The new decade began with black swans that have shaken the nerves of most investors. After the economic damage caused by the Taal Volcano eruption and the regulatory debacle between the government regulators and the water concessionaires, the coronavirus epidemic in China is now a global pandemic. As the coronavirus continues to spread, the government declared a Luzon-wide enhanced community quarantine and placed the Philippines under a state of calamity. Based on the National Economic and Development Authority scenario estimates, economic growth as measured by the Gross Domestic Product could decrease to -0.6% in 2020 from 6.0% in 2019 if the coronavirus pandemic worsens. Before the health emergency becomes an economic catastrophe, investors rushed to escape from the meltdown. Fundamentals were thrown out. Technicals were thrown out. Fear of the unknown sets in and stocks were sold in haste. To stop the panic selling, the Philippine Stock Exchange amended its trading rules and adjusted the lower static threshold from 50% to 30% below the previous close. Although the clinical trial of an experimental coronavirus vaccine has started, it would not be available for general use for at least 12 months. The presence of a government lockdown and the absence of a coronavirus vaccine would make stocks vulnerable to collapse since no price is too low for a bear. The worse is yet to come so fasten your seatbelts and prepare for an economic crash that could lead to an unprecedented pandemic-driven economic crisis. We do know that stocks could plunge to new record lows but what we do not know is how low it could go. Although the coronavirus infection rate continues to escalate, the World Health Organization says that the coronavirus would be the first pandemic in history that could be controlled. Investors are taught to focus on value rather than price and when the latter is lower than the former then it is enough reason to buy. This could be a generational buying opportunity to those who have the financial strength to get stuck for a moment and weather the economic storm. Although we are entering a new era of severe economic downturn, this could be a chance to buy the oversold stocks of undervalued companies whose products and services we cannot live without. How long should you hold a stock? Warren Buffett says that if you do not feel comfortable owning a stock for 10 years then you should not own it for 10 minutes.
