First off, I apologize for the lapse in posting. Blogging about REITs and dividend investing may be a hobby, but I’ve also got a day job that can keep me preposterously busy from time to time. But, on the off-chance there are actually “fans” of this humble REIT blog who have been refreshing the page waiting for another post, well, great news–this is that post. I’ll certainly try to keep this more frequently updated in between work and being a new dad.
If you’re the sort of person who reads down to the second paragraph in a post on a blog about REITs, then you’re probably the sort of person who follows the market pretty closely. And if you’re the sort of person who follows the market pretty closely, you’ve probably noticed that everything is, to use a technical term they teach in B-school, completely fucked right now. The S&P 500 is down 4.42% in a single day today, and that’s following on an entire week of massive losses. A few weeks ago people were breaking out their “DOW 30,000” hats. As of right now, the Dow sits at 25,766. Things are decidedly sub-ideal.
The culprit, apparently, is a respiratory illness in China called COVID-19 or the Coronavirus, a virus which, although I am not a doctor, I can say with some certainty is less appealing than the slightly skunky Mexican beer after which it was (I assume) named. It began in Wuhan, China and has spread to Italy, Iran, South Korea, Singapore, countless other places, and, most troublingly for the Dude who is himself a lifelong Californian, California. All of this seems not great, although the Chinese government is about as trustworthy as a meth addict at the BART station asking to borrow your phone for a quick phone call, so we’re not really sure at this point how dangerous the disease actually is. I guess we’re all going to have to wait and see.
Still, the bottom line is that having your money in the market this week has been about as fun as wearing a pair of underpants made of angry bees. If your portfolio happened to be heavily weighted towards energy stocks or (for some reason) cruise line stocks, you’re probably considering just changing your name, faking your death, and starting a beachside cabana bar in Puerto Vallarta with what remains of your meager savings. (Actually, you should do that regardless of how your portfolio performed this week; it sounds like an awesome idea.) The Dude himself took heavy fire and his portfolio is not looking great. So what do we do?
Nothing. Keep investing like you always have. If you have a little extra money, invest more. Look for great companies that seem unreasonably beaten down, or just throw money into index funds since there isn’t much point looking for deals when the whole market took a dive. The point is, don’t give up; double down. I write this fully aware that the market can drop another 30% in the next 2 weeks for all I know. And, in fact, if the market does drop another 30% in the next 2 weeks, I’ll be writing the exact same thing with even more emphasis. Because as the price of a company’s shares drops, the risk involved in owning those shares does down, not up. The lower the share price, the less risky the investment. The bigger the dip, the more you buy.
The bad news is that we haven’t seen the market like this since 2008-09. The good news is that history shows us that the investors with the courage to double down every time the market dropped and keep taking the pain in those years ended up, if they held on, getting very, very rich. Ultimately, one of two things is going to occur. Either, (1.) coronavirus will be just another passing event and global capitalism will continue to march on toward new highs like it always has, or (2.) it’s really a civilization-threatening catastrophe and we’re all fucked. I genuinely don’t know which it is, although I certainly suspect the former. But if it is the latter, I won’t regret continuing to buy stock, because in a post-apocalyptic, Mad Max-style hellscape where there is no law and we are ruled by gun-toting motorcycle gangs, if I even live long enough through the outbreak to see that outcome, I will have far bigger problems than portfolio underperformance. For instance, a lack of clean underpants.