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The Coronavirus is far worse than the media is telling you

by , 20 February 2020
The Coronavirus is far worse than the media is telling you
This coronavirus is getting out of control!

And markets couldn't care less…

The S&P500 is at record highs.

Chinese shares have bounced almost 8% from their lows.

And yet, every indication is, we're facing massive real-world consequences after the Chinese authorities continue to quarantine tens of millions of Chinese workers.

It's no wonder markets are pushing higher however as the mainstream media seems to be largely ignoring the extent of the damage!
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Thanks to a shortage of pork and chicken in China, this South African poultry business could see a 106% increase in its share price in less than 12 months! 
This penny stock health administrator has been quietly buying up market share and very few investors have noticed… But that’s all about to change… And when the mainstream catches on its share price is going to explode
Shortages are going to take their toll on the markets and company earnings and you need to be prepared
I was sitting with a client yesterday and he was telling my how, as the treasurer of his school, he needed to place an order for 25 PC’s. Unfortunately, the suppliers couldn’t match his order as the Chinese component supplier was not able to deliver.
But the evidence of widespread shortages is not just anecdotal.
Apple released a statement saying the company will not meet its March revenue guidance. The reason? The coronavirus epidemic. The shutdowns across Asia have caused many of Apple’s Chinese factories and stores to either be closed completely or at least operate on reduced hours.
Apple is not the only company having to deal with this issue. Starbucks has closed more than 2000 outlets. That’s about half its Chinese operations.
For many years, hundreds of companies invested heavily in China. As a result, they now rely heavily on China for a large chunk of their earnings. Chinese manufacturing is intricately woven into the global supply-chain.
When these companies come to report, they will feel the pressure in their bottom lines. I am terrified of what will happen as Q1 results start to filter through later this year.
I’m sure many companies will follow Apple in announcing they will not be able to stick to their previous revenue and earnings guidance.
You need to hedge your portfolio!
You could sell out of your stocks and go into cash… but that is a bit extreme. For one you’ll likely get whacked with a big Capital Gains Tax bill.
What you might consider instead is entering into a “hedge position”. This is essentially like buying a bit of insurance for your portfolio. If markets tank, then you get paid back the money you would have lost on the stock collapse.
One of the best ways to get a bit of protection is to buy “put options”.
With low volatility the pricing is very reasonable and, depending on your requirement, you could pick up “out of the money” puts to keep the costs even lower.
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So, how do you buy options?
Unfortunately, the options market in South Africa is almost non-existent. For retail investors I prefer to go offshore where the spreads are tighter, the pricing better and the variety of options is much wider.
You might think investing overseas is difficult, but it’s actually much easier than most people realise. These days, we can fully externalise a portfolio in under 24 hours start to finish.
You simply fill in a few forms, provide FICA documents and fund a local account. You’ll also be able to log into your account online and keep an eye on your investments whenever you like. Amazing what technology can do for you these days!
If you still don’t have an offshore account, I will happily get you set up. Just send me a mail on support@randswiss.com or give me a call on 011 781 4454.
Christo Krog,
Rand Swiss, Wealth Manager

The Coronavirus is far worse than the media is telling you
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