“This is preeminently the time to speak the truth, the whole truth, frankly and boldly. Nor need we shrink from honestly facing conditions in our country today. This great Nation will endure as it has endured, will revive and will prosper. So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself—nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance.” – Franklin D. Roosevelt’s 1932 Inaugural Presidential Address:

Much of the world has come to a grinding halt in an effort to stop the spread of the coronavirus. There’s a ton of fear of the known and unknown. Panic by individuals, companies and governments has resulted in a range of responses.

People are staying home from work or working from home. Businesses are in survival mode. Countries are in lockdown. Schools are closing for the foreseeable future.  Parents are seeing a lot more of their kids, for better or for worse. You’re probably seeing a lot more of family and a lot less of friends and coworkers. A blessing or a curse depending on your perspective.

Understanding the Virus

Nancy Messsonier, director of the CDC,” As the trajectory of the outbreak continues, many people in the U.S. will at some point, either this year or next, get exposed to this virus”. The primary concern is not overwhelming the US healthcare system. It’s not if you will get the coronavirus but when. If too many people get the disease at once then hospitals are overwhelmed and supplies are constrained. This causes preventable deaths from Covid-19 and other unrelated illness due to an inability to properly respond. If we don’t take protective measures we get the large spike noted in the curve below.

Covid-19 is dangerous because it’s spread by people who don’t feel sick.

However, by staying home and social distancing you decrease your chances of becoming infected and infecting others. Over time many still get the disease but at a slower pace so our healthcare system is never overwhelmed. More people receive the needed treatment and fewer people die from the disease.

Source: VOX

This Vox video explaining “Why fighting the coronavirus depends on you” helped me understand the virus and the government’s response.

Source: VOX based on China’s CDC
Source: VOX based on China’s CDC

Considering this chart, don’t turn 80+ and you’ll have the best chance of surviving the virus. In the interest of protecting our most vulnerable I want to abide by government requested quarantines. However, personally I don’t fear the virus. I have a good immune system and I take reasonable care of my health. I expect to get the virus at some point in the next couple of years and fight it just like the flu.

As of now many have a healthy fear of the virus. But if people didn’t have this fear I wonder if those least at risk would continue to take social distancing seriously. Think of all the spring breakers crowding the beach right now.

Source: CDC
Source: CDC

The coronavirus has peaked in China and South Korea and infection rates are now declining. Source WSJ and Science Mag. They’re over the hump and have probably seen the worse of this viral crisis.

South Korea tested 15,000 people a day for Covid-19. The USA would need 100,000 tests a day to be comparable based on our population size. So far we’ve tested about 25,000 people total. Source New York Times

The number of people with the coronavirus is much higher than reported cases above. When we do start testing the masses there could reasonably be 100,000+ people with the virus. Ohio believe they have 100,000+ cases. Source Fox

Once the mainstream media starts reporting those numbers the impact at local hospitals and inadequate resources, how do you expect people to react?

A new heightened level of panic will set in. I predict this is the peak of panic. Imagine how that panic will affect relationships, supplies, crime, jobs, and investments.

If people do stay home and if we flatten the curve then I’m less concerned about the virus and more concerned about the consequences of panic.

Anatomy of a Crises

We have three different shocks underway:

  • The supply shock will become more visible in the coming weeks as the Asian export pipeline runs dry, with unpredictable but possibly widespread effects on US businesses.
  • The demand shock is already hitting as travel slows, people avoid large gatherings, and consumers reduce discretionary spending.
  • The financial shock is well underway in the markets, as you are probably aware. The last few weeks brought volatility we haven’t seen in a long time.
Source: The Real Economy Blog

We’re not technically in a financial recession, yet. We’re in a viral crisis which is creating panic.

Government response

We’re hearing new restrictions on a daily basis. The government’s goal is to flatten the viral case curve and minimize the economic impact. As of writing, Trump is urging $1 Trillion in Aid. He’s dismissing concerns about the federal deficit and will do whatever it takes. This is also an election year and his response to the viral crises will be on trial for the rest of the year. They want to act and act fast for maximum impact. However, I doubt the effectiveness of response, specifically if the response will be large enough and targeted enough to get the right amount of support to those who need it most.

Monetary Policy:

The Fed has used the last of their monetary bullets with near 0% interest rates. Unless, they follow other countries and move to negative interest rates, a first in US history. They are also lending to corporate America. If additional stimulus is needed, they’ll have a difficult time stimulating the economy based on monetary policy or develop new options.

Fiscal Policy:

As of writing, the government is considering a range of stimulus packages including payroll tax cuts and sending a $1,000 check to every adult who makes $65,000 or less, about 2/3 of Americans. I don’t believe either will be effective in stimulating the economy since people are staying home to wait out the virus and not spending it on the industries that need the cash. Although, a check from the government would help some cover expenses if they’re out of a job.

There’s several bills at various stages in the legislature which would provide support for small businesses including tax credit for supporting employee time off. I’ll be advising clients on how to take full advantage of these benefits as bills become law.

There’s an understandable desire for the government to prevent or mitigate financial hardship. The people who are potentially helped by the government this round aren’t likely the kind of people who took financial risks, they’re more people who are caught up in the system and the government’s trying to help them.

One perspective is the government enables large corporations to take aggressive risks and bails them out. Remember, “too big to fail” from 2008? Whether the financial stimulus is truly for the benefit of the ordinary person or wealthy friends of politicians is debatable.  There’s talk of the government bailing out the airlines again, like the last financial crises of 2008 decade ago. The government actually made significant income from most of its emergency investments from 2008. However, there’s opportunity to make money based on predicting the government’s response.

Side note, the next time we have a viral crises the next politician in power will have to do the same or more in response. If every adult gets a $1,000 check from the government due to this financial crises, there will be a precedent for the same or more in the future.

Economic Impact

“People make their worst decisions when they’re drunk or in a panic,” Dave Ramsey. The current economic stress and supply shortage is not due to the virus directly instead it’s driven by fear and anxiety. The longer the panic continues the more devastating the impact is to our economy.

Covid-19 will be remembered as the black swan event that ended the longest bull market in our history. Who could have predicted a virus from China would cause the market to crash?

People are losing their jobs, there are supply shortages and businesses are suffering. Businesses hit hardest are hospitality, travel, retail, entertainment and other businesses necessitating direct contact with the public.

It’s going to be a while before we have the exact data on the loss of economic activity including loss of jobs. I’ve known a handful of people now who have either lost jobs or had their hours cut. Businesses are considering how to take care of employees amid their own financial crises.

I’m hearing antidotal data that interest in real estate has dwindled and existing deals are being delayed or terminated. It’s only a matter of time before the government enacts protections stopping or slowing foreclosures and evictions. It happened after the 2008 crises and more recently in Puerto Rico.

Goldman Sachs’ had a frank Coronavirus meeting where they believed 50% of American would get the virus and believed the stock market would bounce back in the second half of the year.

With government and corporate debt at increasing highs there will be a day of reckoning when it will all come crashing down. But I don’t think this economic downturn is “the great reckoning”.

Ray Dalio founder of Bridgewater, world largest hedge fund, believes 0% interest rates “means that virtually all asset classes go down because the positive effects of interest rates falling won’t exist (at least not much).” The central bank can still print money and buy debt but it’ll have little effect. The economy is already flush with cash and bonds rates can’t be pushed much higher and are unlikely to be sold at low ROI’s to purchase other distressed assets. We’ll experience deflation (as opposed to inflation) due to lower oil and commodity prices, distressed debt and a weak economy. Typically this factor leads to constraints on debt and negative growth. Source: Ray Dalio

Pension funds and insurance companies will recognize lower returns on investments and will have to sell assets to meet their obligations to clients.

Oil prices are at new lows causing expenses to exceed revenue for oil producers, companies and countries. They’ll need to cut spending and sell assets.

Cruise lines, airlines, hotels, restaurant and many small business have suffered from a sharp cut in revenue while still supporting employees trying to survive. Small businesses will suffer the most.

Due to low interest rates debt is in America for companies and individuals. It seems we have learned little since the 2008 financial crises. With corporate debt at an all-time highs many companies and industries will have problems with debt leading to bankruptcy or restructuring. Companies are drawing down credit lines around the world increasing pushing corporate debt level to even greater highs and increased risk levels.

Unless bank debt is backed by the government banks will begin constricting credit. The federal bank is already looking at lending to corporations and to small businesses through small banks via SBA loan programs. This will save some companies but ultimately leave taxpayers on the hook for the risk and debt of others.

I’m most concerned about the recession one or two cycles from now. Risks include social security insolvency, pension collapse, healthcare collapse and government default. This recession will add kindling for “the great reckoning” in the future.

Personal Finance

We don’t know exactly how long this crises will last. It’s prudent to be extra conservative with your personal finances.

The biggest financial strain on Americans will be a lack of cash-flow. Save cash. My best guess is social distancing will last 6-12 weeks.

Consider boosting or creating an emergency fund. This financial crises is exactly why we should all have an emergency fund.

Have some extra cash on hand. In the event banks close you’ll still be able to pay for supplies and services in cash.

Secondly, medical care, especially for the uninsured, is at least a setback if not financially devastating for anyone needing a longer term stay in a hospital bed at $10K a day. Many have passed on expensive health insurance after President Trump waived the tax penalty for not maintaining qualified insurance. Private health insurance companies have agreed to cover coronavirus treatment and waive copayments on coronavirus testing.

Eliminate unnecessary spending. Print your bank and credit card statements and mark the expenses you don’t really need. You can use this extra time to develop a budget, YNAB is my personal favorite budgeting software.

Don’t over-buy food and supplies. Do stock up only on perishables you can reasonably eat and non-perishables you will go through eventually.

Ask yourself, “If I’m home for a month do I really need 1,000 rolls of toilet paper?” If not, leave a few rolls on the shelf for the next person or give them to those who truly need them. (We have not been able to get toilet paper in two weeks but spring is coming and leaves will grow. Worst case scenario, we’ll install a bidet. 😉

Federal student loan interest has been suspended. However, it’s not what you think. You still have to make your usual payment on federal loans but 100% of your payment goes towards principal.

If the financing does dry up then be careful about paying back debt too early if you can afford it. For example if you have a HELOC and you pay it off you may lose the ability to leverage it again.

With interest rates being at all-time lows it would seem like a good time to refinance your mortgage. Lenders are inundated with mortgage requests. 30 year rates have slightly increased due to the refinance demand. Once lenders work through the back log of refinance request rates should normalize and you can benefit from new, lower rates.

Don’t sell investments out of fear, especially those in retirement accounts you won’t need for years. We expect economic downturns as part of the cycle.

I invested in a bank that went public, due to some trouble with paperwork I’ve been slow to exit that position. My shares are currently valued at less than half of market pricing from a month ago. Despite a significant amount of money being tied up in that investment, I plan to wait it out. I only recognize the loss if I sell.

It’s times like these that cause many to sell low and buy high. Remember the 2008 crises when many panicked due to significant loss of value in their retirement accounts. Many sold everything and sat in cash for years. Around 2013-2015 they felt comfortable enough to buy into the market again after missing years of growth. Now people are once again selling at new lows after they’ve already suffered major losses and wiping out much of the growth from when they last bought in. Once you factor in investment fees, taxes and inflation many lost money on their investment.

Business Opportunities

Few businesses will be adequately prepared for this crises. Flexibility and adequate capital will mean the difference between bankruptcy, just surviving or thriving.

Now is an excellent time to develop systems and processes that will allow you to scale and grow quickly later.

With so much uncertainty around paper assets and real estate your best ROI is likely in your business. Work on refining your own business and efficiencies. You can virtually plan and strategize with your team.

Consider reading Traction, by Gino Wickman. The author shares how to implement the Entrepreneurial Operating System, “a complete set of simple concepts and practical tools that has helped thousands of entrepreneurs get what they want from their businesses. By mastering this simple way of operating, leadership teams of growth-oriented companies systematically and permanently improve.”

Virtual businesses will have an advantage. How can you best interact with employees, customers and your business system remotely? Consider developing new business offerings or selling virtual products.

Employees having to work remotely will permanently change how many businesses operate in the future. Consider the cost savings and efficiency from remote work and develop systems to manage employees for now and the future.

Use the time to understand the personal situation of each of your employees. If you have to lay people off or cut hours you’ll be able to make decisions based on the circumstances of each employee.

Consider drawing down lines of credit before the bank cancels them. Paying the interest may be a small price to pay to have the peace of mind and funds to weather this economic storm. By simply outliving your competitors you’ll have your pick of the opportunities post-crises.

Investment Opportunities

The time is coming when those who strategically and aggressively act on opportunity will create a new level of personal wealth for the rest of their life. This is what I help clients plan for.

Is this the bottom? Probably not yet. However, I do see opportunities to buy at a discount for the first time in years.

In periods of uncertainty and fear there is the opportunity for great deals. One risk is buying too early and only to watch your new investment drop for a while, beware of FOMO. Another risk is waiting too long, and not getting any sort of deal. In either you are letting fear drive your decisions, fear of missing out or fear of losing your investment. Many will say timing the market is impossible. I say it’s difficult.

Paper Assets: (stocks, bonds, royalties, EFT’s, etc.)

After the last financial crises of 2008 there was a bit of a calm I felt in January of 2009 where it felt like we were at the very bottom in the muck but we weren’t seeing any more additional disaster coming. That was the time to re-enter the market.

When will you know we’re at the bottom? One good indicator the initial fear and anxiety is over is when you see toilet paper regularly available again. 😉

The number of people with the coronavirus is much higher than currently reported. We’re not testing the masses like other countries. Once we get our testing ramped up there could reasonably be 100,000+ people with the virus.

Once the mainstream media starts reporting those numbers the impact at local hospitals and inadequate resources, how do you expect people to react? This will be the height of panic and likely the best time to invest in paper assets.

This is the first time in years that assets have been on sale. But it is still premature to be buying aggressively now unless you’re clearly seeing deals.

How do you know if you’re getting a deal? Determine the asset’s intrinsic value or an independent measure of value. Methodologies vary based on asset class. For example, if a dividend paying stock normally pay a 3% ROI based on stock price but now you can buy it with a 6% ROI based on a new, lower stock price you might consider that a deal.

Once I believe the coronavirus has peaked I plan to invest in dividend paying stocks from companies temporarily affected by the coronavirus like airlines, cruise lines, travel, hotel and restaurants.

Another strategy is buying stock at regular intervals since you probably won’t get the timing perfect.

Paper Assets have a place in my portfolio but I prefer direct ownership and control of investments. For example, I’d rather invest in a business where I have a board level role than in the stock market. I love the direct control of real estate, the power of leverage and all the tax benefits it provides.


I’ve always been interested in finding a great way to invest in oil while the prices are down but I haven’t quite found a way to invest directly in oil like I can with real estate through single family rental houses. Oil prices would spike if Russia and Saudi Arabia made a deal.

Real estate:

Real estate is how I got my start in investing. I know more ordinary people who have become millionaires through real estate than any other wealth building vehicle. It’s been an amazing wealth creator over the last decade.

Real Estate investment is excellent in almost every market cycle, prices are increasing or stable but not when they’re falling. There will be new buying opportunities for investors but not to the level we saw in 2008. Some will be saved by the equity in their homes.

Those without adequate cash reserves will be hardest hit. Many flippers and wholesalers who have been living month to month and funding most of their rehabs with lines of credit or hard money loans will struggle to survive. Seek a strong cash position.

Wholesalers, start ramping up your marketing now when your competitors are taking a break. You’ll be top of mind when distressed home owners are prepared to sell. If you’re low on funds, start following up with old leads.

Landlords should expect to go a year without income from some tenants. The federal government will likely enact legislation protecting borrowers and tenants at the expense of business owners. This is already happening in some states.

Many investors have been preparing for this moment for years and are sitting on cash. If banks tightened their lending, there’d be fewer investors and that would significantly change the competition in the market. If that were to happen then I could see real estate prices dropping significantly as the loss of jobs washes through the economy.

Should I buy with all this uncertainty? Possibly, uncertainty and fear creates the best opportunities. Stress test any potential buys for a recession including lower selling prices and occupancy. Lock in contracts while uncertainty is highest.

Consider buying with cash now and leverage only when you can safely do so. You can leverage the banks’ money or other people’s money through joint ventures and partnerships. As long as you can get low-interest debt and comfortably make the payments I would prefer the debt. Other people money means you’re less likely to go bankrupt but you’re also giving up much of the equity and personal profit potential. “Debt is cheaper than equity.” – Unknown

Spiritual Response

Our trust is in Jesus, not this world. It’s important we seek God’s peace through this time. In this confusion, fear and anxiety of this world now is a fantastic time to stand as a light for Christ in the darkness by serving those who need it.

“Forget about yourself, focus on others: Fear can drive people into themselves, making them feel isolated and helpless. The best strategy here is to go in the opposite direction, expanding your connection with others — focusing on helping them transform their negatives into positives. The more you contribute in this fashion, the less you will need to worry about your own situation. You will become a source of confidence for everyone else.” Dan Sullivan

Find ways to serve, connect and be generous with the food and supplies and other resources you do have.

Personal Impact

Consider taking a break from our otherwise busy lives to relax, reflect and reconnect with those we care about.

My wife is feeling strangled by the home isolation. She thrives on inter-personal relationships. I think she’d rather be at risk for the virus than be stuck at home. Her mantra, “Give me liberty or give me death.” 😉

I wonder how many will break social distancing to feed the need for community.

Focus on what you can control. Consider personal development or projects you’ve put off.

If you’re not used to spending this much time with your kids, enjoy it. Participate in family activities. When was the last time you did a craft project, played a board game, or learned something new like cooking? There’s many ideas on the internet.

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