{"id":399,"date":"2020-03-26T19:48:24","date_gmt":"2020-03-26T19:48:24","guid":{"rendered":"https:\/\/advisor.wellington-altus.ca\/simonharry2\/?p=399"},"modified":"2020-03-26T20:19:01","modified_gmt":"2020-03-26T20:19:01","slug":"the-chairmen","status":"publish","type":"post","link":"https:\/\/advisor.wellington-altus.ca\/simonharry\/2020\/03\/26\/the-chairmen\/","title":{"rendered":"The Chairmen"},"content":{"rendered":"<p>Since March 2009, in the depths of the financial crisis to February 2020, the US enjoyed an unprecedented bull market. Everything went up in an almost straight line. There were hiccups to be sure &#8211; Trump\u2019s shut down, some concerns over Brexit &#8211; but despite those relatively short periods of time, volatility felt like a bad childhood dream. A dream that might come back from time to time but was easily forgotten.<\/p>\n<p>Until the dream returns \u2013 as a nightmare &#8211; with a vengeance.<\/p>\n<p>I would like to share my experiences with you, to tell you why this incredibly difficult time isn\u2019t concerning me like it is many investors today.\u00a0 I have seen this movie before. I had a front seat ticket to the last two major selloffs being the Tech Wreck and the Financial Crisis. \u00a0The Tech Wreck scared me because I hadn\u2019t seen a major meltdown before.\u00a0 The Financial Crisis terrified me however, because life as we knew it almost came to an end. We were on the brink of destruction and the response of the Fed, in particular Chairman Ben Bernanke, changed the way that I viewed investing permanently.<\/p>\n<p>On Sunday March 15<sup>th<\/sup>, 2009 I watched the following 60 minutes episode from my home.\u00a0 Little did I know that this one episode would change the way I looked at investing, and the way I would advise others to invest, forever. I have copied the interview here for you to watch, I encourage you to watch it as well.<\/p>\n<p><iframe title=\"The Chairman Part 1\" width=\"800\" height=\"600\" src=\"https:\/\/www.youtube.com\/embed\/odPfHY4ekHA?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture\" allowfullscreen><\/iframe><\/p>\n<p>At 8:05 Chairman Bernanke says: \u201cSo, to lend to a bank, we simply use the computer to mark up the size of the account that they have with the Fed\u2026. It\u2019s much more akin to printing money than it is to borrowing.\u201d<\/p>\n<p>The host asks: \u201cYou\u2019ve been printing money?\u201d<\/p>\n<p>Chairman Bernanke replies: \u201cWell, effectively\u2026[yes]\u201d<\/p>\n<p>When I heard the Chairman of the Federal Reserve state that they were using the computer to print money, I never looked back. The Fed was backstopping the market and made a precedent that I never forgot.\u00a0 Since that day, I felt that if there were ever a true crisis, an act of God that we couldn\u2019t foresee, that the government of the United States wouldn\u2019t stand aside, but intervene, in ever bigger ways.<\/p>\n<p>Now this has played out many times over the years. In the industry we called it the \u201cBernanke Put\u201d. This meant that anytime there was a problem with the markets, the Federal Reserve would come and save it\u2026 and time and again it has.<\/p>\n<p>And then we got COVID-19. I don\u2019t need to describe what this has been like for investment markets because we\u2019re living it, but we have had a rally of unprecedented size over the last few days.\u00a0 Between Tuesday and the time of writing, 1:30 pm on Thursday, we have seen the markets rally 20%. We are now in a bull market if you measure that by a 20% rise or more\u2026 If you have been reading my blog posts, or talking to me on the phone or on social media, I have been saying for a while now that the market is giving us an opportunity to invest like we haven\u2019t seen in ages, because the \u201cBernanke Put\u201d has transformed into the \u201cPowell Put\u201d.<\/p>\n<p>This morning there was an interview on the Today show. If you have the time, and have watched the 60 minutes interview linked above, I now encourage you to watch this one with Federal Reserve Chairman Jerome Powell.<\/p>\n<p><iframe title=\"Fed Chair says U.S. &#039;May Well Be In A Recession&#039; As Coronavirus Pandemic Spreads | TODAY\" width=\"800\" height=\"450\" src=\"https:\/\/www.youtube.com\/embed\/WjCAoPYefQ4?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture\" allowfullscreen><\/iframe><\/p>\n<p>The parallels in this interview to the one from 10 years ago, almost to the day, are incredible. The one soundbite that I would quote here comes at the very beginning of the interview, where the host asks: \u201c\u2026\u2019you have the ability to conjure money out of thin air.\u2019\u2026 Is there any limit to the amount of money the Fed is willing to put in this economy to keep it afloat\u2026\u201d and Chairman\u2019s Powell\u2019s response is: \u201c\u2026no\u2026\u201d.<\/p>\n<p>Now, this is not surprising to me. Read my past posts about how this is an incredible buying opportunity and know the reason why I have been as optimistic as can be about why it\u2019s important to own assets through these periods of distress.<\/p>\n<p>When things get tough and the risk of the economy collapsing is real, the Federal Reserve of the United States has a history of not standing still. They would rather \u2018conjure money out of thin air\u2019 than let companies fail and the economy collapse.<\/p>\n<p>This is why it is so important to own good, high quality assets over the long run &#8211; be they stocks or bonds, real estate or art \u2013 at the end of the day, when trouble comes the Fed has responded by printing money, and just as more water added to a pool makes water levels rise, so too will more money being added to the pool make prices rise.\u00a0 Be they stocks or bonds, real estate or art &#8211; and over time, the prices of food, clothing, health care and shelter will be sure to rise as well.\u00a0 If you own high quality assets, there is no surer way to protect yourself against those risks that are scarier to me than what we are currently going through.<\/p>\n<hr \/>\n<p>I leave you with the tale of two charts. The first is of the S&amp;P 500 during the Financial Crisis and Ben Bernanke\u2019s interview. The second is the S&amp;P 500 and the Coronavirus meltdown.\u00a0 I don\u2019t know what the second chart will look like tomorrow, and there is so much more pain and suffering to come with the Coronavirus, but I can say that I have faith that we will overcome, and that though we will likely see more volatility, the light at the end of the tunnel is shining ever more brightly.<\/p>\n<p><strong>S&amp;P 500 2008 \u2013 2010<\/strong><\/p>\n<p><img fetchpriority=\"high\" decoding=\"async\" class=\"alignnone wp-image-400\" src=\"https:\/\/advisor.wellington-altus.ca\/simonharry2\/wp-content\/uploads\/sites\/52\/2020\/03\/SP-500-2008-\u2013-2010-300x131.png\" alt=\"\" width=\"799\" height=\"349\" srcset=\"https:\/\/advisor.wellington-altus.ca\/simonharry\/wp-content\/uploads\/sites\/220\/2020\/03\/SP-500-2008-\u2013-2010-300x131.png 300w, https:\/\/advisor.wellington-altus.ca\/simonharry\/wp-content\/uploads\/sites\/220\/2020\/03\/SP-500-2008-\u2013-2010-768x336.png 768w, https:\/\/advisor.wellington-altus.ca\/simonharry\/wp-content\/uploads\/sites\/220\/2020\/03\/SP-500-2008-\u2013-2010.png 834w\" sizes=\"(max-width: 799px) 100vw, 799px\" \/><\/p>\n<p><strong>S&amp;P 500 2019 &#8211; 2020<\/strong><\/p>\n<p><img decoding=\"async\" class=\"alignnone wp-image-401\" src=\"https:\/\/advisor.wellington-altus.ca\/simonharry2\/wp-content\/uploads\/sites\/52\/2020\/03\/SP-500-2019-2020-300x132.png\" alt=\"\" width=\"800\" height=\"352\" srcset=\"https:\/\/advisor.wellington-altus.ca\/simonharry\/wp-content\/uploads\/sites\/220\/2020\/03\/SP-500-2019-2020-300x132.png 300w, https:\/\/advisor.wellington-altus.ca\/simonharry\/wp-content\/uploads\/sites\/220\/2020\/03\/SP-500-2019-2020-768x337.png 768w, https:\/\/advisor.wellington-altus.ca\/simonharry\/wp-content\/uploads\/sites\/220\/2020\/03\/SP-500-2019-2020.png 848w\" sizes=\"(max-width: 800px) 100vw, 800px\" \/><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Since March 2009, in the depths of the financial crisis to February 2020, the US enjoyed an unprecedented bull market. Everything went up in an almost straight line. There were hiccups to be sure &#8211; Trump\u2019s shut down, some concerns over Brexit &#8211; but despite those relatively short periods of time, volatility felt like a [&hellip;]<\/p>\n","protected":false},"author":35,"featured_media":404,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_oasis_is_in_workflow":0,"_oasis_original":0,"_oasis_task_priority":"","_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"footnotes":""},"categories":[14],"tags":[],"class_list":["post-399","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance"],"acf":[],"_links":{"self":[{"href":"https:\/\/advisor.wellington-altus.ca\/simonharry\/wp-json\/wp\/v2\/posts\/399","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/advisor.wellington-altus.ca\/simonharry\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/advisor.wellington-altus.ca\/simonharry\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/simonharry\/wp-json\/wp\/v2\/users\/35"}],"replies":[{"embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/simonharry\/wp-json\/wp\/v2\/comments?post=399"}],"version-history":[{"count":2,"href":"https:\/\/advisor.wellington-altus.ca\/simonharry\/wp-json\/wp\/v2\/posts\/399\/revisions"}],"predecessor-version":[{"id":408,"href":"https:\/\/advisor.wellington-altus.ca\/simonharry\/wp-json\/wp\/v2\/posts\/399\/revisions\/408"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/simonharry\/wp-json\/wp\/v2\/media\/404"}],"wp:attachment":[{"href":"https:\/\/advisor.wellington-altus.ca\/simonharry\/wp-json\/wp\/v2\/media?parent=399"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/simonharry\/wp-json\/wp\/v2\/categories?post=399"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/simonharry\/wp-json\/wp\/v2\/tags?post=399"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}