Did The World In Fact Change?
The annual Berkshire Hathaway event happened virtually over the weekend and one of the most interesting tidbits I saw was Warren Buffett's comments about the firm's investments in airline stocks. He said “the world changed for airlines” as part of the fallout from the COVID 19 virus. We've all seen the various reports showing 95% declines in the number of people flying everyday. Right here, right now there doesn't seem to be any visibility for when travel might start to normalize or even go back to half of what it use to be. Against that backdrop it is reasonable to wonder whether the world for airlines has changed. If the world for airlines has changed, what other businesses and aspects of everyday life have also changed?
A slightly darker take relates to this article about Laurie Garrett who is the prophet of this pandemic (read the article and draw your own conclusion). She believes that the current event will come and go in waves, "I’ve been telling everybody that my event horizon is about 36 months, and that’s my best-case scenario.” As is my usual take, I am less concerned with the merits of the argument but how to adapt if it turns out that this sort of forecast turns out to be even close to correct. If we're coming and going from waves of shutdowns to partially open and back again, occasional disruptions in supply chains and who knows what for the stock market then we all need to adapt. That last sentence kind of avoids some of the more serious questions like job loss or forced career change, early retirement and any other extremely adverse circumstances that might be relevant for you.
For me, a big part of the solution is increasing optionality in as many aspects of life as possible as a path to adapting to what might turn out to be a changed world.
People in their 50's have already been a greater risk of job loss due to obsolescence, being too expensive relative to younger employees and so on before this happened, it might be worse now. We often hear that we need to learn new skills. This can mean many things. Depending on the industry you work on you might be able to take classes to advance/keep up in that chosen field. You can seek out totally unrelated skills, I've done this by becoming an EMT in 2011 and also taking classes for a couple of different positions on Incident Management Teams (a door that I believe is open to me). If you have a hobby that you might be able to monetize, you can spend time enhancing your ability at that hobby.
While it might sound trite, figuring out how to make a living in the face of having your hand forced is pretty important. That sentence has a couple of layers to it. One is work you can do, will want to do and will allow you to pay the bills even if it doesn't make you rich. The other layer is that the new job is one that will survive. Now might not be a great time, for example, to pursue a love of cooking into a new restaurant. Although a love of cooking channeled into some sort of home meal prep (yes I know there are a lot of these, it's just an example) that doesn't rely on customers sitting at tables in an enclosed space might be more viable.
If one change is that we are not going to fly to take vacations with the same frequency as before then we might need to reinvent how we recreate or take time off. This is some low hanging fruit for me living within a six hour drive of many national parks, national monuments and other natural features and we love going to these places and love going to them again. How can your interests for recreation and vacation evolve if they need to? This actually strikes me as an opportunity for people to discover and learn about completely new things. While not going to Hawaii would be a bummer (for us anyway), being able to adapt on this front is important for mental health and happiness.
A lot of people go to watch professional sports and see concerts. That's a legit use of time but there is visibility for this to somehow be different in the future. Slightly different than a vacation, spending a day at a game or an evening at a concert might need to be replaced. One thing I am interested in learning is how to shoot a bow. No crowds, requires hand-eye coordination, there's a little expense and I have no idea if it would be fun or if I'd be any "good" at it but it's different. Learning about completely different things than you already know about offers all kinds of potential opportunity.
I am always going to include health (diet and exercise) in this sort of exploration of ideas. This is ground we've covered before but it should be obvious that life is easier and better when you don't have to spend a lot of money on medication, a lot of time at doctors' offices and when you can do the things you want to do. Learning about diet and exercise is potentially a never-ending endeavor. I've thrown myself into it in the last few years.
But what about personal finance habits and investing? What changes if any should be made to adapt in the context of this discussion? Saving more, if you can, will never make a bad situation worse. If you look in the right places you can find statistics that say based on such and such data the implied forward annual return is some terribly inadequate number...3%..2%...whatever. There was plenty of that sort of thing in the immediate aftermath of the GFC which was dead wrong but being wrong before has no bearing on whether that sort of analysis is right or wrong this time.
If you are part of the the 75% or 80% of the workforce that still has their job, just keep contributing with each paycheck. That's the easy part. With the other part of your assets or if you are past the point of regularly saving money (like if you're already retired) you could consider being a little more tactical.
I am not suggesting day trading or even frequent trading but occasionally the stock market moves much faster than it should or normally does. December, 2018 is one such example, this spring is another. The S&P 500 dropped more than 30% in a peculiarly short period and snapped back about half of the decline in a similarly short period. There are infinite ways to do this but the least risky that I can think of would be to be more aggressive with rebalancing your asset allocation. This is much easier to do now that commissions have gone away. Whatever tolerance you choose, you will being buying stocks cheaper. This will lead to adding basis points of performance whenever the snapback or recovery happens.
Rebalancing is far from a new idea but it requires do-it-yourselfers to take a more active role in managing their portfolios but tying in another concept from many previous blog posts, taking a more hands on approach to your investing is an example of acting on the idea that no one will care more about your outcomes than you.