Investing

Week 11: Don’t Panic. Here is what I think we all should be doing… Washing our hands regularly!

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Background

Coronavirus is everywhere. It has almost spread to every country, and has captured almost every headline – there is not much else to talk about right now. It has turned the whole world into a Zombieland. Governments, starting from the Italian government, are closing their borders, banning large gatherings, closing shops, schools, and cancelling sports tournaments to stop the spread of the virus. Meanwhile, every single stock index has been dropping and reached the lowest in decades in the last week.

Market Summary

7 Day Return1 Year Total RetunPE Ratio
UK Market-16.2%-18.7%13.9x
US Market-10%-4.5%13.8x
UK Oil & Gas-30.3%-42.6%3.6x

Here are some of the top news items from the financial market that caught my attention last week:

  • The fight between Russia and Saudi Arab over oil turned nasty on 11th March and oil prices dropped to the lowest in decades after Saudi Arab ordered its government-owned oil producer, Aramco, to increase the daily production to a record high of 13m barrels per day. That started a seismic shockwave in the financial sectors.
  • On Wednesday night, US President Donald Trump suddenly banned all flights from 26 European countries, excluding the UK, Ireland and other countries outside the Schengen common visa area. The ban started on Friday at 11:59 pm. Earlier today, he added the UK and Ireland to the ban from Monday, too.
  • The Bank of England (BoE) followed the Fed’s footsteps and lowered the interest rate by half a percentage point to 0.25 per cent at a special meeting ending on Tuesday, leaving almost no room to cut rates further.
  • The newly appointed Chancellor of the Exchequer, Rishi Sunak, unveiled a budget worth £30bn to combat coronavirus and stimulate the economy. He kept his promise for “whatever the NHS needs”, and allocated an extra £6bn for NHS funding over the next five years. You can find a summary of the budget on the BBC website.
  • Many major airlines, especially European airlines, have grounded all their flights. This will have long-lasting effects on their business strategies. British Airways’ parent company IAG already announced job cuts in the coming months to tackle the crisis.
  • Many governments and financial institutions are assuring the market that they will pump in more cash to keep productivity up and avoid a recession. The Fed has announced a $1.5tn cash injection to fight against the “highly unusual disruptions”. The Aussie PM also declared a $750 cash payment to six million low-income earners.

My Portfolio Summary

All my positions are at rock bottom and dropping every single day. As I have mentioned multiple times, we should stop checking and thinking about our portfolios right now. It will likely make your blood pressure higher and you might make a wrong decision; like selling your position at a loss. Apart from the coronavirus crisis, Metro Bank is suffering from other internal and external issues. That is one of my nightmares, and keeps me awake at night!

Nah… I’m kidding.

I am optimistic about the future of the bank and its stock price.

Evraz (Lon: EVR) and Lloyds (Lon: LLOY) are mainly suffering from US-China trade deals and BREXIT issues respectively. I believe that US-China and UK-EU parties will have much softer tones at the discussion table after the coronavirus calamity. It will be much easier to reach bilateral deals quickly.

Ah… I totally forgot to “re-mention” the crybaby argument between Russia and Suadi Arab over oil production. My Shell (Lon: RDSB) and BP (Lon: BP.) positions dropped massively (and up slightly) last week. Once big brother the USA will rebuke the parties, they will start behaving. I am guessing this will happen sooner than everyone is expecting.

I could not stop myself from buying BT (Lon: BT.A) shares earlier this week. I believe the BT share has a great future ahead of it after Rishi Sunak announced £5bn of public money to help spread “gigabit-capable” broadband ISP networks across the UK by the end of 2025. Openreach, owned by BT, holds the most contracts to put the fixed line “superfast broadband network” worth £1.8bn. There are several other broadband-related activities where BT will get the money that the government has promised.

Freetrade Portfolio

My Freetrade portfolio is holding out much better than the other two portfolios. I am building the portfolio based on the US tech shares; I already mentioned IBM (NYSE: IBM), AMD(Lon: AMD), Coca Cola (NYSE: KO), JD.com (NASDAQ: JD), etc. Unfortunately, this is the tiniest in portfolios.

My colleague Grace Kindred was very interested to learn more about investing and personal finance. Earlier last week, I referred her to open a Freetrade account. Using my referral link, she received a PayPoint (Lon: PAY) share, worth £7.6862, and I received a Blackrock World Mining (Lon: BRWM), worth £3.072.

So, that’s my third free share for introducing my friends and colleagues to Freetrade. Smart, huh!

Free share from Freetrade
Free share from Freetrade

Last week, I received my first dividend in this portfolio, for International Business Machines (NYSE: IBM), whose current dividend yield is around 4.6% annually. I would like to top up JD.com in the coming months as the coronavirus situation has started to get better in recent weeks.

Additionally, I am keeping an eye on the Disney share price after reports stated that the company has shut SeaWorld and other theme parks, and ad revenue will drop massively due to postponing the NFL and other sporting events.

My Other Bets

In my last article, I mentioned that I am working to diversify my passive income by starting two new side hassles. Both of them are digital projects handled by two groups of friends whom I have known for a long time. Here is a short update on the projects:

  • We are starting one of the two projects from scratch; from the logo design to domain registration. A designer from Fiverr.com took 5 days to design the logo. It cost us just £39 and we are all very satisfied with the outcome.
  • I also registered the domain name using GoDaddy and set up a Google G Suite Basic package for emails and other collaboration apps. While my friends are busy creating the content, I set up various social media profiles.
  • For the other project, I am handling technical SEO and digital marketing strategies. So far, it’s all going well. We have already released the free version of the product, and will shortly release the pro edition.

Conclusion

The Spanish government has announced a lockdown on Saturday to prevent coronavirus from spreading. I am sure many government agencies will follow the same, including the UK government. The situation will surely get worse before it gets any better. I just came back from grocery shopping and was depressed to see empty shelves everywhere. Staying healthy seems to be the most pressing issue at the moment. I would advise everyone to follow doctors’ guidelines and stay safe. One of the best things we can do to stop the spread of the virus is to wash our hands regularly. I wish you good health and an amazing future.

Keep Calm and Carry On Washing Your Hands!

I am an SEO professional, expert in both on-content and technical search engine optimisation. Besides eating, breathing and sleeping SEO, I am passionate about travelling, photography, collecting vintage mobile handsets and philately. I am also keen on financial freedom - saving, investing and passive income.

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