Good morning, it's Paul here.

UK & USA Futures showed some recovery overnight, after yesterday's sharp falls, so we should be in for a more calm start today.

Estimated timing - the workload is manageable today, so I'll be finished by 1pm  (6 hours work).
EDIT at 13:17 - today's report is now finished.


Coronavirus

All eyes are still on China, with the coronavirus apparently spreading at what seems to me an alarming pace. For that reason I'm not planning on opening any new long positions in small caps until the situation is more clear. I'm happy with my existing positions anyway, so buying new things isn't a priority for me.

A contrarian view would be that, like all previous crises, this one will eventually pass. Therefore, for the brave, this type of situation can provide buying opportunities - not just lower share prices, but just as importantly more liquidity for buyers of small caps.

Looking back at some previous reports here, it seems almost laughable the macro things that we worried about at the time. Crises quickly pass, and are forgotten rapidly. That said, I am really worried about the coronavirus, as its economic impact seems potentially so much worse than previous similar outbreaks. Plus of course, fear of the unknown. With markets being so expensive, it seems to me that risk:reward looks unfavourable right now.

Incidentally, there have been a few cases reported in other countries. These victims are being quarantined obviously. However, what struck me is that those people will have presumably flown home, breathing out the virus - so how many of the other people on that plane will have become infected from breathing in the recirculated air during the flight? Has everyone on those flights been quarantined? I doubt it. This thing could conceivably spread around the world.

Thanks for the interesting reader comments yesterday on this topic. Some smashing posts, especially one from reader Howard Marx here, which got 99 thumbs ups from readers - well worth a read. Thanks for posting your thoughts, Howard, and everyone else.  I feel that the reader comments are just as (if not more) important than the main articles, so keep them coming.


Volatile prices in small caps

There were some strange spikes down in some small caps yesterday. As readers noted in the comments yesterday, BEG shares spiked…

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