Make the best of the worst of times

Business | Andrew Wong 30 Mar 2020

Last week I had suggested that investors follow Warren Buffett's lead and buy into Bank of New York Mellon and Delta Air Lines if they wanted to beat the god of stocks at his own game.

Anyone doing so would have made a killing: BNY Mellon's stock rose more than 11 percent while Delta's rose more than 40 percent by the end of the week. And a week's return is already well above the average annual gain of the S&P 500 over the last few decades.

In A Tale of Two Cities, Charles Dickens famously wrote, "It was the best of times; it was the worst of the worst of times."

So when the market is crashing, how many of us actually believe it is the best time to enter the market?

This is not only a mental and psychological test but also a test of the pace of investments because Dickens' words also hold true in a bull market.

In a crazily rising stock market, you could be like Buffett, who calmly seizes the opportunity to cash out and then have enough cash when the markets crash, and become greedy when others are fearful.

So to some extent, investing in the market is not about how smart you are, because quite often your EQ (emotional quotient) is more important than your IQ.

Meanwhile, there has been there is a lot of analysis that negates the fiscal and monetary policies of various countries because it feels as if the world is shutting down and economic activity has crawled to a halt. And if people have no chance to spend, what's the use of dishing out cash?

However, people seem to be forgetting two important points.

Firstly, the distribution of money can cut down the number of enterprises and people going bankrupt, and reduce the risk of a systemic crisis in banks.

Secondly, once the pandemic ends, there will be a release of pent-up spending. And along with the current national fiscal and monetary policies, the rebound will be unprecedented, unless everyone believes that the pandemic will not subside and end within the next three months. Otherwise, the stock market will always look to the future, rather than explain the past.

So, for now, we should neither be too depressed nor too optimistic about the market.

At the same time, we also should not deny the benefits brought by the monetary and fiscal policies of all countries to the global economy and financial markets.

Of course, there are two sides to every coin, as there will definitely be repercussions from aggressive monetary and fiscal policies. If the pandemic is not brought under control within the next three months, it will be very difficult for all these countries to upgrade their policies again and this could trigger a crisis in the world's economy and financial markets in the future.

And even if the pandemic ends, global monetary policies have actually gone through earth-shaking changes.

In addition to the oft-mentioned liquidity trap, there's a good chance for further deterioration once the outbreak ends and six months to a year later after the economic recovery, and central banks and governments might still have to control global monetary policy.

These are issues that deserve our attention, so instead of arguing about what's happened, it's better to think a little bit more about the real, long-term impact of the pandemic.

Andrew Wong is chairman and CEO of Anli Securities

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