It's a Bird, It's a Plane, It's a... Petri Dish?

Keep calm and profit on...

Written by Jimmy Mengel
Posted March 5, 2020

"Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one."

—Charles MacKay 

Extraordinary Popular Delusions and the Madness of Crowds

I think it is safe to say by now, that we are in complete panic mode.

In the midst of a worldwide pandemic, a stock market crash and a lame, desperate move by the Fed — we’ve all come together as one mad herd. Some of these reactions are completely understandable: nobody wants to get sick and die, nobody wants to be left penniless, and politicians don’t want to be left holding an empty bag during an election year.

They are all scary propositions.

On the other hand, most calm and collected people know that their risk of dying from flu-like symptoms is slim to none. Any decent investor knows that you shouldn’t just sell off your investments in the middle of a meltdown.

And any politician who — well, who really gives a shit about how they feel?

In any case, I’ll give you a couple of simple, concrete examples of how this coronavirus epidemic will affect certain parts of your everyday life and the market, without adding any extra panic...

For one, people aren’t flying.

I first noticed this weeks ago on a flight to Romania. I traveled on Air France into Paris for a quick layover before touching down in Bucharest. After arriving at Dulles Airport in D.C. it took a mere 20 minutes from check-in to gate.

I started to get suspicious. Was this my lucky day? Usually, it takes two to three hours to park, check bags, and get through security.

That’s when I began to see the masks.

While I’m not the type to panic, I did indeed get a bit antsy queuing up in line behind dozens of masked strangers all seemingly on edge and staring around nervously at anyone who even squeaked out a cough.

When we boarded the plane I rejoiced again — I had the seat beside me wide open!

But traveling back a week later was more concerning. The airport felt more like an apocalyptic zombie movie. Nearly everyone but us was wearing a mask, and those who weren’t were loading their hands and faces with hand sanitizer. Even the TSA pretty much stayed hands-off. Our return flight to D.C. was absolutely empty. Not only were there seats left unused, but there were also mostly empty rows. It was nice to stretch out, but it was also very unsettling. 

That fear obviously has a big impact on the economy...

When people are scared to fly, they don’t spend money on plane tickets. Air travel is big business: commercial airlines were expected to generate around $872 billion in revenue this year. That obviously isn't gonna happen now.

The International Air Transport Association forecasted over $30 billion in lost revenues 11 days ago, and that even appears to have been way off. The actual cost seems far, far more dire. American Airlines, Alaska Airlines, Jet Blue, Hawaiian Airlines, United Airlines have all offered to waive travel fees for anyone who wants to change their travel plans.

(A big shout out to Southwest, who allows you to reschedule your flight for free, all the time)

I don’t see many travelers rescheduling those flights anytime soon. Airlines are going to keep bleeding money for the foreseeable future.

Whatever you do, I would urge against getting cute and buying airline stocks right now. Investors have long been warned about catching a falling knife. As far as I can tell, only one man can catch a falling airplane and that’s Superman.

*I personally recommend high-yielding blue chips that will pay off more as stocks continue to drop. I'll have more on that next week.

While the airlines are obviously feeling the burn, so are all of the ancillary travel beneficiaries, like tourism, hotels, and restaurants. It’s the lifeblood of many cities.

This all may sound rather obvious, but the coronavirus has dug its claws deeper into economic spaces that typically don’t get much attention.

One industry, in particular, is one I’m intimately familiar with...

I’m talking about the conference circuit.

Every weekend, millions of business professionals around the world travel to places like Las Vegas, Florida, and Shanghai to network, talk shop, and learn more about their industries. These global events generated over $1 trillion in 2017. 260 of these conferences have already been canceled in Europe alone.

After over a decade as a financial and health writer, I’ve attended dozens of conferences across the country and abroad. The typical day consists of being crammed together with thousands of warm, sweaty bodies inside of a large hall, an amphitheater, or a hotel.

If you are germaphobic — at all — I would not recommend it even in the best of times.

In fact, one of the toughest guys I know — Nick Hodge — just bowed out of such a conference. It was the largest mining conference in the world with over 25,000 people attending. Considering that he’s made his money on mining stocks, it was a big deal to miss it.

“I wasn’t walking into that Petri dish,” Nick told me.

But he wasn’t doing it for him, he was doing it to protect his family. He has three young children who are the ones who are actually at high risk for illnesses like coronavirus.

I like to think of investing that way, too. Sure, if you’ve done well enough to cash out and live a comfortable life I don’t blame you. However, if you play the long game you can do really, really well in times like these. Nick knows that all too well — which is why he can afford to skip a big convention like this with no fear of missing out. 

The herd only recovers its senses slowly, and one by one. Nick never joined the herd in the first place.

Here’s why.


Jimmy Mengel

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Jimmy is a managing editor for Outsider Club and the investment director of the personal finance advisory, The Crow's Nest, and cannabis stocks advisory, The Marijuana Manifesto. For more on Jimmy, check out his editor's page.

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