What Are You Learning From The Pandemic?

rogernusbaum

I've been seeing a lot of Tweets/comments/articles about using our shut-in time productively. Some, more from younger dudes, say things like if you're not learning how to make more money you're doing something wrong or other very judgmental sentiments. I do, however, love the idea that this is an opportunity of sorts for those who are able to take advantage of it. I can appreciate the obstacles to viewing this as an opportunity including a situation related directly to the virus, scrambling for money and/or necessities or having to make serious day to day decisions related to young kids schooling or otherwise structuring their time.

If you're relatively lucky on those fronts then it is an opportunity to take an inventory of what's important to how you want to live your life and maybe also, how you want to engage in markets.

The pandemic has revealed how fragile everyday life is for most Americans especially in terms of health and personal finance. All those articles about Americans not having more than $400 for an emergency might have been correct. A lot of people are desperate for their $1200/$2400 checks, many people and companies were unable to make their April 1st rent payments. What else can't they pay for? The implications are awful.

We know that the Coronavirus is especially hard on people with metabolic syndrome (this includes maladies such as hypertension, blood sugar issues, adipose tissue and so on) which is a large percentage of the population. Being vulnerable health-wise is another form of bottom up fragility.

Government inefficiencies have also been exposed in terms of number of tests, medical supplies, hospital capacity and whatever else I am forgetting. Draw your own conclusion of course but the Government's attempt to be there for citizens is woefully lacking and I would not want my fate to be overly reliant on Big Brother.

A big theme for this blog for many years is the idea that no one will care more about your outcomes than you and that idea is front and center now. Not everyone can have good health and have their finances in shape but the behavioral aspects of these are within the control of many people, maybe even most people. On the health front, there is no one who can't afford to eat less sugar, no one is too poor to do some pushups. On the financial front we can all drive our cars longer (an expensive repair equates to 2-3 monthly payments for a new vehicle, get it fixed and your done versus 69 more payments for the new car). As a matter of philosophy, these things are behavioral and it is up to us prevent/solve our own problems as best we can with health and finances.

@KetoAurelius Tweeted this "plague is an opportunity to question everything you've taken for granted." Are there things you take for granted which have now emerged as something you shouldn't have taken for granted? Regardless of whether empty shelves at stores are due to illogical hoarding or a breakdown in the supply chain, taking for granted that the grocery stores will always have what we need might be a bad bet. I don't want to hoard two years worth of food in my basement but keeping a week or two ahead seems prudent, being willing and able to eat what you may not like (sardines anyone?) can help. Do you live some place where you can grow a little food and have some chickens? Do you live someplace where you can hunt? One deer properly butchered can provide a lot of food.

I certainly took watching sports for granted and although there's no important consequence for fans, watching sports is a lot of fun. There's no real workaround for this that I've found. I took for granted being able to go to the gym. We have weights at the firehouse and I've been able to make due with them and my jump rope.

We all have things that are important to us that we might take for granted. The pandemic is in part, an exercise in learning how to manage when things we take for granted aren't as available as we are used to. This is an opportunity to learn about ourselves and get what is hopefully a small scale look at our resiliency for when things don't go our way.

In thinking about how we view priorities, Andrew Wilkinson Tweeted a list of things that are now unimportant with the context being that people placed importance on them incorrectly like jewelry, cars and other expensive status symbol items.

Daniel Vassallo happens to find himself and his family in a small rental in between having sold one house and looking to buy another with most of the family's stuff in storage. He says he doesn't miss the stuff which he says is thought provoking. De-emphasizing stuff, getting rid of clutter and all the other ways to describe this makes life simpler and simpler is often associated with better, especially to the extent people get overwhelmed by their stuff. This event is an opportunity to reassess how we look at stuff; buying it and keeping it. A pandemic that limits our access to what we need and what we can do maybe makes us realize that a $400 pair of Air Jordans from StockX isn't very important.

This is also a chance to reassess tolerances for risk and volatility in investment portfolios. An eleven year run with only a few shortlived dips, even if a couple of the dips were pretty big, makes it easy to forget that the stock market can get pasted every now and then which triggers all sort of potential emotions. Having the emotions isn't the problem but succumbing to them is. As I said during the financial crisis, if you've learned the hard way that you had too much volatility in your portfolio then you should do something about it but not now, not in the middle of the event.

We talk all the time about sequence of return risk, asset allocation and the use of diversifiers to soften the blow of times like now. Just as it was in the financial crisis it is today, the market will take back its highwater mark. Your portfolio will take back its highwater mark. We just do not know when it will happen. For people drawing on their accounts, having enough cash on hand for expenses mitigates the uncertainty of when. For people still putting money away every paycheck then this decline is a gift. You are buying your funds or stocks 20%-30% cheaper than what you were willing to pay two months ago.

We know what will happen but as Tom Petty said, the waiting is the hardest part.

As you possibly have time now to examine many or all aspects of your life and how to make things better in terms of health, spending habits, preparation and other lifestyle habits, maybe time should also be spent on how to build an allocation more suited to your tolerances as your portfolio is your financial future even if the daily price movements now are unimportant.

I certainly don't have all the answers but I did get an early start on thinking through these sorts of issues and incorporating them into how my wife and I live our lives. It is fun for me to explore and hopefully useful for you to read about.