Fear Levels Are Dropping

21 March 2020

Dear Fellow Investor,

Below are 2 charts. The first is the one-month EWM which is the ETF traded on the NYSE representing the blue-chip shares in the Malaysian market. The 2^nd chart is the Dow Jones. On Friday the Dow dropped 4.55 % while the EWM went up 5.42%

EWM up 5.42 % on Friday

Dow Jones down 4.55 % on Friday.

The VIX index which I spoke of last week also took a big drop of 8.2 % meaning fear levels are dropping.  It does not mean the worst of the panic is over but appears that the fear is lessening.  Should price spreads start to narrow meaning volatility drops, it could mean the crowd fear transitions to uncertainty. Only a terrible unknown event could trigger another collapse. Good news such as sustainable progress on the virus infection rates as is happening in China, Japan, South Korea and Taiwan could turn all world markets to the greed or bull phase.  The Dow took a big drop in the last 45 minutes of trading due to a political statement from a New York politician which has nothing to do with Malaysia.

CNN continues to stoke fear in its broadcasts as it politicizes the virus to try to hurt Trump.  They showed a Covid patient in a Florida hospital bed with multiple tubes and breathing apparatus.    He described his agony comparing it to spiders in his throat eating his flesh.  He was smiling and well-spoken so I wonder how bad was his condition? When the reporter asked him about his recovery progress, they cut his microphone.   

On a positive note, polls have shown that Trump’s handling of the virus is over 60 % positive. His skills as a company CEO handling complicated real estate deals are being applied to the current problem.  It seems politicians of both parties are coming together in this national emergency and this gives me hope for a solution.

Covid-19 is a temporary and not a structural issue. In China, there are already the first slight all clear signals and in certain regions everyday life is returning. We should not underestimate the damage but every crisis is followed by recovery and recovery leads to a surge in consumption.    

Invest well and grow your wealth

Bill