Trading in Turmoil: Calculating Risk and Opportunity Amid Covid-19

To make sense of investing during the outbreak, TheStreet taps James 'Rev Shark' DePorre, who covers the market for 'Real Money.'
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Less than two weeks ago, U.S. President Donald Trump tried to play down the fears that the coronavirus that causes the potentially deadly disease Covid-19 was already spreading in the U.S.

Trump compared the disease to a mild cold and claimed that only 15 people were patients in the U.S. -- “when you have 15 people, and the 15 within a couple of days is going to be down to close to zero, that’s a pretty good job we’ve done.”

But within days of the speech – as the U.S. finally boosted its ability to test for the virus – the Johns Hopkins map that tracks diagnosed infections showed the U.S. map as the face of someone who came down with a bad case of chicken pox: Dotted in red. 

Covid-19 is suddenly revealed to be everywhere in the States, with at least 21 deaths and more than 500 cases as of Sunday.

Now, as what the world saw happen first in China plays out virtually all over, the U.S. has found out it has no special immunity. And the risk to the economy is as novel as the virus causing it. It's been trying for investors who fear not only what will happen next, but what could happen to their own bodies.

Now the stock market is on a roller coaster ride so wild it looks almost too scary to hop on for many. To make sense of what’s going on, TheStreet tapped James "Rev Shark" DePorre, who covers the market for “Real Money” and is the author of “Invest Like a Shark: How a Deaf Guy With No Job and Limited Capital Made a Fortune Investing in the Stock Market” and operates sharkinvesting.com.

TheStreet: It seems like in this time of the coronavirus scare, when we think of the "Nature of Risk," and try to use the basic analogy of crossing the street by looking and watching the signals and proceeding, we kind of feel instead like crossing the street with a broken signal and our eyes covered. Is that a fair analogy, do you think, and if so, how do investors move forward without becoming paralyzed by fear of the unknown?

DePorre: Yes, that is a pretty good analogy. This has been a particularly unusual event for the stock market, because it is so uncertain. There is an old saying that the stock market hates uncertainty. The reason for that is the news can’t be fully priced into the market unless we know what the news actually is and its economic impact. I believe in the case of the coronavirus, there is a theoretical understanding of how it may impact the market and the economy, but there is not a full appreciation of the emotional impact -- until a big part of the population has to actually deal with it in some form. I don't think the market has ever dealt with a crisis quite like this one and that means that many folks will be standing on the sidelines for a while.

TheStreet: It also feels that, unlike with other non-market stories, that the
coronavirus and the economy have become intertwined. Can you relate
what's going on now to any time you recall in the past?

DePorre: The stock market is really struggling right now to try to figure out the impact on the economy. There are constant stories right now about the cancellation of major business events and it has an impact on travel and entertainment. There is going to be a domino effect as productivity drops and maybe even a shift to more remote workers, but once there is some clarity about how to control the virus there should be a strong bounce back. That will be anticipated and, hopefully, will keep some of the damage to the stock market contained. 

TheStreet: I think you talk about in your columns the need for information, and how people need a clear picture of what's going on -- good or bad -- to make sense of things. Right now we have the president apparently trying to play down
the concerns, comparing cases of the disease to the "sniffles" and we
have the World Health Organization saying the death rate could be
shockingly over 3%. We also know that the U.S. has failed to test enough
people when compared to other nations with outbreaks. Are these mixed
signals, do you think, adding to the sense of uncertainty?

DePorre: Yes, it definitely does add a great amount of uncertainty. There is an obvious desire by political leaders to want to avoid stirring up panic, but they also must urge extreme caution. It is a difficult line to straddle, and it is going to produce criticism no matter what happens. Once extensive testing starts and the data is processed, we can deal with some hard facts. But in the meanwhile, we are dependent on rumors and projections that may be wildly incorrect. There is no way we can avoid mixed signals in the absence of facts. Many want to believe that this is nothing more than a severe form of the seasonal flu, but after what happened in China that seems to be highly unlikely.

TheStreet: Do you have any additional advice for how investors should approach
this time period?

DePorre: My best advice right now is to raise cash if you haven’t already done so and not be in a hurry to buy. It is important to be flexible and to not be handcuffed by inertia. It is going to take a while for the market to settle and there will be plenty of time to rebuild positions once there is greater clarity about this crisis. This actually will create some exceptional opportunities that I will be discussing in the weeks and months ahead. If you have a good shopping list in place now, it makes it easier to move quickly when the time is right to jump back in. 

This story has been updated.