Why I still stand by my Dow 15,000 prediction that I made on March 2, 2020 – a time when most of America thought coronavirus was not as bad as the flu. People laughed at me and told me that I was being ridiculous on Feb 20 when I sold all my stock because of the inter-asia airline industry collapsing. I was the first mainstream YouTuber who made a “preparing for a coronavirus emergency” video on Feb 28 where I suggested people get a month of supplies and set up a home gym and many accused me of “scare tactics”. Well its all happened.
Although things have changed a lot since I wrote my 5 reasons why I expected the Dow to go under 15,000 in 2020, they have changed for the worse in my opinion.
Its now March 25 and the last two days, the market has recovered 15% because of the anticipated stimulus package but primarily because President Trump has said there is now a cure for Coronavirus – a claim that no one in the medical establishment has made. It is my view that this 15% uptick is just a momentary bit of wishful thinking and we will soon return to free-fall.
Why I still think the Dow is headed below 15,000 in April:
- The federal reserve has run out of ammunition. They have exhausted every trick available to them and there is nothing else they can do. They have lowered interest rates to zero and have taken over their role of the lender of last resort but nobody wants to lend. Even with the Fed’s massive intervention, the market yawned.
- No more runway. The presidents tax relief package of two years ago gave massive corporate tax cuts and caused our national debt to skyrocket. Because there are basically no corporate taxes left to cut, we have lost that tool also.
- We are royally screwed. Talk of a coronavirus cure is wishful thinking and we are now out of options (see below).
The truth is, we are royally screwed
We had 3 chances to come out of this well and its already strike two. Here are the three opportunities we have to beat coronavirus:
- Back in January we could have used the WHO test kit like South Korea did and effective do contact tracing and testing of anyone who might have been exposed. Because we developed our own test which took two additional months, coronavirus is so widespread that contact tracing is simply not an option any more – strike 1.
- Back in January we could have used the war powers act to quietly build hundreds of thousands additional ICU beds with ventilators and and train the techs to run them. We would not have prevented the virus from spreading but at least people would not have died. Strike 2, didnt do that.
- We are left with one option, a miracle cure and we need it this week. If its not azithromycin + hydroxychloroquine then the miracle better make itself known pretty quickly here.
So if its strike 3 and we dont get a miracle cure, what then? Well, we are totally screwed. The President does have a valid point, we have to be careful about the cure being worse than the disease. If we were to have a national shutdown for 9 months, there would be no United States of America left – water would stop flowing from the taps, food would not be produced and our country would collapse making us ripe for annexation by China or Russia.
Here is the problem, first this was a “Chinese problem” – nothing for us to worry about because democracy is superior to communism, right? Then it became an “Italian problem” – nothing for us to worry about because Italians, well I dunno, we are just superior to them and what is happening to them cant happen to us. Then it happens to New York City and becomes a “New York Problem” that just affects rich, stuck up New Yorkers – nothing that normal people have to worry about. Guess what, you are next, and there will be no resources left to help you. The virus is heading to Dallas, Minneapolis, Phoenix, Great Falls, Detroit, Savannah, and Boise.
In my view, we still have a chance to save some if take this seriously. War powers act. Take 1/4 of the 2 Trillion dollars and use it to build 200,000 ventilators in 2 months and build field hospitals with 200,000 more ICU rooms. We can do this but not with our heads buried in the sand.
What is most likely to happen? Nothing. No miracle cure. No wartime effort to build additional health care capacity. The nation will go back to work and 2% of the population will die. The videos of piled up coffins will be on the news every night as well as people dying in hospital parking lots and the national depression and guilt will plummet the stock market. 15,000 here we come! Please, please, please let me be wrong!!!!
So, how am I investing?
As I said in “Scooby’s stock market advice for 2020‘ I sold all my stock on Feb 20 and then set up accelerated DCA with limit orders and am also “surfing the trough”. Whats surfing the trough? Its when you are making pre-planned purchases at the market trip points indicated here and are sure the market is still going downward, as I am. If you sense irrational behavior causing a market spike then sell and take your gains – “surfing the trough” BUT on your next trip point, you have to double your purchase to keep your accelerated DCA on track.
For example, on Monday March 23, my limit order with 20% of my funds tripped and I bought VOO at 202. Because I anticipated irrational exuberance over the 2T relief package and unrealistic expectations, I set a sell order for that same stock purchase at 235 (16% higher than I bought it at). Two days later (today) March 25, sure enough the market rallied and my sell order tripped and I completed my “surfing the trough” for a 16% return in 2 days. When VOO drops down to 202 again, I will put 40% of my funds into VOO (rather than the 20% I just sold off). This insures that I continue my accelerated DCA.
Ok, whats the worst that could happen to my investment? I sold at the top on Feb 20 and since then have made numerous large short term gains with “surfing the trough”. I am way up from where I was on Feb 20. Worst case, I am completely wrong and azithromycin + hydroxychloroquine cures everyone so that in two weeks, coronavirus becomes yesterdays news as the stock market roars back. So what? That “bad news” would be AWESOME!!! Let us hope and pray that I get this “bad news” so that millions of lives are saved! Financially though, because I still have some purchases made with my accelerated DCA even with this “bad news”, I still win financially.
Yes, I could be wrong
Yes, I could be wrong… but I have not yet been wrong about any of my predictions about the stock market or coronavirus since I sold all my stock on Feb 20 at the peak of the market. IF we truly have a cure for corona virus with azithromycin + hydroxychloroquine then everything I say here will be wrong and the market will continue rebounding and soon be above its old Dow 29,000 level. Who are you going to bet on? President Trump who said on Feb 24 that “coronavirus is very much under control” and his wishful thinking that the cure has been found or the scientists and medical professionals who say the that things are going to be worse than they are in Italy?