Wait, What?

One of my favorite books is Wait, What? It is based on a commencement address, the art of asking (and answering) good questions given by James E. Ryan, the Dean of Harvard University’s Graduate School of Education.

I really suggest you give it a read – it is helping me cope with the current Market devastation. The book gives us five (5) essential questions you should always be asking and listening for:

1. Wait, what?!
2. I wonder…(why or if)?
3. Couldn’t we at least? – or How to get unstuck.
4. How can I help?
5. What truly matters?

So, to use some of James Ryan’s tools to cope, let’s start by asking Wait, what happened? The 2020 stock market crash has eliminated all of last year’s gains in a few days! The S&P 500 is down 21.34% year to date – my portfolio is down 6.42% – I guess I should be happy, but a 6.42% loss hurts!

Why did this happen? The Corona-virus and panic in the oil markets are the obvious answers – but I believe the extreme overvaluation caused by the Federal Reserve last year was the real problem. Until we get stocks back to their historical norms, mean reversion is going to continue – and be painful.

I anticipated this crash, and sold most of my stock during last year’s euphoria – I started 2020 with a portfolio of 20% stock and 80% cash and short term bonds – ready to invest during the next crash. Unfortunately, I started buying falling knives after the first 16% drop (EPD, PFE, and BUD), and moved some of my cash into Vanguard’s Global Minimum Volatility Fund way too early. I have about 30% of my portfolio in stock now, but it has not been fun – two of my individual stock picks went down substantially – and the timing on the Stock Fund could not have been worse.

Still, I don’t own anything stupid (think BitCoin) – so I will just have to take my lumps and cope.

So, how did I get unstuck? I did a few things:

1. Sold my EPD stock, and bought a different Pipeline company KMI, to lock in the Tax Loss.
2. That Tax Loss allowed me to sell an under-performing Mutual Fund in my taxable brokerage account that had a large tax basis gain.
3. Since I will not be buying back EPD for at least a month, the trade will not be subject to the Wash-Sale Rule.
4. I decided to keep the BUD stock I was put – since I feel the stock will come back rather quickly once the Corona-virus subsides.
5. I decided to keep the PFE stock I was put – since I only have a minimal loss, and feel Healthcare does well in down markets.
6. I also sold Puts on DUK and KO – to create more income, premium collected: $2,145.00.

I feel better about my portfolio now – technically I should be buying more stock – but I will be taking it slow – I think we have a long way to go before the true effects of the Corona-virus are known.

If you are interested, here is a YouTube video of Dean James Ryan’s 5 Essential Questions In Life: