It takes about 3 weeks to realise the gravity of a situation.
That’s how long we’ve been in COVID-19 lockdown. One of the toughest lockdowns in the world. It’s like someone has just pushed the reset button on life.
We’re frantic here at Wealth Morning. Working from home, through one of the most anxious and busy stock market periods in history. It’s like the supermarkets, open and queued up with panic buyers — and some panic sellers in the case of the former.
But, in the evenings and weekends, I walk out to streets full of cyclists and walkers. Sometimes with my wife and kids. Sometimes alone. And there’s an uneasy worry in my step now.
The worry that I’m not really mindful of how this is hurting. Because it hasn’t hurt me beyond inconvenience and cabin fever.
Hard times. Disasters. Recessions. They affect people in very different ways.
I’ve had my share of hard times. Times when I saw happy people around me, heard of their hopes and dreams. And things they looked forward to. And I felt crushed inside that these would not be available to me.
I don’t know what your situation is. I don’t know if you’ve lost your job. Whether your business is in trouble. Or whether you’re cashed up and able to use this extraordinary opportunity to grow wealth.
What I can do is share some thoughts in my area of expertise. The financial markets. And how to make the best with what you’ve got.
COVID-19 lockdown is a prison, so what’s your escape plan?
I spent a few years living on a small island in the English Channel, about 14km wide. A beautiful place on the surface, but like anywhere I guess, some problems beneath.
We didn’t realise that it wouldn’t work for our family until we became integrated with the schooling system. My wife in a teaching capacity.
It seemed a punitive culture by my reference point.
Once I came to fully make a measure of the place, my primary objective became escape. Which was no easy feat since we had to sell a property and close a chapter on a life that we thought would last longer.
And you soon learn: it’s much, much easier to get into a situation than get out of it.
This is the nature of the Level 4 lockdown situation we find ourselves in. And it’s hard to formulate an escape plan for many to resume normal life, because we don’t know when the economy will open. Fully open.
It’s even impossible to have rational debate on the subject.
You mention jobs and you’re a murderer.
The anxious see only their aged loved ones being taken early by this horrific virus.
My colleague John wisely pointed something out that hadn’t occurred to me. It is the question of our anxious age. ‘What will you do to keep your family safe?’
And the answer is: ‘I will do everything, absolutely.’
The real numbers behind COVID-19
We need measured debate beyond self-righteous fervour. Of course every human life matters. But health and economic life sometimes requires balance and triage. No health system can save every life. And an economy forced to shut down for long periods of time could destroy more lives than it saves.
Of course, we’re not going to know if we did the right thing until we have the benefit of hindsight. And right now, by many international comparisons, it does seem we’ve done the right thing.
But the virus came later to us. We had seen more warning of its devastation. We’re a small island nation.
Yet we’ve given up all the freedoms our grandfathers and fathers fought for. A previous prosperous economy has been bludgeoned. And the COVID-19 virus is still out there.
Hopefully we’ve prepared better. The health system is ready. But we’ve also dented our ability to pay for a better health system in the future.
As the real numbers on government debt, unemployment, and collapsing tax-take come out, we will see the true costs.
The short-run vs the long-run
What is your best escape plan now?
In my view — to save and invest whatever cash you have in assets that can survive this storm.
Note, I mentioned investing in assets. Not merely saving cash. Because if the government combines debt with ‘money printing’ in the form of ‘forgiving’ quantitatively-eased bonds — cash itself could take a value hit.
Especially in a small country like this. Our currency is not the US dollar. The global reserve currency. It is a far-flung riskier instrument on global trading screens. Push it too far and it becomes volatile and subject to more risk premium like the South African rand or worse.
The upside, though, is New Zealand is a net producer of food, able to feed 50 million in a population of 5. Something of a safe haven in a world that just became a whole lot more unstable. And the remoteness that has challenged our economic potential now provides it some shelter.
So which assets should you seek? We monitor certain favoured equities in our Premium Research here at Wealth Morning. Constantly testing their value.
In the short-run, as Warren Buffett remarked, the market is a voting machine. And voters fret across panicked fear and extravagant greed.
But in the long-run, it is a weighing machine. Separating the wheat from the chaff.
Understand how to find enduring value early and you may find it easier to grow wealth.
Bad times can lead to some good investments, both in assets and in learning. And that’s the optimum escape plan.
Counting the cost of COVID-19
In the mainstream media and in conversations on the subject, I detect a simmering anger now. This virus has cost the world dearly.
Did China cover up the initial dangers of COVID-19? Did the virus come from animal markets or an accident at a laboratory?
There could be major global pushback against China if investigations reveal certain allegations to be true.
This subject is as difficult as the lockdown conversation.
China’s economy is export-led, especially to Western countries. As we’ve already seen, it is not difficult to tariff back GDP growth.
But I’m mindful that such pushback will hurt the poor of China far more than its government. And ultimately hurt the world that now trades with China as a large and growing market.
This conversation is even more complex in this country. New Zealand and Australia have become rich, very rich, over the past few years selling their goods to China.
China herself has lifted millions of people out of poverty.
This is no black-and-white, good-and-bad situation. Probably why we do need controversial, bold figures who are courageous enough to question. And take to task anyone, regardless of size, who may have abused the world’s trust.
Either way, coronavirus has cost the world trillions of dollars. In the hard light of day — if it can be proven a country or a government has culpability — reparations may be sought. And in such an environment, a giant creditor country may sit vulnerable.
We are living in most interesting times. It is the investor’s job to try and make sense of them. And when the reset button on much of what we took for granted has just been pressed, this is the best time to do so.