I would like to put on paper few of my thoughts on Coronavirus. I am writing this on 9th March 2020 and the situation is changing on daily basis. I am currently FIRE at 45 with practically no income except investments. My main duty is helping out with our 3 year old twin boys, which is full on work with some free time but very fractured. So currently it would not be easy for me to find paid work and keep performing some of these necessary family duties. Not easy but possible of course, if the s*&t hits the fan then I will run and try to get some (any) paid work if necessary. So yes I am carefully watching what happens in the world with the disease and economy.
First things I have noticed is how most of the governments are reactive as opposed to be proactive in their actions against coronavirus. No government has done much while China started fighting it. I am not trying to criticize or prize China. I just think first they did bit of covering up and ignoring the problem. But once they realised the dangers, then the government stood up and threw everything to stop the virus. They took in my view extreme but necessary measures virtually limiting movement of 60 million people. Many “experts” criticized it as it of course affected the human rights. What a nonsense. How about the human rights of people who would be infected if people could carry this disease everywhere!
Problem is that if people knew they are infected, they would limit their moves anyway and they would try to limit exposure of others. But due to the incubation period of around 2 weeks, people could spread the virus unknowingly. So the limits on people movements are the best thing which governments can do in my view. I have no idea why it took about 3 weeks longer than necessary to close the travel from China. Luckily USA has done it (late) and then further countries followed. Now governments are again sitting on their hands while virus has spread to most of the world countries and few of them like South Korea, Iran, Germany, Italy, France and Spain measure infected patients in thousands. And of course it will not take long before it will spread further, judging based on Chinese experience.
That’s another huge problem. Governments underestimated and ignored the problem while watching from afar China fighting the virus. Why they did not take a note and prepare themselves for virus hitting them? Why they did not learn from Chinese experience and copy their successful practices? Personally I could feel bit of ignorance and feeling of superiority from many people and governments. Somehow I believe they thought China is incompetent and they thought this would not happen in THEIR countries. They thought, they could handle it, I think.
Personally I could see that China fights it as best as they could and virus still grew. I have spent few days in China 7 years ago and already then I knew the country is much more developed than most of the westerners would admit. So I knew, if this developed country where government has this large powers compared to western democracies, struggles to contain the virus, everyone else will. What worries me is that because the democratic governments have to go through quite a few difficult steps to put in place possibly unpopular anti corona virus measures, spread there might be even worse than in China. And for now I am not even trying to consider what will happen in the poorer countries where the health systems and economy are much weaker than in the west.
Why I came to this thoughts? Already still in January when the data started coming from China I have realised how big problem this was. Actually I have predicted the spread much faster than it happened, because at that time in January most of the days number of cases grew 20-30% daily. That pace luckily slowed down but the situation is still very serious and it looks like it will be long time before it will get under control. Actually based on my assumptions I thought the coronavirus crisis looks like the biggest problem which human kind encountered since the World War 2. We can only pray it will claim less lives. At that time in January forecasters were talking of coronavirus impact on GDP growth only in fractions of percentage points. And the stock markets were at their peak, not taking the notice of the coronavirus at all. I could not believe it. I just did not understand why me as complete amateur and with minimal science (but reasonable statistics) skills I could see it coming, why the governments and “experts” could not. Everyone looked like they were hoping it will SOMEHOW go away without affecting them.
As of now forecasters stopped talking of any growth for 2020 at all and many stock markets dropped yesterday almost 8 percent while being down around 20% since their peak. I believe there is still long way to go down and let’s hope we will muddle through. But for now I cannot see the light at the end of the tunnel. I am just hoping for it.
What I believe that the governments are doing right? Limiting movements of people. First government putting people’s health before economy is Israel, which now forces all travellers (including own residents) into the country to go through 2 weeks quarantine. In my view many other things could be done. First should be to stop unnecessary travel like for business, sport and tourism. Sports and cultural events attracting crowds should be postponed. That would limit movement of people for a while and slow down the virus. But governments somehow are avoiding this (in my view NOT) drastic move. Most of the governments are not putting people’s health and lives before economy, which is not right in my view. For example why we can see so many tourist still now in March? Why people are on cruises or going skiing in Italy? It doesn’t make sense to me at the moment.
What have WE done? Well luckily I have most of my investments locked in properties and most of my income is rent. And I am not checking value of these properties on daily basis. Of course I can get in trouble if Australian economy tanks and my tenants loose their jobs. I do have reasonable share holdings in both tax advantaged and not advantaged accounts. At the end of January I have sold half of our share holding in the tax not advantaged account. In our superannuation account I have switched to the conservative investment option to avoid the volatility which I could see coming. Originally I was in the default growth investment option where there is split about 70% shares, 30% fixed income. Conservative option is reverse 70% fixed income 30% equities. I will switch back in shares soon when I will see some positivity in the markets and improvement in virus situation.
I do realise that this is against all the teachings in FIRE movements. We should not be able to time the markets. I believe there was market inefficiency at the time when I was selling and switching investments. It looked like all of us could see the avalanche rolling at us but markets and governments choose not to act and thought that “she will be all right”. That’s why I have acted. I do realise that to benefit from lucky timing of my sale I will have to time the bottom which might be more difficult. I believe there is quite a bit of the way down for the markets as any vaccine is unlikely in near future and all of us will probably just have to wait and take it on the chin. It looks like a nasty virus but compared to ebola with 90% mortality rate it still looks like just very bad flu.
