April 16, 2020

In late March and early April, 2020, the market is quickly recovering from the coronavirus crash. The threat of COVID-19 is still not over but some people in the market are fairly positive about the recovery. This is good because my existing holding is going back up but as a long term investor:

  • Should you have entered more during the March period?
  • Should you exit some of your holdings now?
  • Should you pay attention to news (because a lot of hedge funds are saying that the market will go down even more)?
  • Will this become a V shape bottom or a W shape bottom?
  • Will it drop even more (worst than the first bottom)?

Depending on when you are watching this video, it can be a case study by looking back into the past in order to help you prepare for the next market crash.

Transcript with 90% accuracy:

Did we miss the bottom?

So this video is really about the stock market coronavirus crash and whether we missed a bottom, and I’m sure this is a question that are in a lot of your minds right now because the markets went up by 10, 20%, even 30% depending on which stock you are looking at. So I’ve been paying attention to the news recently because I want to see what everyone is thinking about the stock markets and whether we’re at a bottom. And so far I have found a ton of news that you know, the markets went up by 20 something percent and the economists are scared of calling it a bull market. You know, Goldman Sachs saying it’s not that bottom yet. And other hedge funds that say, you know, we’re still bearish about the market so we think it’s going to go down. And I think, you know, they are reasonable.

I think I can see from their point of view why they think it’s a bottom. And that’s a fee shape bottom. It’s actually quite unlikely. So as of I’m recording this video right now, the market has went up quite a bit and in the next two weeks is going to be to earning season. So let’s talk about what are the possibilities. And I actually go through this in quite a bit of detail within my program, investing a celebrator, but I’ll also share my thoughts here. So first of all, there are two main possibilities. Now some people will say there are three possibilities, but I think there’s mainly two. The first one is a V-shaped bought up, that means it’s dropped and then it’s going to come back up really sharply like of the, the second one is a w shape bottom. So I can really do it with my hand here, but it’s just kinda like this, it dropped quite a bit, which already happened, comes back up to kind of mid point, you know, or a little bit lower drop again.

And then it goes up eventually. And the last one is kind of like the great depression, you know, the Armageddon version where it dropped and it just becomes an L shape and it never recovers. So those are the three possibilities. I think the third one is quite remote, but don’t quote me on it. I mean, even if we’re heading into the great depression, then hallelujah. You know, God saves us. But what’s important here is actually you want to evaluate the probability between a V shaped bottom and a w shape bottom. And here’s what people think. For people who thinks that it’s going to be a w bottom, they, their main arguments is because, well, a, a lot of people are being unemployed, which I totally agree and that’s going to have a longterm impact.

B is that right now a lot of people are missing their mortgage payments. A lot of people are going to default on their loans. So that’s going to have a huge impact. See consumer confidence, it’s not restored yet and it’s going to take a while for consumers to become confidence again in the markets. So then there’s no way it’s gonna just come back up like this, like a V and I do understand that as well. And probably D is, you know, some sort of default or loan or some of the banks are failing or the commercial real estate market is failing or the real estate market is failing altogether. All four factors that can feed into a w bottom and a w bottom meaning that right now we dropped it, came back up a little bit, right where before the earnings season and it’s going to drop even more.

It’s going to drop past the previous, you know, low and then it’s going to go down and eventually it’s going to come back up to a certain degree. Yes. That’s what I think have a high likelihood of happening, like 65% chance or 70% chance of happening at the same time. I also see the other arguments and the other arguments is that the shape bottom now when you’re looking at a T shaped bottom, it means you’re expecting a very, very, very, very sharp recovery. Now, I already see that in some of the stocks on the market today for sample biomedical stocks, V shaped bottom, no doubt. Now what needs to happen in order for the market to have a V shaped bottom a, there needs to be like a very strong push in the market. For example, like the stimulus from feds, two point $3 trillion. As of today, I’m recording this video number two, the economy needs to restart very quickly.

Now when you look at the Corona virus crash, obviously it has led to a lot of infected people, a lot of death. But then infrastructure wise you know, people-wise, we’re still largely the same. The key difference or the reason why the economy is slowing down is because everyone is staying indoor. So if somehow everyone is suddenly Oak Hills going outdoors again, then that might lead to a very fast restart of the economy. Now if you look at China, is that really happening right now? Not really sure. So we’ll have to see. But then if the stimulus is so strong that it overrides all the other things like, you know, pattern lings in the short term then that pretty much leads to F E bottom. And right now the policy for stimulus is basically unlimited back. So then that’s why I think there is a possibility for a fee shaped bottom.

And what I want to cover for the fee shaped bottom or a w shape bottom is really for people who think that the market is going to drop, go back up a little bit and drop even worse than before. My question for you is, well if a stock already dropped 70% and it went back up by 10 20% do you really think it’s going to drop again past a 70% Mark? And if this company is a great company that grows year after year with a strong amounts of cash, with strong financials, do you really think the stock is going to drop past a previous low? I think the probabilities there is pretty low and I think that’s why you need to look at the market instead of as a whole but one by one as a stock. And here’s what I mean. If you go to the market today, any kind of filter for biomedical stocks, you know, stocks that are directly related in fighting the Corona virus, you’re going to find out these stocks barely dropped or they have recovered already.

And I think that’s very important because that is a V-shape. If you look at stocks that are heavily impacted by the Corona virus, you know like retail, like airlines, then chances are you’re going to get a w shape bottom because it’s going to take longer for these companies to recover. And I think that’s crucial because once you look into specific sectors, then you’re, you can see clearly on what you should do and how each individual stock is going up and down. And that will give you as an investor an advantage. But other way as you are investing in the markets, you need to be prepared for both because a V shaped bottom can turn into a w shape bottom. So as an investor you should have a plan for both in place. So in case of the shape does turn into a w shape, you will have capital to invest when it is cheap.

So then you can kind of lower your costs overall. So that’s what I really think. You know, when we’re talking about the bottom and I think, you know, to worse has passed, you know, to peak fear has passed. And for stocks that is on a deep discount, the bottom you see is probably the lowest it will go. And right now going forward is going to be an uptrend because of stimulus. But then it’s going to be quite a bumpy ride. So that means lots of opportunity for you to get into the markets especially if you know, which stock to focus on. So that will be my 2 cents and my opinion. Now obviously it’s gonna depend on the type of stocks you’re investing in, your researching skill and whether you know how to multiply your profit using options or any other events, strategies and so on.

So my name is Eric Seto and my goal is to help people without a financial background to master investing, target 30% using an hour a week through my own investing strategy. So if you’re interested in learning more about my investing strategy and how I multiplied my return during this market crash, they can click on the link below, which will take you to a free case study called how to get 30% from the markets. So after you’ve watched a webinar, which I pack a ton of value in it you can click on the link below to schedule a call with me and we can have a chat to see if you are a good fit for the program investing us elevator. So that’s pretty much it. Let me know what you think of the bottom. If you have enter successfully at the bottom, which is at very low price, you should be up 10 to 20%, if not more by now. If so, congratulations. And I’ll see you in the next video. So thank you for watching and I hope you enjoyed the video. Please help support me by like, subscribe and you can watch the next recommended video here as well. So I’ll see you in the next one.

About the author 

Eric Seto

Investor, CPA (Canada) based in Hong Kong and Vancouver

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