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Fed's Bullard: Coronavirus shutdown not a recession but an investment in survival – Financial Post

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WASHINGTON — In normal times massive unemployment and a collapse in economic output would be tragic.

This time, as the coronavirus cloisters millions of Americans and shuts down the U.S. economy, it should instead be saluted as an investment in public health that lays the groundwork for a rapid rebound.

That is the view of St. Louis Federal Reserve President James Bullard, who argues that a potential $2.5 trillion hit coming to the economy is both necessary and manageable if officials move fast and keep it simple. It may seem an unconventional view in a moment of global anxiety, but Bullard argues the shutdown measures now being rolled out are essential to shortening the course of the pandemic.

They must also be coupled with massive federal government support to sustain the population through its coming isolation and prime the economy to pick up where it left off.

To Bullard that means:

Match any lost wages.

Match any lost business.

No questions asked.

No arguments about bailouts or “moral hazard” – the sticky issue of publicly funded rescues of bad actors.

And, above all, when the losses are tallied, don’t call it a recession.

Recessions are the ordinary – even predictable – contractions in activity that mark the end of normal business cycles. Bullard, who has earned a reputation inside the Fed for a penchant to rethink problems and reframe debates, said this is anything but.

“Frame this as a massive investment in U.S. public health,” Bullard said in a Friday telephone interview.

“CRAZY HEAVY” JOBLESS CLAIMS? THAT’S OK

Bullard’s comments came as U.S. lawmakers debated emergency economic measures worth $1 trillion or more, a figure Bullard says may underestimate what’s needed.

Nonetheless it is still opening old wounds from the 2007-2009 economic crisis over who deserves what, whether corporations should get help, and how generous the government should be with workers.

The spread of the coronavirus has touched off those discussions worldwide, but with an urgency that is shredding old hesitancies. United Kingdom Prime Minister Boris Johnson’s government on Friday announced it would pick up 80% of the national wage bill for the next three months.

Many Fed officials have called for a stronger U.S. fiscal response in recent days, but Bullard went a step further with an explicit call for the U.S. government to match what is being lost dollar for dollar.

For now, he said, economists and policymakers should turn their view of data on its head because little will make sense otherwise.

The recent jump in unemployment claims? That’s a win, a sign that so-called government stabilizers are being used. The hope should be that such programs get “crazy heavy use” in coming weeks, he said.

If economic output falls by half in the second quarter, that’s a win – not a record-setting defeat. It means businesses have heeded orders to close and customers to stay home.

“We are not trying to move production and income up in the second quarter. We are trying to keep it out of the second quarter,” Bullard said.

“You want capital to just sit in place. Switch off the factory … Then switch it back on.”

30% UNEMPLOYMENT A POSSIBILITY

Bullard was among the large group at the Fed who at first felt the virus risk would pass with little economic damage, as have other similar health scares such as SARS and ebola.

They are all now trying to catch up, with emergency rate cuts, extensive new programs to keep markets working, and other steps to aid an economy grinding to a halt.

In line with his colleagues, he said he was ready to do more, including putting more of the Fed’s direct lending powers to work if needed.

“It is early days and we are willing to do more. I am willing to do more,” he said.

Bullard was blunt about the dilemma posed, saying the economics profession was “reeling” as it tries to understand what is taking place.

For now what’s usually good – jobs and production – are bad, and the headline numbers are going to be staggering.

Bullard’s ballpark estimate is that unemployment could hit 30%, higher than in the Great Depression and three times more than the 2007-2009 recession. Output in the second quarter could be half the norm, a hit of about $2.5 trillion.

That is unavoidable if the virus is to be contained through “social distancing” or government orders to stay at home.

KEEP EVERYONE WHOLE

All this needn’t wreck the economy. Legislation working its way through Congress has begun to roll out some support.

Bullard said the “core aim” can be kept simple: “keep everyone, households and businesses whole through the second quarter.” Do it with a quick expansion of unemployment insurance to cover lost wages, and through grants and loans to business to cover losses from “unemployed” capital.

From a macroeconomic standpoint, he argues, it is a tractable problem.

Again using back of the envelope math and a 30,000-foot view, he said perhaps half a trillion dollars of lost output will be accounted for by necessarily lost consumption – all the movie tickets and clothes no one buys and trips people will not take.

As to the other $2 trillion, Bullard said the federal government should borrow and distribute it to people and business.

“That is completely feasible,” in service of limiting economic damage, he said. “This is a planned, organized partial shut down of the U.S. economy. We are throttling back output on purpose to meet health guidelines… Transfer income to affected households.”

“Call it pandemic relief,” Bullard said. “Get transfers to businesses that are affected heavily, and come out on the other side. Identical economy. Produce the same goods as before.” (Reporting by Howard Schneider; Editing by Dan Burns and Daniel Wallis)

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Metal Tiger PLC has a diverse investment portfolio and a track record of success – Proactive Investors USA & Canada

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What Metal Tiger does

Metal Tiger is an AIM-listed firm that invests in mining projects and companies.

Its equities division invests in companies listed on London’s junior market AIM, the Australian Stock Exchange and the Toronto Stock Exchange.

The direct projects division focuses on the development of key projects in Botswana, Spain and Thailand.

What it owns

The company owns 62.2% of Kalahari Metals Ltd, which owns the Ngami and Okavango copper projects in Botswana. 

It also owns 3.69% Sandfire Resources (ASX:SFR), which acquired former partner MOD Resources.

It also holds a 19.9% stake in Cobre, which manages the Perrinvale copper project in central Western Australia.

It also holds a stake in Pan Asia Metals, which is expected to IPO in due course.

How it’s doing

How’s it doing?

Metal Tiger recently participated in a financing for Australian company Southern Gold. The fundraising was adjusted in response to the coronavirus crisis, but Metal Tiger nonetheless followed its money to go to 17.1%

In December, Metal Tiger reported that Kalahari Metals had completed six holes for a total of 1,656 metres. These successfully proved the existence of the of D’Kar and Ngwako Pan formations that are prospective for both copper and silver.

Hole OCP06 intersected two wide zones, totalling 85 metres, with visible copper-sulphide mineralisation.

What the boss says: Michael McNeilly, chief executive

“We are very encouraged to report the intersection of wide zones of copper mineralisation from diamond drilling at KML’s Okavango Copper Project, on the Kalahari Copper Belt, in Botswana.

“Whilst we are still awaiting core assays the presence of trace copper sulphides, over a total interval of approximately 85m, may represent a mineralised halo to potentially higher-grade copper mineralisation nearby.”

Inflexion points

  • The company’s 30% stake in the T3 copper project was sold to MOD Resources Limited (LON:MOD) (ASX:MOD) in 2018 and MOD was in turn acquired by Sandfire in 2019
  • Metal Tiger now holds just over six million Sandfire shares
  • Kalahari holds interests in 12 highly prospective exploration licences in the Kalahari Copper Belt
  • Drilling on the Kalahari portfolio has encountered significant copper mineralisation

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Have $1,000? Here's My Single Best Investment Idea for April – Motley Fool

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It’s a truly wild time to be an investor. Since the stock market peaked on Feb. 19, 2020, the benchmark S&P 500 has:

  • Logged 10 of its 13 biggest single-session point declines in history.
  • Recorded its seven largest single-day point gains of all time.
  • Screamed into bear market territory twice as fast as any previous bear market.
  • Pushed lower by 30% in 22 trading days, which is about 10 times faster than it typically takes bear markets to lose 30%.
  • Recorded its largest single-session percentage loss since 1987, and its biggest single-day percentage gain since 2008.

In other words, volatility has been the name of the game, with the spread of the coronavirus disease 2019 (COVID-19) squarely to blame.

Image source: Getty Images.

Investing during bear markets is always a smart move

As of Saturday, March 28, there were almost 658,000 cases confirmed worldwide, with over 30,400 deaths attributed to COVID-19, per Johns Hopkins University. The number of worldwide cases has doubled in a week. With stringent mitigation measures firmly in place in many developed countries, economic activity has ground to a crawl, with equity markets around the world paying the price. 

However, there’s always light at the end of the tunnel in even the most dismal situations when it comes to investing. That’s because each and every stock market correction and bear market, no matter how steep or prolonged, has eventually been completely erased by a bull-market rally. This means that if you invest in high-quality businesses and hang on for the long run, thereby allowing your investment thesis to play out, you should come out a winner.

While we can’t predict when the coronavirus crash will end or if we’ve already hit the bottom, we can say with a fairly highly degree of confidence that the stock market will be higher in the future. This means now is the time to take advantage of depressed stock valuations.

The question, of course, is which top stocks to buy?

A person writing and circling the word buy underneath a dip in a stock chart.

Image source: Getty Images.

My single best investment idea for April

Although I’ve personally bought 12 new stocks during the coronavirus crash, as well as added to a handful of existing positions, one stock stands out head and shoulders above the rest. If you have $1,000 in disposable income to invest right now (i.e., not money you need to pay bills or for emergencies), then you should consider buying into what I view as my single best investment idea for April: Intuitive Surgical (NASDAQ:ISRG).

Intuitive Surgical is a manufacturer of surgical-assisted robotic systems. These systems help trained surgeons perform various types of soft tissue surgeries with finite precision, leading to potentially faster recovery times for patients.

As recently as last Monday, March 23, Intuitive Surgical’s share price had lost over 40% of its value from its very recent all-time high. Like many companies wading through the uncertainty of the coronavirus pandemic, Intuitive Surgical warned Wall Street that this outbreak would have an adverse impact on its financial results. With many elective procedures being cancelled and pushed further down the road, this will, undoubtedly, hurt the company’s very near-term growth potential.

However, COVID-19 is not going to be a long-term concrete weight on the global economy. Eventually, treatment options will be found and/or an antiviral discovered, and the corporate world will return to normal. When this happens, Intuitive Surgical’s numerous competitive advantages will shine through.

A surgeon holding a one dollar bill with surgical forceps.

Image source: Getty Images.

Three no-brainer reasons you need to own Intuitive Surgical’s stock

The first clear-cut advantage can be seen in the company’s sheer number of installed systems. Intuitive Surgical ended 2019 with 5,582 systems installed worldwide, up nearly 600 from the end of 2018. None of its competitors are anywhere close to having this many precision surgical systems installed around the world. When coupled with a lofty price tag of $0.5 million to $2.5 million for the da Vinci surgical system, and the training provided to surgeons, there’s virtually no chance of client churn or lost business to a competitor.

Secondly, this is the perfect example of a razor-and-blades business model. In this instance, the razor is the pricey da Vinci surgical system. Even though these systems generated $1.35 billion in sales for the company last year, they don’t generate beefy margins given how complicated they are to manufacture.

The bulk of the company’s margins and growth are derived from its blades, which include the instruments and accessories sold with each procedure, as well as the servicing needed to keep these systems in perfect working order. Last year, $3.13 billion was derived from the combination of high-margin instrument, accessories, and service sales. As the number of da Vinci systems installed grows worldwide, the percentage of total sales being generated from these higher-margin revenue sources will climb. Or, put in another context, Intuitive Surgical’s profit growth should continually outpace its double-digit sales growth

Third and finally, Intuitive Surgical is still only scratching the surface on what its da Vinci system is capable of. The company is already a leader in gynecology and urology surgeries, but still offers a long runway to acquire market share in thoracic, colorectal, and general soft tissue surgeries. Since we’ve established that no surgical system developer has the geographic reach or rapport with the medical community as Intuitive Surgical, it’s only a matter of time before its systems are more widely used in place of traditional laparoscopic procedures.

If you have $1,000 to invest right now, I’d suggest putting it to work in Intuitive Surgical.

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Optimize Your Investment Strategy During Market Volatility – The Motley Fool Canada

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While the world faces the health, social, and economic effects of COVID-19, it can be difficult to implement your investment strategy. This is the most severe market volatility that many investors, veterans, and novices alike have ever experienced. Overall, it can feel pretty daunting to be an investor. I’d like to address a few ideas that can help you stay balanced and focused in this volatile time.

Step back and chill out

During crisis times, attempt to stay as neutral as possible. Every day, we are inundated with hundreds of new virus-related headlines. It can be overwhelming and disheartening. A steady stream of bad news can result in reactionary “fight-or-flight” behaviours. Stress-induced fight-or-flight reactions are quick and spur of the moment. People do not operate in their best cognitive, emotional, relational, and intellectual capacity when they are fearful and reactive. A great example is the global run on toilet paper, water bottles, and canned goods.

Fight-or-flight reactions are not the best way to think, live, or invest. If you feel your stress levels rise, take a break from your news feed. Instead enjoy the extra time with your loved ones, take a walk, be thankful, think positively, and choose to believe in a better future.

When considering your investment strategy, you need the peace of mind to operate at your highest level of cognitive and intellectual capacity. The stock market will likely experience volatility for some time to come. It can be easy to find your emotions riding along with the ups and downs of the market. Unfortunately, for many investors, it means they end up selling on a down day and buying on an up day. Selling out of panic often means you are selling at the wrong time. Make sure the investing decisions you make are well thought out, rational, and focused on the long term.

Make a plan

Take time to make a plan. Begin by evaluating your financial situation and investment strategy. Do you have a budget? Do you have enough savings to live off for a three- to six-month period if you needed to? What are your short- and long-term financial goals? Do you have the financial capacity to invest right now?

Then make a concerted effort to get organized. Evaluate your financial position, plan for the future, and get feedback about your plans/goals from people you trust (like your financial advisor).

Take your time

Should you have some expendable capital to invest, don’t spend it all on the next market dip. Rather, create a list of your top favourite companies. Make sure you deem them worthy to hold for a long time (five years or more). Look for companies with defensive qualities, such as large capitalizations, cash-rich balance sheets, extra liquidity, and the ability to operate now and in the future. These are companies that can become foundational for your investment portfolio. Some examples could be Brookfield Asset Management, CP Rail, Algonquin Power, BCE, or CAP REIT. Focus particularly on quality and avoid the urge to trade stocks during periods of volatility.

The COVID-19 crisis will likely play out over a number of months, if not a year. There will be continued opportunities to “buy the dips.” Consider the approach of Motley Fool co-founder, David Gardner. He suggests taking a measured approach by consistently investing a set amount every month. Gradually buy a third of a position and then add to that position later. By doing this, you slowly average your cost base.

Nobody can time a market bottom. Developing positions over time allows you to spread out your overall risk profile and enables more financial flexibility. It is best to take a nimble approach in times of crisis. If your financial circumstances were to drastically change, you can quickly pull back your investing allocation, and hopefully you will still have some safety cash to rely on.

The Foolish takeaway

The point is to avoid making fear-based, reactionary decisions. Don’t let anxiety and panic be the levers that operate your investment strategy. Be calm, develop discipline, create good habits, and methodically invest with a 10, 20, or 30-year time horizon. Looking back, you will surely remember the principals that helped you achieve your long-term financial dreams.

Canadian Stocks to Buy on the Cheap During the Market Crash

Many investors fear market crashes. However, long-term investors should embrace this crash, because bear markets can potentially allow you to make millions. So if you’re tired of reading about other people getting rich in the stock market, this might be a good day for you.

Because Motley Fool Canada is offering a full 65% off the list price of their top stock-picking service, plus a complete membership fee back guarantee on what you pay for the service. Simply click here to discover how you can take advantage of this.

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Fool contributor Robin Brown owns shares of Brookfield Asset Management. The Motley Fool owns shares of and recommends Brookfield Asset Management. The Motley Fool recommends BROOKFIELD ASSET MANAGEMENT INC. CL.A LV.

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