With markets in full panic mode, Master Investor Jim Mellon issues a quick note to update regular readers.
As advised, this coronavirus has morphed into an excuse for markets to take the biggest swoon in my decades-long experience. Today, I imagine the FANGS, over owned and over hyped, will take a MASSIVE dive, and possibly will not recover for a long time. They are dead money at best, and TESLA (NASDAQ:TSLA) will have marked the top of a period of market complacency, fuelled by empty optimism and cheap money.
However, if you have cash, or bonds you can liquidate, this represents an enormous opportunity for capital gain. This is not a great depression in the making, and I am encouraged that the Chinese caseload of victims is abating; it will do so elsewhere in due course, though it is worth watching out for a resumption of coronavirus in the autumn.
Oil majors are vertically integrated and are mostly capable of riding out this Force 9 storm. If they fall further, I would load up on BP (LON:BP.) and Shell (LON:RDSB).
Oil is going to be a trigger point for collapsing junk bonds though, as US shale is totally uneconomic at these levels.
I am interested to see the collapse of Italian BTPS also, which might presage something worse. This is a theme I will return to at the Master Investor event. See you there in our matching masks!
What I suggest investors do now is:
- Stick with gold and silver. Going higher.
- Dollar is broken down; go long sterling dollar.
- If by any remote change the FANGS have a bounce, short or sell them.
- Dip a toe into the travel sector. IAG in UK and Delta in US v good.
- I think US interest rates are probably over discounting the worst. If you are brave, short the long end of the US bond market.
- Short VIX.
This is a great time for investors – if you are nimble and prepared to change direction on a dime.
Happy Hunting!
Jim Mellon