Economic news has shown some hopes with Apple, stating that it will not have supply chain issues, and with Starbucks reopening stores in China. Epidemiological details are still being determined, but, renowned expert Dr. Anthony Fauci said mortality rates are largely limited to the sick and elderly, and that is a limit subset of the 20-25% who suffer an intense form of this influenza, and that is a subset of those who even get this COVID-19 flu. There appears to be intense global efforts to contain COVID-19, and international travel and exposure to where the flu is spreading is being systematically curtailed. Simultaneously, development of therapeutics and vaccines are under development, and testing and response policies are being implemented. If China’s claims that the spread of COVID-19 is, in fact, slowing, we could see the spread of this influenza begin to decelerate in coming weeks and global containment beginning to take root.
Even with Pimco’s assessment of a negative 6% GPD in China in the first quarter, it appears that the rapid cuts to economic forecasts are being reflected in the markets. This past week’s market action is simply an orderly, though alarming, adjustment to the risk that this pandemic could have a long tail and material global economic impact.
We believe the worst case scenario is largely being priced into the stock market. And, for those investors who can distinguish between the price of an investment and the value of that investment, this decline is rare opportunity to pick up bargains like closed end MLP funds with high yields, discounts to NAV and steady cashflows. We have been selling gold, gold stocks and bargain hunting and will continue to in the days and weeks ahead.
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