Feb 15th – March 22nd 2020

What a crazy time! This virus that’s apparently originated out of at city in China called Wuhan, is sweeping the world.

I’ve kept notes here and there on my phone and computer of different points of interest and situations. One being I was down in Melbourne having an absolute blast at Australia's first wave pool called Urban Surf with my brother and some friends. It was being reported state boarders were about to be closed and Victoria was to shut down in that night.

We’d have been stranded there. After this situation, I wonder what the balance is in the mainstream media between exaggeration and accuracy. I guess time will tell.

The medical officials advising politicians have a huge role to play here. Thus far, I’ve not been impressed by their fear based approach. That said, this is a huge unknown global pandemic, so better safe then sorry.

I should also add, I often forget the poor state of health most people in Australia are in. Two our of every three adult Australians are overweight or obese as are one in three children aged 2-17yo in Australia.

We have more data, information, knowledge and wisdom on being in great health than at anytime in history and we’re going backwards… It could be a real shit show for hospitals and front line medical personnel.

Supermarkets are being sold out of essential items. It’s panic buying in full swing. Toilet paper was the first to go, shelves are empty, flour, sugar, canned foods have also disappeared and hand sanitiser is rare as hens teeth.

Interestingly, I’ve seen no shortage of fruits and vegetables or panic buying of them. I know they don’t last long, but there is an incredibly strong connection with eating lots of them and being healthy. I’m surprised (or maybe I’m not…) of this point being completely missed by the majority of our country.

That said, there’s talk of full lockdown, kids to stay home from school, all non essential work to stop and not being allowed to leave home. If this was the case, which I doubt, we’d still need to shop for food weekly even if we somehow went online for everything else.

We can’t eat food through a computer!

For the long term buy and hold investor of my preferred asset class (business i.e. human endeavour) this appears to be a wonderful time to buy more, if you can manage emotions and stay the course.

There’s a hell of a lot of distraction and noise of why ‘this time its different’ and the like. Based on daily volumes I can see on Commsec (brokerage platform I use) there’s not shortage of people running to the exits. That said for every seller there's a buyer on the other end. It's when there are sellers looking to exit and no buyers, things get interesting.

In a strange way, I’m excited to be experiencing this aspect of investing. I’ve read a lot over the years, but nothing takes the place of direct personal experience or as has been said ‘smooth seas never made a skilled sailor’.

I’m interested in how I’ll handle this, considering I have a fair bit on the line so to speak. So far, from a pure investment point of view, I’m loving it and feel I’ve been preparing for this type of thing (in investing specifically) since the Global Financial Crisis on 2008-2009.

Impending lock downs (depending how long and server they are) will have a significant impact on business and their underlying earnings. It’ll also impact people in general in terms of their wellbeing.

On March 14th Australia’s 200th case of COVID19 is reported and it cases are now starting to increase more significantly.

On Sunday March 22nd Prime Minster Scott Morrison is on TV again today, this time with a second government stimulus package. It’s an enormous government response.

It’s fantastic our country is in a position financially to offer such support to people in need during these incredibly uncertain times.

I should have formally started this diary, with daily updates in February as I had friends and family skiing in Japan then, talking about it, but better late than never!

Let’s get into from this point...

 

Monday 23rd March 2020

Crazy day on the share market! The markets response to the Prime Minister Scott Morrison's level one ‘lock down’ measure is brutal.

All bars, clubs, restaurants, gyms, cinema’s, airlines cutting more domestic flights, café’s and so on are now closed for business, to help ‘flatten the curve’ of the spread of the virus.

ARG down 13% today.

VAS down 7% today. 

CCP down 35% today, now around $7. That’s not a typo.

Made some purchases today.

Thousands of people are now temporarily and/or permanently unemployed and I feel this is just be beginning. Centrelink has queues of thousands of people filing for government assistance all over the country.

The NRL (National Rugby League) suspended competition indefinitely. I cannot see all 16 teams in the competition remain solvent during this suspension if it lasts the entire 2020 season.

Spoke to the GM of USANA Australia today, as I had business partners in New Zealand ask me about all non-essential business now shut down in New Zealand (New Zealand are currently a stage ahead of Australia in this area). To USANA’s credit they’ve engaged something called a 3PL (3rd Party Logistics) company to distribute products in Australia and NZ during this lock down period. This way, we can continue to supply our customers needs and keep our businesses operational  and the economy going in a safe way health wise. Large logistics companies are essential businesses in Australia. Impressed with USANA’s forward thinking as always over the past 16 years working with them.

 

Tuesday 24th March 2020

Australia’s 220th case of COVID-19 is reported. 8 reported deaths now. The most recent an lady in her 70’s who was a passenger on a cruise ship recently docked in Perth if I remember correctly.

The market was up around 2.5% today. Plenty of green today after yesterday’s huge sell off.

xxx came around this morning to stretch and train, as gyms are closed and I work and train from home. Had a good chat. Also had a good chat with xxx and xxx about all this economy and with xxx more investing related.

We’re both down up around 15% - 45% depending on the company. On average it would be sitting around 30% however this is irrelevant and only on paper, as we’re buying for the future passive income steam and to protect our purchasing power against inflation in the future.

Virgin Australia email came through, lounges closed until further notice. Definitely no domestic travel for the foreseeable future. 

A friend text me tonight telling me his brothers business (which historically has been a fantastic business) had its best February ever, to now declining weekly orders of -40% last week and -60% so far this week. He needs to reduce his staff from 30 to just 5 to stay afloat. He’s lucky he has little business debt and some personal wealth to help.

An incredible martial artist I know has had to close all of his dojos along with every other gym and dojo operator in the country. This person has also lost his employment for the next few months at least. It’s incredible to witness how fast things change. From what I hear his wife’s employment has also ceased. Tough times. The good new here is he’s gone online (like I’m sure everyone else will) to generate income and continue to share his skills.

Platforms like YouTube, Patreon and the like are incredible in this regard. Just ten years ago these opportunities didn’t exist. What a time to be alive!

A good mate of mine reckons there’ll be a reset in middle management employment payment for a stack of employees. They’ve become a little inflated in recent times and this will be just the stimulus to reverse this trend.

 

Wednesday 25th March 2020

Last night Prime Minister Scott Morrison announced a ramp up in the isolation measures. Now:

-       Weddings capped to five people

-       Funerals to ten people

-       All food courts closed except for take away

-       Yoga, Pilates, martial arts, etc studio’s now closed

-       No real estate auctions or open homes

-       Interestingly, Personal Trainers can continue with up to 10 people per session provided 1.5m between each person

-       Schools are still open

He’s basically said all non-essential businesses are closed, but then stated all jobs in Australia ARE essential. I’m guessing he’s doing his best to not shut down jobs/businesses completely, instead modifying them to comply with health regulations. A good idea.

Upon waking I saw the DOW is up 11.37% and the S&P500 is up 9.38%. Huge gains over night, in fact the biggest one day gains since 1933 (The Great Depression). I believe this is related to the 2 trillion dollar stimulus the USA announced.

Athletes in the AFL and NRL are now resisting taking necessary pay cuts it’s being reported. This will be an enormous reality check for many of them. AFL Players Association is saying they’ll take 50%, yet the league needs them to take 80% cut.

The NRL is similar. 80% of the office staff at the headquarters were let go yesterday. Players are resisting pay cut, but I don’t see another option. In fact, my guess is a handful of NRL clubs won’t make it through this if it lasts the entire season.

More people will be working from home. A few of the local radio stations (do people still listen to them?) are broadcasting from their homes. Virgin Australia made further cuts overnight, cutting 90% of their domestic flights and standing down 8000 of their 10,000 employees.

A friend came around at lunch. Talked shares. He holds a bunch of individual companies. Told him I’ve realised that approach is not for me. LIC’s and ETF’s pay another type of dividend and that’s me not having to worry about the details. The LIC’s I have will do what’s in best interest of the shareholders. And the ETF’s will pass on whatever market returns they receive to me. Simple.

Another mate called me who’s built a fantastic business in the medical industry. He’s noticed a down turn and suggests we’re heading towards a depression like outcome, with too much debt and too much Central Bank interference. His AirBnB’s have cancelled. He’s cashed up and awaiting greater opportunity.

Today is also the second day in a row with lots of green (rising prices). Seems strange. Just hypothesising here, if prices went up from here solidly for a few years, have I gone in hard enough during this low? I feel like I have, but only time will tell.

My thinking is, we’ve got a way to go. Not because I’m attempting to time the market, because one certainly in this life is I cannot do that!

Instead because of the mass shut down of businesses, mass layoffs of huge businesses and small businesses. I got a phone call from another mate today. He owns and runs a successful radiology clinic. He needs to lay off reception staff and some casual technicians to keep the business alive and profitable.

Tough times for everyone in someway shape or form.

 

Thursday 26th March 2020

ABC news reporting this morning deaths in Australia are now sitting at 11 people and confirmed cases of 2600 and rising quickly.  Worldwide cases are predicted to hit 500,000 in the next 24hrs and over 20,000 deaths.

Listed travel company Flight Centre, have stood down 3800 employees today.

We had another day of green in the market. Feels odd to see this after weeks of red and lots of it! Market was up around 2.5% today, with some of my holdings up 6%-7%. My last individual company holding RHC (Ramsey Health Care) was up around 18% today, after being smashed over the past few weeks.

 

Friday 27th March 2020

The DOW in the USA is technically back in a bull market. It’s the third day of green and days one and three were huge gains. I’m the last person who can predict future movements of the share market but somehow I don’t think we’re out of the woods just yet.

COVID-19 cases in Australia now close to 3000 confirmed cases, now 13 deaths, and over 500,000 cases globally.

Retail giant Myer will stand down 10,000 employees for at least 4 weeks during this stage two lock down.

It also looks like the curve of COVID-19 cases in Australia look to be flattening out just slightly. Time will tell if that’s the case.

PM Scott Morrison today announced further restrictions for incoming passengers from overseas. They’ll be required to quarantine in a hotel for two weeks in the city they’ve arrived in. This is now law from midnight tomorrow might.

The reason for this is apparently 2/3rds of COVID-19 cases in Australia are from overseas arrivals not isolating. If these numbers are true, this will have a significant impact on reducing cases.

The ASX was up 3% at midday day then turned down sharply to finish down 4.5%. Strange... Bought more VAS today $63.80. Grateful I’m able to invest in these uncertain times.

 

Saturday 28th March 2020

Overnight the DOW down 4% over night. British PM Boris Johnson is confirmed as having COVID-19.

Latest Aussie numbers are 3291 confirmed cases and still at 13 deaths.

Here in QLD we had to vote today for our city mayoral choice and local representative with is absolute insanity. Considering wedding’s is only allowed 5 people in attendance, funerals 10 in attendance and hairdresser’s appointments can be no longer than 30mins. But 100,000’s of people can come together, stand in long lines next to each other and vote. This is the height of irrational behaviour by people in power.

David Jones has also closed small stores and their Country Road chain, putting a further 5000 employees out of work for the time being. The retail sector in Australia (so far) has laid off over 100,000 employees.

Outdoor adventure brand Kathmandu (owner of Rip Curl) will close its doors for at least 4 weeks. There goes another 2000+ jobs around Australia and their also not paying a dividend this half year and all senior management have agreed to a 20% reduction in salary for the time being.

Talking to a good mate today (we talk most days exchanging info on what happening and what we’re hearing) he suggested the first industry to go was tourism (people stopped travelling). Next was hospitality (with level two lockdown laws around clubs, pubs, restaurants, cafes) and now retail (people staying at home, not spending plus huge job losses). He thinks construction will be the next industry affected if lockdowns persist.

 

Sunday 29th March 2020

Talked to a coaching client who's an Economist today. He reckons we’ve gone too far with the closing of businesses, café’s and the like. The end result will be a recession for sure and a possible depression like situation for some.

Cases are now at 3978 and 14 deaths.

Prime Minister Scott Morrison moved to stricter social conditions including:

-       No more than 2 people in public together

-       People over 70yo told to self isolate for their own safety

-       Personal Trainer’s not only allowed to have one client per session

-       All parks, slides, exercise equipment is now off limits

-       Stay home unless you have to go out to get essential items

-       Incoming passengers from flights from overseas are being quarantined in hotels in CBD’s for 14 days under police supervision

Right now there’s a national cabinet meeting with plans for another stimulus aimed at paying wages to people who’ve lost income. While incredibly helpful for those in need and for retaining social safety, we’re going to be paying for this for decades to come with increased taxes, budget repair levies and the rest. Leveraged and passive income particularly with a tax credit (ie franking credits from dividends) will become even more valuable moving forward.

I can’t remember if I’ve mentioned this, but all state level Rugby League is cancelled in QLD and NSW. This is huge. Not solely from a sports point of view, but as a society no longer having physical access to the wonderful community that is Rugby League, the feeling of belonging, the players burning off energy, having a purpose and goal achieving behaviours and the list goes on. This does not bode we for our community and society as a whole.

 

Monday 30 March 2020

Well, well, well. What a day. The Prime Minister today announced a $130 billion dollar stimulus package to protect employees for 6months against the economic freeze. Wages/income for approximately 6 million Australian’s will be subsidised in this package meaning people who qualify will receive $1,500/fortnight for the next 6 months.

Full time and part time employees who’ve been laid off, businesses with a 30% drop on gross turnover since March 1st and same for sole traders. Casual employees who’ve been employed for at least 12 months will also qualify.

I feel this will help enormously, particularly the human side of things, not just financially.

This is $19,500 per qualifying person (minus tax) an enormous boost.

I cannot believe how wonderful the times we live in are. Exceptional. At the same time though, I cannot help but feel there’s a dependent like message, for lack of a better word, that’s been spread. The government essentially saying ‘you don’t have to be prepared, we’ll rescue you’.

Furthermore, the future taxes we’ll pay in attempt to repay this and the two other stimulus’s isn’t something I’m looking forward too for the rest of my life.

The ASX had a jump before close (when this stimulus package was announced) I feel we’re in for more green moving forward. But that’s just my guess. Ultimately, I have no idea!

RM Williams the 100+ year old footwear and clothing business, who make the best boots in the world, in my biased opinion, laid off all staff and shut down its retail stores as of midnight last night.

 

Tuesday 31st March 2020

4364 cases in Australia with 18 deaths thus far.

I was dollar cost averaging in when the market was high, so why should I be concerned with continuing to DCA in at any price lower?

With this in mind I bought more xxx today at $3.78. Personally I feel xxx under $4 is good value. Approximately 15% of it is CSL and another 16% of it is international holdings.

Today Virgin Australia is looking for a $1.4 billion dollar government support to remain operation to get to the other side of this crisis. They’re proposing to pay back the government with 2-3 years. If Virgin falls over, hello buying opportunities and goodbye Gold Velocity Frequent Flyer Status...

Today was also the first day of stricter social distancing. On the spot fines for groups of 3 or more people in public socialising of $1330/person and there’s talk of closing beaches and no boating, which is ridiculous. Not going to the beach to swim, surf, exercise, walk, get some sun will do more harm. I understand beaches like Bondi being closed and if people don’t respect the new social distancing laws, but anything else is ridiculous.

This morning I also placed an order for VAS at $64 and was going to delete which ever order didn't execute first. I forgot, so at 3:30pm saw an email from Commsec for buying VAS for $64! Great problem to have, owning more shares/units of assets!

These times are also forcing more people to work from home and cancel events, meetings, etc. Once we move past the virus risk it will be interesting to see how much business changes. Will working from an office be as popular? Will events and meetings be held with the same frequency? My guess is no, things will change for the better, there’ll be more flexibility and better lifestyle balance post COVID-19.