Stalemate

When I started this blog it was late March and the heavy virus-related restrictions were just starting to gain steam. Here we are 2 months later and the restrictions are still in place, in some cases easing slightly, in some cases turning into a disturbing new normal. 

The civil policies are debatable to say the least. 

Catch-22 Stalemate

I remember thinking in March that if we could get through the first wave of the disease then there would be a clearer trajectory for the crisis (positive or negative), thus providing a clearer signal for decision making (wait it out or take some sort of action). 

Is the trajectory clear now? It does appear that the worst case scenario is off the table. Hospitals in many areas are not overwhelmed (in fact, they are suffering as staff are being furloughed due to a lack of procedures/business.)

But the best case scenario--back to normal by summer--is also off the table. In major cities, parks are still closed, summer camps canceled, and we wear masks in public to avoid breathing in the invisible poison. Local governments face a catch-22: restrictions flattened the curve; a flatter curve means we could loosen restrictions; if we loosen restrictions the curve will not be flat; we can't loosen restrictions. 

Therefore, we're in an uneasy stalemate with the disease. The worst case scenario is no longer on the table, but a bad case is hiding under the bed, ready to pop out and scare us if we come out from under the covers. 

What if there is no curve? What do we do with a sustained level of uncertainty and anxiety?

Governments will do what they do. On a personal level we've needed to make choices. My wife and I like to take action if we can make our situation better. So, in April we went out to the country and spent a lot of time outside. It wasn't always easy but it worked. Now, in the midst of the new stalemate, we've decided to move out of our apartment permanently and rent a house. It's the quickest way to more space, a yard, sustained sanity.  

At first it sounds extreme, to move and change schools and all that in quick fashion. It's not. We will significantly improve our quality of life with this change. If there's a miracle cure tomorrow the only downside is the hassle of moving. I'll take those odds.

Investment Thoughts

Stalemate is also a word I could use for the S&P 500. In a month the index has essentially gone nowhere. But, as I've been saying, the story is different under the hood. 

Not sure if the chart will be easy to see but here's what's going on. The orange line is the S&P 500: flat. Energy (XLE) and the Nasdaq have been outperforming, but energy was much lower during the crash and is starting to turn down again. Smaller caps are also starting to turn down again. Worst of all, financials barely bounced after the crash and have been making new lows.

Some of the debate over whether or not we will "test the lows" is missing the point. Some tech stocks might not test the lows. Banks are already testing the lows. 

These are macro thoughts. What I'm really interested in, of course, is my own portfolio. 

This is a stock picker's market, which is good if you enjoy picking stocks like I do. What I like about my current portfolio is that it's built for offense and defense. My biggest sectors--gold stocks, biotech, video games--have the ability to go up when the broader market is going up or down. They might not go up quite as fast when the market is ripping. For that reason, I've tried to add new tech for the big up days. 

At some point, the environment will change and I will change with it. Just because the environment presents a stalemate doesn't mean one can't take action.

What I'm Reading: Trying to get into a new book. 

Mindful / Stoic Thought: If you met you at the grocery store, would you like you? If your kids belonged to someone else, would you like them (kids)? 

Final Thought: One of my kids asked if the virus would ever go away. My other kid joked that it might end humans. Serious question: if we knew that our current situation (risky for a portion of the population, minimal treatment, no vaccine, highly contagious) would last for 5 full years, what would we do differently? What about 10 years? 20 years?