Americans are facing a difficult dilemma during the pandemic. We have to decide between the economy or maybe your life or my life.
How long are we willing to purposefully shut down our economy to combat the coronavirus and risk losing even more people due to a great depression?
I don't know the answer, which is why I'm turning to you to hear your input.
My gut instinct is that most of our nation is willing to go through at most a 2-month (how wrong was I updating this post in 2021!) long lockdown/quarantine/shelter-in-place before we demand our local and federal governments allow most businesses to operate again, with modifications for safety.
As of March 23 ,2020, there are supposedly ~35,000 confirmed coronavirus cases in the U.S. and 458 deaths (~1.3% mortality rate so far). The number of cases will surely go up as more testing becomes available and more carriers infect others in their community. On the positive side, the mortality rate should also go down as the denominator grows. You can check the daily numbers on Worldometers.info.
To put some perspective on the number of coronavirus cases and deaths so far, please note that since 2010, the CDC estimates that from 12,000 to 61,000 Americans die annually from the flu. Roughly 31 million Americans so far caught the flu during the 2019-2020 season.
Put differently, the number of coronavirus-related deaths in the U.S. needs to increase by 35X – 175X to match the number of flu deaths that occur each year. With the California Governor saying roughly 25.5 million people in California will get the coronavirus within eight weeks if no measures are put in place, the numbers are plausible if we believe him. Some scientists have postulated that 60% of the American population will eventually get the coronavirus.
Let me be clear that I'm not saying the flu is like the coronavirus. COVID-19 looks to be at least 10X deadlier. I'm just providing some numbers so we can think about what we are doing to prevent an unknown toll on human life.
At the same time, we know that millions of Americans will file for unemployment benefits in March, and millions more will file for unemployment benefits each month we are under lockdown. We also know that the S&P 500 is down ~30% so far and that a recession is almost an inevitability.
Eventually, millions of Americans will lose everything. The unemployment rate will skyrocket. Families will break apart. Children will go hungry. Homelessness will increase. Burglary and homicides will increase. Millions more children will be trapped in a cycle of poverty.
The result will be even more strain on the government and on our community to help those who've been most adversely affected. If this strain becomes too great, even more people will suffer.
How Many People Died During The Great Depression?
One would think that the more people living in poverty, more people would die during a great depression. However, life expectancy actually went up during the last one. Ironically, it is actually economic prosperity that increases U.S. mortality.
Here are some interesting insights from History.com.
In the first few years after the 1929 stock market crash, the only major cause of death that increased was suicide, says José A. Tapia Granados, a professor of politics at Drexel University and co-author of a 2009 research paper in PNAS about life and death during the Great Depression.
While suicides went up, Tapia found that deaths from cardiovascular and renal diseases stabilized between 1930 and 1932, the worst years of the depression. Traffic deaths dropped in 1932. Deaths from tuberculosis, the flu and pneumonia also declined.
As a result, the average U.S. life expectancy rose from about 57 in 1929 to 63 in 1933. In both decades, people of color had a lower life average expectancy than white people. Yet when the depression hit, the average life expectancy for people of color rose more quickly than that of whites, increasing by about eight years from 1929 to 1933.
According to the Association For Safe International Road Travel, below are the following crash and death statistics for America:
- Over 37,000 people die in road crashes each year
- An additional 2.35 million are injured or disabled
- Over 1,600 children under 15 years of age die each year
- Nearly 8,000 people are killed in crashes involving drivers ages 16-20
- Road crashes cost the U.S. $230.6 billion per year, or an average of $820 per person
- Road crashes are the single greatest annual cause of death of healthy U.S. citizens traveling abroad
Given this data, a clear silver lining from the coronavirus-induced shutdowns is that fewer people will die from car accidents since fewer people will have to commute to work. Further, given more people will tighten their spending, more people will reduce unhealthy habits such as smoking, drinking, and overeating.
In another study by Bluestone, Harrison and Baker, “The Causes and Consequences of Economic Dislocation” from 1981, for every one percentage point increase in unemployment, they estimated a 37,000 increase in deaths, of which, 20,000 are from heart attacks, 920 are from suicides, 650 are from homicides, and the rest are undisclosed.
If we get to a 20% unemployment rate from 3.6% currently, according to the authors, this might result in roughly 610,500 more deaths. In this scenario, it seems that there will be more deaths in America attributable to a great depression than to the coronavirus itself.
How Much Of A Net Worth Decline Can You Endure?
The uncertainty of the lockdown period is what really hurts Americans. Because we do not know when the lockdown will end, we will have a difficult time planning for the future. As a result, we will rationally hoard as many resources as possible (food, toilet paper, water, cash, ammunition etc) in order to prepare for the worst.
If various governments can give us a detailed time-line guidance, everybody will feel much better and be able to plan and spend accordingly.
For example, if we assume that it takes up to 14 days from exposure for coronavirus symptoms to manifest and another 21 days for a person to recover from the virus, it would be helpful for the government to provide this informational guidance for a 45-day lockdown period.
The guidance can be one of several different lockdown scenarios if they want to hedge their bets.
Unfortunately, because so much is still unknown about COVID-19, this type of guidance has not been forthcoming. Instead, people like the Governor of California are saying that schools could be closed until Fall (in 5-6 months) without any clear guidance as to why. As a result, families in California are freaking out about what to do. Californians are logically extrapolating that most businesses will also be shuttered until Fall as well.
This is a failure by the California government and governments everywhere to communicate and show strong leadership. The Wuhan lockdown lasted for roughly 50 days and economic activity is returning. Why not deliver this message and use Wuhan as precedence?
If you are a deca-millionaire Governor who has aspirations of becoming POTUS one day, you can afford to wait things out for another 5-6 months. Unfortunately, tens of millions of Californians cannot. And if you bankrupt tens of millions of people in your own state, you can kiss your aspirations of POTUS goodbye.
To add some color, I decided to ask several people about how much financial pain they would be willing to endure before demanding the government allow businesses to reopen. I've also shared some of my own thoughts.
27-year-old preschool teacher with no kids.
I share an apartment with three other people. My rent is only $800/month. It's a terrible apartment, but I've chosen to live frugally to save as much money as possible. I spend around $1,600 a month and I've been saving about $2,000 a month for the past six months. I've got about five months of living expenses saved up before I run out.
We've been creating videos at home for our students to watch. As of now, our school plans to pay us for the month of March and April, even though school is shut down. After that, our paychecks will probably stop unless the coronavirus goes away.
I only have about $10,000 invested in the stock market. I'm using this opportunity to buy a little bit of stock ($500), but I also want to save more more just in case I get laid off or don't get a paycheck until the fall or longer.
I would like the government lockdown to be lifted by May 1 (~40 days). My net worth would likely be completely wiped out by the end of the year if we go much longer than a two month lockdown. Most of my friends who are teachers will likely be laid off. I have plenty of friends in the restaurant and travel industry who have already lost 50% – 100% of their income.
We need the government to provide Universal Basic Income for the duration of the lockdown ASAP. They are the ones who are forcing our schools and businesses to close for good reason. I hope they are also the ones who will help us survive during this time crunch. $1,000 a month will help me and my friends a lot.
36-year old mother of two.
I'm a freelancer who used to make about $5,000 a month doing various web design projects. I expect my business to decline by 80% next month as my clients take a wait-and-see approach. We were counting on my freelance income to help us buy a home over the next couple of years. Maybe real estate prices will finally become more affordable.
Luckily, my husband works in the medical field where demand is high. He makes about $170,000 a year. On the downside, my biggest fear is that he will catch the coronavirus at the hospital, has to self-quarantine for 14 days, and then spreads the virus to the rest of our family. We live in a 900 sqft, two-bedroom, one-bathroom apartment.
We've got about six months of expenses saved up in an emergency fund. But we also have about 90% of our net worth invested in the stock market. It is so painful to watch. I am very scared about our future. When the Governor said schools might not open until Fall, I had a nervous breakdown.
I'm using the decline in freelance work to homeschool my children while my husband works. I would like businesses to open up after 30 days. Based on what is being proposed in the Senate, we will not be eligible to receive any financial benefits.
Although the situation looks scary in places like Italy, they have an older demographic with different social customs. We cannot purposefully destroy our economy for longer than a month. I think the coronavirus has already been here for a while.
32-year old food delivery man.
Business is booming, but I'm not making as much as I used to because I lost my other side job as a DJ 3X a week. I'm getting 3X more tips now than I was before the lockdown. Customers who would never tip are now at least tipping me $2 – $4.
I used to make about $4,000 a month at my day job. During really good months, I was making $6,000 a month from my side hustles with a lot more freedom. Due to the coronavirus, I'm back down to about $3,000 a month. It's enough for me to live. But I'm not saving much to get ahead.
I'm nervous about the future, but also hopeful too. I feel patriotic doing my part to help people get their food. With so few people on the streets, I feel safer.
This lockdown isn't going to last forever and I think a lot of things will get back to normal by summer. In the meantime, I'm going to continue delivering meals and groceries because that's where the opportunity is right now. The lockdown has to end by June 1 (70 days).
38-year old restauranteur and father of one.
Our small restaurant (14 tables) is still open during the shelter-in-place order, but only for pickup. We weren't on the various food delivery services because they took too much in fees. But we're going to sign up for at least one of the big ones now.
Business is down about 80% and rent is still due. I have let go of four people. Like you, we still need to pay preschool tuition this month and next month as well. Thanks to the preschool community and the surrounding neighborhood, we are still getting orders.
I don't think we can last longer than a 2-month lockdown. We need to be allowed to open up within two months. To make our restaurant safer, we plan to remove some tables to have a larger separation of space. We will install a hand sanitizer dispenser in the front and another one in the back. We don't expect people to return like they used to. But at least by lifting the lockdown, more people will likely drop by for a meal and order take out.
If the Universal Basic Income proposal is based on 2018 tax returns, we won't qualify for any help.
42-year old father of two (me).
Between December 15, 2019 – March 5, 2020, I was sick with a terrible cough. You can hear my husky voice in several previous podcast episodes. Before this incident, I had never been sick for longer than one month. My mind started to fray in February as I began wondering everyday whether I had the coronavirus. I'm sure I caught the cold from my son who caught it at preschool.
I never had a fever during this time. There might have been one or two days I felt a little achy. But I had enough energy to continue writing 3X a week and play sports two times a week. However, the three months were difficult because I also had to take care of a toddler and a newborn. Every day, I wondered whether I would get my baby daughter sick. She ultimately came down with a cough for five days.
With now roughly 25% of our net worth in equities (~21% before the selloff), we've so far taken a ~7% hit to our net worth with the S&P 500 down about 30%. Our real estate holdings are also in a precarious situation if the S&P 500 goes down much further and does not rebound in the second half. Overall, we expect to take up to a ~20% hit to our net worth during this bear market versus a ~35% hit during the 2008 – 2009 bear market.
Although both my wife and I don't have jobs, we do have various sources of passive income that provides for ~160% of our existing living expenses if we don't cut anything. With the excess investment income, we've been saving and reinvesting the proceeds since I left work in 2012.
As stock dividend payouts and several rental income sources gets cut, I expect our passive income to decline by ~20%. A 20% and 30% decline in our passive income will result in a reduction in expense coverage to 133% and 117%, respectively. To increase the buffer, we will cut down on extraneous expenses if things get more dire.
We also have Financial Samurai, which continues to generate online revenue despite a shutdown. Although traffic is down 16% YoY for the trailing 30 days as people work from home and shun their finances, there is little risk of Financial Samurai shutting down. Operating expenses are extremely low. For example, you can start your own website right now for less than $5/month. You can customize a free generic template. You also don't have to pay yourself anything.
I would like California to open for business after a 45-day shelter-in-place. A 45-day shelter-in-place order should be sufficient to flatten the curve. 45 days provides for 15 days of quarantine and 30 days of recovery if you have the virus. I also expect folks who end up sick to take more time off to protect their community. In the meantime, I expect the government to provide at least $1,000 in Universal Basic Income for two months or at least a total of $2,000.
Because our government and the media have sufficiently scared us straight, when the shelter-in-place ends, the majority of Americans will be much more careful going out when sick, much more diligent washing their hands, and much more considerate in practicing social distancing.
Losing 30% of our net worth (S&P 500 down about 70%) is where I draw the line and will start protesting to get our small and large businesses open again. At this level of net worth loss, I will risk getting the coronavirus to support local businesses by getting a haircut, getting a beer at a bar, buying some flowers for my wife, getting a massage, and going to the mall. So far, we've been delivery-ordering 90% of our food to support our local restaurants.
I assume by the time our net worth is down 30%, our country will be safer from the coronavirus since we will have likely been shut down for longer than three months. I also assume given our relatively conservative net worth asset allocation, if we get down 30%, millions more will feel even more pain and lobby for change.
How Long Are You Willing To Suffer?
“It's a recession when your neighbor loses his job; it's a depression when you lose yours.” – Harry S. Truman.
To combat the coronavirus, I'd love to know how long you'd be willing to shelter-in-place and how much of a net worth loss you're willing to take before you demand the government open up businesses again. How do we make sure the cure is not worse than the virus?
When do you think the inflection point will be when the economic loss of a lockdown will be much more devastating than the loss incurred by the coronavirus? By answering the two survey questions below, I think we can get a decent idea of when Americans can get back to business.
The coronavirus figures coming out of China and South Korea look promising. These countries went through a serious two-month lockdown. I think most of us are willing to do the same provided our government communicates a clear plan why.
It seems like the entire world will only recover after there is a successful, concerted global effort to control the virus. Though China is mostly back in business, its stock market is still struggling. They can make all the widgets they want, but if the rest of the world isn't buying, there's no point.
Loading ... Loading ...Update 2021: All I've got to say is thank goodness there are several efficacious vaccines being rolled out. Also thank goodness stocks and real estate have rebounded. Let's all hang on until her immunity!
Pandemic Post-Mortem 2023!
The pandemic is finally declared over as of May 11, 2023. HOORAY! It is surreal that we all went through this time period and I decided to write some wins and some regrets we had during the pandemic.
My biggest regret was not seeing my parents more. I'm also sad my kids haven't gotten to know their grandparents. Time is so precious! The pandemic took away at least two visits. We plan to make up for lost time.
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Update June 10, 2020: Lockdowns are easing across the country and by July 1, the majority of the country will no longer be under lockdown. The stock market has returned to an all-tim high and I think it's worth looking for any laggard real estate listings from sellers who think the worst is yet to come.
Related: Personal Lessons Learned From The 2008 – 2009 Financial Crisis
Another take on this: how many of your fellow citizens are you willing to imperil even to death so you can preserve your life savings? This is not a condemnation. It’s a real moral choice. We are living a real-world actual trial of the Trolley problems — how many people are you willing to kill to save (others/yourself).
The next one could be even worse. Are we willing to change our society at the other end of this to respond as effectively as the Koreans to the next one.
It’s not exactly the Trolley problem, because you or your loved ones are among those your are either condemning to death or saving. Our collectively social isolation increases the chances of every individual’s survival but also financial demise. While my chance of infection and subsequent death is average, my ability to withstand a financial downturn is far above average. It’s an obvious choice for me personally.
Guys, this all goes away. We are all going to die. Just enjoy today, be happy with what you have. You are just a little insignificant blip that doesn’t matter.
Take It easy, take it easy
Don’t let the sound of your old wheels
Drive you crazy
Lighten up while you still can
Don’t even try to understand
Just find a place to make your stand
And take it easy
If covid 19 kills large numbers, opening the economy will suffer regardless. People will drastically alter behavior to avoid infection. Even if you think you are healthy, your at risk from increased morbidity from infection. Without citing articles there are cases of end organ damage in healthy subjects, decreased lung function. Also you could have an unknown chronic disease process that has yet to present, then covid 19 hits you, you end up in the ICU. But ICU could be full so someone will need to decide who lives or dies. Thousands of front line physicians and nurses develop ptsd and cause a long term, hard to measure hit to society. What I’m babbling about is this does not end well.
Anyone who says 2 months or less doesn’t grasp the seriousness of this health problem. We are basically at war. If bombs are falling all over, you don’t go outside and pretend life is normal. If this thing is raging in 2 months and we look like Italy, we will see how many insist on living a normal life. We must isolate to get this under control. How well we do that determines the financial pain we will endure.
Bombs kill 100% of the people they detonate on, this virus kills 1-10% depending on demographic. I agree there will be adjustments and life will not be the same but it will be up to everyone to determine the risk they want to take when they try to start opening things up again.
I appreciate the seriousness of the situation you are describing. However, in fact, people do carry on some semblance of normal life during a war. It’s a sad fact of survival in dire situations that people must choose between venturing out for work, supplies, etc. and facing bombs and bullets vs. staying at home and starving.
Widespread testing and isolation of the infected and the high risk are reasonable long-term solutions. Mass social isolation is not a viable long-term option beyond 2 months. Other health problems caused by the financial stress may outweigh the human cost of isolation.
We cannot use Wuhan’s lockdown numbers. They produced PPE and ventilators and erected entire hospitals overnight. In addition, their lockdown was draconian, which you can do in a totalitarian state. None of these tactics work in a western society. I understand the calculus but as a healthcare worker, saying you will allow the spread, knowing full well a percentage of patients and healthcare workers will die from lack of resources as a consequence of an economic decision doesn’t seem ethical to me. It’s possible to achieve containment. Look at South Korea, Hong Kong, Taiwan, etc. It just takes a level of government oversight and individual discipline we simply don’t have.
I am a 34 yo pregnant anesthesiologist. I cannot sleep worrying about my own risk of preterm labor/miscarriage, the health of the residents at our hospital, my coworkers and our high risk patient population. The risk of increased mortality, both for people with covid-19 and any other chronic health condition, from an overwhelmed healthcare system is very real. For anyone who does not feel the severity of what is happening, ask yourself if you need any type of emergency medical treatment, what would you want or expect? If you are in a car accident and need surgery, if your mother has a heart attack or stroke, if a friend has cancer, would you want and expect good medical care? If your answer is yes, you should be supporting quarantine for as long as it takes hospitals to get ramped up and prepared for the surge of sick patients that have/are inevitably going to come. When hospitals become overwhelmed as they have in Italy and Europe, do not expect the same treatment you would have gotten even 2 weeks ago. If you are okay with getting no medical care, and will refuse any treatment, and will not contribute to overburdening the health care system, then, I would say you are free to continue your life as you wish. Anyone working in high risk professions (first responders, emergency departments, respiratory therapists, nurses, doctors) are scared for the health of their families and patients. Our department is understaffed at baseline; we can’t just stop working because there won’t be enough staff to run the hospital and enough people to take care of our patients. Hospitals are already running out of and rationing basic protective equipment to keep health care providers and thus all patients in the hospital safe, and we are only at the beginning of this. It only takes one super spreader to infect 30-60% of a hospital. 30% of positive tests in Wuhan were asymptomatic carriers and not included in official case numbers from China. China did not halt their economy and build thousand bed hospitals in a week for nothing. The US (particularly NY) is on a worse trajectory than China or Italy. Yes, everyone is going to be affected by this.
Thank you for summoning this up well. I have tried to explain this to patients, over the phone, that are young and healthy. I’ve been to war torn areas of the world…Iraq and Afghanistan. People need to take it seriously and realize they need to sacrifice to help win many battles to win a war. Doing things right will cause less suffering than in these places hit the hardest in a battle.
Thanks for your reply – it’s always nice to hear from people with strong medical credentials about their take on this. Your response was honestly more eye opening to me than a lot of what has been peddled on the news. Thanks and stay safe as much as you can.
I agree completely. We’re asking medical professionals to make huge sacrifices. We need to support them.
I agree with everything you said having spent my nearly 40-year career working with Healthcare professionals. First and foremost, I pray for safety and security for you and your unborn child.
Second, for all of these folks who think it’s time to reopen America, look at how well the grocery stores were stocked when the surge hit and imagine that is our healthcare system when YOU or someone you care about becomes sick. The reality is our healthcare system needs time to gear up for when the worst is upon us and not when we have no time to react to the surge that will inevitably come. If we are prepared, we can deal with it but the system needs some time to get ready which is why the restrictions in place now matter more than ever.
Inconvenience in the short term is much better than having to choose between who lives and who dies in the long term because of rationed ventilators/respirators caused by an under-resourced healthcare system, not to mention the number of unavailable caregivers who wind up sick themselves and can’t be available to help anyone else.
This was an excellent post. I am an anesthesiologist too and my wife is pregnant. Take care of yourself and your baby.
I have many family members in the medical profession who continue to work. The least we can do is to maintain the quarantine to support them and the rest of society. This would be bad time to go to the hospital. The 3 months before this whole thing hit, my immediate family went to the ER 3 times, 3 family members were hospitalized in unrelated incidents, and everyone was ill with something.
Thoughts of the virus do not keep me up. But I do consider multiple scenarios in my planning. Beyond an individual calamity (e.g., car accident, flu, chronic problems, etc.), one should also plan for a secondary mass event. What would happen to hospitals if we were to suffer a major earthquake right now? What would happen at supermarkets if we suffered a power outage for a few days? What if there were severe wildfires or snowstorms? Anything can be a tipping point.
I don’t mean to be an alarmist and I don’t obsess over these scenarios, but I am keenly aware of the frailty of our support structures. Covid-19 is the all encompassing focus right now, but there are other risks out there.
If 80% of Americans catch the disease, a 1-10% fatality rate means 2.6-26 million deaths.
After 3k Americans died on 9/11 the United States went to war for 19 years and counting.
We can afford to increase the social safety net to support Americans through this crisis.
Love what you wrote and put things in perspective. I work in mental health, your comments on suicide are a good reminder on what we can focus on. Made me curious about the Great Recession, looks like suicide rates did not increase (Link below). But, I recall many calls from clients who were suicidal due to their financial situation at that time. Great article. I still grab take out, go for walks and meet up with a healthy friend. Other than that we stay home majority of the time. We stay away from older and immune compromised people. Willing to do social distancing for as long as needed.
Not concerned for my health, more for others.
On a side note from your other article, my hope is that you are successful in your endeavors. I take no pleasure in you not succeeding.
https://pubmed.ncbi.nlm.nih.gov/28625812/
There is no benefit to anyone getting yourself into a fetal position or running around like a headless chook!
Enjoy the time away from the 9-5 grind.
See this as an opportunity to look within and discover what is in your control and how this can benefit you.
You may discover that what is really important to you, costs less, is already within reach and has been there all along waiting for this moment to reveal it self to you.
Excellent post, Peter!
My comments are not going to be popular. But, I personally don’t think we can afford to do a shutdown at all. Maybe two weeks while we get it together so to speak. First, most folks can’t afford it. Many of them because they were too lazy or too selfish to prepare. That doesn’t matter though. It is a reality and it has to be dealt with. They will not shelter in place. We are already seeing it and it will only get more and more obvious with each passing day. I have a nice view of my city from a very tall condo building and I can see with each day it is getting busier and busier. Construction workers are building, folks are out exercising, …. plenty of people are showing up to work (I am also in a shared office space in a downtown building nearby). Second, and here is the part you are really not going to like, we have given a playbook to every terrorist and rogue nation on the planet for how to cripple us. It is not that hard to create another one of these viruses. We simply cannot afford to do this again and again. It will destroy everyone’s way of life. It’s a sad reality. Thousands will die. That is simply the way it is and we need to deal with it like adults. You cannot shut down the world every few years. Way more people will die from poverty than a virus (at least one of this strength).
Let’s flip the switch back on and ask everyone over 60 to stay in place while we work on a vaccine. Then let us send everyone of them a $100,000 check for the inconvenience. It would be cheaper. Way cheaper than what we are doing. Let’s all pitch in and bring them food, computers, whatever… Let’s dump another 500 billion into hospitals and ventilators, etc. Let’s all volunteer to help them. Whatever it takes. This current strategy though–is a loser from the word go. It won’t work, it cannot be sustained, and most importantly, it can never be repeated. Let’s use this case right now as a test case and figure it out the hard way.
Finally, Sam, you want to put a more impressive stat up on your website? Put this link:
https://www.cdc.gov/tobacco/data_statistics/fact_sheets/health_effects/tobacco_related_mortality/index.htm
“More than 480,000 deaths annually” from smoking. If we really cared about our healthcare system we would start by banning smoking today–right now. That would clear up a ton of hospital beds. But, I can still go by a pack right now (even with the shutdown). If this country (or this world) really cared about people dying, smoking would be a thing of the past. It offers zero value to society. It exists because we are a free people by and large. Free to kill ourselves (and apparently others via secondhand smoke). If we are going to do something as extreme as shutting down the whole world, let’s make some even bigger decisions while we have everyone’s panicked attention. If the government can’t ban smoking to save nearly a half million people annually in the U.S., then it has no business shutting down the country to save 50,000.
I predict you will be drafting an article in six months with the title “What were we thinking???”
Great point! Although we are willing to distance ourselves, agree on those that are vulnerable to stay home instead. The problem is most people who think they are healthy have poor immune systems, so it will be hard to identify these folks and might still overwhelm our healthcare system if we don’t identify clearly who needs to distance themselves. Plus those with multigenerational families, they run the risk of exposing those at home. Adolescents can be immune compromised and not even realize it. (These are the answers I’ve gotten to my equally unpopular comments that you mentioned in your comment).
I totally agree.. I am 70 and could get the virus but I dont think I will.Even if I get the virus I have a 97 percent chance of living. GOOD ODDS . I had a heart attack 6 years ago and I coded twice. I think survival rate less than 10%. Let’s go on with our lives and not shut everthing down.
We have to be okay with looking like we overreacted and saying “what were we thinking?” That means the shutdown worked. If we don’t, we will be Italy and if that’s the scenario you want, then please don’t come to my hospital when you can’t breath, I won’t have a bed for all those who need one.
It is not your hospital. That’s a concept you may want to get comfortable with very soon. it is an American hospital. When kids are starving in the streets in a few months I don’t have to be “okay” with the overreaction. Life is a tradeoff. I will trade the young for the old. That’s what caring adults do and it includes myself. We are destroying the next generation to save people in their 80’s. Ask someone in their 80’s if they are okay with that. I bet you will be shocked by the answer.
Since I take care of patients in their 80s, I can assure you that the majority of them (and their families who love them) would disagree with you entirely.
When the bodies start piling up, people will change their tunes. By then, it will be too late. In the abstract, a death is just a statistic. When people are literally dying in hospital parking lots due to lack of space, people will finally understand the tragedy.
Unfortunately, our government did not seem to have a plan for this. We must buy time in order to develop a comprehensive plan.
Pompeo let it slip last nite that this is all a military exercise. There is no virus. It’s all a smokescreen to collapse the financial system.
Pediatric critical care doc, as well as formal epidemiology training here.
A much broader view of this is that we are very likely going to have to go through some sort of significant isolation scenario for 30 days at a time REPEATEDLY.
Just because many of us hunker down for a period of time doesn’t mean the virus won’t still be circulating. Once folks are released to a semblance of normalcy because the number of new cases and/or hospitalizations has decreased enough to allow for hospital stability, the numbers will simply spike again, going right back to an overwhelming state. I expect that repeated cycles of sheltering in place will become the norm until viable vaccines and/or treatments are available.
This is going to be a much longer fight than the next month or 2. I fully expect to see the same scenarios in Wuhan Province, SK, and throughout Europe once their restrictions are lifted as well.
Hey Sam I respect your desire not to promote other channels. Have you had a look at ZM that I mentioned. The new leaders are emerging and your listening/calculating too much. Follow the leaders!
Upthread Sam mentioned to VOLinNYC:
“… enjoy your beach house! But I recommend not telling anybody that you are. It’s bad optics during a pandemic.”
This hit kind of close to home, but on a more temporary basis. I have booked a beach house for a week starting April 04 also on the SC coast, which was to be our Spring Break trip.
I’ve been turning this over in my head – whether to go or not.
On the “pros” side:
– We can take enough kitchen essentials to not need to grocery shop (I hope you can trust me on this one – we rent houses about twice a year and I know what I need to get by for a week).
– We can get there on one tank of gas, so we’d only need to interact with people at a gas station one time, when it’s time to go back (to the extent there’s any social interaction at a gas pump, in the first place).
– Restaurants in SC are still permitted delivery/curbside pickup.
– Being hermits and sheltering in place while watching the ocean off the back deck for a week is better than sheltering in place here for that week.
– I’m already out half the rent because (so far at least) the real estate agency has not relaxed its cancellation rules.
On the “cons” side:
– Bad optics, as Sam already mentioned. Going on a “luxe beach vacation” during a pandemic.
I’d welcome hearing people’s opinions about this.
Many thanks.
You should go as planned. Enjoy more space. It’ll help keep your sanity. But posting pics on FB about it is probably not a great idea.
Thanks Sam. No worries – no one uses social media (yes, we’re a weird group!).
Be careful as some places have “closed” and you have to prove you live there (OBX) and other places are requiring quarantine when you get there (parts of Florida).
Thanks MoonKnight. I had to google – OBX is NC Outer Banks? I hadn’t previously learned of the local restrictions, so this was a very helpful watchout.
Thanks again.
I should mention a couple of items. The house we plan to rent has been vacant since the first week January (apparently the Spring is one of their slow times). Also, both of our home county and the destination county are low/no in currently confirmed cases.
We have taken recommendations seriously and so have been sheltered at home for 11 days now, with one person (me) getting groceries every 4th day (mainly eggs, milk, bread, etc).
I am on Fripp Island right now for a week. We had the same debate on whether to come or not. Here now with wife and two children. We are so glad we came. Hunkered down with good weather but not interacting with other people. Yesterday I walked two miles on the beach without encountering another human.
Hi George, I appreciate your comment and viewpoint. Many thanks.
I wanted to update this. I’ve been watching the news and many coastal cities in South Carolina have as of late last week or early this week prohibited vacation rentals, even those already rented/paid for.
My rental agent called me Monday and canceled my reservation and will refund my partial payment.
I’m glad for George that he got his family’s vacation in just ahead of the shut-down!
At the end of the day, we don’t really have a choice in this. I mean, people can choose to not do what they should but businesses will be closed and things will be a mess. And by being out and about it just prolongs the problem.
I’m not sure financial independence is entirely accurate. We need society to function to have the chance to be financially independent. If it doesn’t, forget about it. I’m also not expecting the end of modern society, but we’re more in this together than we sometimes realize.
So I have my preferences for how long I can reasonably tolerate what is required, but the fact is, it really doesn’t matter what I think about it. It will be what it will be. For now I’ll stay home and wash my hands. :)
If California shuts down borders will the rest of us been able to get fruits and fresh fruits and vegetables.
I assume shutting borders will be to typical human traffic, and not to trucks (and truckers) moving goods back and forth.
Excellent article, Sam! I was beginning to see conversations about how this may be doing more damage to the economy than the virus itself. Thanks for putting some numbers together to give a better idea. I am certainly concerned for small businesses and even medium sized businesses in these times. As for myself, I am still working my part-time job over here in Canada, and my small blog income has been increasing. Fortunately, my job is not on the front lines, but I am still required to travel for work as my job supports some essential services. In fact, my hours are increasing during this pandemic, so my income is increasing and so is my small blog income. As long as I can stay safe, my financial situation may improve with what is going on. But obviously my portfolio is being dismantled. I am already concerned with the 30% drop…I would be getting seriously concerned around 50%. I am going to try my best to ride this out. I plan to hold and add more to my portfolio as long as my hours increase. Thanks for sharing!
Hello all my wife and I had a 600k stock portfolio all in large blend funds….Vanguard and Fidelity…..we are currently down 35%….we are both 48 and plan on retiring at 55…I have a pension through ford motor co…..I plan on riding this out…we both continue to but 20% each in our 401k….our goal was to have 800k in our 401k…we plan on retiring in Arizona but the Philippines is also an option if our savings gets completely wiped out and never recovers…I still have a pension of 2500 a month after taxes….our current home is paid off and we also have another 300k after the sell….any thoughts would be appreciated…love all your articles…..
Unfortunately, I don’t think a 30 or 60 day “lockdown” will end the pandemic. It wil subside but then quickly come back. The idea right now is to attempt to “flatten the curve”. I think we will likely see regional “rolling lockdowns” based on heathcare capacity. We also have to hope that the Senate passes a stimulus plan that actually puts money in the pockets of the poorest and most vulnerable. As of now, I’m worried that it will be too slanted toward helping big businesses with no strings attached. 2 Trillion allocated effectively could be a life saver for many families. Hopefully more states will follow New York’s lead and enact their own measures to shore up unemployement and provide funding to keep small businesses open if the federal government doesn’t act soon.
There can be a whiplash effect when a lockdown is ended but also consider those who were previously contagious and had the virus are now immune and will not be carriers, creating an additional buffer we don’t currently have.
I think we can take 2 months of lockdown. The problem is lots of people still aren’t serious about staying home. The news said the beaches and parks were very crowded last weekend. The US isn’t like China. People are too independent to go into real lockdown unless it’s really dire. Many locations still aren’t hit hard and the people aren’t locking down hard enough.
I don’t think 2 months is enough unless everyone gets on board. Travel restriction will have to be in place too.
I heard lots of bored young people from WA (a hot zone) came down to OR beach recently. They are going to spread it down here. We need to close the state borders, but that’s not going to happen in the good old US of A.
Stay healthy everyone.
Easy for you to say, you stay at home all day while your wife earns the money.
I’ve been preparing for this scenario for decades. Social isolation. A rich net worth, chainsaws, axes, and holy water.
This is only The Beginning.
In the next phase, those who have died from The Virus will be returning to life.
Thus begins The Zombie Apocalypse…
In the following phase, the walking dead will be joined by Satan’s other footsoldiers: vampires, werewolves, demons…
Then even weirder, scarier shit happens: skulls will fly through the air, fresh water will turn into pools of blood, mirrors will reflect your future death…
You have two choices; Embrace Lord Jesus or Embrace Lord Satan (the latter has his proxy on earth in the White House). If you get infected and have the money, send it to Him in the White House–for He will give you a presidential pardon from death.
Pain is Pleasure to some. And Pleasure is Pain to others.
I’ve been warning people across decades about this new era. They laughed at me! Today many of them are dead or dying, or in hiding.
Sam, what is the point of “moderating” comments if crap like this gets through?
I find the occasional “end of the world“ type of comment entertaining. It’s also informative because there are people who have always been very doom and gloom. If this person has been warning people for decades, does that mean he has been living a doom and gloom lifestyle for decades and has missed out on an incredible bull market?
It’s just interesting to hear from different people so long as there are not direct insults. But let me have a look again as I sometimes overlook things given there are so many comments.
I hear you but this is just comedic trolling at best…
“in the following phase, the walking dead will be joined by Satan’s other footsoldiers: vampires, werewolves, demons…
Then even weirder, scarier shit happens: skulls will fly through the air, fresh water will turn into pools of blood, mirrors will reflect your future death…”
Not gonna lie…I thought it was pretty funny, and I needed the laugh.
Over here in the UK our ethically commendable / biblically expensive free universal healthcare system meant the National Health Service was on its knees going into this crisis. Hence we’re already rapidly heading for an Italy situation where Doctors are going to have to choose who’s Mother / Father / Brother / Sister gets the last ventilator and vast numbers of eminently treatable patients are going to die due to lack of capacity unless containment gets draconian and the infection rate slows.
How you weigh that suffering against the suffering that will follow a decimation of the economy I have no idea but reading the article and the comments it feels like the consequences of the infection rate getting out of control are underestimated. I hope the US doesn’t repeat Europe’s mistakes.
People here were complacent until a week or so ago thinking if you’re young you’re fine. Now there are plenty of previously healthy 20 & 30 year olds in hospital on ventilators fighting for their lives. This thing isn’t well understood and the age distribution in the death rate stats leads to a lot of complacency.
Personally I think policy will have to be much more dynamic than a single containment period. The dilemma boils down to treading the line between an out of control infection rate leading to overwhelmed hospitals and a death rate far beyond what was unavoidable vs the consequences of a decimated economy, hence the calculation driving the extent of containment policies will presumably be based on the capacity of the healthcare system to cope with the volume of critical cases and the latest probability / timing of vaccine deployment. As government your optimum approach is essentially to impose the least economically destructive measures possible that are still robust enough to keep the number of critical cases at any one time within the capacity of the healthcare system. Ultimately that probably means a constantly shifting approach to containment and waves of isolation periods to arrest the infection rate as hospitals reach capacity, followed by looser periods to enable the economy to function at least in some capacity until herd immunity or a vaccine puts an end to this monster.
Hello Sam and readers,
I rarely post to the site but thought I’d update the group on my family’s situation and see if others are in a similar situation.
I sell IT Consulting Services and my wife sells travel industry related advertising. We have a 2 year old and own our apartment in Manhattan. When NYC schools closed our nany let us know she could no longer take care of our toddler., since her own children needed to be cared for. Last Sunday 3/16, we made an executive decision and packed our bags, rented a car, and drove from NYC down to Charleston, SC. We are lucky in that my in laws rented a beach house there for March-May long before the pandemic started. We felt that we were sitting ducks in Manhattan and we turned out to be right.
Economic impact: My wife’s company has already asked her to take a 40% salary reduction. So far my clients have clamped down on any new business, however I have a large run rate business in place and will be profitable to my company for the foreseeable future if I don’t sell anything new for the next 9 months and my clients don’t cancel Purchase Orders, etc… My wife and I are easily able to work 100% remotely, so we are extremely fortunate.
Over the last 18 months I have been hoarding cash, making almost zero stock purchases. I felt that the market was overheated and a recession was on the way. At the moment I’m feeling a sense of relief that my wife and I will be able to buy into a market that is sure to decline by 35%, which will give us semblance of hope of getting the return on equity that our baby boomer parents got to experience during their earning lifetimes. So that’s the good news in my eyes. I plan on nibbling our way back into the market as it declines, buying S&P index, and well capitalized business that are going on sale (Visa, Mastercard, Disney, McCormick, etc…)
The bad news is that we are unable to rent out our Manhattan Co-op for short term leases. So we’re taking a loss on that as we live in South Carolina paying roughly $2500/month for our beach house rental. So our home costs have temporarily risen ~ 40%.
In the meantime, we are able to split up caring for our 2 year old between 4 adults, while working remotely, buying back into this market, and spending time on the beach. The beach here and will remain open only to those with a resident address, luckily we have our lease and that will get us on the beach each day.
I’m hopeful that things will bounce back by May/June and have enough cash to live here indifferently should we need to. Perhaps if the local real estate market takes a hit (it’s been overheated here for years), we can put a down payment on a place and put down some roots here. That would be best case scenario of of course.
Cool. Thanks for sharing and enjoy your beach house! But I recommend not telling anybody that you are. It’s bad optics during a pandemic.
But this is another datapoint among many that shows perhaps more people are OK with this bear market that people realize.
I’ve been thinking about the start date for your lockdown? Seattle, New York City, Colorado (ski areas), California have all been locked down early due to a high volume of visitors from out of state or foreigners. There may be a 60 day window before new cases sufficiently decline, but at that point, travel should be restricted to keep other areas safe (who have better managed their peak cases).
My family recently paid off our school loans and I just started investing and learning about investing at the end of January, my overall investment have actually gone up thanks to timing healthcare industries but all others have tanked.
I’m an embedded programmer and work from home but was laid off when the PA governor closed down the state on Friday (no orders in, no money to pay R&D) financially my family will be ok so long as unemployment payments come through (and doesn’t run out, the system will be under duress) since we live in a very low cost of living area, but I won’t have spare cash to invest when the market bottoms out. I think buying into the market now (or soon) is a big opportunity that I don’t want to miss out on.
I’m also going to look into starting my own business while I’m laid off, hopefully I’ll have a product ready to sell when this is over (I’m hoping our curve follows Wuhans or faster) and then have an additional income stream when I do get back to work.
I started Financial Samurai July 2009. In retrospect, it was the best career/business/lifestyle move I have ever made. Now is the time to test your creativity and try new things online while we are sheltering-in-place.
If not now, then probably never.
I have been following the virus since mid-January in Wuhan (i.e. less than 500 documented cases worldwide) and I am concerned with comparing the Wuhan lockdown with the California lockdown. If you were watching on Twitter daily (or hourly as I was) back then, there were post after post removed of the scenes of the lockdown, people dying on streets, video-recorded suicides, people scaling/falling from multi-story buildings, legitimate empty streets/cities, etc. The Chinese government was scrubbing the streets and Twitter by the minute as posts would appear and disappear (as with active people/reporters) within hours or days.
In short, there quarantine was legitimate, locked/welded buildings, arrests, etc. Do not mistake this for condoning or recommending these actions, but that’s what they did (and it seems to have “worked”).
I have been walking and riding bikes daily to get outside and living a quarter-mile from the beach, it looks like a summer day in terms of foot traffic. Sure, some people are a little more spread out on the sand, but Main Street, the bike/walking paths and hangout areas are as packed as a beautiful July day. Literally, trios of moms (with babies) walking within feet of each other. Volleyball courts? Every one–full. Grocery Stores? People sandwiched in line, everyone holding carts/baskets, every freezer/cold door opened and closed to clear the shelves, and a small fraction of people with gloves and masks. Del Taco? A couple groups of teens hanging outside the couple different ones I drove by.
In short, our quarantine is a farce. I fully support a legitimate, no contact outside of home quarantine of 30-60 days, but beyond that and some sectors or parts of life will be damaged beyond repair, I am already concerned about some local establishments and we are not even two weeks in.
Personally, I can weather the downturn as long as necessary so it’s easy to ask me, or most rational readers that respond here, but my real concern is my immediate family and the 99% of people not reading your blog. I think much longer than 30 days or if martial law is imposed things could turn ugly, quickly…and that has me concerned.
Due to the uniqueness of the situation and political/economical carnage, some governments are being very careful about what is and what isn’t said, but some are not, which is a huge concern of mine. At this point the information and misinformation is borderline wreckless, which is scary. (Discussing potential drug combinations that MAY have some type of benefit to some group of people with the general public? Holy shit–c’mon.)
The mass-buying/hoarding is a prime example of the psychological aspect of situations like this, and if someone doesn’t get involved in monitoring the information that is being put out to the people, I am concerned where this might be heading. People need to feel that someone has accurate information and control of the situation (regardless if they actually do), and until someone can give that feeling/impression, it’s going to get worse.
Kids don’t know that there parents don’t know everything, but they think they do (or can at least figure it out), and that is extremely important to get them through the scary, strange world they navigate on a daily basis. And that’s where we are at right now. We need someone to believe in, and so far China, WHO, POTUS, etc. have all led the masses down a scary path of censored and misguided.
I have been tube, especially this one Chinese youtuber named Chen something something who has now gone missing for almost two months.
What would take for you and others to stay inside?
I presume you are referring to Chen Qiushi, and yes, I too am curious where he and quite a few others have ended up over the last 6-8 weeks.
For us to stay inside? I guess I don’t know if a true in-house lockdown is necessary. Not sure why I can’t sit in the driveway. Leave property? Not sure why I can’t ride my bike in the neighborhood. And down the slippery slope we go.
But honestly, stay inside for x number of days? We could do it relatively easily, fortunately, even with 2 young kids. We have a small but nice home with everything we need for maybe 30 days and we didn’t rush out any buy or hoard anything. (And fortunately I am working at full-capacity from home, minus a hard drive that went bad for some reason.)
As soon as the order is put in place to stay in, we are ready. Until then we are going to sneak out for some exercise (biking and walking) as currently allowed.
Sam,
The Wuhan lockdown lasted ~50 days , but this was with draconian measures. Videos showed officials knocking on doors, checking every residents temperature, and forcibly removing people from buildings who met certain criteria. These videos also showed officials soldering the locks on the exterior doors of apartments, to enforce quarantine. Shelter in place in one country is not the same as shelter in place in another. Therefore, the results from Wuhan showing a rapid recovery will be impossible here.
THIS IS AN EXTREME OVERREACTION THAT IS CRUSHING OUR ECONOMY. OUR GOVERNMENT OFFICIALS NEED TO GET OUT OF OUR WAY.
Or perhaps we will learn from them and come out of this just as quick.
How long are you willing to have the lockdown happen in America.
This is definitely going to be a dance between too much action and keeping from killing the economy. There is absolutely a line where the cure is worse than the problem, I sure don’t know where that is though.
What I’m personally worried about (other than dying of this damn virus) is a fundamental breakdown of the financial system and then no asset is safe. Bonds become worthless, real estate tanks 50%, hyper inflation makes cash worthless. So even though I was only 20% stocks before this mess because I didn’t need to play the game anymore. I realize this is highly improbable, but it isn’t impossible. Interesting times, stay healthy everyone!
Thank you all for all your comments. I am a 40 yr massage therapist in Colorado who has been laid off. My husband might, as his job is tied into the tourist industry. We started out in 2009 as a young family and in absolute poverty. Finally, in the past year, we were able to finally be making enough money to actually start saving some. I am guilty of my over priced coffee, but we otherwise stick to a pretty strict budget. We will be fine with this shut down for maybe 3 weeks. The unemployment is over run, and with a normal 4-6 week turn around time, it’s not looking good. We have 3 kids ranging 11 – 5, and I am in a super panic about food availability, cost of food, and what this is doing to our country’s ability to come back economically.
I am tempted to go out and get a job. But, after reading all your comments, I will stick it out as long as I can for the sake of the hospitals and health workers, because them becoming overwhelmed is also causing me extreme panic. I’m desperate for Italy to hit their peak, I hope it is coming soon.
I guess I am surprised that some of you are shocked at the lifestyle a lot of us service providers live. I am not in the least bit surprised of the skyrocketing unemployment. I mean, every single thing that people do to have fun was cut. That’s a ton of work force. Those people are lucky to be making 14/hr, the service industry doesn’t get paid what they are worth. We are seeing that now with the nurses and grocery workers. Minimum wage is ridiculous and will not keep people alive, especially when rent is so high. They don’t have time or energy to learn to invest, and they don’t even know where to start. I was making 18/massage, and that is the best money I have ever earned. I was only just learning about investments starting this last fall.
Thank you all for your words of encouragement. Thank you, to the ones that can, that are doing what they can for those still at work (grocery especially), and to keeping the small business going. They really are the backbone to the communities, and the longer they can go, the better we will be.
Hi Jamie – Hang in there. One thing I feel strongly about is that there is a lot of food supply. The panic feeling does increase when we go to the grocery store due to to the numbers. Try going late morning or late evening 30 minutes before closing. Not the best time to go to get the best selection, but there is still tons of food. It is the TV and the images of hoarding that causes us anxiety.
If you were in SF, I would book 10 massages from you! Demand will come back. Best of luck.
Yes, I’m not so worried about the chain of supply breaking…. yet. I am more worried that the store workers are going to burn out, get sick, die… We went this morning, we had to go to two stores, but we got everything we need for now. Even found tp! However, one store was seriously under employed. That store is our regular store and they have always had a good amount of staff. Not today. The ones that were there looked so tired, not happy. If they are anything like me, then they also or living every moment in full panic while also dealing with the public. My panic gets to stay at home, so far.
As for anxiety, I don’t watch t.v., but I read the news articles and I’m sure those are just as bad. My husband thinks the whole thing is overblown and is getting a little frustrated that I won’t go work at the store. Maybe next week, I don’t know. The back and forth on the type of illness to expect doesn’t leave me confident at all.
And, thanks for the compliment! I do love massage work, I love helping people feel better. I’m not worried about the demand for that. I just hope it gets here sooner rather than later.
I really like the crux of this article about the tradeoff between public health and the economy.
That said, I’m not sure all of the criticism of the CA governor is fair. I too would love to know when shelter-in-place will be over, but I’m guessing there is too much uncertainty related to the public health cost (the economic cost seems more clear) to give a specific end date for shelter-in-place.
If the governor said businesses could open April 30th, but on that day we weren’t yet at the flat part of the curve and it made since to extend the shutdown, it could cause more devastation (and even less trust in govt.) from business owners that previously planned on opening then.
I’d prefer governments just be honest about what they know, honest about what they don’t know, and promise to take care of individuals and small business owners during the times of uncertainty.
Saying “indefinite” is poor leadership. A leader must come up with a concrete plan with various scenarios. Wealthy people have the luxury to wait for months on end. The rest do not.
We are likely looking at many months of closed businesses. Doubt schools will open next fall. People just aren’t taking this serious enough.
I believed schools will open before Fall 2021.
How long and much are you willing to endure?
Hi Sam,
We entered this situation 36% cash- held in high interest savings accounts and GICs- which I think are the same thing as CDs in the US. We spread it out less than 100k per account as we wanted CDIC (insurance).
We were 57% stock market exposed through direct investing accounts.
The other 6% was invested in worker group RRSPs – which are similar to 401k.
We are mortgage free on a house in Vancouver.
So far our net worth is down 17% from our February month end numbers. We don’t include the value of our home since we don’t plan on selling and think it will retain value- but who really knows.
I’m not sure how to answer the question you posed in terms of what is the breaking point. It’s very hard to attach a dollar value since we can’t be sure which costs will inflate or deflate given the circumstances (zero interest rates/ massive money pumping). I’m also worried about the value of Canadian currency without stable oil pricing. And of course safety is numero uno!
Remember if you have been financially successful you’re just good at navigating rules under conditions in a stable economy. This can be taken from us at any time, so it’s best to acknowledge going forward that things may not be so easy.
I worked as an ER nurse for 13 years- currently on maternity leave. I’m very familiar with Main Street versus Wall Street ;) I don’t believe 50% of Canadians have the money to stay at home for even 1 month without UBI mailed to them. Any longer than that – even with government support and the financial market gets too distorted.
I love your posts and you’re a beacon of comfort for many of us. Thanks for taking the time to write and helping us all navigate in real time!