Market down – when and where to invest in the recovery
Many people are wondering where to invest now.
The best answer, if you don’t have the resources to do a fundamental computer analysis, would be to go for the index funds and waiting.
Many stores are falling apart, like macy’s, jcpenny, and others. Their stock prices are too low to even short sell them. It is almost a certainty that these companies, going bankrupt before social distancing and now closed in most of the country. Is short selling worth it? Many stocks, like boeing, which were expected to recover, have already fallen. Let me know in the comments if you know of stocks you believe to be handling this crisis badly which will fall through.
Many people believe it is immoral, just gambling, to short sell or purchase options. If you make money off of such a gamble, this is often said to be bad for the markets, and for society as well. This is not always true. Foreseeing a future price drop, and profiting off of it, can provide advanced warning to the market of a coming drop. In the end, the US congress who has debated this extensively has allowed this kind of futures trading specifically because it provides the market signals that can be useful to pricing the stock market, often preventing quick declines by providing warnings ahead of time as people start short selling.
Many stocks from countries just beginning to be effected by covid-19 have buying and short selling opportunities, like India and parts of Africa. Debt forgiveness would be a great step for Donald Trump to take, who has benefitted from many bankruptcies.
For stocks sure to survive this crisis, like disney, coca cola, and proctor and gamble, there are many reasons to invest for a long term gain, though short term there are no guarantees.
What is the best way to invest now? Waves of market drops in are likely to continue. It is not necessarily the case that the end of the covid-19 crisis will be the end of the financial problems. The financial problems were much deeper, and will only make it more difficult to compete for corporations to get bonds with more and more governments issuing them.
In the short term: reopening areas due to lower covid 19 cases is great for business. Local businesses in the re-opening areas are sure to be doing much better.
In the longer term, expect the debts accrued in recent years, and especially the severe debts taken recently, to become more severe.
More and more, we will be hearing about debt forgiveness, and many will reject the idea outright. The idea deserves serious consideration, especially for countries like puerto rico, but even european nations may seriously need to consider what can be done to remove debts that are getting more and more severe.
All options should be on the table, we do not want a full collapse of large economies.
For investors, there are great opporunities out there, but it will require patience and fortitude. Gardening might not be such a bad investment at this time, with food becoming more scarce and food waste at an all time high. Investments in gold or silver would not be highly recomended, mineral prices continuing to drop. Gold is currently high, but production is high and there isn’t much to push it higher at this time. (1730.52 last close)
Mineral price investments are inherently a losing proposition in the long term, as it cannot gain in value on its own like bonds or stocks.
Mining companies have not done well, and there is no doubt that mining companies will have to slow down some production due to covid-19. Most small oil producing companies in the USA are on the verge of bankruptcy. Expect Exxon to drop more as weak demand and falling prices continue.
Movie theaters will shrink, even a cure or a vaccine won’t be enough to make people leave their huge TVs to see a movie in a theater, the risk is too great, and the payoff is low and getting lower as new streaming services provide better value.
Bonds are not the best investment, since the federal government has been buying them, shoring them up but also removing any chance of profitable opportunities.