Bizarro World: Where Toilet Paper is Worth More than Oil

March 16, 2020

When I was a kid growing up, the innocence of Saturday morning included my favorite TV show: The Superfriends. And my favorite superhero was none other than Superman, of course. One of Superman’s arch nemesis was known as Bizarro. And on Bizarro’s home world, everything was completely backwards or upside down. For example, Bizarro had freeze vision, while superman had heat vision. And Superman, of course, fought for truth, justice, and the American way. Whereas Bizarro was evil and sought to wreak havoc and destruction.

I wanted to paint the picture of “Bizarro World,” because to me, that’s what we are enduring right now in the U.S. Economy. The stock market has taken a beating, yes, but it’s a lot more bizarre than just that. Kids are home from school. High School seniors are wondering if they are going to march at graduation or not. Concerts have been cancelled. Vacations and business conferences have been shuttered. Even the Disney parks have closed for the remainder of March.

To illustrate my point about Bizarro World, take a look at these two images for a moment:

                                                                             

Now, ask yourself this question. In today’s Bizarro World, which is more valuable to you: a roll of toilet paper or a quart of motor oil?

At face value, I believe that most of us would say the roll of toilet paper. That’s because if you visit your local grocery store or big box store, you are likely to find empty shelves, where once there was plentiful and cheap toilet paper.

Comparing Stock Performance of Toilet Paper and Oil:
But the comparison between these two products goes beyond the empty grocery store shelves. I did a little more research, to study stock companies that make toilet paper and oil, and the results are quite surprising.

Let’s take a look at a comparison of Proctor & Gamble and BP Oil. Proctor & Gamble makes Charmin bathroom toilet paper. And BP is a well-known global petroleum company. As of the close of business on March 16, 2020, Proctor & Gamble has lost 12% of its value, year-to-date. BP Oil, on the other hand, has lost a whopping 51% of its value, year-to-date.

Did Bizarro Just Defeat Superman?
Just take a moment and ask yourself, does it make sense – I mean, any type of logical sense, that BP Oil lost 51% of its value? Or, is that fact about as believable as Bizarro defeating Superman. Simply put, our world is upside down right now. What was up is down (oil). What was once cheap and readily available, is now sold out (toilet paper). Handshakes have stopped. Social distancing is now part of our vocabulary.

Translating this to Investment Decisions
The analogy regarding Superman and Bizzaro World might seem silly, but it really does a good job of painting the importance of normal conditions as it pertains to our investment decision-making policy. At Calder & Colegrove, we believe in crock-pot planning, not microwave advice. The time that we have taken, through the years, to determine your investment direction, was crafted with you in mind – and you alone. It was not done so based on the short-term swings of the market. I have never, nor will I ever, put my trust in the markets when it comes to their short-term direction. I will, however, recognize that some of the greatest gains in our stock markets have risen out of some of darkest days of our history. Here are two quotes that might help paint that picture. But first, a little context. If you are old enough or you’ve read enough history, do you know what happened in the USA in 1974? Take a moment to think on that time in our Nation’s history, and then read on.

In 1974, President Nixon resigned. And the turmoil from that event and the Vietnam War, ushered in an awful and long-lasting downturn in the U.S. Economy – including the stock markets. Jim Fullerton, who was the CEO of the Capital Group (parent company of the American Funds), made this providential statement:

Bear markets do come to an end. And they usually come to an end when all the news is still bad and while the economy itself is still deteriorating. They come to an end not because of some visible external piece of good news, but because raw emotion has carried prices too far down.

Here’s another watershed moment.

In 1932, the United States was in the grips of the Great Depression. The stock market collapse back in 1929 made today’s stock market challenges look like a walk in the park. In May of 1932, Dean Witter had this to say:

Some people say they want to wait for a clearer view of the future. But when the future is again clear, the present bargains will have vanished. In fact, does anyone think that today’s prices will prevail once full confidence has been restored?

Stay the Course or Make a Change?
With all this said, it should come as no surprise that I recommend that we stay the course. Going back to my story about Bizarro World: Does it makes sense to formulate a new strategy based on the backwards and upside-down information available to us today? As I alluded to in our message from February 28th, the Cornerstone from which I formulate investment direction has been temporarily turned upside down.

Are We Worried?
If you are still worried, you’re not alone. In the long run, I believe our markets and economy will rebound, and, as a result, will be stronger than ever. But yes, I’m worried too. Frankly, I’m worried about you. Just in my household alone, both my girls are now home from school. It’s only Monday, and Savannah, my older daughter, is already telling me that she’s bored. She’s bored because she doesn’t want to sit around and play video games. This is her Spring Break. And she was scheduled to engage in a meaningful mission trip, which of course, was cancelled. She wants challenges. She wants to serve. She wants to run track with her team. She wants to get up in the morning and endure the challenges of her classes at school. Most everything is put on hold temporarily here at our home. And I’m sure it’s that way at your home too. So yes, I’m worried about you and your family. Because what’s playing out here at my home, is undoubtedly, playing out at your home and every other home across America.

Risk Quiz
I know that I may sound like a broken record, but if you still want to do a double-check of your risk tolerance, please take 5 minutes, click here, and take our risk quiz. And even if you are confident in your investment course, it’s still a wise and prudent exercise. The process of taking that quiz will help both of us understand what, if any action, should be taken on your investments. That way, we can continue to make sound investment decisions together—not in Bizarro World—but rather, in a clear-minded way, in which once again, oil is worth more than toilet paper.

Disclosure
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change. References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

This Research material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

 

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