The new coronavirus, which first emerged in the
Chinese city of Wuhan last December, has infected more than 200,000 people in
at least 173 countries and territories globally, according to the World Health
Organization.
Major institutions and banks have cut their
forecasts for the global economy, with the Organization for Economic
Co-operation and Development being one of the latest to do so. In a March report, the OECD said it
downgraded its 2020 growth forecasts for almost all economies. Putting aside the
social, health and supply chain impacts from a consumer staples reference
frame, let’s consider the state of financial markets.
As of March 18th, 2020 the S&P
500 has lost approximately 30% of its value, a decline that hasn’t
been seen since the Great Financial Crisis of 2008. Investors across the world
are roiling, but should they be?
A litany of articles, press release, news
segments and emails have flooded people’s devices as fear turns in to absolute
panic. From a messaging standpoint, voice recordings at financial institutions
and mass email updates are urging investors to remember that they put plans in
place for these environments and that, unless your financial situation has
changed, you should remain calm and do nothing. That’s a good start, butThomas Carter, Founder and Chief
Executive Officer, and John
Nance, President and Chief Investment Officer at Deal Box, Inc. are taking it one step further
together.
John spent the early years of his career as a
proprietary derivates trader, financial advisor and portfolio manager. He
renounced these roles in December of 2018 and went on to his current position
at Deal Box in an effort to communicate the inefficiencies he observed in his
years in the traditional financial services industry and encourage investors to
think differently.
John had this to say regarding the current state
of financial markets “Asset
managers and investors alike have spent the last 12 years of the global bull
market analyzing their mistakes during the last financial crisis. The amount of
research and analytics on the impact of long term investing relative to market
declines is so robust you could spend your entire life analyzing it and not get
through all of it. But what exactly did we learn and are we applying it
correctly today?”
Thomas is a FinTech leader, digital securities
pioneer, and entrepreneur with more than 30 years of experience in capital markets
advisory and funding. He is a founder and innovator of multimedia/internet, financial
services and blockchain industries. Over 400 companies have benefited from
Thomas’s keen understanding of capital markets and early-stage venture
funding strategy.
With that in mind John and his team at Deal Box
are using the current market situation to encourage investors to use this as an
opportunity to speak with their financial advisors about how to better assess
their portfolios. These types of stress tests give investors very rare insight
into how their portfolios perform to
the assumptions made when constructing them and adjust accordingly.
Putting it all together, John Nance answers his
question posed above in the following way “If
you follow the smart money guidelines and want to be an intelligent investor,
the current environment is one in which you want be investing as much as you
can reasonably afford to. The immense value and opportunity that has been
created by this presumed catastrophe is something we haven’t see in over a decade. So, if you
remove your emotions from the equation, you should be asking yourself ‘what
did I learn about how to respond to instances like this’. The answer is quite
simple, start identifying what assets are irrationally mispriced and start
taking advantage of them.”
Deal Box has been communicating to its network
and stakeholders that true value has been created in the past few months and
will continue to present itself for the foreseeable future. Their opinion is that given the decline in public markets,
risk to return profiles of private vs. public companies have shifted
dramatically.
Thomas and John
presented the following example “Let’s
say you invested $100 in the S&P 500 at the exact high and your $100 is now
worth $70. Just to get back to even, the market needs to go up roughly 43%.
According to Goldman Sachs, the average recovery time for the type of decline
we have seen is 24 months. The 2008 decline took 4 years to recover to new
highs. Presumably, if you were to invest in the S&P 500 today, you’re
looking at roughly 2-4 years to recover that $30 you just lost. This radically
changes the way investors should be thinking about the risk and return spread
between public and private companies.”
Deal Box looks at the scenario outlined above
and believes it to be the foundation for incredible opportunity in private
markets as public market risk to return profiles and time horizons have
drastically expanded.
In times like these, the most important question
investors might ask themselves is whether they will give way to fear and panic
or whether they will act with rationality and use proper analysis to identify
opportunities where they have been created. Time will tell whether we really
have learned anything since the Great Financial Crisis…or not.
—Thomas Carter, founder and CEO of DealBox; read about Thomas: “This FinTech Veteran Is Making Cryptocurrency Startup
Funding Legitimate”; connect with
Thomas on LinkedIn and Instagram
Deal Box, Inc. and its affiliates do not
provide tax, legal or accounting advice. This material has been prepared for
informational purposes only, and is not intended to provide, and should not be
relied on for, tax, legal or accounting advice. You should consult your own
tax, legal and accounting advisors before engaging in any transaction.
The post Dynamic Duo Thomas Carter and John Nance at DealBox on How to Turn Pessimism in to Profit: Seizing Opportunity When Others are Not appeared first on Knnit.