Podcast – Episode 73 – The Quarantine Playbook


Podcast Transcript

Hey passive traders, How are you doing today? Today, I wanted to talk about creating a quarantine playbook. Obviously this corona thing has changed things. Everywhere you look, people have been affected, and we’ve been doing podcast episodes about this for a few weeks. It’s on top of everybody’s mind. It’s what everybody’s thinking about. It’s affected, everybody.

And luckily now we’ve gotten to the point where everything is … A lot of things are reopening. Some are already open, some are getting ready to open or they’re opening slowly. I’m in Texas, and they opened a couple of weeks ago. I think gyms are open this week. Restaurants are at 50% capacity. Doctors are open. They’re taking patients and everything. So, things are trying to get back to normal, but there are still a lot of people who think that things will never get back to normal.

We really don’t know what’s going to happen. Nobody knows. Everybody’s trying to predict. Hopefully, there’s a vaccine or not or what, but it has really thrown everybody for a loop. We had a mandated recession, right? Bear market, 35% drop because of this virus. You already know this. You’re probably watching the news. You’ve been listening to me, trading this market. And it’s been difficult because it’s something that has never been done before. We’ve never seen it before. Right?

But the numbers are going down right now. Depending on what state you are, fatalities are going down. I know in Texas, we’re in Texas, the numbers are actually going up. Numbers of how many people sick with the virus are actually going up because now they’re testing more people, but they’re still opening it up. Hopefully, the deaths will continue to go down. People who are sick or the virus will continue to go down. But the experts say that when everything opens up again completely, the virus can come back. If it doesn’t come back now, in a month from now or two months from now, it can come back when the flu season starts, at the end of the year. September, October, whenever it starts getting a little cooler, flu season is going to come, and they’re saying that corona is going to come with it.

So are we going to have to start shutting down in a couple of weeks if cases go back up? That’s what some of the governors have said. Even in Texas, pure Republican, they are saying that if the numbers get out of hand, they’re going to start shutting down again. If it comes back with a vengeance in September, maybe they have to shut down again over then. So we need to be prepared.

Even if this virus is eradicated, maybe a vaccine comes out tomorrow and we don’t have to worry about corona ever. Well, that’s not true, because it’s going to take a while to get everybody vaccinated. And there’s still going to be those people who do not want to be vaccinated and refuse to be vaccinated. So we’ll still see about that.

But this is one virus that can easily mutate. There can be other viruses, other pandemics, and as the world is getting closer and travel is getting faster, it’s just going to increase. So if there’s a virus, if there’s an illness, there’s still Ebola out there, SARS is still out there, Zika is still out there, H1N1 is still out there. All these diseases are still out there. They have no cures for them. They can easily transfer to us in the United States, or maybe there’s a virus that starts here and goes over there, what goes across the pond? Who knows?

As investors, as traders, we need to be prepared. Even as individuals, we need to be prepared if a quarantine happens again. So I want to do a little mind experiment with you. Knowing what you know now, if you could go back in time or if you could send a letter to yourself or a video or whatever to yourself, 30 days before the quarantine hit, what would you tell yourself? Make a playbook.

Now, this podcast is about finances and investments. So I’m going to stay and say, Hey, yeah, let’s make an investment playbook, a trading playbook for quarantine. Now you could obviously add other things to it. I mean, what would you have done differently? Stocked up more on toilet paper? I don’t know. A lot of people would have in advance. Buy more beef jerky, maybe? I don’t know, but when it comes to finances, we had a steep bear market. The market has dropped like 30% in two weeks. And then we had a rally off the bottom. And now we’re kind of in no man’s land. We’re at 50% retracement from the bottom and the top, and now nobody knows what’s going to happen in the market.

But there are certain stocks that are doing really well. Certain stocks are hitting all-time highs. Certain stocks are at all-time lows, and they’re probably going out of business. They’re going bankrupt. So when the quarantine hits again, whether it’s the corona, COVID-19, or something else, if you take some time and create a playbook of what to do, you will be prepared for when this happens again. It might be in two or three weeks, it might be close to the end of the year, it might be next year, it might be another virus. I don’t know.

The only way we learn is by looking at history and then learning from it. That’s how we learn from our mistakes. And this is not necessarily a mistake, but we’re learning from history. First time, we didn’t know what to do. If it happens again and we don’t know how to take advantage of it, well, that’s on us. That’s our fault. You know, they say, “You fool me once, shame on you. Fool me twice, shame on me,” because I should have known it was coming. And we know that most likely it is coming. So, prepare yourself. If you need more cash, if you need to take out a loan, you have that money ready, whatever you need to do, have a playbook.

What are some of the things that could be on your playbook? Well, get ready to short, because the market is going to drop. But not everything’s going to drop. What are you going to invest in? When are you going to invest? If you have no money sitting on the sideline, then you won’t be able to take advantage. If you’re a hundred percent invested, then when it drops, you’re going to have a big loss, and then when it recovers, you won’t have enough money to put back in. So that’s why, when we’re doing passive trading, we’re selling options, but we’re keeping money on the side. So if there is a drop in the market and our favorite stocks lose, then we can go ahead and start buying them.

What strategies are you going to be using? In a bear market, something like an iron condor was not going to work. The market volatility shoots up sky-high, butterflies, calendars, all these non-directional trades will not work because there’s just too much volatility. So this is something you need to think about in advance, something you need to be aware of.

Now we’ve already been through it to some degree. We can say it’s not over yet, but we’ve been through the worst in this cycle. If there’s another cycle, you should know what to do and be prepared. That’s what I want you to do. That’s what I want to focus on in this episode. That’s what I’m talking about is having you sit down and take a look at what really happened. What hurts you and how can you protect yourself?

There are some of you who are looking and thinking about it, and they’re like, “Man, I lost my job.” There are a lot of people, 40 million people, who lost their job. Hopefully, a bunch of them will get their jobs back, but a lot of them will not get their jobs back. Well, if we have another virus in six months, another quarantine, you’re going to lose your job again if you don’t do anything about it.

So if you’re not investing, if you’re not passive trading, if you’re not doing anything with options, then you need to learn now so that you can do it when you’re stuck at home. Because right now, yes, the government is printing as much money as they can. Yes, they’re sending everybody checks. They might send everybody more checks, but they can’t keep doing that forever. Eventually, they’re going to stop and you need to take care of yourself.

What if you had a nice cushy job, but now you have to work from home, and working from home also means that your kids are home, and so you’re not getting anything done? Or maybe you’re a freelancer and you get paid by the hour, but you can’t get stuff done because you got to take care of your kid. Well, maybe you need another source of income.

So when I’m talking to people, traders, I’m hearing two different stories. The one story that I’m hearing is that, “Man, I don’t know what’s going on. Everything is so crazy. I don’t know what to do. I don’t want to trade right now because it’s so up in the air. I don’t know if I should buy stocks. They might go back down. I don’t know if I should sell everything, because it might keep going up. I don’t know what to do.”

On the other side, I’m hearing that “Man, I need to take full responsibility and I need to take control. I gave away my power. I need to grab my power back. I need to be in control of my life. And I’m going to do that by trading. I’m going to learn how to trade and I’m going to learn how to take control of my finances. I’m going to get my house in order because I was on risky sand, I was on quicksand. And I didn’t know it, but now because of the virus, I’m sinking, and I need to fix it.”

Those people are taking action, and they are joining courses, and they are asking questions, and they are listening to podcasts, and they are learning, and they’re practicing, and they’re doing it so that when things do normalize, they can jump in full steam and say, “Yep, here we go. I’m going to practice what I learned and I’m going to get better, so that the next time this happens, it doesn’t blindside me.”

That’s the last thing I want, for you to be blindsided because we know that this thing is not gone. It might be coming back. We don’t know when, but it’s here. And there are some experts who were saying it’s going to be here for years. Some people are saying it’s going to be here at least till the end of this year. Some people are seeing is going to be here till at least the end of 2021. Nobody knows for sure. But the only thing everybody agrees on is it’s not gone, because there are still new cases every day. And this is just one of the viruses that are out there.

In the beginning of the pandemic, if you went to the store, and I saw videos of people going to the store and looking at cans of Lysol and disinfectant, and on the back of those cans, it says that it helps with coronavirus. It actually says that on the can, if you look on a disinfecting can, it says on the back that it helps with coronavirus. And people are like, “Ah, see, this is all fake, because these cans were made before the virus hit. These cans were on the shelves. They were selling these cans before the virus hit. It’s all fake. It’s all a big ploy to sell more disinfecting and all this stuff.”

The truth is that this virus that we’re dealing with right now is just one virus in the whole coronavirus family. It’s not called coronavirus. This one is called COVID-19, but there are many other viruses in the world that all fall under the category of being a coronavirus. So calling this as a coronavirus is incorrectly labeling it. That’s not the name of it, coronavirus. There are many of the viruses that fall under that category. And so that’s why these Lysol cans had it on there that, hey, this works for coronavirus, because there’s not just one. So now there’s not just one, we’re just dealing with one is causing so many problems. What if another one hits, or two hit at the same time?

This is a wake-up call. Not only that, but they say that this virus is hitting more and it’s hurting more people because of the way the environment is. I don’t know how much I should go into that one, but it is true that these natural disasters that we’re having more and more common are now hurting people who are actually sick. So, that’s a whole different story.

But what I want to talk about is the playbook. Go back in time. Take a look at what happened. What are the things that you would have done to protect yourself? What are the things you would have done to capitalize on this? Because there are people, I was talking to somebody just the other day, he said it’s a friend of his, and he has a factory in China where they make those little wristbands. You’ve probably seen them. They’re rubber. They give them out as freebies, but they come in different colors and they’re on your wrist. The Livestrong used to have them in yellow. They all come in different colors for branding and whatnot.

So this fellow has a factory in China that makes these things. Well, when this whole thing hit, they switched the factory from making these wristbands into making masks and some other personal protection equipment. And supposedly what this guy told me was that their factory-made $15 million by switching over and selling this stuff. So there are people out there that did take advantage. There are people that got rich, very, very rich. There are still people that are taking advantage. And if you did not take advantage, then you need to be prepared for the next time.

I’ve been talking about in our Facebook group about some of the stuff that I was doing, and I made a list of some of the companies that I wanted to buy as they were dropping. So when the bear market was going on, I started making a list and this was probably, I already have a list of companies that I want to own, but because of the difference in what happened here, not all companies fell or dropped at the same rate. Restaurants really got hit. You know this. Airlines got hit. Cruise lines got hit. A lot of other companies got hit. And I had to make a completely new list of stocks that I wanted to buy, not for the long term, but just for a short bounce, because I thought the bear market was overdone. So when they stopped dropping, that’s when I started buying.

Now, I found some good companies that I think I am going to keep for a long time, but just about every company that I bought, every stock that I bought, is up. They’re up at least 20 to 30%, all of them. Some of them have more than doubled in less than a month. So, I took a gamble. A lot of these companies, they could have gone bankrupt, which is true, but I put a little bit of money in each one, diversified my bets, and now I’m back to being more positive. So even though the stock market has not recovered, my accounts are back to where they were before the bear market.

So yes, there is always a way to take advantage. Because I remember in the financial crisis, I freaked out and I sold. I sold a lot of stocks, as they were going down, they were going up. I was trying to trade it back and forth. And I lost my shirt. I lost a lot of money. This time, hindsight, experience, call it whatever you want, I didn’t sell anything. Instead, I had money sitting on the sideline and I started buying. And I started buying stuff that I wouldn’t buy normally. I bought some insurance companies. I bought Shopify. That one was not a stock that I even had on my radar, but it showed up on when I was looking around. And now that stock is doing super great.

So, have a playbook of what to do if this happens again. This is not the only playbook that you might want to put together. You can make a playbook for anything in the economy because in the economy, we have cycles and things happen over and over again. They might not happen to every quarter or every year, but every four or five years, it can happen again. So if you can make your playbooks in advance, maybe you can have a playbook when inflation hits, you can have a playbook for when oil is super high and super expensive, or when it’s super low and super cheap, or when interest rates are high or when interest rates are low when there’s a presidential election. You can have playbooks for all these different avenues so that when this event occurs, you pull out your playbook, you look at what happened in the past, you look at what worked and then you go to work. And he’s actually really that simple. You can actually do this because you’ve just been through it.

So, that’s it for this episode, guys. Remember, trade with the odds in your favor and be safe.

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