Oil prices hit and rising coronavirus cases plunge Dow – Here are 3 tips for investors – Yahoo Finance

OK, you can now panic a little and dust off this investment manual that has been buried since the 2008-2009 financial crisis.

nervous stock market – The Dow Jones Industrial Average fell by around 1,500 points at the start of the session after a brief stop near the opening when the circuit breakers tripped. The Dow Jones at one point fell almost 2,000 points. “Data-reactid =” 17 “> Oil prices fell more than 20% on Monday after Saudi Arabia’s surprising decision over the weekend to cut prices. This troubled an already nervous stock market – The Dow Jones Industrial Average fell about 1,500 points at the start of the session after a brief hiatus near the opening when circuit breakers tripped, and the Dow fell at around 2,000 points.

Overall, the large bull market is threatened by what some professionals see as a continuing financial crisis at the hands of the coronavirus epidemic.

Since I don’t know which notes are on your 2008-2009 financial crisis manual, let me share mine. At the time, I was a sales side equity analyst covering outright retailers, or in the clear – retailers such as Costco at Abercrombie & Fitch, a teenage clothing destination.

Tip 1: The value may not be the value.

In late 2008 and early 2009, countless experts said that banking stocks are huge values. Most major banks were trading below book value, which appeared to be a blatant purchase. But it was not a glaring purchase, as the banks had sieved balance sheets of opaque assets that were worth almost nothing as the housing bubble burst and consumers collapsed financially. In addition, the long arm of government was hiding to overturn the business models of the banks for their reckless ways (we remember you, Barney Frank).

cruise stocks like Carnival Cruise Line which trades on multiple single digit prices / benefits. These companies are likely to face a fundamental change in the way humans see cruising for years thanks to the coronavirus epidemic. This will mean several years of profits under pressure as cruise line tickets drop below optimal levels and deal with still high fixed expenses. “Data-reactid =” 22 “> The same reasoning could be applied to the actions of cruise lines like Carnival Cruise Line on low multi-profit prices. These companies are likely to face a fundamental change in the way humans see cruising for years thanks to the coronavirus epidemic. This will result in several years of profits under pressure as cruise tickets go below optimal levels and face still high fixed expenses.

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Heck, an ExxonMobil – who crashed 17% Monday on Saudi Arabia’s shock decision to cut oil prices – may not yet represent major value even with a dividend yield of almost 9% . All oil producers and their supply chain could see their net results drop significantly in 2021 due to oil below $ 35 per barrel.

Tip 2: The consumer does not rush into the fray and automatically saves the day.

Another well-used line of thought in 2008-2009 was that the American consumer would rush to save the situation. “The American consumer represents 70% of the American economy and will spend in the midst of falling gas prices,” said a line of lazy experts who were very frequent at the time. Obviously, this was totally untrue, as major retailers were financially penalized while consumers increased savings rates and ate at home instead of the Food Court mall. They did not resurface for the 2010 holiday period, more than a year after the market bottom in March 2010.

Be careful right now not to accept the logic that American households have strong balance sheets. Most do so after an 11-year bull market in stocks and better-paying jobs. But to think that consumers will not change their spending behavior with the stock market on fire and the spread of coronavirus is stupid. In turn, building up consumer-oriented stocks right now is also probably a bad decision, as stocks are building up due to slowing demand and companies are struggling to cut costs.

Tip 3: A market in crisis when fiscal policy unites with monetary policy.

Remember the Troubled Asset Relief Program, aka TARP? How about Ben Bernanke uncorking something unconventional at the time in quantitative easing? These measures were essential to stop the plunging stock markets and lay the foundations for more stable investment conditions. Overall, they worked.

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