As always, I am not recommending anyone purchase any particular stock. However, interest rates at banks are far below the rate of inflation. Keeping large amounts of money in your local bank causes the value to decline dramatically, even though the numbers grow ever so slowly. Therefore, I am recommending downloading Robinhood and investing in your favorite company, or perhaps companies. As a small incentive, if you use my link to download Robinhood, open an account, and deposit some money, you and I will both receive one free share of stock worth about $4. Here's my link:
By now everyone knows that President Donald J. Trump signed into law a precedent-setting stimulus bill. I won't go into all the things I like or dislike about this bill, nor will I go into how I expect it to impact our economy. The justification for this unprecedented citizen and small business relief fund was to counter the economic damage created by forcing bars and restaurants all across the United States of America to shut down in an effort to prevent COVID-19 patients from overloading our fragile healthcare system. Many different states, including my home state of Ohio, have either requested or ordered their citizens to remain home until mid-April. The general theory being that keeping everyone isolated at this time will stretch out the contagion curve over time allowing the healthcare system to ramp up for and serve the huge number of cases that COVID-19 is expected to create. Part of the reason the stock market (and my meager portfolio) has collapsed this year is an expectation that forcing people to stay home and forcing businesses to temporarily close will cause extensive damage to the profit margins of any business large enough to be publicly traded on the exchanges. People cannot work, therefore people cannot earn money, therefore people cannot consume, therefore corporations cannot sell. Naturally if corporations cannot sell they cannot earn profits. To counter this, the federal government will pour two trillion dollars of non-existent money into the American economy.
By close of business Tuesday everyone who buys and sells stocks was certain the bill would pass and be signed into law. This had a very predictable impact on my meager portfolio:
After bouncing around throughout the remainder of the week, often rising above my breakeven point of $2100, the market finally closed on Friday just a whisper below my breakeven point. This current portfolio began on December 19th with $600 in stocks and an expectation of receiving another $40 in dividends by the end of January. Dividend payments and further cash deposits have brought it to it's current breakeven point of $2100. Along the way I doubled the number of stocks owned in every company, reduced my average cost per share in every company, and added a couple more companies including General Moly (GMO), a mining company based in the United States of America that produces the highest quality molybdenum in the world. Here is my current portfolio:
And here is the current value of my portfolio:
As you can see, this week has been a huge boost for the value of my meager portfolio. After spending two months deep in loss territory, my portfolio has risen almost to the breakeven point. About two-thirds of my stocks are now in profit positions, even if only slightly. The final third are either in loss positions or at the new, lower average cost per share achieved by doubling my portfolio a couple weeks ago. This is an historic moment in the history of the stock market. I hope everyone who had any extra cash laying around was able to get into the market before Wednesday. From here on out I expect to see a strong, steady climb upward for the next two months followed by an explosion upward as more and more people realize the importance of this moment in history. Granted, no one can predict the future, so everything could easily drop through the floor.
One of the factors making the future paradoxically both more and less predictable than in the past is that 90% of the transactions in the contemporary market are actually handled by computers. No human ever intervenes. This innovation was supposed to "rationalize" the market, making it safer for the 10% who, like me, manage their own transactions. However, the AI algorithms that control these transactions follow predictable curves in response to everyday news headlines. They are programmed this way to protect the assets of large investing firms such as Vanguard and Wisdom Tree, firms that specialize in creating and marketing ETFs (exchange traded funds) which are bought and sold just like ordinary stocks. ETFs are "baskets" of different companies. The actual buying and selling of individual stocks is performed by the marketing company. This provides investors a layer of safety, but also exposes investors to enormous tax complications. For many investors this is a fair trade and they are happy to hold ETFs rather than individual stocks. If you have a company-managed retirement account of some kind, it is probably primarily invested in ETFs.
I strongly suspect that never again in my lifetime will stocks fall as low as they did at the end of February and beginning of March. This period in time will be studied by economics and finance students for generations to come. It has been very exciting to be an active participant in the turmoil of the past three months. Annoying, heart-stopping, and stressful beyond belief, but then, all good adventures stop your heart at least momentarily, that is why we call them, "adventures". From here on out there will be more peaks and valleys, until sooner or later we experience another one of those explosive upswings that predicate a huge collapse, but never again will stocks fall to the levels we have seen these past three months. Anyone who bought stocks during this collapse is guaranteed to make at least a small profit in the years ahead. There will be individual companies whose stock price falls into loss territory as a result of bad management, changing technology, or changes in consumer priorities, but the possibility of the entire market falling to these levels is almost impossible to envision.