What Happened in the Stock Market?

The world is not ending. Stocks went down ~10-12% on the week. Oil went from $52 to $45/barrel. Gold went from $1,666 to $1,587. Bonds went up about 2-3% this week. What will happen next, truthfully no one knows.

Instead of what is the reason, you have to realize the Stock market is a psychological phenomena. People tend to over react to bad and good news. There are multiple interesting events this week.

More likely what we are seeing this week is a combination of issues:

Stocks were priced for perfection. Prices were ~20% too high (in my opinion) for earnings. China the second largest economy unable to export goods will hurt sales all over the world.

Automatic trading and momentum investing deserve some blame. During the run up momentum investing was developed to keep buying winners. When the stock market adjusted lower the same algorithms keep selling. The effect of automatic trading is to amplify ups and downs in the stock markets.

Speculators having to cover losses. People with options have to sell other holdings including precious metals and commodities to pay for their losses.

Corona virus is all over the news, but 80% of cases are mild and only ~2% of cases are fatal. Mostly fatalities are senior patients with other existing. My expectations are the number of cases and countries will grow. Flus are very contagious. But a flu shot will likely be available in time for fall, quarantines are working to contain breakouts, and countries with modern medical facilities will be able to treat patients successfully. In a year this should be over.

Bernie Sanders surprised Wall Street who discounted his run to be the Democratic nominee. His proposed policies and higher taxes on the wealthy will lower profits and stock prices. Most Wall Street analysts believed President Donald Trump will be reelected against a moderate Democrat. But Bernie Sanders’s popularity and early primaries results are creating election doubts. He is as popular with the same blue collar voters as the President.

BTW if Democrats did not have Super Delegates, Bernie Sanders may have beat Donald Trump for President. Senator Hilary Clinton ran a terrible campaign.  At this point he is tracking like President Trump did through early primaries leading to his nomination. He is likely to win.

So we know what may have triggered the stock sell off this week. What should we investors do?

First option is do nothing. If you have a diversified plan, it will survive this pull back. My investments are down ~5-6% this week, because have about 50% stock, 40% bonds and 10% commodities/precious metals/REITs. The non-stock investments went up lowering my losses.

If you have 80% -100% stocks, consider moving some of your money to bonds or other investments. The decision is not all or nothing, but to be more aware of other choices like bonds or CDs. Remember, what you lost this week is much less than you gained over the last 3 years. We can also work a few more years before retiring.

No one knows what the stock market will do next week. May go up, continue to fall or stabilize at the new levels. But over years stocks typically grow. Our retirement funds buy stocks every month. Long-term stock prices will go back up.

Predicting Your Life

Blog post #300 - Thanks to all readers making this worthwhile

Most of us believe our life will turn out the best. “A great marriage. Nice house. 2 cars. Great careers. Our kids will be perfect.” Life is full of Unexpected Experiences:

• Addiction
• Cancer, Heart Attack, Stroke or Medical Issues
• Divorce
• Early deaths of loved ones
• Employer or your business closes
• Homelessness
• Jail time
• Losing your job after 50
• Mental health issues
• Moving to find work
• Severe pay cuts
• Spouse disabled
• Special needs children
• Suicide
• Unemployment stretching years

None of those things above are in our dreams growing up, yet most adults experience one or more or your family experiences several surprises. Most are out of our control. 

For example mental illness strikes 1 of 5 adults, 1 of 6 children, and 1 of 3 families.

You can do everything right and still have health problems. Hereditary and luck are part of health.

 However some of these are in your control. Start saying “No one will know” or “They’ll never catch me” and you are likely going to jail. 8.1% of federal prison inmates were college graduates. Harvard Graduate School encourages MBA students to stay out of jail.

What to do?

First realize you are not alone no matter what goes wrong in your life. Read advice columns like Ask Amy, Ask Carolyn and The Moneyist to learn about how people treat each other. Dear Abby helped prepare me for life, and she had a wonderful sense of humor.

Build Your Resilience

Be realistic and seek feedback about yourself. Create a list of all the things you have learned or overcome. No one is as great nor awful as they think. Even then you can still change.

Try Something New

Failing or flailing at new sports or hobbies expand your mind as well as humility.

Ask for Help

Everyone gets stuck. No one accomplishes it all on their own. Working with people can create miracles.

Spend Less

People in debt for spending struggle more often. Savings give you more options when things go wrong or your future. My WW2 mentors on first job told me to have a “FY” fund, in case a boss ever asked me to do something illegal or mistreated me.

Have Courage

Not trying to worry you. Worry is unproductive. No one can prepare for everything. Just ask any parent raising children how unprepared they were. Yet kids grow up to be good adults in spite of us.

When problem come up, sometimes we cry, sometimes we laugh and sometimes we pray. Then we Go Do Our Best.

#300 starting writing in 2007 with the ‘Success Ladder’. Have learned to communicate, have empathy, try new experiences, and met many wonderful people. You will be amazed how many people help you learn, and root for you. I root for you as well - to succeed, learn and share. Thanks for reading.

Sick Days Now and Then

Have accumulated 34.5 sick days in 9 years, basically figure time will catch up to me and will need them some day.  Virus for 3 sick days two weeks ago and cold for 2 sick days this week. New to being on an Agile team, so just wonderful for my output this sprint.

Been a long times since sick, so let’s compare sick days now versus the old days. Times have changed.

Old days called in to the central reporting, then have them forward me to a boss’s extension to leave a message when someone answered. Then go back to sleep and I would sleep a lot. If woke up had the boredom of daytime TV as a distraction. MTV helped better when it came along. BTW usually slept a lot.

This year pull out my laptop and send calendar notice to manager & team am out. Was getting worse on Wednesday, so they already knew. Then log in and put in sick hours for day. My body still wants to sleep.

During the virus, spent 2 days 4 hours each attending training online, then finished 3^rd day training at work. Don’t forget answering emails and small tasks. For this cold finished updating a large document that was due.  So completed more than half days while out, assuming wasn’t falling asleep in my chair or bed.

The good news is while trapped at home, the entertainment is much better. Prefer reading on the internet, and have sports or movies to watch. 

The better news is this cold will pass. No it is not Coronavirus, which hear from people who are joking and not joking (worse). 

Your Job Is Not Secure

Especially if you are over 50. The Urban Institute study by Richard W. Johnson and Peter Goesselin tracked 2,086 people from 1992 to 2018 until they were 65. Study showed regardless of education level 28% were laid off / business closed, 13% quit for job dissatisfaction/boss, 13% unexpected retirement, 9% health / disability / family, and 2% other. Total 66% careers disrupted with over 6 months unemployment or family income down by 50%. Only 19% choose to retire and 16% are still working after 65.

Employers have an aversion to hiring older workers. “Only 1 in 10 of involuntarily separated workers ever earned as much after their separation as before. Median household income fell 42 percent following an employer-related involuntary job separation”. 

Interesting most job growth is over 55, but mostly low paying jobs like “home health-care, personal health-care and in janitorial services. It might be the bargaining power of older people is just not pushing up wages,” - labor economist Teresa Ghilarducci.

What can we do?

1) Save more money for retirement. Every year when you get a raise, increase your % retirement savings and your emergency savings. Avoiding unnecessary debt. Buy a smaller home and less expensive or used cars.

2) Keep learning and developing skills in demand while working. Research your and other industries. What skills do your company need they are having a hard time hiring? What skills related your existing strengths are other employers having a hard time hiring? These jobs should pay better. If your employer won’t pay for it, you pay for it. Community colleges are very affordable. Be more productive, a revenue producer and value creator. Make sure your boss realizes that.

3) If you are laid off, deal with the emotional loss first. Take a little time to grieve your loss, work is a large part of identity. Start collecting unemployment and find what benefits you can get immediately. Work a taxi job beneath your education to get through. Work off any kind helps your confidence. Consider freelance work full time. Companies often hire experience people at higher pay on projects, rather than hire full time.

4) Keep your health up. Exercise and eat healthy to stay energetic.  You will enjoy your life better than sedentary coworkers. Plus you will be more productive and a key person to keep.

5) Plan on downsizing your condo/house after you retire. Move to a community or near family in an affordable area when your income goes down. After layoffs my wife and I shared an apartment with a roommate to save on expenses until our income recovered.

None of this is pleasant to consider. However only 1 in 8 work till full retirement age, we must prepare and expect difficulties in life. My preparations got me hired after 50 by a Fortune 100 company at a higher income. These steps will give you resilience and a better career.

Links to articles below:

Urban Institute ‘How Secure Is Employment at Older Ages?’

https://www.urban.org/sites/default/files/publication/99570/how_secure_is_employment_at_older_ages_2.pdf

Marketwatch - ‘Holding on to a job after age 50 isn’t always easy’

https://www.marketwatch.com/story/holding-on-to-a-job-after-age-50-isnt-always-easy-2020-02-07

AARP - ‘Workplace Age Discrimination Still Flourishes in America’

https://www.aarp.org/work/working-at-50-plus/info-2019/age-discrimination-in-america.html