MetalCap - I wondered if anyone did anything in response to this Experiment, thanks for sharing that. I hope that $300 tripled like the experiment!
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There's some back story that made this experiment possible. I was a passive index investor for decades before 2020. I believed markets react to new information, so it's useless for me to predict markets in advance. There were some anomalies on certain days or times of year, but after discovery those went away.
Back in Feb 2020, I was following Covid-19 closely. I noticed the number of cases in China seemed to follow a pattern, and I used that pattern to predict 10,000 cases days later. Imagine my shock as a passive investor when the market reacted! The media had breaking news, China hits 10,000 cases. I had predicted the future days in advance, and for whatever reason, the media and investors hadn't caught on.
In March 2020, bad W.H.O. data lulled me into thinking the U.S. had zero new cases on the weekend of Mar 7-8. But the Fed wasn't fooled, and it was so urgent they met 3 days early. Interest rates to 0%, quantitative easing available - they signaled a red alert. The market panicked on Mar 9, with me joining them in the selling. According to infectious disease experts at the time, the situation was going to get much worse. I wasn't panicking at what was known, I was selling to avoid what was going to happen next.
The next day, Mar 10, the market revealed it's obliviousness. Overnight, some resolution in the oil price war made investors breathe easy, and markets went up 3 or 4%. This was another sign of insanity to me - Covid-19 went from 1,000 to 5,000 cases in every country, no matter what they did. And Covid-19 had a foothold in the U.S., and markets priced it as a 3-4% loss?
I sold about 1/8th of my equities (keeping 60% passive). Being new to active investing, I put that money in long-term bonds and gold - both of which dropped. Now I know cash is king in a crash. I created a spreadsheet to predict Covid-19 cases, and watched hours of CNBC and Bloomberg to see what investors were thinking. I pretty much had a part time job tracking Covid-19 and the markets.
The next week, I watched the New York Times confuse the market, claiming that U.S. Covid-19 testing was far behind. But they wrote the article days earlier, from data compiled weeks earlier. That same week, Deborah Birx of the White House Covid-19 Task Force warned people that cases would go up because testing was increasing exponentially. Well, who was right?
I checked raw sources, and testing was increasing exponentially - with a much higher exponent than Covid-19 was spreading. I was comparing exponentials, and the media hadn't even used exponentials yet. I called the bottom Mar 19-20 (Th/Fri), and pushed to 100% equities. On Monday, Mar 23, markets dropped 2% ... and bottomed out. To be fair, Congress played a big role here as well (*).
That weekend I realized individual stocks were an even greater opportunity, but with risk. Stocks that had fallen to 1/3rd of their prior values would triple if they recovered. Even if half went bankrupt, there was a +50% return to be made. I screened lots of stocks, trying to avoid the company with the worst debt in each category. Once I finished buying, I revealed 3 of my picks and started this experiment.
(*) One follow up note on Congress' role - I felt it very likely they would act. They could watch entire sectors (hotel, retail, restaurant, airlines) all go bankrupt and unemployment skyrocket... and then get voted out in ignominy, with no cushy lobbying or speaking fees. Or... they could spend other people's money. Career suicide, or something they do all the time... I counted on the self-interest of Congress.
