Buffett thinks it is going to get worse.

This is another blog that started out as a reply to a reader's comment: HERE.

During the Global Financial Crisis (GFC), I believe the lowest price I paid for AIMS APAC REIT (then AIMS AMP Capital Industrial REIT) was about 17c a unit. 

Or was it 13c a unit?

Anyway, at 17c a unit, after a 5 to 1 consolidation that took place some time later, that would be 85c a unit.

If it was 13c a unit, that would be 65c a unit.

Things were pretty bad during the GFC.

Back then, AA REIT was surely trading at a big discount to NAV and there would have been some negative rental reversions too.

However, now, things look like they are worse than what they were during the GFC.

During the GFC, we didn't have forced shutdown of economies which resulted in record unemployment.

The kind of monetary rescue packages thrown at the economy by the central banks in response to this crisis dwarf whatever they did during the GFC.

I know some countries call them "stimulus" packages but they are really "rescue" packages.

There is nothing to stimulate but plenty to rescue.






A couple of months ago, in a blog, I said I paid attention when PM Lee said that the negative effects of this crisis could be worse than what we saw during the GFC.

I am more cautious during this stock market crash compared to the crash caused by the GFC.

With the ramifications that this pandemic has and we have yet to discover all of them, I feel that it isn't a bad thing for anyone to be more cautious with money this time round.

There is no certainty that it will happen but, increasingly, chances are a second wave or even a third wave of COVID-19 might hit us.

More shutdowns to come?

Maybe.

In a recent blog, I said I watched a documentary on the Spanish flu and how that health crisis took two years to resolve as the virus attacked in waves.

The Spanish flu crisis changed the way people behaved for a long time and it was bad news for the economy for a long time.

During the GFC, people were not dropping like flies like they were during the Spanish flu crisis and also this crisis.

This crisis caused by COVID-19 will not only be remembered for a long time but it will also change the way people behave for a long time to come.

For many businesses, more enduring behavioral changes caused by the COVID-19 crisis will continue to be negative for them and the effects will ripple through the economy. 






Mr. Market could sink again into a depression as economies reopen to a new reality of probably reduced confidence and much slower growth.

Things could get worse before they get better.

When we have a safe and effective vaccine, things should get better.

Having said this, to get back to where we were before the pandemic hit us would surely take quite a bit of time.

With that belief, I am still staying invested, adding to my investments from time to time but not throwing in everything including the kitchen sink.

There could come a time when I throw in everything BUT the kitchen sink but even if I don't do so, it is OK to me.

I rather make sure that I am ready for a relatively long and bumpy ride which could be in store for us in the weeks or months ahead.






I would like to end this blog by sharing a video I found on some things Warren Buffett said at Berkshire Hathaway's 2020 annual meeting for shareholders.

Why has Warren Buffett not bought anything yet during this market crash?

Take a leaf from Warren Buffett's book.

Have a war chest or two ready.

Also, make sure to have an emergency fund and an adequate one at that.

You might want to start watching from 4:48.







"Federal Reserve Chair Jerome Powell says the U.S. economy faces unprecedented downside risks." 13 May 2020.

Related posts:
1. Market sways between hope and worry.
2. Survivability and opportunity in times of distress.