Unless you were on Mars last week, it was impossible to not notice the stock market carnage that transpired in the last week, which explains part one of tongue in cheek title for todays blog. The later is an omage  to the special day that appears on calendar every 4 years!

While stories of gloom and doom are every where, I want start todays blog with the following screen shot from twitter feed by @EddyElfenbein

I believe this  twitter feed paints succincct picture of market mania resulting from zero friction trading environment that we live in today.

Gloom and Doom

More than 6 Trillion of global wealth was destroyed in the past week. My share of that destruction, 7 %.

• AVI Family Net worth (as percent of FI) on 02/22/2020: 65.02
• AVI Family Net worth (as percent of FI) on 02/28/2020: 60.58

AVI family is back to where we were at the end of Nov 2019.

The two charts below offer a perspective on how fast the market pull back has been and how bad it still can get!

The correction in the valuation of S&P500 index  last week has been the quickest 10 % decline from its recent peak  in the index’s history.

Notice the striking similarity to the run up in market valuation and the subsequent crash. If history is any indication, things could get a lot worse!

Opportunity

In the short term (year 2020), the disruption of global supply chain resulting from corona virus is going to impact earnings and therefore stock markets. The market, which primarily operates on quaterly earnings cycle, is going to be affected and as some would argue, even with the massive correction, the markets may be overvalued today as opposed to at the peak reached on February 19th.

In times like this, pre-mortem analysis comes to the rescue. I have given quite a bit of thought to my action plan should markets decline >10 % as is evident from the response to first question in my pre-mortem analysis. In that article, I noted that any correction not induced by fed-action on increasing interest rates could represent a massive opportunity to get cash working again. As noted, my intention would be to beef up my portfolio with stocks of stable and growing companies that were trading at premium valuation before the correction.

True to my word, I went on a buying spree last week. My timing has not been impeccable (it never is). All stocks that I purchased in the last week were after two successive 3 % market drawdown days. And as it turns out, the market saw a further drawdown on 4 % on Thursday, Feb 27.

Below is the summary of my stock purchase action for the last week:

For all the purchases above, I have not added any new money to my portfolio. Rather these purchases were made by reshuffling funds out of short-term bond ETFs held in my active portfolio as cash hedge. Should the markets continue to fall, I may consider adding outside funds to my active portfolio, always being a net buyer of assets as long as we continue to be in the correction/bear market territory.

I want conclude with an optimistic note, as summarized wonderfully well by the following chart from @michaelbatnick

Video/Book/Article/Audio for the Week

• Video: Howards marks on how to think like an investor in these times of uncertainty
• Blog:  Ashwath Damodaran weighs in on market meltdown
• Blog: An old post by Jason Zweig, but still very relevant on what to do when panic is wild and fear is irresistable
• Blog: Charts galore to savor on the week that produced the fastest collapse in US stocks since great depression