Prepare for a Major Blow

“Widespread fear is your friend as an investor because it serves up bargain purchases"

- Warren Buffett

The Portfolio

The portfolio is up around +5.00% YTD.

Our benchmark index, the S&P 500 is down over -8.00% YTD.

If you're interested in the stock market, are looking for diversification or growth please feel free to connect me. I'm always available to talk, maybe provide some new ideas or to present to your group. clay@claybaker.com

What I'm doing today

I'M GOING TO TRY AND RAISE MORE CASH TODAY. THE MARKETS ARE SET TO TRIP THE CIRCUIT BREAKERS THAT WILL HALT TRADING AS A PROTECTIVE MEASURE.

Circuit breakers are in place to halt trading if the market drops 7%, 13%, and 20% of the closing price for the previous day. If the S&P 500 falls 208 points we'll trigger the first circuit breaker.

What's Happening?

An international row between two of the world's biggest oil producers – Saudi Arabia and Russia – has triggered a price war and sent the price of crude spinning to its fastest fall since 1991, just at the time when the coronavirus crisis threatens to torpedo the global economy.

Coronavirus

Let's stop guessing and sharing inaccurate data about Coronavirus. To see the actual numbers of cases, deaths and recoveries you can visit this site. COVID-19

Oil

Oil below $40 creates problems for most producers, over the weekend the price of oil dropped below $30. Saudi Arabia told Russia that they intend to keep pumping oil which will create a massive oversupply. That over supply will drive the price of oil down to levels that will hit Russia's economy very hard. Unfortunately this will all wash ashore in the U.S. too. Oil producers in the U.S. shale regions will likely find themselves defaulting on loans if oil prices decline as much as I'm anticipating. Within the high yield bond market represented by the HYG

What Should You Be Doing?

Raise cash, be patient and wait for opportunities. Nobody every made a dime panicking. I suspect deep values will show up in about 1-2 months. These are the times when gold and treasuring perform well as a balancing act.

Do not try to reach for yield from companies like Exxon Mobile and MLPs in order to get dividend income. That yield is no longer secure. If you must keep generating dividends try American Electric Power AEP, American States Water AWR. Also a drug company like Merck MRK because of their drug Keytruda could be a good place to keep generating yield.

Another holding I always like to keep in the portfolio is gold in the form of the GLD. From low to high year-to-date the GLD gained 30%. When the dollar declines, gold goes up. When fear increases in the market, gold goes up. While gold produces nothing and has very little industrial value, gold is a stabilizer for all uncertainty within a stock portfolio. The GLD is a fund that hold physical gold and has the best liquidity of any gold fund available. I feel that 10% of a portfolio is a normal holding and increasing that to as much as 20% in uncertain times is reasonable. I've pegged the Stay Invested portfolio at 15%. We're currently below that level and need to do some allocation work, reducing stocks and building up our index funds and gold.

"Markets don't go to zero, Portfolio's do.

Buy quality, be patient...and look twice for motorcycles."

- Clay Baker

Stay Invested,

Clay Baker

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Keep Me Honest 2019

  1. S&P 500 declines to 2,350 or more (1-3-2019)

  2. Healthcare and Biotech sectors outperform (1-3-2019)

  3. S&P reaches 3,000 by year end (1-11-2019)

  4. CSCO reaches $60/share (1-18-2019)

  5. VEEV reaches $145/share (2-14-2019) (achieved $145.23 on 5-10-2019)

  6. CVS reaches $91.50 (2-27-2019)

  7. Bull market takes another leg up (4-7-2019)

  8. The Fed will lower rates 1-2 times (5-13-2019)

Clay's Rules

Rule #1: Don't lose money

Rule #2: See Rule #1

Rule #3: Portfolios go to zero, markets don't, Stay Invested

Rule #4: When a good stock you own drops 10% below your cost basis, add shares

Rule #5: Bull markets aren't sustained without the Transports

Rule #6: When Forward P/E is lower than TTM P/E, expect earnings to increase

Rule #7: When an investment bank sells below book value, buy it

Rule #8: Tips are for waiters. Do your own homework.

Rule #9: Don't sell a stock because you're bored with it. Do your own homework.

Disclosure: I am personally invested long in some or all of these stocks or funds that appear in the Stay Invested portfolio and may purchase or sell shares within the next 72 hours. I am also invested in other stocks and funds that do not appear in the Stay Invested portfolio but may be mentioned or related to this article. It is not my intention to advise or encourage the purchase or sale of any security. I am invested long in these securities mentioned in this post:

HD, AMRN, BSTC, CVS, CSCO, VEEV, STZ, AMZN, NVDA, BCRX, GS, BDSI, VEEV, VTI, GLD, HD, AWR, XLNX, MRVL, NBRV, ENPH

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. This article is not intended to offer investing advice, guarantee 100% accurate predictions, or to be interpreted as providing a personal recommendation.

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This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice.
This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities.

© 2016 by Clay Baker all rights reserved