Why This Market Rally Spells ‘Sell’

Do you remember WHO’s reluctance to label the coronavirus a pandemic? And the agency’s ire at Scott Morrison for jumping the gun with his own pandemic announcement.

Or when we were told the China travel ban would only last two weeks. And then just one more. And one more…

And the early ‘cautious’ voices warning on the impact to economic activity in the ‘first quarter’…indicating things should be well on the road to normalcy by Q2. Which, incidentally, we’ve just begun.

Then there was all the rationalising on why the public doesn’t need face masks or gloves. For some reason these items offer essential protection to healthcare workers…but they’re useless to the rest of us. Just wash your hands, folks!

(The US is doing an ‘about face’ on the mask advice. You can expect a similar re-think here…once the supply shortage is addressed.)

The drip feed of bad news has come to us in carefully measured doses. And it continues today. Let’s not overwhelm the sheeple with too much information all at once.

Now we’re being told that Australian businesses may be sidelined for six months. But don’t panic! It’s all going to work out OK.

From The Sydney Morning Herald :

A senior Commonwealth Bank executive [head of business and private banking Mike Vacy-Lyle] says businesses can “tread water” for six months if their wages, rent and banking costs were all frozen, as the lender revealed it has already approved $150 million in emergency taxpayer-backed loans.

Mike is referring to the government’s hibernation strategy. Where businesses will simply freeze their activities for six months and re-emerge kicking.

We have grave doubts many businesses will be able to do so. And further concerns with the massive taxpayer-backed loans intended to keep them functioning during their winter sleep.

Not that we advocate letting countless businesses fail. But the loans and outright government handouts won’t be enough to match the lost income for most workers and businesses. And don’t forget we are talking about loans here. Money that these businesses are meant to reimburse…post hibernation.

The only silver bullet…

The news we’re getting today would have shocked most Australians only a month ago. But it’s likely that by next month we’ll look back and realise that this news too — deliberately or not — is being sugar-coated.

We hope for the rapid advancement of drugs to treat those afflicted with coronavirus. And for equally rapid progress in delivering fast, reliable testing kits. All that will help mitigate the impact on lost lives and lost livelihoods.

But the only silver bullet here is a vaccine.

As Bill Gates told Fox News over the weekend, ‘It is fair to say things won’t go back to truly normal until we have a vaccine.’

Barring a miracle, most experts in the field predict a widely available vaccine is still 12–18 months away. Meaning anywhere between April and October 2021.

As we’re moving into another week of possible stock market gains — the ASX 200 is up 4.4% at time of writing — you shouldn’t lose sight of the long game here. And you may want to consider ‘selling the bounce’.

As The Rum Rebellion editor Vern Gowdie writes, ‘The good times are over, we have now moved into the make or break phase…and it requires you to see things differently.’

PS: While most every stock has come under selling pressure in recent weeks, The Rum Rebellion editor Vern Gowdie lists five stocks he believes you should consider selling immediately. You can find out which ones, and why, in his free special report here.

Bernd Struben is an Editor of The Rum Rebellion. In this capacity, he has access to one of the most intriguing and powerful networks of practical investment insight anywhere in the world.

Bernd has worked on four different continents, and has more than 20 years of professional finance, editorial, and management experience. He holds a degree in economics.

The Rum Rebellion