Ready For A Volatile Week

Ok, so we are back in our apartment and it's going to be a heckuva week. My wife is returning to work this week and I'll be teaching 2nd Grade solo. It's not the material; I can do spelling and subtraction. It's that my twin boys have always been in separate classes by design, because when they are together they are either extremely combative (competitive, annoying, and so on) or super cooperative (to the point of uncontrollable laughter). There is not much middle ground with them. 

My theme for the week is "independent learning" so we will see how that goes. My goal is to be stoic no matter the volatility I'll be faced with. 

Also, I think the stock market will be equally volatile and challenging, more on that later. 

Diverse Answers To The Virus Can Make Sense 

We were in the country for more than a month and I can see how there are many perspectives on the virus and the reaction to the virus. Out in the country, people are respecting social distance and all that, but there's no sense of imminent danger and no one is wearing masks. I grew up in a very small town and I imagine it's the same there. It would be easy to think that the whole thing is overblown, and the city/state/national orders to shelter in place are political overreach. 

Here in the city most people are wearing masks and there's a sense of foreboding. It will be equally eerie going into work where extensive measures are being taken to separate people and clean workspaces. In the city, the virus is a real and present danger. It would be easy to think that anything less than lockdown is either risky or foolish.

I dislike partisanship so the my personal view is not based on a political bias, it's more of an observation: there is probably not a one-size-fits-all answer to how people should get back to normal, and how normal After Virus can be.

Diverse Sectors In The Market Can Make Sense

Last week I thought it was time to hedge the markets and it turns out I was correct (big selloff Friday, continued selloff likely on Monday). I sold my put options too soon; it happens. I don't mind my positioning, however, because I raised a lot of cash last week in longer term accounts. Cash won't create profits but it will prevent losses and give me some fuel for the next leg up. There may still be time to buy puts depending on how the decline plays out.

I remember this fairly vividly from the financial crisis. It's important to anticipate the next move, otherwise you're always behind the curve, selling on the way down and buying near the temporary tops.  

This week will be a good stress test for my portfolio. I expect the broader market to be down, but I expect my own holdings to be down less. I reviewed my main sectors here previously.

If gold holds up, the gold mining stocks should do well. The biggest players (Newmont, Barrick) report earnings, and I have no idea how that will go. If Newmont sells off, it may be a buying opportunity. 

Also reporting earnings will be Activision and EA, two of my video game stocks. Same deal -- either they pop and I'm happy or they sell off and I buy more. 

Speaking of earnings, Chevron and Exxon reported last week and Chevron stock reacted much better. I am questioning my positioning in energy stocks ... but with those dividends I'd like at least one long term hold in the space. Chevron is probably that hold. I have a small position in CVX and may make some moves out of XOM and into CVX, in small size, as the sector pulls back. 

Finally, I think I'm well positioned in the short and long term by being so heavy in biotech. I've been reading / listening to podcasts on different aspects of how the scientific and medical communities are responding to this crisis and it's becoming clear that even if we "solve" Covid, a lot of attention (and money) will turn to preventing the next pandemic. I think there will be an appetite for investment and innovation. This is a generation-defining crisis -- governments and their citizens will insist on being prepared as a matter of national priority. Biotech companies and life science technology companies should benefit. 

There are many ways to construct a portfolio and the key, I think, is to have a good reason why you hold a position and be open to information that may change your mind. Same thing in life. The virus has not gone away but we are learning. A month ago we wouldn't touch anything that was outside our control and last night we ordered takeout and it was glorious.