1.   Review your existing Investment Policy and Risk Profile in terms of where your portfolio was prior to the crisis, where your value is now and what you want your portfolio to look like after the crisis. Were you taking more risk than you expected? Were you aware of the portfolio risks you were taking?   Do you know what risk you need to take to meet your future income needs?   Did you have less risk in your portfolio and now would like to take advantage of the market decline to increase capital to meet future income need?

2.   Acknowledge the financial threat of this virus while maintaining perspective and realize emotion should not be a component of your investing: Surgeons do not perform medical procedures on themselves or family members. The markets will likely decline further, including all asset categories – bonds, including treasuries and precious metals at times.   Although the virus risks were present and known before the market decline, the belief that this would be contained, and the strong US consumer-based economy was not vulnerable were clearly false assumptions. This sharp, abrupt decline is unprecedented; the Great Depression market drop was over 2 months not~ 25 days.  

3.   Realize and understand the difference between an Event Driven Market Decline vs. Economic Driven Market Decline and historical market recovery precedent and why.

4.   Negative Perspective: The economy has hit a wall and there is no way to reasonably forecast corporate earnings or economic growth over the short/mid-term, other than substantial declines. We are waiting for the largest portion of the Virus Storm to arrive.:   We are likely in a global /US recession, which will be worse than average but hopefully shorter than average.   There is expected staggering economic contraction now and in the 2nd quarter with further ripples into the third quarter; possible earnings /GDP declines of 10-20% are expected.   The worst bear markets declines have ranged from 45-50%. Just holding declining positions without a recovery strategy   will make it nearly impossible to get back to even.   This decline has been highly correlated encompassing all market caps, strong and weak companies, fixed income and hedging positions.

5.   Positive Perspective:   The market declines due to the virus occurred after the US economy entered the year with a strong foundation and record wealth accumulation.    Although all the wealth created last year (~ 11 trillion) has been wiped out in 25 days, event driven declines, such as a pandemic, can have a much quicker and sharper recovery.   We may be able to put this behind us after 2 quarters.   Usually recessions exhaust themselves in 11-18months   based on history. This recession will likely be shorter as this is not a financial meltdown, unemployment was at historical low.   Recall that the financial crisis was a huge hit to wealth as both stocks and housing went down 50 and 30% respectively. The low interest rates locked in -borrowing costs near 0 - will not be going away.   Actions being taken by both monetary policy (0 rates) and fiscal policy - Quantitative Easing and   subsidies -will likely be a larger and implemented more quickly than during the financial crisis.   Both have a lagging affect but will be positive. The economy will stop declining once productivity is resumed; the market will start recovering before the economy bottoms.   Shutting the economy down to avoid a surge in virus cases, which overwhelm medical services , will run its course but soon   –likely weeks, not months – the economy will resume , like China, while attempting to contain the spread and successfully treat the inflicted.   The existing and likely lower future market values provide the most attractive buying opportunities since the bottoming of values during the financial crisis.   Of course, one must take action and implement a strategy to recover and thrive in the next Bull Market (6-10 below).

6.   Scaling to reduce risk and increase risk based on key parameters including market, virus, liquidity and global trends.   Sharp rallies are not indicative of bottoming; retests of bottoms can happen months later.

7.   Focus allocations by company quality, size and sector- growth vs. value sectors, large vs. small, domestic vs. international.

8.   Theme based Investing including consumer, technology, healthcare and " New World” economies.

9.   Culling weaker players from portfolios that are at risk, won't recover or dividends are in jeopardy.

10. Risk allocation should be targeted and heavy at times. The shortest recession/bear market in history, could be followed by the sharpest and shortest bull market in history; a “hangover” recession, based more on fundamentals, could follow?

March 20,2020