As the saying goes:
There are decades when nothing happens; and there are weeks when decades happen.
This is one of those weeks.
With stock markets (and other assets) crashing around the world, European travel to the U.S. on lockdown, and the NBA suspending the rest of its season, the panic is finally starting to set in for many Americans.
As I have watched this play out, there are 3 things I learned that you can use today and, hopefully, for the rest of your life.
1. This is Going to Suck
First off, there is no good way to say this, but, this is going to suck. Most of us are going to have to shelter in place for a few weeks, possibly months, while we wait this thing out. Going out to games, going out to eat, etc. is all going to be severely limited for lots of people, especially those living in big cities.
As a result of this expected slowdown in economic activity, the market is crashing (the S&P 500 closed down 9.5% today and is down 15% over the last 4 sessions). This is extreme, but seems complete rational to me.
Less economic activity => less future earnings => lower stock prices. That’s the story as far as I can tell.
For some of us this will suck a lot more than others. I have the privilege of working from home, and many of you probably do too. However, there are lots of other people who either (a) can’t work from home or (b) can’t work because there is no current demand for their services.
So, yes, things are going to suck. But that’s life. Sometimes you go through painful experiences. Divorce. Cancer. Quarantine. It’s tough now, but we will get through it.
2. There is Only One Safe Asset Class
Another useful thing that has come out of this crash is the realization that lots of “safe havens” aren’t actually safe.
Bitcoin is trading at around $4,500 (down 55% in a month), gold is basically flat since the market peak, and every equity index is down by 20% or more. Even bonds have had a recent decline:
This just goes to show that when things get real, the money flows accordingly.
The fantasy that Bitcoin is the safe haven everyone is going to run to in a panic is a lie. (Disclaimer: I own some Bitcoin but NOT for that reason). The same thing goes for gold.
People are selling all their risk assets to raise cash. And guess what? Bitcoin is a risk asset. Same with gold. Same with so many others.
So which assets are safe havens?
Barton Biggs wrote a book called Wealth, War, and Wisdom where he discusses what to invest in during times when “The Four Horsemen” (War, Pestilence, Famine, and Death) are on the loose. In the end, he concluded:
Perhaps brains or a skill are the most portable and best wealth preserver.
And that, my friends, is why the only safe asset that I know of is the one that sits directly between your ears.
It is the only asset that can’t be drawn down, can’t be stolen, and can’t be lost.
So, take the retirement. Take the brokerage. Take the checking. Take the savings. Take the Bitcoin. Take the bonds. Take the stocks. Take it all. Because you can’t take the one thing that got me all of those other things.
With one of the horsemen upon us (Pestilence), I hope you remember this in the tough weeks (and possibly months) ahead.
3. Enjoy Your Life While You Can
Lastly, of all the things I have learned from the Coronavirus crash, it is simply to enjoy life while you can. To illustrate this, let me paint you a picture:
Imagine someone who has been saving money for 40 years. They have been sacrificing day in and day out so they would have enough for retirement. They don’t eat out often. They don’t splurge on themselves. They make all the “right” financial choices.
Then they hit retirement and decide that they can finally live a little. They take a trip to go skiing in Italy in the winter. Nice time of year. Then it happens.
It starts as a cough, but it gets worse. A fever follows. Then they know they have it.
Some version of this scenario has played out or will play out for seniors across the globe.
All those years of savings, all those plans to travel, and all the golden years gone in an instant. It is a sad, unfortunate circumstance. But, there is a valuable lesson in there.
Yes, you should save money. But, don’t beat yourself up if you splurge once in a while. Live a little. Enjoy today, because, for some of us, tomorrow may never come.
When It’s Over
One day, this human tragedy will end. We will come out of our houses and we will go to games. We will eat out. We will celebrate. I don’t know when that day will come, but it will.
And when that day comes, I hope you remember this moment. Sitting at home. Getting your paycheck. Not spending as much money as you probably normally would.
Because when COVID-liberation day comes, I want you to go all out.
Tip your Uber drivers. Tip your hosts. Tip your waiters. Tip your flight attendants. 15%? No. Do 30%. Give back to those people who aren’t fortunate enough to be sitting at home right now living their lives through the internet.
Spend the money you would have normally spent had this virus not been present. That’s how we get things going again. Go all out. I know I will.
Until that day though, we are in this for the long haul. Stay safe out there and thank you for reading!
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This is post 169. Any code I have related to this post can be found here with the same numbering: https://github.com/nmaggiulli/of-dollars-and-data