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Panic Journal Season 2 – The Dancing is getting Much Harder

Back in lock down mode

Four weeks after my first post of “season 2” it is pretty clear: Wave 2 of Covid-19 is definitely here and growing.

In contrast to my assumption and the general feeling 4 weeks ago, Europe is now back in lock down mode. Certain areas in the UK, Spain, France, Italy and Belgium went into different forms of lock down already a few days ago. Here in Germany I think many Germans got the message, when the German Health Minister Jens Spahn had to announce that he got infected a few days ago

A “lock down light” will come into force in Germany on Monday with restrictions on contacts and closure of Restaurants and Bars. Austria just announced a harder version which for instance disallows any private visits after 8 pm which in effect is a 8pm curfew under another name.

What’s different this time compared to the first lock down ?

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Panic Journal – Season 2: “Taking Stock”

Two and a half months after the end of “Panic Journal Season 1”, it seems that “Season 2” is about to start (or has started already in some areas like Madrid or Israel, or never ended as in the US)

Time to summarize what from my point of view has changed or been confirmed since season 1:

Positives:
+ Vaccine efforts are well on the way. AstraZeneca, despite a short interruption still seems to be a forerunner and end of 2020 seems to be realistic for a functional vaccine to be available
+ although the US had many days with more than 1000 deaths a day, overall the ratio of deaths to reported infections seems to go down in most parts of the world

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Panic Journal 9 – “End of Season 1”

Roughly 4 months have passed since my first post that I called the “Panic Journal” series in order to document my thought process during the “corona crisis”. Time to look back and reflect. These were the posts so far:

March 9th Part 1 – Baby steps

March 15th Part 2 – Fear & Bullet proof your portfolio

March 18th Part 3 – Expert Virologists and statistics

March 23rd Part 4 – Consolidation

March 29th Part 5 – Everyone has a plan

April 13th Part 6 – After the Hammer

May 7th Part 7 – Where is my bail out

June 7th Part 8 – Easy Dancing

Major missjudgements made: Covid-19 winners and time available

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Panic Journal 8 – “Easy dancing”

It has been almost one month since my last panic journal post and a lot has happened in between. The stock market has roared back like crazy and everyone seems to ask themselves when they look at YTD charts and compare it with unemployment numbers and GDP “growth”: What the hell is going on ? Is this the next “Bubble” ? Are people crazy ?

Of course I can’t explain what is going on either but at least from my perspective three main topics stand out that I did not expect to such an extend and seem to be fundamentally positive surprises compared to a worst case scenario:

  1. Central banks and Governments have acted more quickly and more radical than anyone thought
  2. The “Dance” after the “Hammer” so far looks a lot easier that envisaged
  3. A vaccine might come earlier than initially expected

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Panic Journal 6 – After the “Hammer”

At the time of writing, it seems that the worst is over at least for the developing world. Numbers of newly infected persons are shrinking and in the Epicenter, Wuhan, life slowly seems to open up again. Yes, the number of deaths is still rising but this is to be expected as there is at least a 10-14 day delay in deaths compared to new infections.

All in all, it looks that “the hammer” including lock downs seems to have worked for the time being. For me time to think about two areas:

  1. What did I learn in the last few weeks ?
  2. What should I focus on going forward ?

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Panic Journal (5) – “Everyone has a plan until they get punched in the mouth”

When Mike Tyson was asked by a reporter whether he was worried about Evander Holyfield and his fight plan he answered; “Everyone has a plan until they get punched in the mouth.”

This is how the current crisis developed so far for me personally and that is why i decided to do this more frequent “Panic journal” in order to document my actions and to hopefully learn a thing or two.

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Panic Journal (4) – Consolidation

Transaction summary:

The last few days were almost  “High Frequency Trading” for me with more transactions in 10 days than the 2 years before. Here is the overview (also in the comments) after my “Panic Journal 1” Post including a short assessment. I have also listed the stocks that I bought before the panic as part of my “German” basket, but which I should have clearly bought later.

Overall, I added 10 11 (!!) new positions, sold 3 positions and ended up with a cash position of 14,4% (this is also an effect of the ~-22% lower portfolio value YTD).

I was clearly too early in many case, but what I have learned over the last 20 years or so is the following: In a tanking market you always look stupid in the short term as a buyer and smart as a seller. In the long term, you look smart when you have bought at cheap valuations and you look stupid if you sold at cheap valuations.

This week I need to slow down a little more and think if everything that I did really makes sense ;-). I will try to limit daily transactions to 0.5% of the portfolio in any direction.

My overall assessment at the moment is that some sectors (Travel, events) will be hit much longer than I initially thought. I do think that “The Hammer and the Dance” scenario is a very likely one.

Here is the the transaction list:

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Panic Journal (3) – Why Expert Virologists seem to be really bad (or careless) with statistics

Disclaimer: I am an anonymous investment blogger and not a Virologist, so please be aware of this. I also think that Covid-19 is a huge threat and that everyone should contribute to public safety by staying at home and avoiding contact for some time.

The Problem

As mentioned above, I am a “stock guy”, however mostly a fundamental/Behavioural type of investor. If I see a number, I want to know where it comes from and how it is derived.

The current discussion on Covid-19 is, at least in Germany, mostly about numbers. Two numbers stand out and get reported all the time and everywhere:

  1. Number of Covid-19 Infected persons (per day and daily change)
  2. Number of persons that died due to Covdid-19 (again per days and daily change)

The official source for this number is the Robert-Koch Institute (RKI) named after the German scientist who discovered the tubercolosis bacterium more than 100 years ago.

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Panic journal (2) – Fear & Bullet proof your portfolio

Upfront remark:
Although this blog is mostly about investing, I hope that none of my readers will lose any dear ones because of Covid19. Stay safe, stay at home as much as possible and don’t take any unnecessary real world risks especially if you belong to or have regular contact to people who are most vulnerable.

Panic turns into fear
At the time of writing, Spain and France have gone into lock down after Italy last week and the US has implemented a National Emergency and Austria even tries to ban meetings of more than 5 persons. In Germany, Schools and Kindergartens are closed and the coming week will bring more lock downs as well.  So it is pretty useless trying to predict what will happen with the economy in the coming weeks/month. It is pretty clear that there will be a recession, but it is close to impossible to figure out how deep and how long this will go.

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Panic Journal (1) – “Baby steps”

This post is written mostly for myself in order to document my thoughts and actions and to learn from my obvious mistakes. But I promise that the blog won’t turn into a short term trading site !!

Today was a lot worse than I expected. Who would have expected that OPEC members disagree and the Oil price would tank more than 30% overnight ? In general, lower oil prices are good for most economies, but such a move will create some issues with regard to margin loans, counter party risk, indebted frackers etc etc.

So instead of the expected Monday “Corona panic” we have now the “Corona + Oil super panic”. Plus some strange moves like the EUR gaining strongly against the USD, despite Europe always being in the weaker position, even now with the Corona Virus.

Nevertheless, I started to put some money at work. Surprisingly not in the tourism sector, as I need to do more homework there.  Not everyone might have read the comments but this is what I bought today:

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