The Silver Lining

A pilot awoke to a beautiful Florida day and decided to go sightseeing in his small plane. Several miles away another gentleman decided it would be a perfect day for jogging on the beach. As he ran along he passed many others who had awaken with the same idea and together they enjoyed the beautiful morning.
 
Suddenly the engine in the small plane jerked to a halt and the pilot was forced to make an emergency landing, on the beach. Thousands of aircraft fly everyday without incident. Millions of joggers run every day without a problem. But on this rare day, a series of unfortunate events brought the two together in a tragic accident that lead to the death of the unsuspecting jogger. Statisticians call these “Black Swan Events” because they are extremely rare.
 
For decades the stock, bond and real estate markets have provided tremendous wealth to investors, but occasionally a rare event throws things temporarily into chaos. Of all the market disrupting events I have witnessed, I don’t think any has come on faster, or created more confusion, than the Covid-19 Crisis. It may well be that future black swan events are referred to as Covids. Let’s take a brief look at this extremely rare crisis.
 
In early February our economy was firing on all cylinders, putting out positive numbers like never before. In late February the virus hit New York city and within days the stock market was in meltdown mode, falling over 30% in a couple of weeks. Soon after, people started losing their jobs and unemployment rose at record speed to incredible highs. The government responded with both parties agreeing to give away money that did not exist, in amounts no human could even comprehend. And then they did it again, and again. Schools and businesses closed, panicked politicians issued executive decrees with questionable authority and without even fully knowing who the enemy was. In its entirety it has been perhaps the most bizarre political and social scene I have witnessed. 
 
After two months of serious panic, the stock market suddenly began to recover, eventually doing something even more unusual. Many stocks rose to all-time highs even as the crisis continued. What are investors to make of it all? What could Wall Street be thinking? Despite all that has gone on, one thing seems clear. This crisis is a rare black swan event, which is actually the good news. “Good news” because it is not likely to repeat itself, especially given what we are learning from it. It may even turn out to be a blessing as we will be better prepared to deal with similar situations in the years to come. It will also lead to wonderful new technologies and advancements in medicine that will make our world safer and more efficient. This is what I believe Wall Street is seeing, and this is why I remain optimistic. This disastrous Black Swan crisis may be one of our greatest investing opportunities.