Friday File: Cheap Insurance and Expensive Silver

By Travis Johnson, Stock Gumshoe, April 17, 2020

Here’s my soothsaying bit for this week, which you should feel free to ignore — like everyone else who’s predicting the future, I’m probably going to be wrong.

I don’t think, even now, that we’re pricing in even the bad news that is already almost certain this year… or if we are, we’re pricing in a bounceback recovery in 2021 that knocks your socks off. Most stocks are still not cheap, and I still think we’ll have another huge fall in the market when people really “give up” — I don’t know whether we’ll get below the lows of late March or not, and of course I’ll have to wait a couple years to tell you with certainty where the “bottom” is, but I think we’ll have more opportunities like we saw in March to buy good companies at better prices.

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The interview the legendary Barry Diller did with CNBC earlier this week is a good reminder — he is primarily involved with two companies, Interactive Corp (IAC) and Expedia (EXPE), and the former is well-capitalized and likely to see a downturn in advertising revenue but ready to maybe make some investments if opportunities present themselves… while the latter is licking its wounds and suddenly went from having a huge business to having no revenue at all. And he had one quote that helps to remind us of how interconnected everything is in the global economy…

“[A]t Expedia, for instance, we spend $5 billion a year in advertising. We won’t spend $1 billion in advertising probably this year. You just rip that across everything. There you are.”

So that’s what I’m more worried about than anything else, that “rip that across everything” function that can allow slashed consumer spending and closing businesses and mass unemployment to snowball into something far worse over a few months (or longer). It doesn’t necessarily have to get dramatically worse, but it certainly might, and my assumption is that the economy will be slow to recover… so even if we miss the absolute best days for investing, it’s OK, we’ll probably have lots of opportunities in the next six months to buy our favorite stocks at prices that aren’t dramatically higher than we’re being quoted today, and maybe if the snowball builds speed and size enough to really shift sentiment and scare people, we’ll see a big dip below the ...

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