Market Meltdown March 2020 Reflections from Bob "TurboBob" Knight

Markets had another historical sell off as the bear is well in control now. When you think the selling is done and it can't get any worse, wait for another 10% drop. There is no abject fear and despondency yet. We are only in the disbelief, creeping up to the fear stage. We still need to go through despair, panic and capitulation.

But don't worry. There will be another opportunity of a lifetime when the markets do bottom and turn to go the other way. 

But we are not even close. 

There is too much damage done for this market meltdown to be a V bottom recovery. Look for more of a double bottom like we had in November 2008/March 2009. 

When it comes, rest assured I'll call it like I did in 2009. I was only trading for myself then, but I remember the day like it was yesterday. I was on the phone with my brother (who also is a finance guy) and I said to him in simple terms, "This is the bottom."  From that point forward we never saw a lower low. In fact, it was the start of the longest bull market in history. 

I am also on record for calling the start of the recent 37% move up starting in January 2019.

Then in October and November 2019 (on record), I said go long the Santa Claus Rally. It will take us through to the end of February (14% move).  I just didn't expect a "Black Swan" event to kill the bull market with such intensity.

If you are looking to re-enter the market on the long side, I might suggest deploying 30% of your capital at this level. If the markets bounce, don't chase. It will just be another "dead cat bounce" (no cats were actually injured in writing this blog)

I will be looking to short all bounces. We will get a bounce as markets are extremely oversold. Then, if we get a double bottom over the next few months and it holds, then we may get a change in direction. There is a lot of damage and almost all asset classes are being sold off regardless of their value. It will take some time to work through all of the damage. Earnings for the next few quarters will be dismal.

Real estate is the only asset relatively immune to the crash at the moment.  But we will see what happens to this asset class when people stop getting paychecks and businesses go broke.  The only saving grace may be that money is getting cheaper. But, if things go from bad to worse we may start to see a forced liquidation of that class off assets as well.  It is not the end of the free world as we know it, but stay short (or at least keep your powder dry) as markets will continue to languish for months to come.