (The Birth of Netflix), Barbarian Days, and The Ride of a Lifetime.
3). Go for a walk or run in a quiet neighbourhood — following Dr. Bonnie’s social distancing recommendations of course. Despite my failed first attempt in my busy hood, I’ve discovered that Shaughnessy is a great place for a run if you live in Vancouver (wide avenues and few people).
4). Go outside at 7pm and listen to your community cheer on all the frontline healthcare workers as they change shifts. Participate in it — LOUDLY. These people are putting it all on the line for us.
My wife and I have made this last one part of our daily routine (it’s even more powerful for us because we live close to Vancouver General Hospital). It's a great way to expand the patience tank.
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