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Announcer (00:00):

You’re tuned in to the Investing for Beginners podcast. Finally, step by step premium investment guidance for beginners led by Andrew Sather and Dave Ahern. To decode industry jargon, silence crippling confusion, and help you overcome emotions by looking at the numbers, your path to financial freedom starts now.

Dave (00:36):

All right folks, welcome to Investing for Beginners podcast. This is episode 141 tonight. Andrew and I got a, well actually we’ve got a great a wetter from one of our listeners recently, a couple of weeks ago and it describes, it touches on two subjects that are very forefront in the news recently with the growing possibility of a pandemic with Coronavirus as well as the ups and downs of the stock market lately over the last three or four days, which is mostly down the last three days. So we thought we would read this sweater and kind of help answer this question for the gentleman, and I’m going to turn over an Andrew, and he is going to go ahead and get us started.

Andrew (01:16):

Okay, sure. I’ll start reading what he said and to give context. So we’re recording this on the 27th of February. Trump just did his first conference on the Coronavirus last night and today, earlier this morning, and I saw reports that we have cases in California now with the current virus.

Andrew (01:42):

So it’s getting really serious. People are freaking out and with good reason, and I mean, I had a warning about this two weeks ago from this email I received, and it’s just one of those things you can’t, I guess ever really understand the gravity of it until it starts to affect you. But let’s read some of his experiences. Talk about how that’s evolved and what we see for the market moving forward. So this is from Matt. He says, hi there, Andrew. I’ve subscribed to your monthly stock picks, and they’ll start following them, investing in the stocks you choose. I have a few questions regarding the current economic environment and the future outlook. I’m from Australia but live in Singapore. The current Coronavirus has created a lot of havoc in this part of the world, and it doesn’t look like it will calm down anytime soon.

Andrew (02:33):

From my perspective, I run rehabilitation clinics around Asia, and our patient numbers have dropped by around 30% our medical supply chain has been greatly interrupted, and the companies are unable to deliver our stock. China has stopped at manufacturing schools, and businesses are starting to close and stop operating for periods due to the virus. People are not eating now. I don’t see this situation calming down anytime soon. Then the virus is not even yet, so the situation is only going to escalate. He says, my misunderstanding comes with how the stock market is reacting and still reaching all-time highs given the companies are going to start getting hit hard. He says I’m looking at this as a buying opportunity when the market does drop by. My major concern is being invested in the stock market currently. And if I should hold cash and wait for the big crash, he says, I know that time in the market isn’t something you should do.

Andrew (03:27):

So yeah, I mean with hindsight, right? It turns out that the stock market was still ignoring a lot of the coronavirus things. And I remember just a week or two ago seeing a meme online where they show like the S the cycle, and it’s like a circle, and they say you know, a news report about coronavirus and then market scare or market drop. And then people forget about Coronavirus and then market rally. And so for several weeks, it seemed like the market just anytime it dipped, that meant it was time to buy and you’re just buying the dip. And it was until tomorrow when the market forgot about the virus, and everything was all fine and dandy. Now, as far as this week goes, the last week of February 2020, that’s finally ceased to happen. And in the past several days, as Dave said, the market has just continued to go down quite drastically, literally to the point where this has been the quickest.

Andrew (04:44):

This has been the quickest correction that the world has ever seen. I know the Dow lost something like 7%. I might have been close to 10%. I don’t have exact numbers, and it just keeps getting worse every single day. But it’s now with the the the fact that it’s spread to Italy it’s spread to Latin America. And then as of yesterday or today, actually now in California we’re looking at a huge, huge problem. And I think from an economic standpoint, the fear is a, you know, we’re talking about a lot of economic ramifications, which I think we should discuss some of those today, but a lot of them have already happened, and it’s, it’s causing a huge strain and causing major disruptions in the business world for huge companies here in the States. And we’re just talking about China shutting down.

Andrew (05:39):

And then number two, obviously the spread of the virus and how that can have, you know, if how things shut down China happens here. What kind of chaos we’d see financially. Just the possibilities are endless. So I want to continue reading because he does have a question I think we can answer. You know, essentially met what Matt’s asking. He says, based on what I see in the huge amount of debt and the massively overvalued stock market, the coming recession will be of Epic proportions compared to what has been experienced before. He talked about some of the debt and the QE, that’s not called QE, but you know, we’re, we’re calling it something else. Repo and Matt are saying the bubble has to burst. How can one not try the time, this event and plan for it? So let’s start there.

Andrew (06:34):

They’ve timed the market. I know we’ve talked about it in the past, we’ve talked about it in the archives. Why don’t you shine some of your thoughts on; we’re reading this two weeks later. So in this one particular case, I guess Matt would have been justified to say, I should, I should have sold out on the 14th when I sent this email, and I should start by now on the 27th, 28th because the market has dropped so steeply in such a quick time. But you know, that, how does that line up for the future and how reliable is a strategy like that, you know, what, what kinds of thoughts do you have there?

Dave (07:19):

Well, as we’ve talked about in the past, and we’ll continue to talk about going into the future trying to time in the market is a very, very difficult thing. And the saying, you know, hindsight is 2020 kind of thing strikes home in this circumstance, of course, because, you know, everybody in the brother would sell then and buy-in now because, you know, the price of Disney is now, you know, 118 70 were two weeks ago. It was 130 $536 a share. So it’s, you know, everybody would want to do that. But that’s a difficult thing to do. And you know, who knows when the top is going to be and who knows when the bottom is going to be and you, you can’t really, I don’t feel like you can time the market. I think you have to look for opportunities when you think they’re going to present themselves and try to take advantage of those when you can.

Dave (08:18):

And as a value investor, when the markets are going down, that’s when I look at chances to buy something like Disney, for example. I’ve been looking at that company for a long, long time and it just frankly was too, too expensive. And now, because of the complete downturn in the market over the last three days, it’s presented an opportunity for me to buy the company now. Now, does that mean that it won’t go down some more? It may and it may not, but it also means that if it goes down some more than I could try to buy some more as well. Because, you know, for me, I feel like that it’s a great company and it’s a great opportunity for me to invest in that company wherein the price I feel like is below what it’s worth. Because at this point, if you look at the financials for just Disney, for example, nothing has changed.

Dave (09:10):

They haven’t released any financial documents to show things are going South with the company because of what’s going on with the economic conditions that you know are going to be coming very shortly. And why I’m saying [inaudible] are going to be coming because as I’ve been reading, we’ve put away as, when I say us, I’m saying the United States in particular, but in the world generally, we’ve put a lot of our eggs in one basket, and that was China. And by that, I mean we were shipping our products over there to be manufactured. Things were being made over there and sold here a lot cheaper. And we had a lot of things. I mean, if you look at just about anything you buy now is made in China, made in China, made in China. And because of that now and their struggles with everything that’s been going on with the Coronavirus, they’ve been, they’ve had to shut down factories so they can’t produce all the things that we buy from them.

Dave (10:10):

And so people are running out of stuff. And you think about the airlines, you think about the cruise lines and all the other different aspects, the tourism, you know, the mats, you know, living in Singapore, you know, that’s a very big market for them as tourism in Singapore. And they’re struggling now because of that because people aren’t traveling there to see stuff because they’re afraid of getting sick and rightfully so. And so because of that, Singapore is struggling. So all that to say we put a lot of our eggs in one basket and now the market is finally starting to realize two weeks later that Hey, this could be something significant that could damage companies. You know, Apple just recently announced that they are cutting their guidance for the first quarter because they’re expecting an iPhone sales to be down drastically in China.

Dave (11:04):

30 to 50% is what they’re predicting. And that’s a huge blow. And when that announcement came out, the overall market didn’t adjust so much, but Apple stock dropped four or 5% is that one day alone. And so that was a big concern. And so I guess to kind of steer back to math question for my little side view there was that you couldn’t time the market and if you see an opportunity, you need to try to buy it. And you know, if you have a plan, you need to stick to the plan. And you know, being driven by emotion is a really easy way to lose money in the stock market. It’s a real what did I read the other day when a stock market is going down as a real bad time for you to discover what your risk tolerance is for investing.

Dave (12:08):

And I think dollar-cost averaging is a great way to try to hedge your bets, and the stock market is going to recover at some point. It will just like, it goes, it always goes up. But there are times when it will go down, and this may be one of those times, and it doesn’t mean that everything is bad, and it’s all bad. And it just means that you as a value investor are going to have opportunities to buy fantastic companies. You know, like an Apple, a Disney Hormel you know, Berkshire Hathaway, any of these other companies that you’ve maybe wanted to buy for a long, long time. You’re going to have that opportunity to do that now. And the, what you need to do though is have a plan and stick to your plan and try not to get emotional about this because it’s an emotional thing. And it’s scary, and it’s understandable to feel that way. But you have to try to tune that out and realize that this is what your, what your goal is or what you’re trying to do. And if you stick with that and, and go with what you think is the right thing to do, you’re going to come out a better ahead in the long run.

Andrew (13:11):

Yeah, I agree. And I, you know, I don’t know how long Matt’s been investing. I’ll tell everybody I’ve been investing since 2012, and if I could count the number of times that somebody said, Hey, the crash is coming go to cash, I would have, I would have no returns from all the, all the time that I’ve invested so far, and it just would’ve been a big waste of time and just a big disappointment I probably would never invest ever again because I’m just waiting for that perfect moment. Now that being said, I think; this has more of a potential to be a type of long, long-standing crash than anything else we’ve seen up to this point. But it’s a very short term mentality because just as likely as it is that this thing spreads and the whole economy shuts down for a while.

Andrew (14:18):

It’s just as likely as it gets contained, or the spreading slows down. We build antibodies for the virus, and it dissipates away. So you don’t know. And it’s so easy just to say, well, I feel like I know what, what the right timing is. In reality, it’s just a very prideful thing to say. And I think the more experience you get in the market, the more you will that the idea that you can figure out what the market’s going to do tomorrow or you know, what the world’s going to do tomorrow. It’s, it’s just an obscene idea. And so, you know, maybe there’s a lot of people out there who are just starting in the market, just starting into investing and just starting out looking at stocks. And when you’re in that stage, it’s really easy to look at the market and say, wow, compare it to 2009, 2010 things are very overvalued.

Andrew (15:24):

Or you could say, well, you know, the market has just been generally rising for over ten years. So obviously a crash is coming. I’m telling you, people were saying those same things when I started in 2012 and 2013 and again, it just, the market could crash 50, 60% tomorrow and I will still be better off than if I tried to hold cash ever since 2012 when I was scared and tried to wait for the right time to get into the market because there’s no right time. If you look at some of the best investors in the world, guys like Warren Buffett, Charlie monger, a lot of the heroes that we like to follow guys like Peter Lynch. Some of the value investors like Joel Greenblatt, Monish provide these are guys that are doing it over the long term. And, and especially with buffet and Munger, those, they’re in there for the very, very longterm and they’re invested regardless of how dire the economic situation becomes. And so, you know, the next part of Matt’s question, he asks, based on your investment strategy in your valuation method of stocks, the stocks you choose are longterm dividend growth stocks and have good valuations. Do you believe they will hold up in this risky environment? He says, I know that is a tough question to answer. And if there is a recession, everything will be impacted. But those stocks that are undervalued will fare the best during times of recession.

Andrew (16:57):

And the answer that is, I don’t know. And frankly, it does not matter to my goals and why, why I’m buying these stocks in the first place. Because part of having the humility to understand that you’re not going to have the ability, the time, the market also comes with the idea that you also have humility. That it’s not necessarily the, that you’re the best stock picker in the world and say you’re going to pick the next Apple or Amazon or you know, Google or any of those great businesses, right? The idea is you build a portfolio of enough decent businesses, and over the very, very long term, they’re paying you a dividend. Those dividends are growing, and you’re receiving those dividends, putting them back into the market, and you’re compounding your wealth. And it’s something that happens over time. And you know, ideally, it would happen in a nice kind of like stairs on the lather where it’s just consistent, and the stock’s going up, your dividends going up and you see your wealth going up, your net worth is going up, your brokerage accounts going up.

Andrew (18:10):

And it does do that for a long time and a good portion of the time. But you can’t take the good sides of the market and not experience the bad sides too. And this is a negative part of being in the stock market, is that you’re going to have times like this where things crash, where you know what you thought was going to be by the dip ends up being on buying the falling knife. But when that time comes, you need to reset your priorities, reset your ideas, your mindset, and you to go back to the basics, go back to the fundamentals, remember why you’re in the market in the first place. And if you remember whether the things that are most likely to give you success, then that’s what you’re going to focus your attention on. So what is that again? It has a longterm approach.

Andrew (19:03):

Having dividend growth stocks that have good, you know, you buy them when they’re at good valuations, and the price can go wherever it wants to go from there. And they should have good balance sheets. And what’s a balance sheet? Do a balance sheet is showing you the longterm health of a company. So if a black Swan comes in like a Coronavirus or any or any, you know, a, a China trade war that we saw six months ago any, any big macro thing, right? Or any disrupt disruption in the, in the industry, a strong balance sheet helps a company survive through that. So there’s, you know, well, coronavirus impact things. Yes, most likely. Yes. So the idea is you have businesses that have prepared for it, and they’ve been conservative with it. And so they’re not, yes, they’re going to take a hit, but you hope that it’s not going to crumble the business completely.

Andrew (20:08):

And so that’s, that’s what the mindset behind that is. And so when you look at the risky environment and who knows how long it will last, or living in the midst of it right now, you know, we, we, you don’t know if their stock prices will hold up, but you buy these stocks with great balance sheets that, you know, when a company doesn’t have a lot of debt or when they don’t have to spend a lot of money to make profits, they could have down years of profits or they could, you know, they could, let’s say they make only 20 cents a share instead of $2 a share because the coronavirus has just devastated the economy. Well, if they don’t have much money, they need to spend, and they don’t have much money going out to, to pay off their, their debtors, that’s a business that’s going to be fine in five to 10 years.

Andrew (21:01):

So, you know, I don’t want to try to put certainties on or projections or anything on what’s going to happen in the future. I don’t know. We don’t know if this is another dip or if it’s a longterm slide that we’re starting to embark down. We don’t know. And I don’t know if a risky environment means the next five days or the next five years, none of these things. We know what we know is we’re going to be investors and whatever happens to our stocks. So they have their portfolio. It’s only a loss if you sell. And so if you go back to the basics like I’m saying, these are the times, the desperate times, the panic times, the times when you’re worried you’re stressed, you have to go back to the basics. And so if you go back to, we had a series called back to the basics.

Andrew (21:53):

You could go back to episode four, the one that starts there. You start to remember that we talk about things like, don’t put money into the market unless you’re fine not touching it for five, 10, 15, 20 years. Warren Buffet says, don’t buy stock in a company that you’re not comfortable if the market was closed for the next nine years or ten years. And then it reopened. If you’re not comfortable with that idea, don’t buy, don’t invest in the company. So these are big, major pieces of investing in stocks and buying stocks that take precedent over anything else because we could get a million pundits on here on the podcast to talk to you guys. We could have any emotional person come in and sway you one way or the other. We can have any medical doctor come in and cherry-pick facts one way or the other to make you convinced that this is a dip.

Andrew (22:49):

This is not an issue. Or you know, this is the worst thing that’s going to happen to us. Anybody could make that argument, and nobody knows. And you know the people who call it one way and then are wrong tomorrow, they’re not the ones telling, bringing attention to the fact that they were wrong. So remember that nobody knows what’s going to happen in the future. We have to understand that timing the market is very, very foolish because you could do it once and maybe you luck out, but then what are you going to do again? You’re going to do it again, like find me one person who’s had a reliable strategy of time in the market consistently. And I’ll tell you; I haven’t found one person like that yet. So don’t try to time the market. We don’t know what’s going to happen next.

Andrew (23:36):

But if you remember why you’re in the market and you and you really, I made a list, ask Dave to make a list too, and I think this would be a great time for us to share it. But I think there are certain things that you should do in times like this when the market is absolute chaos, its blood red. And so there are some things you should do to help you cope through this. And I think those are the most important questions to answer. Because it’s obvious and I think you’ll talk to anybody and it’s obvious now as of last night, you couldn’t even buy a mask anywhere in the United States because they were all sold out. The local news over was in my neck of the woods is talking about how schools will probably close people will probably be working from home.

Andrew (24:28):

And the CDC, you know, our gold standard for disease prevention, government agency, they said it’s not, the current virus is not a matter of if it’s a matter of when. So it is very likely that we’re going to have huge even bigger developments than what’s been seen in Singapore. What’s been seen in China, what’s been seen in Italy with people getting stranded there as well. Americans being stranded. And we’ll have to see, and I don’t have the answer for you on that particular topic, but what I can say is, hi, you know, this is the absolute worst time to be betraying what you believe for what you stood for, for so long. And so trying to think that this is going to be time to time in the market. I just don’t see that as a good long term strategy.

Andrew (25:25):

You know, panicking and locking in losses on stocks that you still feel good about their business. You think they’re great dividend growth stocks, you think you bought them at good evaluations, but you’re scared, and you’re going to sell that. I don’t think that’s a good longterm strategy. These are things that are longterm strategies, and if we’re not talking about longterm strategies, then we shouldn’t be talking about the market anyways. So with all of that in mind, I have a list of things that I think are useful to think about. Maybe try to implement yourself when the sky is falling, when the stock market has been red for multiple days in a row in a time like this. And I know Dave does too, and maybe he can start,

Announcer (26:08):

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Dave (26:19):

Okay, Sure. So really the first thing that I try to think about when I see stuff like this happen, or I feel like that I’m getting nervous or scared, is I look at people that I look up to that have way more experience in the market than I do and see how they’re reacting. And so I take comfort in how other people are reacting around me.

Dave (26:44):

I think about it like if I worked in a business that was stressful or if I was possibly in the military, I would be looking up to yo my superiors and how they’re reacting because you’re going to take strength from the comfort from that. So I think about Warren Buffet and Charlie monger, for example. Both of them have been on the news recently because Charlie had his daily journal meeting. I think it was last week. And Warren buffet released his annual shareholder letter and was on the news a few days ago. And both of them were very right on par, right on point. They were still talking about all the same things that they talk about continually, about, you know, not trying to time the market. You know, I’m looking to buy us a great company at a great price with great management and that has never changed for them, and they keep doing what they do. I mean, that’s, you know, Charlie and Warren keep doing what Charlie and Warren do. And I take comfort from that. That helps me stay focused and say, you know, Hey, this is, these are the guys that I’ve seen do what they do well, and they’re not freaking out. They’re not changing. They’re not running for the Hills, and they’re still doing what they’re going to do. And that gives me comfort and strength then. So that’s one of the things that I do.

Andrew (28:05):

I liked that one. Oh, thanks. I’m going to relate to my first one. I don’t think it’s as good as Dave’s, but I’m going to relate it to my personal life a little bit. So I tend to do this regardless of what the entire stock market does. So if I have a stock that has been a lagger and you know, let’s say it’s been down a lot compared to the rest of my portfolio, maybe he’s doing fine, I’ll always look at it, and I’ll figure out why is it down so much? Why is it down so much? And you know, and the case like this now with the coronavirus, everything’s down almost everything. And I have some stocks that are down more than others. So I tried to figure out why that is the case and just put a microscope to that and see if, try to try to take the emotions out and see if this is something that is my fault, something I’m overlooking.

Andrew (29:04):

Is it a mistake I’m making, or was this a situation that was out of my control? And the reason why I said this in regards to my personal life is that as Dave knows, behind the scenes, I’ve been hacking my way into a golf swing. He hasn’t seen it in person yet, so he doesn’t maybe understand the severity of when I say my way into. But last time, last time we hung out, like, you know, casually mentioned how I’ve been getting into it and Dave’s like, yeah, I’ve been playing on my life. And he mentions his score, and that’s like my dream score. And it sounds like your, your score when you dust takes the dust off of your clubs, you know, after two months or two years or something. But you know, similar to the stock market, right, where the stock market kind of slowly improves over time.

Andrew (30:01):

My handicap, if you want to, it’s a big one, if you want to call it that improved over time. And then I had one day where it was just absolutely awful. And so it was at that moment where I was like, what is going on here? And I took an honest look at my swing. It sounds silly, but I think I feel like it relates, and I’m, look, look, drill down that the details. And then from there, I noticed, okay, I’m doing this, and you should not be doing that. And then from there now with I have a sense of what I’m doing, then you go to back to the basics, and then you say, well, how should I be doing it? And so that’s what I did with my swing. And then, sure enough, I make a little fixed in the tweak, and you know, the jury’s still out on the next time I go out, how I’ll, how I’ll perform.

Andrew (30:52):

But when I was out there making the adjustments, everything fell a lot better. My stats were better, my launch angle was good, my, my speed was good, all of that. So, you know, you relate that to the market, you look at some of the stocks, and when you look at it from this lens of being a learner rather than somebody who’s stressing out over the results, because I’ll, I mean I’ll tell you, like I, I look at my portfolio, and it can make my head spin to see some of the negative values on there. If you look at here’s your unrealized loss, and in particular on particular stocks, if it’s a lot of money to you, it’s, it could, it could make your mind spin. So you just, either you’re going to focus on the fact that it’s like, wow, I’m down this all this money.

Andrew (31:44):

And it’s like you start counting up the days of, of working that, that, that could have been you could do that. Or you could say, well, first off, the game’s not over. I haven’t sold the stock yet, and this isn’t something that I’m getting graded on, right? No test says, well, if you didn’t get a 10% return by March, you are a bad investor. Like none of that is in play. Secondly, you know, if you’re looking at it from a lens of maybe being a little bit more humble and not being so tied to the results, but like, well, maybe there is something that I need to learn from this. And so you examine that, and you look back coronavirus spreading and being a, a, a huge disruptor. Like it’s been, I think it’s fair to say that if you didn’t see that coming, that’s probably not your fault.

Andrew (32:39):

That’s probably okay. But if you start to look at you, the companies in your portfolio and some of them are falling a lot further than some other ones are. So you could compare to peers who may be in the same industry. And if as these numbers get released and, and more data comes out from the impact of this, if, if some businesses are struggling more than others, then that might be a good indicator that maybe you made a mistake on picking this stock over that stock. If you start to hear some, someday that, you know, there’s going to be a lot of news pieces, a lot of people trying to explain why stocks are going down, why is this stock struggling? Why is management guiding this stock down or their earnings down?

Andrew (33:29):

And maybe a lot of that is jargon to you. Well, this is a good opportunity to try to figure out what’s going on. And then you go back to the basics, and you cement your foundation. And then it’s from, there are those times where you’re examining yourself, and how you’re going to learn and how you’re going to react to this adversity that’s going to, that’s going to help guide your path forward as time goes on. So I think those are, that’s the way I would try to look at it when it comes to a situation like this. Understand that no, the investor’s going to be 100% right. You’re going to make mistakes. Buffet bought a company, I think it was a boot company and ended up going bankrupt, and he’s owned up to that mistake and said, yeah, that was dumb, and I wasted a lot of shareholder money. Such a guy like him makes a mistake. I think it’s fair to say you’re; I can make a mistake too. So really try to examine your mistakes. Try to take some of the emotion out of it and look at it from an objective lens. See if there are areas that need to improve. See if there are gaps where you aren’t completely knowledgeable on the topic and then take it from there and roll with the punches and try to learn from what’s going on rather than feel trapped by it.

Dave (34:52):

I agree. And I think the thing that I like about what you were saying is thinking about learning from your mistakes. You know, I always look at one of the things that I have on my list that we were going to talk about tonight was warning from my mistakes and trying to use when I make a mistake as an opportunity to learn something new that I can try to avoid a mistake in the future. And I’ve talked about this in the past and I’ll; I’ll bring this up again. I look back at my I’ve started, I started a journal. When I buy a company, I want to know why and we don’t always remember why. And at least as you know, I’m getting older, my, my memories slip a little bit from here and he, from time to time, you can ask my fiance about that.

Dave (35:39):

She’ll tell you the same. But it’s nice to have that journal to go back and look at and, and a time like this when I, you know, like Andrew was saying, everything’s red, and you look at your, your brokerage account and you’re like, ah it’s, it’s, it’s easy to get emotional. But when I look back at the journal that I’ve started, and I look at a company like a Disney, or if I look at Corning, or if I look at JP Morgan if I look at those companies and I see the reason why I bought them is still valid, and it’s still doing the things that I expected it to do when I bought it, then that helps give me comfort that, Hey, I made a good decision. This is the right thing to own. Now that doesn’t mean that I’m not going to go back and assess it in the future.

Dave (36:29):

And you can make adjustments as you go along. This is a great time to be a value investor. This is the time that you can find, you know, that opportunity that you’ve been waiting for for a while. If you have, if you’re like me, I have watch lists, I have companies that I keep track of and in the hopes that maybe someday I can get lucky and be able to buy something like this and it doesn’t come along every day, and they’re still going to be, you know, companies who just aren’t going to get a chance to buy. And like Andrew says, you know, you’d never know that for sure it’s going to be a falling knife. But in a certain, in a circumstance like this, you got to think about kind of how the market behaves. And if you look at just about any company on the market today, they’re all down.

Dave (37:15):

And does that mean that every single company that is in the stock market is bad or they’re always losing money? They’ve all gone bad? No, it, what it means is, is that the emotion of the stock market is driving everything down. It doesn’t mean that all the companies are now bad. It just means that it just like when everything rises in the tide, everything comes up with the tide. And kind of the same thing with a tie goes out. Everything kind of goes with it too. So it can go either way. But having something that can help ground you just like I did with, you know, looking at the mentors that I follow and their reactions to things that help ground me. Looking at something like a journal that helps ground me because then I’m focused on what it is and why I bought it.

Dave (37:59):

It helps take the emotion out of it. And I feel like I have a little bit of an advantage sometimes with this because of I kind of look at when I’m looking at my brokerage account, I look at it a little bit like waking up box scores back in the day when you used to be able to read a newspaper. That’s the only way I knew what was going on with my team. The giants. I could look every day and see how will Clark did every single day or Barry bonds, and I could follow them every day. And I didn’t get too high or too low because you know, they had an offer or them, you know, one for four and three strikeouts or you know, they lost the game five to two cause bonds didn’t hit a home run in the fourth inning, you know, or whatever it may be.

Dave (38:40):

I got used to seeing a bit of failure because when you watch baseball, that’s the name of the game is they fail three out of, you know, seven out of 10 times. So you get used to that. So when I watch my brokerage account, for me, it’s not as emotional because I’m just looking at it as a bunch of numbers, not as like, Oh my God, I lost this much money today. Or Hey awesome, I made this much money, I’m going out and buying dinner. So all those things to be helped ground me a little bit.

Andrew (39:11):

I, you know, yeah, I’m a younger guy, but I do remember those newspapers. Okay. I may or may not have made clippings of them back in the day. Oh, okay. All right. I like it even more. I like that idea a lot. I think if you think of it and like extend it to how we are today, and it relates to one of the big things I wanted to say that was on my list too is trying to get your mind off it when your brokerage account is going the wrong way. It’s so easy to access things now with the internet, and you know obsessively check on the tickers. You could watch your wealth, you know, vanish before your eyes on the computer screening, or you know you could maybe do it like the old fashioned way. Maybe you look once a day, and I think it just helps too if it’s stressing you out if it’s causing you major, major discomfort, I would, I would try to take a break from it for a while.

Andrew (40:24):

The frustrating part of the stock market and investing is that just because you put more time and effort into it doesn’t necessarily mean that you’re going to see instant results. So you could be studying like a madman right before the final exam trying to figure out, you know, what stock is going not to drop as much, or you know, which stock am I going to short? Now I’m going to play the other side of the market. These are, these are all just things. And if you’re going to be somebody with a longterm plan, I’ve talked about that at the beginning. You know, what’s, what’s a good, reasonable, decent longterm plan, and how are we going to execute on that? And think about obsessing over the ticker constantly checking on it and tying your emotions for the day based off that it’s not a good place to be in mentally and it’s not going to help in any way, shape or form.

Andrew (41:31):

Like if, if, if you need to like pick yourself up and move and close the screens and, and find something else, you know, find the hobbies to take up your time where maybe before you used to get that dopamine kick of watching your portfolio go up in value, you didn’t realize, you know, how bad of a habit that was and now you need to replace it with something a little bit more productive. So you know, you don’t stick your head in the sand. You want to be doing the normal type of research. I think, as I said, it’s a good idea, or it’s a good time to be evaluating, doing an audit on your, on the companies you own getting convicted on why do you own them? Whether they’re financial situations right now. And then what I like to do is I have right next to, you know, on my spreadsheet where I have every stock I own, I have a column next to it, and it shows each month that the company’s next annual report will come out.

Andrew (42:32):

So whatever month that is, you know, I’m looking, and it’s like, Hey, well, I haven’t updated. Disney’s 10 K’s. So, you know, there’s comes out in November. So now that November is here, let me update them. Let’s look at their financials. And so time like this where you’re likely paying a lot more attention to your portfolio, you’re paying a lot more attention to the stock market in general. I feel like everybody is right now. That’s a time to, to take a good look and use that time, try to use it productively and don’t use it. I’m wringing your hands on things you can’t change and things that don’t matter in the big picture.

Dave (43:13):

I agree. And I, I think that’s a great, great way to think about things is try to try to shut it out of your mind and you know, out of sight, out of mind kind of thing. It, it helps calm your nerves. And I think one thing that I want to point out as Andrew and I keep talking about how to, about ways that you can help minimize your emotional connection to this. And it’s really easy to get emotional about this. When you hear it on the news, you see it on TV; you hear people talking about on podcasts like us. I mean, it’s, it’s, it’s everywhere, and it’s real easy to get excited and concerned and all those things that you have to try to remember your plan, remember your plan, stick to your plan, stick to your plan, and try not to overreact to things. And if you feel like you’re going to make a bad decision that doesn’t make the decision, stop, stop what you’re doing and relax.

Dave (44:15):

Do something else, you know, play with her kids, go for a walk. You know, read a book, watch a movie, whatever it may be to try to get you to get out of your head. And all those things I think will help make it clear and you’ll feel better about everything. A lot of this that’s going on right now. It’s out of our control. We don’t have control over this. And I think as a, as human beings, I think that’s one of the things, the hardest things for us to overcome is an emotion of we can’t fix it, especially as guys, we want to fix stuff. That’s what we do is when there’s a problem, we fix things and this is a problem, and we can’t fix it. And we have to be as unemotional as we possibly can.

Dave (45:02):

And again, I go back to my mentors. When I look at people like Charlie and Warren and Vitaly and [inaudible] by all those guys are unemotional about this, and they’re not getting excited, and you don’t see a lot of panicked comments on social media or the news or you know, videos that they do or articles that they write. It’s very calm. It’s very rational; it’s very unemotional about things. And I think that’s the biggest thing that you need to take away from. What Andrew and I returned to talk about tonight is trying to take the emotion out of this. And like Andrew was saying, go back to the basics. Think about your plan and stick to your plan. If you’ve got a plan and you’re working it, keep doing it. There’s no reason why not to. Yeah, I mean if you, if you just can’t

Andrew (45:52):

Completely step away, use the time than to dive into a rabbit hole where you’re picking up a really good book. You know, like a very historical book. Like one that I recently started re-listening to on audible was the black Swan. And I hear that, and I have some lessons from that that I’d like to share in the upcoming episode. But you know, hearing that and hearing how uncertainty is not this new thing and it’s something that’s happened in the past and how people have reacted to it, it helps bring clarity and perspective. Another one that’s good. I just picked up, I believe it’s called the University of Berkshire Hathaway, and that’s this guy and that it’s great, it’s a great book. Have you read it? I did. Yeah, that’s great. Okay. Okay. Yeah, I’ve, I feel bad cause I don’t, the author’s name doesn’t come up to the top of my head, but you know, he’s talking, and he walks through a timeline from a, I think it was like 1987 or 1986 when Charlie and Warren buffet held their annual meeting, and there was like 300 people there and that, you know, you fast forward to today, and there’s like 40,000 people in the arena but you kind of time travel back to then and you hear the things they were saying then.

Andrew (47:14):

And back then, the huge deal as interest rates and inflation and buffet was saying stay away from bonds. And so you know, you can kind of time travel into different places, dive into a good book and get on where you are and understand that what’s happening today isn’t the ninth inning, it’s not the final score. If you’re investing for the long term, it’s a longterm game. So try to get things in perspective and seriously, like we don’t know. Like this coronavirus is a Black Swan, and it could be like one of the most destructive black swans that we’ve ever seen. So at the end of the day, you know the market’s going to be there. If you’re worried about what happens to your portfolio, if this thing goes full viral in the sense that it’s like killing people left and right on the street, you’re going to have bigger problems than what the numbers are on your, in your brokerage account. So, you know, focus on the things around the other people around you, the environment around you, and come back to the market when the time is right.

Dave (48:22):

All right, folks, we’ll that is going to wrap up our discussion for this evening. I wanted to thank Matt for taking the time to write us a that was a fantastic question, and I hope we helped answer your question. If you guys have any other fantastic questions or just any questions at all, please takes take a moment and send them to us. We’d love to talk about the air, and it would be great. So if you are enjoying the show, please take a moment to subscribe, or if you’re enjoying the show, take a moment to go to iTunes and give us a nice five-star review. That would be fantastic. The more five-star reviews we get, the higher we go into rankings, and the more people we can help. And that’s what Andrew and I heard to do. So without any further ado, I’m going to go ahead and sign us off. You guys go out there and invest with a margin of safety emphasis on the safety. Have a great week, and we’ll talk to you all next week.

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