Heading Back to Bora Bora
Message Sent 06.22.2020
Today was our 4th Trade Day since the Coronavirus became a regular part of our life. In one way or another, COVID-19 has caused us to change or alter nearly everything in our day-to-day lives. But, one thing that didn’t change was the Snider Investment Method.
Just as the sun rises in the east and sets in the west, Trade Days rolled through just like usual. Options expired on the 3rd Friday of the Month, and we returned from Bora Bora to place a new round of options on the following Monday. Of course, it felt different. It might have been harder than ever to follow the rules and buy more stock right in the face of a pandemic. We had a plan, and all we had to do was implement it—the same as we had done for over a decade.
The Method wasn’t designed with a pandemic in mind. You’d be crazy to do so. But it was designed to handle all types of market conditions; bulls, bears, the Great Recession, and now COVID-19. The market continued its recovery through June’s expiration. After some terrific premiums back on May’s Trade Day, we sold a lot of shares at expiration and even closed some positions. With volatility still at escalated levels, today was another great day for option sales.
Thankfully, I think we can all rest a little easier as it relates to our portfolios. Unfortunately, the pandemic is far from over. As our economy begins to recover, areas all over the country are reporting record new cases. Going forward, another shut down seems unlikely. Instead, we will need to adapt to a new normal, hopefully protecting ourselves from contracting the virus.
Since we are in a much better place than when I started sending these notes back in March, this will be the last Monday note. Going forward, you may receive a stand-alone email or a special message included in the Alumni Newsletter. I hope you’ve found these notes comforting in a time when we all needed it. For now, I’m going to pray we can develop a vaccine. I prefer to be optimistic. I’m hopeful one breakthrough can have us back to hugs and handshakes, a world that seems so foreign and unusual at this moment.
Please take care of yourself and stay safe. I’m just a phone call or email away if you need anything. And finally, be proud of yourself. Time and time again, investors have failed these tests. We’re glad to be by your side during this journey.
Bankruptcy Risk and COVID-19
Message Sent 06.15.2020
COVID-19 has put everyone’s finances to the test. Whether it be individuals or businesses, no one could have predicted the financial strains and damage the virus could do. After years of very few bankruptcies in the Snider Method portfolio, the pandemic accelerated the issue, forcing an unusually large number of companies to restructure.
Bankruptcies typically come in two forms, going totally out of business or restructuring to reduce debt and financial obligations. In both cases, it is common for existing share prices to decline to $0. Those companies that plan to stay in business will often work out a deal with bondholders to reduce debt or exchange bonds for new shares of stock. COVID-19 has done the most damage to retail, travel, and oil and gas-related industries.
Retailers have been struggling for years with more shopping shifting to online markets. With rent as one of their highest expenses, those with the biggest real-estate footprint were hit the hardest. Two local companies, JC Penny and Pier 1 Imports, are just two of the many national retailers to file for bankruptcy. JC Penny expects to remain open, and Pier 1 will close permanently. Sadly, many jobs will be lost, stores closed, and shareholder wealth eliminated.
Another industry that had struggled in previous years were oil and gas companies. In addition to a steep drop in demand at the beginning of the pandemic, Russia and Saudia Arabia chose to begin a price war. Through most of 2019 and into early 2020, a barrel of oil was in the $60 range. At that level, companies could continue to drill more wells and generate profits. However, in March and April, the price dropped into the $20s, teens, and even traded at a negative price for a short time. Prices have since stabilized in the mid-$30s, but this is still well below the price necessary for many companies to produce profits.
We all know bankruptcy is the biggest risk of the Snider Method. Uncertain economic times will expose those companies with the highest risk and will escalate the number of bankruptcies. I know how frustrating this can be for our clients. Keep in mind, companies near bankruptcy already trade at very low values since their financial instability was already a factor. Bankruptcy is simply the trigger for us to sell our shares and realize the loss.
I often get the question about why we don’t sell companies earlier before they file. Of course that is an option, but first, we need to decide on an objective reason to abandon a company sooner. Unfortunately, there is no clear signal of bankruptcy before the inevitable. It would also mean realizing losses on more companies. The losses on the individual positions would be smaller, but the quantity would be higher.
It is discouraging to experience a bankruptcy. Nothing makes me feel worse than seeing a headline that one of the companies in our portfolio has filed. It is a factor of the Method we are always trying to reduce and eliminate. In difficult times, it even causes us to question the entire process. It is human nature for us to avoid losses at all costs and not appreciate the equivalent gains as much. In times of frustration, please recall the many, many profitable closed positions in your past.
Overall, I’ve been delighted with the Snider Method’s performance over the previous three months. I knew at the beginning of this pandemic companies in our portfolio would fail. So far, it has only been those in the worst financial condition. We will never end the search to minimize these losses and make them less frequent, but they will always be a risk when making stock market investments.
For the first time in three weeks, markets gave back some of their gains last week. Even with the previous week’s decline, the S&P 500 is still higher by over 6% since last expiration. Unless we have some steep declines this week, we will sell more shares on Friday. The pandemic is far from over. That means stocks will likely remain volatile, but with some mental fortitude and patience, we will get through this.
Job Gains and Market Strength
Message Sent 06.08.2020
For a third consecutive week, the market closed significantly higher. With gains just short of 5%, the S&P 500 continues to show strong strength and indicate a quick recovery from the pandemic. The week ended on a particularly high note with the unemployment figures from May surprising everyone.
After losing over 20 million jobs in April, economists expected more job losses in May. Instead, the Bureau of Labor Statistics reported the largest job gains since they began tracking the data in 1939. The unprecedented nature of this economic shutdown makes forecasts almost useless. But, each data point does give us some indication on the extent of the damage as well as the speed of a potential recovery. Over time, we must recover all of those 20 million jobs lost in April. With a return to gains in May, the feeling is that it could happen a lot sooner than originally expected. I believe it also demonstrates the immediate effectiveness of the government stimulus packages. With direct relief to individuals, unemployed, small businesses, and many others, the funds may have provided just enough cushion for the American economy to get rolling again.
Although Trade Day is still a few weeks away, June has the potential to be a banner month. We kicked off the month with some of the largest option premiums on Trade Day in some time. With the strong gains over the previous three weeks, we will also have a good amount of capital gains to add to the total at expiration if markets remain at current levels. Selling stock at expiration will also be a big boost to cash balances reducing our market risk.
With even the worst-hit areas of our nation starting to reopen today, we are on a path to recovery. Please keep practicing safe behaviors so that we continue to improve.
Gains in the Face of Challenges
Message Sent 06.01.2020
If you were to simply look at the stock market’s performance since my last note, you would probably think all is well in the world. The last two weeks have consisted of continued good performance with gains of over 3% each week. However, our lives stretch well-beyond our investments, and the emotional toll of recent news has been painful.
To begin, let’s start with COVID-19. As we returned to work from a long weekend where we remembered the soldiers who died for our freedom, the death toll for the virus exceeded 100,000 in the U.S. Sadly, many of these families were not able to mourn the death or celebrate the lives of their loved ones because of the restrictions. As businesses reopen and economic recovery begins, I hope we can find a way to pay tribute to those who missed proper recognition.
Overshadowing the COVID-19 news in the last few days has been civil unrest in many major cities. I pray the violence will end, and our country can find a way to be a more united, caring place. There is no place for senseless violence in this world. Let’s all try to be better people and leave this world better than when we entered.
The market can completely ignore these alarming headlines and charge higher. We must remember it is unemotional. That is also why we designed a strategy to eliminate emotions in our investment decisions. The market is not a gauge of our happiness or sadness; it is an economic measure of the value of our businesses. Right now, it indicates things will be alright, even with all the challenges we face.
Please take care and stay happy, healthy, and positive.
A Good Day for Option Sales
Message Sent 05.18.2020
It was two Trade Days ago when the crisis was at its peak in terms of the stock market. On Monday, March 23rd, the market opened lower after experiencing the biggest decline between Trade Days in our history. The drop had exceeded 30% in less than 30 days. That morning I sent out a note encouraging everyone to stick with the plan even though everyone was fearful of what could happen next.
Thankfully, in terms of our portfolios, that may be the worst we have to endure. At that time, few of us would have predicted the extent of the number of cases, deaths, or length of time businesses would be shut down. Today, we still don’t know many of those answers, but the fears of the worst have subsided.
Since that low point, we’ve had a big rebound in April and a calmer but slightly lower month in May. Option premiums for both months remained consistent with levels we generated as the market was setting all-time highs in previous months. We often get questions about the ability to generate income in declining markets, so I’m happy to see the Snider Method meet expectations and pleasantly surprise new clients experiencing their first significant decline. I don’t have the exact total yet, but option sales today for June look to be the highest total in at least the last six months.
In addition to good option sales, the markets gained over 3% today on comments from Fed President Jerome Powell and rumors of a potential vaccine. I think we will continue to experience large day-to-day swings in the near future as good and bad news will continue to be announced. Fortunately, we’ve got a strategy to deal with the volatility.
Thank you for your trust and support.
Our office will be closed next Monday, May 25th, in honor of Memorial Day. We remember and honor all those that sacrificed their lives for our freedom. There won’t be a note next Monday, but I’ll be back in touch Monday, June 1st.
Positive Momentum Continues
Message Sent 05.11.2020
To all the mothers out there, I want to wish you a Happy Mother’s Day. With COVID-19 claiming another holiday, many people’s annual traditions were once again disrupted. In a time when we could all use a hug from our mothers, it will have to happen in the future. Just be sure to make the next one extra special.
On Friday, some alarming figures about unemployment were released. Even with expectations of high numbers, it is shocking to hear over 20 million people lost their jobs in April, and the unemployment numbers exceeding 14%. At this level, the unemployment rate is the highest recorded since the Great Depression. As I’ve discussed in previous notes, this is just some of the Bad News we can expect to hear over the next few months.
In the face of the bad news, stocks increased by over 1.5% on Friday and 3.5% higher on the week. Even with many businesses still closed, the markets seem to be indicating a fast recovery, something I’m sure we would all love to see.
We’ve been dealing with the seriousness of COVID-19 for over two months now. As restrictions begin to ease, we can look forward to some of the habits and hobbies we’ve missed out on. However, don’t give up on the importance of social distancing, washing hands, and wearing masks. These potential annoyances will allow us to work back to normal while not letting the virus spread exponentially again.
Everyone stay healthy and safe.
Message Sent 05.04.2020
When the stock market closed last Thursday, April 30th, many of the indexes celebrated their best month since 1987. Now, we both know this followed one of the worst months ever, but you may be asking yourself where are these gains coming from? Most of us are still stuck in our homes with only a “plan” for businesses to open in a limited capacity in the coming weeks.
When we picture bear markets in our heads, we think of only falling stock prices. In reality, these events can stretch on for months, or even years, with generally more losses than gains, but not just prices in a free fall. As we read about cases surpassing 1.2 million and deaths of over 69,000, it is hard to wrap our minds around getting back to business as usual. However, with each additional data point, it becomes a little more clear what the long-term implications of COVID-19 will be.
As prices continue to swing unpredictably, we can see the benefits to the Snider Investment Method. By actively buying shares of stock as well as repeatedly selling calls month after month, we maintain an income even with prices lower. If shares don’t return to all-time highs any time soon, we will still sell stocks when they bounce off lows or lower the average cost if prices stay at lower levels. There is opportunity in bear markets, and the Snider Method will capitalize on them.
If the past tells us anything, trying to predict the future is impossible. Markets will change direction when we least expect it. However, a systematic strategy built to handle the ups and downs of the market will help you prevail in unpredictable, emotional, challenging, and pandemic conditions.
As more details emerge to reopen businesses, please continue to make smart, healthy decisions.
We appreciate your business. Thank you for your support.
Message Sent 04.27.2020
Roughly six weeks after our economy went on lockdown, it is time to develop a plan to get it rolling again. First, we should acknowledge this is a giant positive and step in the right direction.
Even if restrictions remain in place for a few more weeks, the fact we are talking about returning to our “normal” life and not more outbreaks and death is encouraging.
The next phase of this pandemic will be about reopening and recovery. Just like the last six weeks, there is no set of rules we can follow to accomplish the task best. There will be trial and error, but hopefully, we can progress forward without another significant outbreak of the virus.
Since the economy came to a screeching halt back in early March, our government has taken various actions to sustain us through this pain. There was cooperation in Washington, and their efforts were swift and significant. Of course, it wasn’t perfect. In many cases, we hear about the bad and not the good. But overall, our government came together to stop the bleeding and give our economy a footing to move forward.
Although behind the scenes and less headline-worthy, the Federal Reserve stepped in to support financial markets fully. Unlike in 2008, this did not begin as a financial crisis. Without support, it could have easily spread into markets and escalated the situation. In actions well-beyond cutting interest rates, the Fed made sure the money kept flowing, and the liquidity in the lending markets remained in place.
Soon, it will be our turn to do our part. Sadly, we can’t just simply flip a switch and return to our lifestyle from 2 months ago. But, we can work our way back to “normal” while also practicing the social distancing behaviors new to our life. No one likes the fact that hugs and hand-shakes will be off the table. Masks will be a way of life, rather than a cause for concern. But, these tradeoffs can help us get out of the house, back to work, and our economy moving again. We still must proceed with caution because future shutdowns could be even more harmful. So let’s be smart in reopening America.
Stay safe and healthy. Thankfully, things are moving in a better direction.
Thank you for your trust and support!
Another COVID-19 Trade Day
Message Sent 04.20.2020
Today was our second Trade Day while also dealing with the COVID-19 pandemic. At this point, it looks like March’s Trade Day could be the low point with fear and uncertainty at their peak. The decline from February’s Trade Day through March’s expiration was the largest we’ve experienced in our history. The rebound over the previous month was easily the most significant upward move in our history. The swings up and down were both unprecedented and unpredictable.
With the substantial gains since last Trade Day, nearly all of those shares purchased last month sold at expiration. We had small gains on the stock sales, but the option premiums from March were large from the big volatility. It would have been easy to let emotions get the best of us and alter our strategy. But thankfully, we designed a plan to deal with uncertainty and overcome the fears sparked by steep declines.
As time continues to pass, we each will be more impacted by the virus. At this point, we probably all know at least someone who has lost their job or has been laid off until things return to normal. We may also know someone who contracted the virus or even passed away. These connections speak to the bad news I wrote about in a previous note. Once again, I encourage everyone to stay confident. On a positive note, many of the headlines today have shifted from new cases and death to restarting the economy.
The next phase of this process won’t be easy. We need to carefully re-open businesses to avoid new outbreaks and additional closers in the future. The overall impact of the virus will be significantly less if the closures are a one-time event. So for now, let’s stay safer at home for a few more weeks.
Once again, we thank you for your trust during these difficult times. We’re grateful to be here on this adventure with you.
Bear & Bull Markets
Message Sent 04.13.2020
I’m a day late, but Happy Easter! For most of us, this year’s celebration was very different from the previous Easter holidays. On the surface, it could have been the most challenging day so far because it surely would have been spent with family and friends. All these sacrifices are difficult, but don’t forget, they will help us return to normal life. Thankfully, for most of the country, that seems to be the case. Discussions are quickly moving towards restarting the economy rather than extending restrictions.
I mentioned last week that the markets got off to a good start, and that trend continued throughout the week. Overall, markets saw their most significant weekly gains since 1974. As the curve of new cases flattens, we start to have a better understanding of the future and the overall impact the virus will have on companies. We continue to have large day-to-day swings, but thankfully last week’s direction was significantly higher. Restarting the economy will be no easy task, but if it can be done without new outbreaks, the worst may be behind us.
When we talk about the stock market, we like to use the labels: bull & bear. To define them, a bear market is any time prices have declined by over 20% from their highs. On the flip side, a bull market is when prices have increased over 20% from their previous lows. In this past cycle, the markets declined into bear market territory at the fastest pace ever after setting a new all-time high in February. Amazingly, gains were so strong last week you could technically call the current environment a bull market since prices have already recovered over 20% from the previous low on March 23rd (March Trade Day). You can’t truly define these swings until long after the fact and one sentiment has taken control. But, the fact we went from a bull market, to a bear market, and back to a bull in a matter of weeks verifies just how much uncertainty the markets are dealing with at this time.
With the first quarter over, quarterly and month-end statements will arrive in the mail any day. It is very easy to get discouraged as you review these documents. The values of our accounts are a lot lower than in the past, and it may feel like a lot of progress has been lost. This is exactly why we try to focus on income generation. If we can produce consistent cash flow in up and down markets, your account can support you throughout retirement in both bull and bear markets. As evident by the option premiums in March, that has held true so far.
Finally, we work with roughly an even split between retirees and those still in the workplace. Unfortunately, current events have put many of those workers out of work and potentially facing early retirement. More often than we expect, the retirement decision is forced on us rather than our own choice. For that reason, we are putting together an exclusive webinar for those of you in this situation. We are finalizing the details, but please watch for more information about this webinar in early May.
Overcoming Bad News
Message Sent 04.06.2020
Over the weekend, President Trump warned this might be the toughest week our country has faced so far in the fight against the coronavirus. Sadly, that will include an increase in both infections and deaths. It also highlights a central theme I wanted to discuss in this week’s note: bad news.
It has been barely a month since we started facing the challenges of COVID-19. With most of the world effectively shut down, all we hear about are the virus and its devastating effects. Slowly, our world will start to return to normal, but bad news will continue to grab headlines.
I’ve heard an excellent analogy for the current situation. To halt the spreading of the coronavirus, countries around the world had to put their economies into a comma. The sudden stop in commerce should limit the damage of the virus. Such actions have never happened in the past, and the implications will continue to trickle in for many months.
Right now, you will hear about record-setting unemployment claims. There were over 10 million during the last two weeks in the U.S., with more likely. In the coming weeks and months, we will hear about record declines in sales, unemployment, and likely a recession. All these negative headlines to come were the driving factors in the stock market drop over the previous weeks.
Stocks are a leading indicator, meaning they are one of the first things to predict what’s to come. By the time the actual figures are released, most of the numbers are already baked into their price. I say all this because I don’t want you to get discouraged as the stream of bad news may continue for the foreseeable future. As an investor, your portfolio has already adjusted to the new reality. Unless things take a dramatic turn for the worse, you’ve gotten through the worst of it from an investment standpoint. For example, facing the news of the deadliest week so far, markets were up over 6% today. We have a ways to go, but we will get there.
At this time, we all must do our part. That means social distancing, following shelter-in-place orders, and practicing safe hygiene. By doing our part to stopping the spread of the virus, we can get out of this economic comma sooner. The sooner that happens, the quicker we will see progress toward full recovery.
Last week, I covered the CARES Act and the implications for our clients. I forget to mention one crucial change affecting many of you. There will be no Required Minimum Distributions (RMDs) for 2020. So if you don’t need your RMD to meet living expenses, you can skip it this year. If you’d like to change your withdrawal plan for 2020 to handle these changes, please let me know.
COVID-19 Stimulus Package
Message Sent 3.30.2020
After what felt like a free fall, the market started to stabilize last week and made moves higher. For the first time in over a month, the market experienced back-to-back daily gains and recovered some of the losses from previous weeks. It is still early, but last Monday (Trade Day), the market reached the most recent low. All the major indexes had declined over 30%. Fortunately, things started to reverse on Tuesday, and the markets rose over 10% on the week with additional gains today. Fiscal stimulus and support from the Federal Reserve fueled most of the gains.
In relatively short order, Congress was able to put together and agree on the largest economic stimulus package in history, the CARES Act. With over $2 trillion in funding, the bill supports a wide range of recipients including large corporations, small businesses, and individuals. For our clients, the highlight will be direct payments of $1,200 per individual ($2,400/couple) for incomes up to $75,000 ($150,000 for married couples). The figures will be based on your 2018 or 2019 tax return. Most payments will go directly to your bank account if you’ve had a tax refund direct deposited in the past. People should start seeing the funds in early April.
Nearly everyone around the world is dealing with some level of shelter-in-place orders. The global economy has been put on hold while the world tries to limit the damage of COVID-19. The goal of the stimulus package is to allow companies and individuals to overcome the disruption. It also serves as a way to boost consumer confidence and provide the necessary spark to the economy once we can get back to our normal day-to-day lives.
With the virus cases continuing to grow, it’s difficult to be optimistic. But, here in Texas and most other areas around the country, the social distancing and shelter-in-place orders were enacted before significant infection. More testing sites will identify more cases but will also help to get the virus under control. As these measures help us limit the spreading, we can start to calculate when life gets back to normal. Dealing with strict restrictions today will help us get there sooner.
I hope that you and your family are doing well. At this point, most of our clients aren’t in the worst-hit areas. I’m hopeful the constraints put in place will keep it that way. We are here for you if you need anything. We are all in this together, and with smart decisions, it won’t be long before COVID-19 will be a thing of the past. Finally, let’s all say a prayer for those in the hardest-hit areas as well as the doctors, nurses, and healthcare workers fighting this battle.
Asset Management Advisor Update
Message Sent 3.27.2020
I hope this note finds you and your family in good health. The disruptions CONVID-19 has made on our lives are unprecedented, but some short-term isolation is much better than dealing with a dangerous disease. Please take all the necessary precautions to keep yourself safe.
Over the previous month, the market experienced the most rapid decline from all-time highs into a bear market ever. Amazingly, it almost all happened between Trade Days. The decrease from February Trade Day through expiration was the largest we’ve ever seen in the market in our history, with October 2008 coming in a close second. It was a swift, painful move leaving all investors wondering where we go from here.
We entered March’s Trade Day with a plan. The same strategy we’ve executed on the Monday after the third Friday for the last 15+ years. With emotions, particularly fear, at some of their highest levels, we were ready to keep implementing the Snider Method and following the rules that have led us through previous bear markets. That meant buying stock and selling calls as the market continued to decline. It is still very early, but as it stands today, that plan worked.
Thankfully, it is not all bad news, and I do believe there are a couple of reasons to be optimistic. First, because all this started right around the previous expiration, we had closed some positions, and our cash position was at good levels. This cash allocation was not subject to the steep declines over the previous month. It also gave us resources to put to work on March’s Trade Day.
Next, because of the historically high volatility, option premiums were at some of their highest levels. In almost all cases, we were selling calls over the purchase from this month, but the premium we received was significant. In fact, over our entire portfolio, we received more premium on Monday than we did in two previous months this year. We often talk about our ability to create income in both up and down markets, and this is some excellent evidence.
One final bit of good news, those purchases we made on Monday were at the most recent lows. For the first time in over a month, the market had a few consistent days of gains and is up over 15%. I realize it still has a long way to go, but seeing some stability and positive movement is encouraging. I’ve mentioned previously, I plan to send out regular updates each Monday. I also post all these notes on our blog. You can go back and read previous notes or follow along here.
Sadly, it is unlikely I’ll be able to meet anyone in person over the next month, but I’m more than happy to have a phone call or “meet” over the computer. I’ve already had a lot of great discussions with clients. These particular circumstances are new to us all, but I’m confident we can work through these declines and weather this storm like others in the past.
COVID-19 Trade Day
Message Sent 3.23.2020
Today’s Trade Day might be the most challenging our investors have ever faced. Even those of you that have been with us for over a decade and navigated the financial crisis never had to do so without leaving the house or limiting the social interactions that help us cope with difficult times.
With all the stress and pain from the recent drop, it’s common to let emotions drive our actions. Today more than ever is the time to stick to the rules of the Snider Method to take the emotions out of trading. I’ve said it in previous notes, but we built the Snider Investment Method to handle bear markets and produce income in both up and down markets. But, for that to work today, we must buy more stock right when it is hardest to do so.
Option premiums this month will be some of the highest we’ve ever seen. With volatility so high, option prices will meet or exceed the highest levels we saw during the financial crisis. Because stock prices fell so steeply so fast, in most cases, we will just be selling calls against our purchase this month. The future is unknown, but a couple of things could happen. If prices stay at these levels for a few months, we will accumulate more and more stock to lower our average cost and sell more calls. On the other hand, if prices recover quickly, we create and climb our price ladder back to our higher purchases.
No one knows how long this might last, but we are well-positioned to handle a slow recovery. However, I expect a good bounce back once we have more clarity on the virus’ impact. Markets tend to overreact and dislike uncertainty more than anything. Even bad news could move the markets higher if it helps define how long this will last or how many people will be affected.
Please know we are here for you. We are proud to be your partner in overcoming this obstacle. Remaining focused and consistent will help us come out of this conflict sooner. As always, please don’t hesitate to reach out to us if you have any questions. Today we will focus our efforts dealing with trade-related problems, but if you’d like to schedule a time to review your account or address your concerns, we will be more than happy to do so.
Take care of yourself and make wise decisions to stay healthy in these tough times. Also, be positive. We will overcome this. Thank you for your trust and support.
Message Sent 3.18.2020
The world is in a much different place from our last Trade Day. I hope that everyone is safe and taking good care of their health. Limiting our interactions with others and using caution will help us overcome this virus as quickly as possible. The best thing that can happen right now is to curb the spreading of the virus.
From day-to-day, the market is swinging wildly up and down. We went from record highs to a bear market nearly between Trade Days. As I mentioned previously, we’ve planned for these types of conditions. When building the Snider Method, we knew it needed to generate income in both up and down markets.
No one wants this type of decline, but from a strategy standpoint, happening so quickly is beneficial compared to a slower decline of the same magnitude. Most portfolios have a large percentage of cash protected from the decline and ready to put to work at these lower levels. As it stands today, we will be placing our trades on Trade Day just like every other month. I will send out another update early Monday morning, but at this point, you should plan on implementing the Snider Method as usual on Trade Day. (We recommend one minor adjustment for Lattco and Lattco PRO users. Please see the article below about using Limit Orders on your option trades.)
We know these are scary times. This is exactly why we built the Snider Investment Method and the rules to guide us through the investment process.
COVID-19 & Our Commitment to You
Message Sent 3.16.2020
First, we want you to know we care greatly about our clients, and your health is extremely important to us. The majority of our clients are in the demographic facing the greatest risk when coming into contact with the virus. Please be safe and use caution when making decisions over the coming weeks.
Next, you can rest assured that Snider Advisors will be here to help you. Whether we are here at our office or working from home, we can provide you with the same support and guidance you’ve come to expect. We have a Business Continuity Plan in place for these types of circumstances so that we can continue operations with little or no disruption to our clients and services.
In times of crisis, communication is key. For that reason, I will be sending a weekly update each Monday going forward. I said last week the market would face more big swings until the world gets a better grasp on COVID-19. That was very true last week, and I don’t see any changes in sight until we receive some “good” news. Unlike last week, the virus is a lot closer to home now impacting all our lives.
Finally, I encourage everyone to seek out reliable news sources. Too often, we see things shared on social media that are simply incorrect or exaggerated. News can spread rapidly in this day and age. It is best to get your information from national news agencies with the journalistic integrity to fact check their reports.
My thoughts and prayers are with everyone. I’m confident that we will get this under control, and our lives will return to normal. Let’s hope the drastic changes we’ve made to limit contagion happens sooner rather than later.
Thank you for your continued trust and support.
Addressing Current Market Conditions
Message Sent 3.9.2020
Today was a bad day in the market following a rough few weeks. The near future will likely hold more big swings until the world gets a better grasp on COVID-19. It is a scary situation, but nothing the market and the Snider Method hasn’t survived in the past.
The market took a dramatic change of direction in mid-February. Large swings in the market have dominated the last few weeks, but with the overall direction lower. Fear has stormed into the mind of investors. Since the S&P 500 set an all-time high on February 19th, it has declined nearly 20%.
The most important message I can share with you in these declines is to remember, we planned for market conditions just like this. When the Snider Method was initially designed, and as we continue to make improvements, we have never forgotten the fact that we will experience bear markets along the investment journey. Building an investment approach to accommodate price declines was critical in creating a successful strategy.
However, even the best planning doesn’t make the situation feel any better in the heat of the moment. As prices fall, it feels like it may never stop. Our instincts push us to react when patience is the best response. Right now, it feels like no action will be a mistake. When in fact, the decision to have a systematic approach like the Snider Investment Method in place in these emotional times was the best course of action.
I purposely wanted to keep this message short. But keep in mind, I am just a phone call or email away. We are here to deal with this uncertainty and ensure the best decisions are made for you and your financial well-being.