As already discussed in previous articles The Golden Investor fears the mid-March supply chain disruption and its implications for American businesses. Now, increasing fear for local spread among several states in the United States has become real and we have yet to see the end of this. Because of the lack of testing by the United States the amount of corona cases is severely under-reported. At the time of writing around eight thousand people were tested in the United States since the beginning of the outbreak.¹ In comparison, in South-Korea almost one hundred thousand people are tested. This shows the extreme lack of testing by the federal government. Private health care labs are now allowed and equipped to test for corona and it is very likely that because of that the amount of cases will rise. This severe under-reporting of cases could be devastating to the already fragile healthcare system in the United States. Americans without insurance are not very likely to visit the doctor if they have symptoms, only if they get critically sick they will ask for help. This will lead to huge pressure on the healthcare system and will cause the corona crisis to be significantly worse than in Italy right now where proper measures are taken. Stock markets will more sell-offs this week and it would not be strange if more rate cuts and central bank measures will follow soon.
At a price of 9.50 at the time of writing The Golden Investor picked up some Alpha Pro Tech (APT) stocks. Lakeland Industries seems also very interesting, but this company is only partly American-based and has some of its factories in South-East Asia which makes it less interesting of an investment. At around two and a halve times the normal price it is reasonable to pick up some Alpha Pro Tech, especially if one is thinking this corona situation could get way worse in the United States. Although Alpha Pro Tech (APT) has seen some insider selling, is already operating at full capacity and is a low cap company, but it stays a valuable manufacturer and a safe-haven during viral outbreaks. If one is less risky, Flow Traders has been doing great the last few weeks and The Golden Investor expects this stock to stay this way. The only problem for Flow Traders will be maintaining their business during a possible quarantine period, The Netherlands has seen a big rise in corona cases too.
Low oil prices don’t only hurt oil companies, but also the companies working for oil companies. This seems rather logic, but the hits oil companies get this quarter will be passed on to other companies. Suppliers of drilling and building materials for oil constructions will be hit. These companies are hugely dependent on the demand of these companies. Many banks have huge exposure to the energy sector and will be hit big if companies default. Our current economy is built on oil and the effect of low oil prices will be seen. It’s interesting to see that even though our tendency is to think that were already green, hard economic evidence shows that we are still heavily dependent on oil.
Although The Golden Investor is not a fan of cash, cash is trash, under the current market conditions it is very risky to make safe trades or to value companies properly. Fundamental analysis of the markets is very hard and making predictions is something even The Golden Investor can’t do. The expectation of The Golden Investor is that on the short run this thing is far from over yet and on the long run gold stocks will be priceless.
Disclaimer: The Golden Investor is not a fortune-teller, be sure to make the right decisions in accordance to your own financial situation, this is not investment advise or anything like that.