Most of us already know the history of the Coronavirus. Coronavirus is believed to have originated in a wet market in Wuhan, China in December, 2019, and from there has spread rapidly all around the globe. The really dangerous thing about it is you could be infected and speading it to others a week before you develop symptoms yourself — meaning you don’t even know you’re contagious until after the damage is done.
It took a while, but governments all over the world have done the only thing they could to fight the virus — implementing lockdowns. (Even then, lockdowns will only slow the virus down, not stop it.) Where I live, it’s not legal to be outside except for “essentials” like visiting your doctor or buying food or medicine — and even then, no more than 2 people together. I’m impacted less than most, but even then I’m worried that when the lockdown is supposed to be over, it will simply be extended.
The manufactured recession
The lockdowns are basically shutting down the economy for the duration. I need some supplies and such that just can’t be bought in my city right now. (I did go for a much-needed manicure and pedicure just a few days before they locked the doors, and of course I’m happy I did.) But the businesses that closed have fixed expenses like rent that must be paid anyhow, even when there’s no money coming in. They can temporarily lay off employees, but those employees have fixed expenses themselves; everything from food to recurring bills that won’t stop just because there’s a virus knocking at the door.
Governments have collectively pledged trillions to help people weather the infection. But where is the money going to come from? This is only possible by printing money, which is usually how governments finance wars. (Although in actual practice these days, a wire transfer is more likely to be used instead.) What does this mean in the long term? It can only result in strong and persistant inflation.
Some of this money will be earmarked for helping small businesses stay out of bankruptcy. But I suspect what will really happen is that small businesses will be given just enough money to pay off their bank loans, and without enough to resume business afterward, they will just have to go bankrupt anyway. In other words, the money is all going to go to the banks while the small business owners themselves will be thrown under the bus.
Investing in the age of Coronavirus
Every time the stock market is down, I see ads to invest now, while stock prices are cheap. But as I have said earlier, if there’s no specific reason for the market being down, then what you are seeing is just market jitters (investor nervousness, or lemming-like behavior). But if there’s a specific, tangible reason for the market being down, such as, uh, a pandemic, then the market is probably going to continue in the same direction for a long, long time. Now is a good time to get out of stocks and into inflation-proof investments. Bonds (government or corporate) will also be a bad investment; even if you get all your money back, the coming inflation will make it worth less than before.
Big business and the internet
As small businesses fail, their assets, inventory, infrastructure, and customer lists will be gobbled up by big businesses, who will emerge with a market share greater than ever.
In these locked-down times, the only way many people can do just about anything is over the internet. Those who have been avoiding the internet, because it’s confusing to them or because they want to support their local brick and mortar stores, will find they have no choice. And once they become acclimated to ordering online, many will continue to do so, ignoring the struggling appliance shop in their own neighborhood.
Mega-corporations like Amazon are doing so much business shipping health and sanitation supplies now that they have suspended the shipping of all other product lines — such as books (which is where Amazon began).
These days there are plenty of shopping opportunities that are available only on the internet — if you don’t have internet access, tough, you can’t get there from here. Expect this trend to explode in the future.
Winners and losers
As I’ve said, holding stocks or bonds is not a good idea right now. Nor is any kind of account where the amount in the account is denominated in the local currency. If it has a $, £, €, or ¥ in front of the value of your account, don’t keep a lot of money there. (This goes for cash under the mattress as well.)
Much better are “hard” assets such as collectable works of art or uncut diamonds (although you do have to have a place to keep them). But beware of an “account” that keeps precious objects for you in their own vaults; regardless of how much is in your account, if the company goes bankrupt, you can lose everything. Be careful!!
I expect the situation in the last two paragraphs to go on for about 10 years.
If the virus is truly devastating, with many people lost to it, expect real estate prices to soften.
I personally don’t believe the virus was intentionally created as a power or money grab, but now that it’s here, plenty of shady operators are coming out of the woodwork, asking, “how can we make money off of this?” Any scheme they come up with is likely to line their pockets by taking your hard-earned money. This is what is meant by a zero-sum game.
The community of nations
If you believe the experts (I do), then the best we can do right now is to implement a lockdown and keep it implemented until the danger is over. Yes, it’s a bitch, but I’d rather stay home today than die tomorrow. Countries that don’t do this will lose more people to the virus. I feel especially concerned for the United States, where just 4 out of 50 states have gone into lockdown mode. What’s to stop a Californian from driving to Reno or Las Vegas to get her hair done? A lockdown in the United States would have to happen (and be enforced) in all 50 states simultaneously — or at the very least there would have to be strong border checkpoints between locked and unlocked regions.
Our lives will change. I don’t think we’ll have a near-extinction event, but things will change for those who make it through.
My hat is off to those knowledgeable professionals, from Atlanta, Georgia, USA to Wuhan, China who are tirelessly working hard to save us. If you want to know what they’re going through, I suggest the board game.