LATIMES.COM/BUSINESS FRIDAY, MARCH 13, 2020C3
Instead, he said, Presi-
dent Trump and Congress
must come together for a
“very targeted fiscal ap-
proach” that would spend
money on medical research
and prevent smaller and
midsize firms that employ
the majority of people in the
country from failing.
So what is the average
investor to do? If that per-
son is in their 20s, he said, it
would OK to “get their toes
wet” by buying into the
market now and on a consis-
tent basis as it keeps going
down, an approach called
dollar-cost averaging.
“If you are in your late 50s
or older, then I would say
just sit tight if you have a
good manager and wait for
the correction to be over.
Don’t get out and into cash
because then not only don’t
you have equities, but when
the recovery takes place,
you have nothing to go up
with,” he said.
David Bailin
Chief investment officer,
Citi Private Bank, New York
The bank, a unit of Citi-
group, offers money man-
agement and other services
to clients with assets of at
least $25 million.
While it would be a
stretch to label Bailin an
optimist amid the biggest
market rout in more than 30
years, the chief investment
officer of one of the most
exclusive private banks in
the world sees tremendous
buying opportunities amid
the rubble — and not just for
the ultra-rich.
“I would give the same
advice to my father as I am
going to give a wealthy
client in this environment,”
he said. “Do not sell equities
when markets have had this
big a move. I have to say that
wealthier people are actu-
ally investing now, because
they have the benefit of
being able to think five to 10
years out, and they know
these are times you can get
very, very good values.”
Of course, that advice is
based on assumptions and
caveats, a crucial one being
that investors believe that
the U.S. and foreign govern-
ments will ultimately get
right their response to the
coronavirus outbreak and
the widening economic
fallout.
Unlike some advisors
who believe that the market
had been highly overvalued,
Bailin said the bank be-
lieved that underlying econ-
omic conditions supported
the recent record run that
topped out Feb. 12, includ-
ing the end of the trade war,
high personal savings, low
unemployment and a 7%
forecast in corporate earn-
ings growth.
Many of those conditions
are now being tested by the
coronavirus, but the bank is
viewing the outbreak as a
severe but still “exogenous”
economic shock, not one
that necessarily alters those
fundamentals — even if the
economy enters a technical
recession, defined as two
consecutive periods of
negative economic growth.
“When this economic
period is over, let’s say six
months from today, buying
intentions, individuals’ and
corporations’, are going to
remain, in our opinion,
largely intact. If you in-
tended to buy a car and you
don’t buy it today, you are
going to do it in six months,”
he said.
So what does it mean to
get the response to the virus
right? Bailin believes a
“shock and awe” approach
similar to the 2008 bank
bailout is in order. He is in
favor of Trump’s payroll tax
cut, boosting and extending
unemployment benefits,
and loans to struggling
businesses — along with a
very large monetary stimu-
lus to ensure liquidity.
The bank in particular
likes quality companies
where earnings and divi-
dend growth is expected,
particularly in healthcare,
fintech, cybersecurity andalternative, non-fossil fuel
energy.
But what about the
60-year-old worker facing
retirement and watching his
401(k) taking haircuts by
the hour?
Bailin says whatever that
investor does, selling equi-
ties should not be an option.
In fact, he recommends the
opposite.
“For somebody who has
a 50-50 portfolio, you want
them to rotate slowly from
their fixed income portfolio
and add equities over time.
You can’t market time. You
can’t choose when to enter
the market, but you can
choose to enter the market,”
he said, recommending a
steady, dollar-cost averag-
ing approach.Kevin Barlow
Managing director,
Miracle Mile Advisors,
West Los Angeles
The registered invest-
ment advisory firm provides
wealth management serv-
ices to high-net-worth indi-
viduals and families, typi-
cally with an average net
worth of $3 million to $5
million.
Money managers at the
firm have been telling cli-
ents to stick with their
current investment plan
even as the stock market
drops and rebounds, cre-
ating a whipsaw effect that’s
enough to nauseate even
the sturdiest investors.
One reason for that? Thefirm had met with clients
earlier this year and stres-
sed that they should not
expect the 30%-plus market
returns of 2019.
“Any financial plan or
strategy that was created
and didn’t account for a
potential 20% drop in the
markets was not one that
was going to succeed over
the long term,” Barlow said.
“Our view is the right posi-
tioning decisions are the
ones that are made prior to
when all the market turbu-
lence hits, not in the middle
of all the turbulence.”
He said the firm “took
risk off the table” by adding
cash to client portfolios and
taking a defensive position
in the middle of 2019, but
with bond yields low, it did
not direct a lot of money
into that asset class.
It also reduced clients’
holdings in companies that
have exposure to global
trade, which tend to have a
higher risk. That was mostly
driven by tariff fears, but
has stood up well amid the
coronavirus outbreak.
It also moved clients’
stocks away from industries
that had seen run-ups, such
as semiconductors and
technology, and into such
areas as consumer staples
for accounts that were
equity based.
Companies that it saw as
better investment opportu-
nities were in healthcare
and consumer staples, such
as Colgate-Palmolive. Bar-low noted that Walmart and
Costco, where people buy
essentials, were doing rela-
tively well, though even
those companies fell amid
Thursday’s market rout.
One of the firm’s prime
concerns now is whether the
coronavirus and the drastic
responses by governments
and companies will not only
cause a temporary disrup-
tion in the economy but
affect fundamentals, espe-
cially if layoffs start and
hiring stops.
“That’s going to affect
markets more like nine to 12
to 18 months out and may
have impacts throughout
the rest of this year and into
next year. And I think that is
where a lot of the fear lies
right now,” he said.
Even so, Barlow cautions
the average investor from
making any precipitous
moves, noting younger
investors should weather
the storm, while older ones
could make a hasty decision
they could regret.
“This is an event-driven
bear market and an event-
driven bear market tends to
recover all their losses
within 15 months,” he said.
“If there is one sort of piece
of advice, it’s that when we
are in turbulent times like
this, don’t flip the boat. One
bad decision in a time like
this can hurt you quite a
bit.”Alex Chalekian
Founder-chief executive,Lake Avenue Financial,
Pasadena
The firm is a registered
investment advisor to cli-
ents with an average ac-
count size of about $400,000.
Although Chalekian said
he never recommends any-
one try to time the market,
something he calls impos-
sible, he does believe that it
still may be possible for
investors to stem some of
their downside risk because
there are “going to be huge
ripple effects” from the virus
yet to be experienced.
“We are in uncharted
territory here,” he said.
“People have forgotten there
are risks. All they have seen
for the last 10 years is their
account values go up.”
In late February, the firm
wrote a post on its blog
raising the possibility that
the coronavirus could have
a more far-reaching effect
on the world economy than
outbreaks of past viruses.
Since then, he had become
increasingly concerned.
The advisor has moved
funds in non-retirement
accounts into less risky
assets, such as municipal
bonds. In retirement ac-
counts, many assets were
moved into Treasurys. Also,
the firm shifted assets into a
BlackRock-managed ex-
change-traded fund, the
iShares USMV, that is struc-
tured to minimize downside
risk, though investors have
to give up some upside
potential.
“Late last year, we
wanted to take some risk off
the table. We did the same
thing in 2006 and 2007. When
things don’t make sense or
it doesn’t feel good, we want
to start making some
moves,” he said. “I don’t
have a crystal ball, but my
guess is that the damage
isn’t done and there is still
more downside.”
With the Fed widely
expected to cut rates again
at its meeting this month,
he expects bond prices to
continue to go up, providing
an opportunity for investors
to lessen their downside
risk.
“Inside a 401(k) plan, if
they want to lower the risk
in their portfolios, they
should look at the cash
options as well as the fixed
income options, bonds and
so forth,” he said, adding
that investors should al-
ways first consult their
financial advisors.
“We are going to have
what I call a yo-yo market
for a while, but it will contin-
ue to go lower if, I had to
predict, before it turns
around,” he said.Experts offer advice on market’s rout
THE NEW YORKStock Exchange on Thursday saw its biggest rout since 1987’s Black Monday. One invest-
ment advisor wasn’t quite surprised: “If it hadn’t been [the coronavirus], it would have been something else.”Jeenah MoonGetty Images[Experts,from C1]
those attacks two decades
ago, flights were halted
nationwide for three days.
Americans’ reluctance to fly
lasted months. The drop in
demand resulted in heavy
losses to airlines.
Princess Cruises, a sub-
sidiary of Carnival Corp., an-
nounced Thursday morning
that it was suspending oper-
ations for 60 days. The move
came after 21 people on its
Grand Princess ship tested
positive for the virus, trig-
gering delays and quaran-
tines for thousands.
“By taking this bold ac-
tion of voluntarily pausing
the operations of our ships,
it is our intention to reassure
our loyal guests, team mem-
bers and global stake-
holders of our commitment
to the health, safety and
well-being of all who sail with
us, as well as those who do
business with us, and the
countries and communities
we visit around the world,”
Jan Swartz, president of the
Santa Clarita cruise line,
said in a statement.
The cruise line said it
planned to dock all ships on
current cruises at the near-
est available port and trans-
port passengers home.
Also Thursday, Viking
Cruises suspended opera-
tions until May 1 and gave
people up to 24 months to re-
book canceled trips.
After Trump announced
the new travel restrictions
Wednesday evening, admin-
istration officials clarified
that they would not apply to
U.S. citizens and their im-
mediate family members, or
to permanent U.S. residents.
Under the policy, most for-
eign citizens are banned
from entering the United
States within 14 days of be-
ing in Europe’s passport-
free travel zone, known as
the Schengen Area.
The restrictions, which
take effect Friday, led to a
surge of passengers trying to
reschedule flights between
the U.S. and Europe, caus-
ing hours-long waits on res-
ervation phone lines and so-
cial media backlash.
The restrictions would
mean cutting nearly 7,000
flights between the U.S. and
Europe, with about 2 million
seats, in each direction over
the next four weeks, accord-
ing to an estimate from flight
data company OAG.
The flight restrictions
would affect nearly 11% of all
flights from the United
States, OAG estimated.
Delta and United Airlineswould be the hardest hit, ac-
counting for 31% of the af-
fected flights.
Low-cost European
carrier Norwegian Airlines
announced Thursday that it
was cutting 4,000 flights and
laying off nearly half its staff.
Earlier in the week,
United Airlines reported
that domestic bookings had
dropped 70% in the last few
days and that it was pre-
pared for overall revenues to
fall 60% to 70% from April
through June.
The world’s airline indus-
try, which had been report-
ing increased demand over
the last decade, could be hit
with $113 billion in revenuelosses in 2020, with carriers
in the U.S. and Canada ab-
sorbing about $20 billion of
that hit, according to a re-
cent estimate by the Inter-
national Air Transport
Assn., a trade group for the
world’s airlines.
“Suspending travel on
such a broad scale [as
Trump outlined Wednes-
day] will create negative
consequences across the
economy,” the trade group’s
chief, Alexandre de Juniac,
said in a statement. “Gov-
ernments must recognize
this” and provide support to
the industry, he added.
Sara Nelson, president of
the Assn. of Flight Attend-ants-CWA, which represents
50,000 flight attendants at 20
airlines, called the new re-
strictions “irresponsible,”
saying the move “only cre-
ates more confusion and
proves this is about politics,
not public safety.”
The industry already has
been reeling as people
choose not to travel for fear
of catching and spreading
the coronavirus.
“Temporarily shutting
off travel from Europe is go-
ing to exacerbate the al-
ready heavy impact of co-
ronavirus on the travel in-
dustry and the 15.7 million
Americans whose jobs de-
pend on travel,” said RogerDow, president of the U.S.
Travel Assn., a trade group.
Industry experts say U.S.
airlines are much better pre-
pared to absorb the losses
than they were after 9/11,
when the drop in demand
led some airlines to file for
bankruptcy protection.
Growing travel demand
and relatively cheap jet fuel
have enabled U.S. carriers to
reduce debt and build up
cash reserves, said Henry
Harteveldt, an airline ana-
lyst with Atmosphere Re-
search Group. And mergers
have consolidated the indus-
try to a handful of large, fi-
nancially stable carriers.
“U.S. airlines are cer-
tainly in a better position to
navigate their way through
this challenge than some for-
eign airlines,” he said.
The spring break travel
season can’t be salvaged,
but airline executives and
other travel business lead-
ers held out hope that the
virus might be contained in
time to take advantage of
peak summer travel.
Airlines have offered to
waive reservation-change
fees to let customers rebook
new flights up to a year after
their ticket purchase. Prin-
cess Cruises offered to trans-
fer 100% of the money paid
for cruises toward future
cruises, plus added credits
that can be spent on
onboard expenses.
Bassani, the Assn. of Pro-
fessional Flight Attendants
president, said she and
American Airlines execu-
tives had discussed ways to
reduce staffing without lay-
ing off flight attendants,
such as offering early buy-
outs to some workers and
putting others on three- to
six-month unpaid leaves of
absence.
“These are unprecedent-
ed times for our industry
and our union,” she said.Airlines, cruise lines cut service amid outbreak
LOW-COSTEuropean carrier Norwegian Airlines said Thursday it was cutting 4,000 flights and laying off
nearly half its staff after President Trump announced new restrictions on travel between the U.S. and Europe.FG/Bauer-Griffin/GC Images[Travel,from C1]