RPF0707-Where_Do_We_Go_From_Here_COVID19
00:00:00.000 | Welcome to Radical Personal Finance, a show dedicated to providing you with the knowledge,
00:00:04.520 | skills, insight, and encouragement you need to live a rich and meaningful life now while
00:00:09.120 | building a plan for financial freedom in 10 years or less.
00:00:12.120 | Today on the show, we're going to talk about the week ahead or the few weeks ahead as I
00:00:16.320 | record this.
00:00:17.320 | It's Saturday, March 14th, just before 8 o'clock in the evening, and it's been quite the momentous
00:00:22.320 | last few days.
00:00:24.680 | But I wanted to share with you a few ideas.
00:00:27.720 | Now recently I've been sharing with you what I've been thinking about, trying to help guide
00:00:32.520 | you, give you someone to hopefully thoughtful and rational to talk through some of the events
00:00:38.080 | that we're living through.
00:00:39.440 | And it seems like you can't keep up.
00:00:41.320 | News is changing very, very fast, which is why I'm recording this.
00:00:44.880 | And basically what I'd like to accomplish in today's show is I'd like to give you some
00:00:48.080 | ideas so that you can understand basically what the different options are.
00:00:53.760 | And as we think about the path ahead, as we think about where we're going from here, I
00:00:57.560 | want to share with you what I see as the best case scenario and the worst case scenarios.
00:01:02.360 | And then you can watch over the coming days to try to figure out what we're more in line
00:01:08.480 | with.
00:01:09.480 | And I want to talk about this in light of the specific threat of the virus itself, talk
00:01:15.720 | about kind of what a best case scenario looks like and what a worst case scenario looks
00:01:20.080 | like as I see it, and then also talk about it economically.
00:01:24.360 | What is an economic best case scenario and what is an economic worst case scenario?
00:01:28.920 | And I did this analysis for myself because as I look around and watch the events of the
00:01:34.480 | day, it makes me, it's hard to believe.
00:01:39.240 | I think we're probably all in that same situation where it's hard to believe.
00:01:42.280 | And I figure if I'm finding this hard to believe, and the reason I say me is simply I'm someone
00:01:48.540 | who's thought about this for years.
00:01:50.240 | I've read novels about viral outbreaks.
00:01:53.640 | I've read history of previous viral outbreaks.
00:01:57.840 | I've thought about it.
00:01:58.840 | I've considered what it would mean, and I find it hard to believe where we are.
00:02:02.960 | My normalcy bias is quite strong.
00:02:04.800 | I just think, man, my analysis says that these are the events that are happening, but I can't
00:02:10.400 | really believe it.
00:02:11.480 | And that's that normalcy bias kicking up its head.
00:02:13.560 | And so I figure if I'm finding it this hard to believe, then you're probably wrestling
00:02:17.440 | with the same thing.
00:02:18.440 | So I want to talk it through with you.
00:02:20.000 | Let's begin with the virus.
00:02:21.600 | Where do we go from here?
00:02:23.240 | Well, obviously we don't know, but let me paint out what I see as the bad situation,
00:02:30.440 | the really bad situation, and also the not so bad situation.
00:02:35.560 | And then you can consider where the facts are taking you when you look at this data.
00:02:42.800 | Let's start with the not so bad situation.
00:02:45.120 | That's actually where we are, again, on Saturday evening at a quarter to eight.
00:02:50.440 | If we're going to say that the virus itself is not going to be so bad, here are some of
00:02:55.160 | the things that you would need to be convinced of.
00:02:58.560 | Number one, you would need to be convinced that there aren't actually that many people
00:03:02.960 | sick in your country.
00:03:06.160 | You would probably need to be convinced that the official statistics are accurate.
00:03:11.640 | You can go and you can look up the official statistics.
00:03:14.240 | There are many websites that are tracking it, saying something like almost 150,000 people
00:03:19.500 | around the world currently have this virus.
00:03:22.320 | Those official statistics are tracking the number of people that have it, the number
00:03:26.280 | of people recovered, the number of people who have died.
00:03:29.160 | And so perhaps you can look down at the official statistics in your country and you can say,
00:03:33.520 | "Look, it's not quite so bad.
00:03:36.240 | There aren't actually that many people sick.
00:03:38.400 | Maybe there's only 5,000 people sick.
00:03:40.520 | Maybe there's only 2,000 people sick."
00:03:42.760 | And perhaps that would be worth considering.
00:03:45.400 | After all, the official statistics are official.
00:03:48.800 | Now let me go through the list and then I'll come back and poke some of the holes in this
00:03:53.320 | because I don't think that this kind of best case scenario is realistic.
00:03:56.720 | But that's what you would need to believe.
00:03:57.880 | There aren't actually that many people that are sick in your country.
00:04:02.320 | The second thing that you would need to believe for a not so bad scenario—notice I'm not
00:04:06.920 | saying great, just saying not so bad—is that the social isolation and various containment
00:04:13.960 | procedures that have been instituted in your country and in countries around the world,
00:04:19.920 | that they're going to work, that they are effective in slowing the spread of the virus.
00:04:25.880 | Not entirely, but they're effective enough to slow the spread of the virus so that the
00:04:30.040 | healthcare providers can actually keep up.
00:04:33.800 | There's a good chance that happens.
00:04:39.720 | It is true that social isolation will work.
00:04:42.200 | It's basically the only strategy that's really going to be effective.
00:04:45.200 | That and washing your hands, which is why you hear it everywhere.
00:04:47.320 | So if you're looking for the best case scenario, you want to believe that it's going to work.
00:04:51.720 | Number three, you want to believe that because this is not such a serious sickness, for a
00:04:57.160 | best case viral situation, you're looking around and you're going to find that not very
00:05:01.980 | many people get seriously sick and die.
00:05:05.320 | Basically you're looking for a low morbidity and a low mortality rate.
00:05:08.520 | Yeah, we know that you get the virus, but it's a little bit of a cough, a little bit
00:05:12.400 | of a fever, a couple of days in bed and some chicken soup and people get better.
00:05:16.040 | And so there's much debate and discussion about what's the actual mortality rate.
00:05:20.160 | Is it 1%?
00:05:21.480 | Is it 0.04%?
00:05:23.240 | Is it 20%?
00:05:24.240 | Well, of course there are various complicating factors to it, but if you want to see the
00:05:28.680 | best case scenario, that's what you're going to look for.
00:05:30.880 | And I think there's evidence to think that it's not as bad as it could be.
00:05:35.100 | Another thing that would really lead to a best case scenario with not that many people
00:05:39.100 | getting sick is just that we find some ways to really help treat people who are currently
00:05:46.700 | in serious condition.
00:05:48.580 | There are some breakthrough therapeutic reliefs or methods of relief that are developed to
00:05:55.700 | help people who are really sick.
00:05:57.620 | Maybe a company develops or maybe a physician or hospital proves that an antiviral drug
00:06:04.540 | is really helpful to people who are suffering from this condition.
00:06:08.780 | Perhaps somebody finds a really breakthrough way to develop a new drug that provides relief
00:06:15.580 | for somebody who's experiencing the symptoms of the disease.
00:06:18.560 | That would be really helpful.
00:06:20.620 | Another thing you would want to see is that perhaps those who do get the virus develop
00:06:24.740 | immunity from it and they don't suffer any serious long-term effects.
00:06:28.620 | Yeah, they got it, but they were young, they were healthy when they started and they were
00:06:33.220 | healthy afterwards.
00:06:34.540 | And then they also developed antibodies and they developed immunity to the virus.
00:06:37.580 | That would be good because in many ways then you could say that the people who get it earlier,
00:06:42.220 | that's the best situation.
00:06:43.220 | So that's one thing.
00:06:44.720 | You would look for the virus to be pushed back with warm summer weather.
00:06:51.120 | Many viruses are not tolerant of the heat and so perhaps the warm summer weathers that
00:06:56.700 | are coming to the northern hemisphere would help to have a relief from the virus and its
00:07:02.260 | effects.
00:07:03.540 | Another thing you would look for is you would look for a successful vaccine.
00:07:05.980 | You would look to see that a company or some companies or researchers are able to develop,
00:07:12.080 | are able to test, and then are able to manufacture and deliver a vaccine.
00:07:17.180 | And that that vaccine would have wide acceptance, there would be wide vaccination rates, and
00:07:22.260 | that it was effective.
00:07:25.580 | That it didn't have a lot of side effects, people were willing to take it, and they're
00:07:28.940 | able to develop and deliver billions of doses of the vaccine.
00:07:34.340 | And then another thing that you would want to see for kind of a not so bad case scenario
00:07:38.940 | is simply that internationally the virus is only bad in the countries where it's already
00:07:42.940 | bad.
00:07:43.940 | Yes, we know it's bad in Italy.
00:07:44.940 | Yes, we know it's bad in Iran.
00:07:47.100 | We know it was bad in China.
00:07:49.120 | But people in other countries all around the world learn from the successes and failures
00:07:54.060 | of the countries that were hit first and they successfully follow the same procedures.
00:07:58.860 | And that would help to mitigate its spread.
00:08:02.420 | Now I see this scenario as the not so bad scenario.
00:08:07.960 | This is about the best case that I can say because realistically, although the total
00:08:14.180 | number of people who are killed by it so far is less than some past sicknesses and viral
00:08:24.860 | infections, you have to acknowledge that it's pretty bad already.
00:08:29.500 | There are many, many people dying.
00:08:31.740 | Hundreds and hundreds of people dying all over the world.
00:08:33.780 | Many hundreds and now thousands of people have died.
00:08:36.460 | So it's pretty bad already.
00:08:38.300 | So I don't think that we could call this a really good scenario, but I would call it
00:08:41.540 | just a not so bad scenario.
00:08:44.980 | Certainly there are other factors, but if you're trying to think it through, those are
00:08:47.140 | some factors that I think are significant.
00:08:50.900 | Now let me give some quick analogs to those points.
00:08:55.860 | First you'd have to believe that not very many people are currently sick in your country.
00:08:59.380 | And in the last days I'm seeing many public officials openly and clearly acknowledge that
00:09:06.340 | the official statistics are simply not accurate.
00:09:09.620 | And they're not accurate either because of problems with testing people or various factors.
00:09:18.340 | Some estimates are that the true rates of infection are 10 times higher than what the
00:09:23.700 | official data is reported.
00:09:25.620 | Some estimates are much, much higher than that.
00:09:27.720 | In countries where there have been major problems with the testing, such as in the United States,
00:09:32.020 | where only a tiny number of people have actually been successfully tested, it's almost impossible
00:09:37.260 | for a rational person to believe that the numbers are accurate.
00:09:40.420 | It just can't get there.
00:09:42.260 | And so it's much more likely that there are many people sick.
00:09:47.620 | If we switched from the not so bad condition to the really bad condition, what would make
00:09:52.700 | the viral infection really, really bad would be if there are hundreds of thousands of sick
00:09:59.060 | people already here, here being where you live, and that the virus has been spreading
00:10:04.500 | in the community for weeks and weeks and weeks, and that it wasn't accounted for due to poor
00:10:09.100 | testing or due to people not understanding the symptoms, et cetera.
00:10:12.580 | That would be the really bad scenario.
00:10:14.740 | Now is it really hundreds of thousands of people?
00:10:18.060 | I don't know.
00:10:19.060 | I'm not an epidemiologist.
00:10:20.940 | This is not my area of expertise, but I don't believe the official statistics.
00:10:25.860 | And so I would say realistically, we're probably somewhere between the official statistics
00:10:30.940 | and the worst case scenario.
00:10:32.740 | But my instinct at this point is that there are at least thousands and thousands and thousands,
00:10:38.340 | if not tens of thousands of people who are sick and who've been spreading the sickness,
00:10:43.180 | and it just simply wasn't detected.
00:10:44.620 | I hope I'm wrong.
00:10:46.100 | The next thing that you would say, back to social isolation and containment procedures,
00:10:53.980 | to make something really bad, a really bad scenario, would mean that instead of social
00:10:58.740 | isolation and containment procedures being put in place quickly, that they're put in
00:11:02.900 | place very slowly.
00:11:04.500 | They're enacted too late, and they're followed too little.
00:11:07.980 | The social isolation and containment procedures are most effective if they're done before
00:11:12.580 | there's really strong evidence that they're needed.
00:11:15.520 | If you wait until somebody's demonstrating symptoms, you wait until you have several
00:11:19.180 | sick students before you close schools, then you get better results.
00:11:25.580 | Sorry, you get worse results if you wait for them to be sick.
00:11:28.900 | If you find out about a sickness, find out that it might be closed, and then you close
00:11:31.900 | the school, it's much, much more effective.
00:11:35.320 | And so a really bad scenario would just be that social isolation and containment procedures
00:11:39.140 | are enacted too late, and then they're just simply not followed.
00:11:42.260 | They're not enforced, they're not followed.
00:11:44.220 | People take it casually, they interact with one another.
00:11:47.740 | Now here, my assessment is that it's probably a little of both.
00:11:53.360 | Probably some of the hardcore social isolation and containment procedures are a little bit
00:11:58.460 | too late to be maximally effective.
00:12:01.100 | I think people were caught sleeping and too slow because of the heavy cost of imposing
00:12:05.880 | those social isolation procedures, that people responded very slowly.
00:12:11.260 | But I do think that people are taking the advice seriously.
00:12:14.580 | If we look at some of the scenarios like in Italy currently, and Spain last couple days,
00:12:21.780 | and then France today, locking down France as of tonight, I think that people are taking
00:12:26.140 | it seriously.
00:12:27.140 | And I think that people are taking the risk seriously in the United States and other places
00:12:31.760 | around the world.
00:12:32.820 | So probably not at the really bad scenario, but probably not at the very best scenario.
00:12:41.780 | Now the third factor, that not very many people get seriously sick and die.
00:12:46.520 | If the virus were not going to have a severe impact, you would be looking for low morbidity
00:12:50.240 | and low mortality rates.
00:12:52.380 | Whereas if you were looking for a really bad scenario, where it was really impactful, instead
00:12:58.060 | of it being low morbidity and low mortality, people would be very seriously critically
00:13:02.060 | ill and you'd have a very high death rate.
00:13:05.020 | Now here, one of the things that's been encouraging to me over the past weeks has been that people
00:13:12.260 | who are generally healthy don't seem to suffer the most severe of complications from the
00:13:17.100 | virus.
00:13:18.420 | Unfortunately, that means that those who are unhealthy do.
00:13:22.700 | And so we know of course that people who are older are at a high risk.
00:13:26.840 | And here's one where I think the United States may face some very significant problems.
00:13:33.080 | In the United States, there's a generally unhealthy population, significant levels of
00:13:37.140 | obesity, significant levels of diseases, lots of elderly people.
00:13:42.360 | And in that population, it's possible that there would be a much higher rate of illness
00:13:47.100 | and a much higher rate of death.
00:13:49.100 | So it's not the worst case scenario.
00:13:51.700 | The disease is certainly not unsurvivable.
00:13:54.340 | But when you consider the factors of who's involved, it's pretty significant.
00:14:01.900 | And so the short answer is we don't know.
00:14:05.020 | But the United States population is not the healthiest around.
00:14:08.980 | Right now I'm focusing on the United States.
00:14:10.580 | The bulk of my listening audience is in the United States.
00:14:13.660 | But there are also other places in the world as well, which also have generally low health.
00:14:17.420 | We'll cover that in a moment.
00:14:20.460 | The next thing that would make it really bad would be that instead of there being some
00:14:24.900 | breakthrough way to, you know, some great therapeutic relief, development of an antiviral
00:14:32.340 | drug that proves really helpful, what would happen is the opposite.
00:14:36.860 | That not only is there not a breakthrough relief, but the healthcare system could be
00:14:41.120 | completely overwhelmed.
00:14:42.680 | The healthcare system is flooded with cases, just far too many for the healthcare workers
00:14:48.020 | to handle, and then perhaps even worse, maybe due to the shortages of personal protective
00:14:54.100 | equipment, of masks, of face shields, the healthcare workers themselves get sick.
00:14:59.500 | Hospitals are overwhelmed.
00:15:01.460 | And then the hospital workers have to—they can't treat everybody who needs help.
00:15:04.380 | They have to engage in triage.
00:15:05.740 | And there's a very high death rate because not only are there a lot of people who are
00:15:10.500 | sick, but the hospital systems are overwhelmed.
00:15:12.380 | The healthcare workers are overwhelmed.
00:15:13.900 | There's not enough ventilators.
00:15:15.100 | There's not enough relief supplies, and there are not enough doctors, not enough nurses,
00:15:21.180 | etc.
00:15:22.180 | I think this is a very possible outcome.
00:15:24.740 | I hope it doesn't happen, but it's a very possible outcome.
00:15:27.460 | And I think if you look at Italy, you see that outcome right now.
00:15:30.700 | You see the tents set up outside the hospitals, and you could see that same thing in the United
00:15:35.660 | States.
00:15:36.660 | Instead of being able to treat people in hospitals, you're treating people in gymnasiums or out
00:15:40.460 | in tents, things like that.
00:15:43.420 | And they're just simply triaging people.
00:15:45.060 | They're saying, "You're too old.
00:15:46.100 | We can't treat you because we don't have the facilities to actually treat you."
00:15:49.420 | And that would be very, very significant.
00:15:52.180 | In addition, one thing that would go to the far end, the end of making it really bad,
00:15:56.900 | is simply instead of people who develop the virus getting immunity and not really suffering
00:16:04.100 | long-term effects, rather what would happen is that those who do recover continue to have
00:16:08.880 | lingering effects.
00:16:10.280 | They have lung damage even after the illness, or perhaps they don't even develop immunity
00:16:14.940 | to the disease.
00:16:16.580 | I'm not convinced on this subject one way or the other.
00:16:18.820 | I've read concern on both sides, but I don't know how to judge what I read.
00:16:23.220 | But it could be the case that those who have the disease experience, especially more significant
00:16:28.300 | cases, have continuing effects.
00:16:29.900 | And I think that would change how people viewed it.
00:16:33.100 | What I see happening is most people looking at this particular disease and saying, "Oh,
00:16:36.340 | the death rate is only this tiny percentage."
00:16:38.900 | But realistically, perhaps 20% of people, if 20% of people who get it have lingering
00:16:44.540 | effects, that would be really, really significant.
00:16:48.620 | I don't want to spread fake news, so I'll just pause and just simply say I've seen stories
00:16:55.820 | on different things.
00:16:56.940 | I don't know what the case would be.
00:16:59.220 | What about the weather?
00:17:00.220 | Well, on a best-case scenario, the virus would abate with weather.
00:17:03.640 | But in a worst-case scenario, perhaps it wouldn't abate significantly with weather.
00:17:08.260 | Or perhaps even worse would be that it does abate with the weather.
00:17:13.500 | People become complacent.
00:17:15.200 | They return to their normal lives, and then it returns with a vengeance in the fall when
00:17:18.500 | the weather goes cold.
00:17:19.900 | Now many people say, "Well, the virus is here.
00:17:22.500 | It's going to be with us for a long time."
00:17:24.540 | And that may be the case.
00:17:26.320 | That would be the kind of thing that's a worst-case scenario, where it maintains a very high infection
00:17:30.300 | rate and then it's with us for years in the future without the development of a vaccine
00:17:34.460 | or an effective treatment, et cetera.
00:17:36.540 | And so that's the kind of thing that would make it really bad.
00:17:40.020 | And then two more would be that instead of successfully developing, testing, manufacturing,
00:17:45.740 | and delivering a vaccine, researchers just can't create one.
00:17:50.880 | There's no luck in developing a vaccine.
00:17:52.620 | There's no luck in effectively finding one that would work.
00:17:57.100 | And/or there are problems in the development and distribution of it.
00:18:00.340 | I mean, ask yourself this question.
00:18:03.880 | Given the current problems of developing an effective test for a disease, and then given
00:18:10.340 | the current problems of manufacturing and distributing an effective test for a disease,
00:18:17.140 | do you have a high degree of confidence in the authorities in your country to be able
00:18:23.260 | to actually successfully develop, manufacture, distribute, and deliver a safe and effective
00:18:33.100 | vaccine?
00:18:35.180 | Especially given the widespread concerns with vaccination in general?
00:18:39.820 | As far as I'm concerned, that's a hard one to really believe.
00:18:47.500 | And then perhaps the worst case scenario, or the last factor that would make it a worst
00:18:54.600 | case scenario, would be that instead of the best case that we talked about, that internationally
00:18:59.100 | the virus is just where it's already at and then people close their borders, every country
00:19:03.220 | in the world closes their borders and they're able to stop it right there.
00:19:07.220 | Instead of that, you have a real international pandemic.
00:19:10.740 | You have real international contagion.
00:19:13.660 | And perhaps countries with strong, well-funded healthcare systems hold out for a little while
00:19:17.940 | longer before they get overwhelmed and they collapse, a la Italy right now.
00:19:24.100 | But the virus spreads globally and you have countries with weaker healthcare systems and
00:19:29.740 | poorer populations and people in poorer health that are just decimated by the virus and it
00:19:36.060 | leaves hundreds and hundreds of thousands of citizens, if not millions.
00:19:41.800 | That would be a worst case scenario.
00:19:46.060 | The question would be, I'm sure there are other factors that you can think of, but the
00:19:48.580 | question would be if you're trying to analyze it practically, look around you and see which
00:19:53.260 | of those seems, which of those factors do you see happening right now?
00:19:59.740 | My answer is, for me, what I see right now is I'm hoping for the not so bad case, but
00:20:06.220 | I think it's probably somewhere in the middle of that.
00:20:10.780 | The point being, it's a serious, serious problem.
00:20:16.100 | And the reason we have such a hard time with it is just simply the difficulty of understanding
00:20:19.500 | the numbers, difficulty of understanding the multiplying effects and exponential growth
00:20:23.820 | and the difficulty of really digging in and grasping the significance of the numbers.
00:20:29.980 | We're still at that place where it's only some thousands of people.
00:20:32.820 | I still hear people saying, "Well, so many thousands of people were killed by H1N1,"
00:20:36.900 | or "So many thousands of people received it," and "So many thousands of people get the flu,"
00:20:41.460 | etc.
00:20:42.540 | Nobody disputes that fact.
00:20:46.760 | The fact that disputes that argument, however, is just simply the fact of viral replication.
00:20:54.540 | Time will tell.
00:20:55.940 | I think my guess is we're probably somewhere in the middle of those two things.
00:21:01.620 | And my point in going through that type of analysis is to say, I believe that an analysis
00:21:09.980 | that leaves you saying, "This is bad, and this is going to be bad," is rational.
00:21:22.260 | Because that not so bad scenario, still pretty bad.
00:21:26.300 | Now, hopefully there's something I'm missing there.
00:21:29.940 | I really hope, but it's still pretty bad is the point.
00:21:33.420 | Time will tell.
00:21:35.380 | Now let's switch to the economic effects.
00:21:39.460 | I'm encouraged that I'm not—I don't think we're going to be in that worst-case scenario.
00:21:44.860 | I think there'll be some breakthroughs.
00:21:46.140 | I have a huge degree of confidence in human ingenuity.
00:21:50.660 | There are thousands of people all around the world who are working day and night to try
00:21:53.860 | to find solutions to some of these problems.
00:21:56.140 | And although the problems are real and they're dire, human beings shine in times like this.
00:22:01.420 | And so I don't think it's going to be a worst-case scenario, but I do think it's going to be
00:22:06.460 | quite bad.
00:22:07.460 | Hopefully I'm wrong.
00:22:10.180 | Now let's switch to the economy, because after all, this is a finance show.
00:22:13.780 | And now let's talk about the best-case economic scenario and the worst-case economic scenario.
00:22:20.420 | First, remember where we are as I record this, again, Saturday, March 14 at now, 8.06 p.m.
00:22:27.780 | Eastern Time.
00:22:30.140 | The best-case economic scenario is already quite difficult.
00:22:37.060 | As I record this, Italy, Spain, and France are all in basically a societal lockdown.
00:22:48.300 | They still have some services like supermarkets and pharmacies open, some other necessary
00:22:56.500 | workers, et cetera.
00:22:57.500 | But basically, the whole countries, all of those countries in Europe are basically locked
00:23:02.060 | down.
00:23:04.380 | Dozens of countries around the globe have closed their borders to travelers, some completely,
00:23:10.460 | letting in no tourists, no travelers, some just to tourists and travelers from certain
00:23:15.100 | regions.
00:23:18.380 | That's where we already are.
00:23:21.540 | Now the best-case scenario would be that it just stops with this.
00:23:25.700 | These countries that have locked down, they finish their lockdown in two weeks, as they
00:23:29.300 | talk about, two or three weeks, and then life goes back to normal, perhaps.
00:23:37.100 | That would help with the economy if it were a short-term thing.
00:23:40.500 | Perhaps all of the countries that are not, Italy, Spain, and France at the moment, perhaps
00:23:44.340 | for some reason they can escape having to do the same thing.
00:23:47.460 | Maybe the United States doesn't actually have to go to a nationwide lockdown or martial
00:23:53.620 | law.
00:23:54.620 | Perhaps it's just magically it doesn't need to be done.
00:24:00.180 | Maybe magically there's actually only 2,000 cases in the United States or 5,000 cases
00:24:04.460 | or whatever the official number is right now.
00:24:05.780 | I forget at the moment.
00:24:07.740 | Because of that, they're all perfectly quarantined and all those people are locked away and the
00:24:10.940 | United States doesn't actually have to go to lockdown.
00:24:13.940 | You just have what's already in place.
00:24:16.500 | We continue what has already been done for a few weeks.
00:24:19.220 | School is canceled, but it's only canceled for a couple of weeks.
00:24:21.900 | Large gatherings of people are banned in the vast majority of states, but only for a few
00:24:25.460 | more weeks.
00:24:26.740 | The timing is relatively short, maybe one more month of this.
00:24:30.900 | The schools follow through on their current few weeks of breaks.
00:24:33.700 | They do some extra cleaning, maybe move the desks farther apart, and then everybody goes
00:24:37.780 | back to school, back to work, and life resumes.
00:24:40.660 | All of the events that have been canceled start slowly picking up again.
00:24:44.860 | Baseball, for example.
00:24:46.140 | Maybe spring training was mixed, but baseball season starts on time.
00:24:51.540 | Then conventions are rescheduled, but are later and smaller.
00:24:55.760 | All the people that had to figure out how do I do this with my event and they canceled
00:25:00.340 | it, but later on they go ahead and reschedule.
00:25:03.980 | Maybe this magically happens all throughout the world at the same time.
00:25:07.400 | Right now it's just three more weeks and then we're out of it.
00:25:11.740 | I'm sorry if I sound sarcastic.
00:25:13.420 | It's just I'm trying to paint the best example and you can hardly believe it.
00:25:17.340 | I don't know.
00:25:18.340 | Maybe you say this is an economic good.
00:25:19.840 | We're looking for the best case scenario.
00:25:21.340 | We got rid of all the old people.
00:25:22.780 | They're all dead.
00:25:23.780 | We got rid of all the sick people.
00:25:25.940 | They're all dead.
00:25:26.940 | We freed up some of the strain on Social Security and Medicare.
00:25:29.940 | And now, hey, after all, in the United States, the baby boomers, they're all the old ones.
00:25:33.700 | They have all the wealth.
00:25:34.700 | And so they die.
00:25:36.480 | All their children inherit the wealth and the younger generation gets all the money
00:25:39.600 | and they can go out and start spending and consuming the money.
00:25:42.600 | After all, the old people were just sitting on it.
00:25:43.920 | They didn't need it anyway.
00:25:44.920 | So get rid of them.
00:25:45.920 | We released the strain on the social net and then everyone can spend money.
00:25:51.400 | Obviously, that's an incredibly offensive and horrific thing to say, but it's like,
00:25:57.920 | I don't know, maybe that helps the economy.
00:26:01.400 | Maybe all the people in industries that have already been devastated by this just get bailed
00:26:06.780 | out by magical government printing presses, magical loans, free money, free money for
00:26:13.340 | all.
00:26:14.340 | No student loan interest.
00:26:15.340 | Forgive the student loans.
00:26:16.340 | Give it all away.
00:26:17.340 | Free money and it all just works.
00:26:23.780 | Even that best case scenario is pretty stinking bad.
00:26:27.820 | And that's where we already are.
00:26:32.840 | If you count the cost on the amount of money that is being lost every single day by so
00:26:39.440 | many people.
00:26:41.160 | Now right now it's industries that are very close to things like travel.
00:26:44.800 | But the news headlines of yesterday, Delta Airlines cutting 40% of their capacity.
00:26:51.860 | That's 40% of flights and I bet the remaining flights are not even full.
00:26:55.880 | Just imagine everybody associated with travel and think about all of the industries that
00:27:02.840 | rely on that.
00:27:05.460 | When you go through these industries, you go through the NBA, you go through these big
00:27:10.520 | headlined ones, but it's not just them.
00:27:13.520 | It's people who have conferences and classes and who make their living in small hotel rooms
00:27:20.060 | and small meeting rooms and things like that.
00:27:23.120 | All of that stuff, devastated.
00:27:26.600 | And even if the event itself is just short term, the trouble of planning it, they can't
00:27:35.080 | plan.
00:27:36.680 | When some of these events are held, think about the Olympics.
00:27:41.080 | The Olympics is years of very, very carefully scheduled and planned out events that have
00:27:47.020 | to happen exactly on schedule.
00:27:49.360 | Otherwise they just don't work.
00:27:52.680 | And so imagine if the Olympics wind up canceled and that just affects the big guy, the little
00:27:59.440 | guy.
00:28:00.880 | The point is simply that what already is, is bad, is devastating.
00:28:09.920 | Even down to your next door neighbor.
00:28:13.600 | There are lots and lots of people who have rental houses that they put on Airbnb.
00:28:17.880 | Well Airbnb just came out two days ago and changed their booking policies and provided
00:28:24.640 | free cancellation to everybody.
00:28:27.240 | I saw lots of people rejoicing over that about go Airbnb, taking care of the customer.
00:28:32.000 | The problem is what about the person with the house to rent?
00:28:35.540 | They depended on a clearly written policy from Airbnb and now their schedule is just
00:28:41.120 | being completely down.
00:28:42.120 | They have no cancellation fees.
00:28:43.440 | They've got mortgages to pay.
00:28:44.520 | They've got rent payments to pay.
00:28:46.360 | They've got expenses.
00:28:48.080 | And that's just, these are just examples that I think about.
00:28:51.240 | You can't even imagine the number of examples that are out there.
00:28:55.860 | So if the best case scenario is economically that we just deal with what's already been
00:29:01.440 | done and then magically in a couple of weeks everyone goes back to work, everybody picks
00:29:05.760 | up and we're back at it, it's already devastating.
00:29:13.760 | So what's a worst case economic scenario?
00:29:15.720 | Well let's paint that one out.
00:29:18.840 | Worst case scenario is all the countries that are currently locked down stay locked down
00:29:24.040 | for longer.
00:29:25.040 | Because here's the thing, you've got to, for the lockdown thing to work, which is really
00:29:31.160 | one of the very few public health tools that a public health official has, for that to
00:29:37.640 | actually work you have to do it until the virus runs its course.
00:29:47.420 | If you do it, if you release too early then it winds up being no good.
00:29:52.520 | And so maybe, everyone gives these todays, right?
00:29:55.560 | It's like if your child's school was canceled, the school sent home a letter saying your
00:30:01.240 | child's school is canceled until March 29.
00:30:05.160 | That's what the letter says.
00:30:06.560 | But you know that the school has no idea how long school is actually going to be canceled.
00:30:11.640 | They're just trying to give an initial date.
00:30:14.200 | Because there's so many factors that are involved with them having a date to start again that
00:30:18.520 | that's just their first goal.
00:30:20.360 | Realistically it could be school's canceled for a month.
00:30:22.960 | Realistically it could be school's canceled for six months.
00:30:24.520 | They have no idea.
00:30:25.520 | None of us do.
00:30:27.260 | So all the countries that are currently locked down stay locked down for longer.
00:30:31.360 | And then worst case scenario is that more and more and more countries are locked down
00:30:35.280 | tightly.
00:30:37.480 | Now personally I think that is the probable outcome.
00:30:45.720 | I think it's probable that many of the countries that are locked down stay locked down for
00:30:49.680 | longer and that many more countries are following suit.
00:30:54.000 | The reason I think that's probable is just simply due to the time delayed nature of dealing
00:30:59.480 | with the viral outbreak.
00:31:01.320 | The countries, if you put yourself in the head of a public health official in any country
00:31:07.840 | and you think through what they're facing, they're facing the same data that you and
00:31:13.920 | I can see.
00:31:15.680 | They're facing a viral infection that is spreading through the population.
00:31:20.200 | It's multiplying every few days, doubling every few days.
00:31:25.080 | They're dealing with a healthcare system that can't cure it, can only provide therapeutic
00:31:30.240 | care and try to keep people alive until their bodies can get rid of it.
00:31:38.200 | And basically the only tool that they actually have is some version of isolation.
00:31:45.200 | That's it.
00:31:46.200 | That's about the only tool they have.
00:31:48.040 | They can try to put out tests and whatnot, but all of that is designed around the strategy
00:31:53.360 | of isolation.
00:31:55.120 | The goal is not to isolate an entire economy and shut everything down.
00:31:58.080 | The goal is just to isolate a family.
00:32:01.500 | That's why the testing is important in the early phases of an outbreak, so that you can
00:32:04.960 | test and then you can test the person that that person talked to and you can isolate
00:32:08.640 | those people.
00:32:11.860 | But it's still an isolation strategy.
00:32:14.600 | Once it breaks out, once it gets to that system of community spread, then now isolation and
00:32:19.960 | quarantine becomes just a giant hammer that has to be used.
00:32:25.560 | And so you start, because it's such a devastating thing to do, you start in modest amounts.
00:32:30.480 | You try to isolate and say to people, "Well, let's cancel schools.
00:32:34.160 | That's some measure of isolation."
00:32:36.120 | And then you say, "Well, there's an outbreak in this city over here, so let's isolate this
00:32:39.340 | city and let's lock this city down."
00:32:40.920 | Again, look at Italy.
00:32:42.840 | Let's lock these regions down.
00:32:44.900 | And then you see that that's not working and then you lock the whole country down and it
00:32:47.760 | just gets tighter and tighter and tighter until you can get it to work.
00:32:50.800 | But because it's such a heavy, awful thing to do, because it devastates lives and livelihoods,
00:32:56.480 | that's why a public health official will move slowly.
00:33:00.100 | So if you want to look at where you're likely to be in the United States, look at where
00:33:06.000 | Italy was a few weeks ago, because you can't speed it up or slow it down.
00:33:12.120 | It's just a systematic progression.
00:33:13.800 | Unless there's something that comes in and stops the spread, it's highly predictable.
00:33:20.760 | It just feels like it's all happening very slowly, because it is, but it's as predictable
00:33:25.200 | and as inexorable as almost anything else.
00:33:31.680 | I think that you're going to see a lot more lockdowns and I think that they're not going
00:33:36.840 | to be nearly as effective as they seem to have been in China.
00:33:42.600 | Now it'll be interesting to see what happens in Italy, France and Spain in the coming week,
00:33:48.280 | but China says that they have effectively stopped the spread of the disease.
00:33:56.960 | My guess is they probably have.
00:33:58.360 | I have a hard time trusting anything they say, but my guess is they probably have.
00:34:02.360 | Maybe I'm wrong.
00:34:04.120 | But even that said, I think the only country in the world capable of doing what China did
00:34:08.200 | is China.
00:34:11.280 | One of the major benefits of a viciously strong authoritarian government is they can move
00:34:18.400 | fast in situations like this.
00:34:21.360 | Just think about their response of building those hospitals.
00:34:25.840 | China comes in and says, "We're building a thousand bed hospital on that field," and
00:34:30.240 | nobody starts protesting environmentalism and nobody starts protesting about, "Well,
00:34:34.560 | you don't have a diverse workforce and you can't do that and you can't make those people
00:34:46.080 | work overtime and blah, blah, blah."
00:34:48.160 | China just says, "We're doing it," and they do it.
00:34:51.220 | That's one of the benefits of an authoritarian dictatorship.
00:34:56.160 | They can do incredible things and that's what China has been doing for decades now.
00:34:59.840 | They've been taking money and just building these mega cities just again and again and
00:35:03.600 | again and again.
00:35:04.600 | Now in the process they destroy people, but that's not the society that we live in in
00:35:09.480 | the West.
00:35:12.000 | We are almost the polar opposite of that.
00:35:16.200 | This is how ridiculous it is.
00:35:20.960 | I was in bed the other day listening to the radio and I was in the United States and I
00:35:28.760 | had LASIK eye surgery done and while I had to recover from that surgery, after the surgery
00:35:35.120 | I had to go home and I had to lie in bed with my eyes closed for six hours as part of the
00:35:40.080 | surgery, but I had to put drops in my eyes every hour and a half so I didn't sleep.
00:35:44.040 | I put on NPR and I'm listening to NPR and this is in the midst of it.
00:35:48.160 | When I was younger I used to listen to NPR all the time.
00:35:50.600 | Loved NPR.
00:35:51.600 | I don't know, maybe I just wanted to have that cool NPR voice and modulated sound and
00:35:57.080 | those elegant tones and perfect diction of the perfect East Coast and West Coast neutral
00:36:04.260 | accent and talk with all my hoity-toity friends.
00:36:08.360 | But I'm listening to NPR and they're talking about school closures.
00:36:12.320 | I could not believe some of the stuff that they were saying on NPR.
00:36:16.480 | It's been years since I've listened to NPR.
00:36:18.000 | I could not believe it.
00:36:20.080 | What they were talking about was how all these schools are canceling school, but they're
00:36:23.880 | trying to decide whether they can teach school online, teach classes online, or whether they
00:36:31.640 | should just cancel class.
00:36:34.320 | And they're talking about how the school superintendents and educators, administrators are wrestling
00:36:39.640 | with this because they have to treat everybody perfectly fairly.
00:36:47.720 | And after all, only the privileged students have computers and internet connections.
00:36:54.560 | And unless the school can provide the same access to education for all the students,
00:37:00.040 | then the school can't teach and they can't do the classes.
00:37:06.700 | And so probably what they're going to do is probably just completely cancel class because
00:37:11.480 | they can't guarantee that all the students have access to computers and internet connections.
00:37:17.280 | So they're probably going to cancel class and make up the work in some kind of summer
00:37:20.960 | term.
00:37:23.960 | I couldn't believe it.
00:37:24.960 | I thought, "Is this what the United States is these days?
00:37:29.120 | That any 10-year-old kid can go online and become a teacher themselves with nothing but
00:37:37.960 | a cell phone?
00:37:40.760 | And you have an entire world who lives on a cell phone, but you're saying that we can't
00:37:46.600 | teach school online because only the privileged kids have computers and internet?"
00:37:52.560 | I'll acknowledge as much as anybody that there may be somebody who doesn't have a phone.
00:37:57.480 | Maybe, hopefully.
00:37:58.480 | Probably the kid's parents are smart.
00:37:59.720 | Maybe they don't have a computer.
00:38:02.160 | But that's got to be the tiniest percentage of problems.
00:38:06.660 | And to have the entire student body dragged down and not be allowed to learn or study
00:38:15.140 | based on this is insane.
00:38:18.380 | That's the world in the United States that we live in.
00:38:21.120 | So now you take that culture and the going on and on about how do the stools deliver
00:38:25.880 | free lunch and certainly, and I'm listening to all these stories about food insecurity
00:38:30.220 | and housing insecurity.
00:38:31.220 | And I think I'm like, one thing I learned is I'll never listen to NPR.
00:38:35.400 | You're guaranteed to be depressed at the end of that when you listen to NPR.
00:38:40.520 | I felt so disempowered and overwhelmed and like I just couldn't do anything in the world
00:38:44.640 | unless somebody came and solved my problems for me.
00:38:47.480 | But you take that kind of culture and you try to say, "We're going to lock everybody
00:38:52.520 | down and we're going to stay locked down and then we're going to bring this technological
00:39:01.020 | system in that China has done where now you got to show the pass on the internet in order
00:39:05.920 | for you to get on the train."
00:39:08.120 | It's insane.
00:39:09.120 | The United States is doomed in that situation.
00:39:14.720 | That's not even acknowledging just the complete general lack of compliance culturally.
00:39:21.400 | The Chinese, they do it, right?
00:39:23.160 | They put up with it.
00:39:24.400 | And some of them speak out, but Americans start a war before they do that.
00:39:31.280 | Americans certainly aren't compliant with that kind of thing.
00:39:33.200 | So the point is the lockdown, it's not going to be a short-term thing.
00:39:37.400 | They can't turn around and pivot the way that China has.
00:39:42.280 | It's not going to happen.
00:39:43.280 | You can't even get testing kits created and delivered and administered.
00:39:47.240 | How on earth would you do anything even more difficult than testing?
00:39:50.680 | And the testing doesn't even fix anything.
00:39:53.660 | So worst case in economic scenario is that the countries that are currently locked down
00:39:58.360 | stay locked down and locked down for a long time.
00:40:00.320 | That would be very bad.
00:40:01.720 | What about supply chains?
00:40:03.040 | Well, what you're seeing right now is you're seeing supply chain weakness.
00:40:08.040 | That's why there's shortages.
00:40:09.040 | We've talked about this extensively on Radical Personal Finance.
00:40:12.080 | There's always some slack in the system, but the whole system is designed for efficiency,
00:40:17.120 | for maximum profit.
00:40:18.760 | And maximum profit means that any store, any retailer, any distributor, any manufacturer
00:40:25.320 | at every stage, you don't want to maintain large amounts of inventory because that's
00:40:30.200 | inefficient.
00:40:31.200 | So you want to maintain enough inventory to maintain operations during normal conditions,
00:40:40.800 | plus you want to maintain enough inventory to be able to resupply and to cover some shocks
00:40:46.160 | to the system.
00:40:47.880 | Because especially if you think about large retailers, large retailers want to be a basic
00:40:53.840 | source of supply for their customers.
00:40:57.980 | So if you're running public supermarkets and public supermarkets is getting ready for Thanksgiving
00:41:03.480 | season, public supermarkets does not ever want to run out of turkey.
00:41:07.160 | And so they're going to do everything possible to maintain turkey, including having an excess
00:41:11.600 | supply, which is why they put it on sale afterwards.
00:41:14.580 | It's far more important during Thanksgiving that publics not run out of turkey, or whatever
00:41:20.460 | your local grocery chain of choice is, it's far more important that they don't run out
00:41:24.340 | of turkey than that they have perfect efficiency during Thanksgiving, which is why you see
00:41:29.100 | big buckets of turkey and then sale afterwards.
00:41:31.920 | But and the same thing applies during other difficult times of crisis.
00:41:37.220 | So if it's hurricane season, Costco does not want to sell out of water during hurricane
00:41:41.580 | season and so they plan for that.
00:41:44.140 | Walmart does not want to sell out of chips and beer during Super Bowl season.
00:41:48.380 | So they plan for it with these very sophisticated supply chains and you have warehouses that
00:41:53.740 | do have stocks of that because they don't want to run out.
00:41:57.100 | But the problem is that only works for predictable events like hurricanes or Thanksgiving or
00:42:04.460 | Super Bowl.
00:42:06.060 | It doesn't work for the black swan events.
00:42:09.420 | It doesn't work for things like a global flu pandemic.
00:42:13.460 | And it doesn't work for a global flu pandemic if the manufacturers are not able to create
00:42:18.580 | and deliver.
00:42:20.100 | And so what happens when supply starts taking off?
00:42:23.300 | First, it's a little weird and the suppliers, the stores don't know how to deal with it
00:42:30.380 | when something weird takes off like toilet paper.
00:42:33.580 | The great toilet paper shortage of 2020 is not necessarily a practical thing.
00:42:39.820 | It's a product of human psychology in my opinion.
00:42:43.500 | Nobody just magically needs cases and cases of toilet paper.
00:42:47.760 | But that was the thing that people started to realize, "Hey, if I get locked down in
00:42:52.260 | my house, I'd like to be able to use toilet paper.
00:42:55.340 | After all, I use this stuff pretty frequently.
00:42:57.220 | I'd like to have it."
00:42:58.220 | So they started buying more and it creates a self-fulfilling prophecy and it creates
00:43:01.380 | a human panic that's all based upon human psychology.
00:43:04.540 | Somebody says, "Well, you should buy some toilet paper."
00:43:06.220 | And another person says, "Hey, that's a good idea."
00:43:08.420 | So they go and buy some toilet paper.
00:43:09.660 | Then somebody posts online and says, "Look, people are buying toilet paper, big carts
00:43:12.540 | full of toilet paper."
00:43:13.820 | And then you get worried about it and you say, "I got to go get toilet paper."
00:43:16.700 | And you're worried because now instead of just getting one or two packages because you
00:43:19.860 | thought it was a little bit, you thought, "You know, there's going to be a toilet paper
00:43:22.700 | shortage."
00:43:23.700 | And so you load up your cart and then that creates the toilet paper shortage.
00:43:27.580 | And so the toilet paper shortage is not due to a practical need for months and months
00:43:33.580 | of toilet paper.
00:43:34.940 | It's based upon the human psychology of seeing that there is a need.
00:43:38.660 | Now the current food shortages of some kinds of foodstuffs in some places are a much more
00:43:43.100 | obvious example of a more practical need.
00:43:46.140 | But even still, the human psychology comes into place.
00:43:49.420 | And that's where the just-in-time delivery system fails because you can't predict human
00:43:54.060 | psychology.
00:43:55.420 | It could have been toilet paper, but it could have also been something that was related
00:44:00.620 | to, I don't know, Tylenol or chicken or something.
00:44:05.180 | It just happened to be toilet paper.
00:44:07.140 | So it's got to be obviously some useful good like toilet paper, but you can't predict that.
00:44:12.940 | And then once there's a need, then people start to freak out and they start to buy more
00:44:17.700 | and then you start to have hoarding and then people stop trusting the system.
00:44:21.780 | And so the supply chain continues to be stretched and stretched and stretched, little by little,
00:44:30.060 | pulled tighter and tighter and tighter.
00:44:32.540 | And the retailers rush all the goods out from their central warehouses.
00:44:39.420 | They rush all those goods to the stores as fast as they can.
00:44:43.020 | And if the whole supply chain is working on the back end where stuff is coming into those
00:44:48.820 | warehouses, then they've got a chance of making it.
00:44:53.500 | What's the problem?
00:44:54.500 | The problem is the virus hit China first.
00:44:58.780 | The problem is that China was shut down for weeks.
00:45:04.580 | The problem is that it's still not up to normal capacity.
00:45:11.780 | The problem is that many things are manufactured in many other places and countries are starting
00:45:15.860 | to protect themselves.
00:45:17.320 | One of the most concerning ones was the Indian ban on the export of medicines.
00:45:21.940 | A huge percentage of medicines are manufactured in India and that is very concerning because
00:45:28.900 | the medical supply chain has exactly the same need or the same system as toilet paper.
00:45:34.300 | Now there's some slack in it, but then when the shortages come, it's more and more and
00:45:38.220 | more and more.
00:45:39.960 | So the worst case scenario is that the supply chains continue to be stripped out and that
00:45:45.140 | resupply doesn't happen for months and months.
00:45:48.940 | Now we could make this worse.
00:45:50.700 | Now so far, thankfully, the trucks are still going.
00:45:53.580 | The truckers are still delivering goods and everything is still working.
00:45:57.060 | But what if there's some kind of problem with the trucking system and the truckers stop
00:46:01.660 | delivering goods?
00:46:03.980 | That would shut down resupply and that's one of the major weak links in the supply chain.
00:46:09.700 | Now thankfully at the moment, I don't see any current risk that would say that the truckers
00:46:13.420 | would have to stop delivering goods.
00:46:15.540 | A trucker in his cab is just as safe from the coronavirus as he is at home and so he
00:46:24.020 | can still keep working and be happy for the money, probably.
00:46:28.940 | But if something happened that interrupted trucking, it'd be desperately terrible.
00:46:32.700 | Or more importantly, it would be more countries stopping exporting products.
00:46:37.100 | We've mentioned the Indian medicines.
00:46:38.860 | For a nation that lives largely on imports like the United States, it's really tough.
00:46:43.140 | And so you'd have shortages everywhere.
00:46:45.420 | And now part of the bad economic scenario is that people are hurting.
00:46:49.060 | They're uncomfortable.
00:46:50.060 | They can't get the stuff that they're used to.
00:46:51.500 | Now the United States, we're used to a ridiculous amount of variety, but it can be serious.
00:47:01.740 | There are people right now who are having to come up with alternatives to toilet paper
00:47:06.060 | and that's frustrating, annoying, and uncomfortable, and hopefully sobering enough to make them
00:47:12.140 | recognize how foolish they have been and perhaps how foolish you have been by not planning
00:47:16.300 | ahead for that.
00:47:18.180 | Now what else would make the economic situation really bad?
00:47:21.740 | Well, large numbers of layoffs.
00:47:26.780 | Do you think that there will be large numbers of layoffs?
00:47:32.020 | The answer right now is probably I don't know.
00:47:36.340 | Over the last months, been significant good jobs reports, right?
00:47:41.180 | Hasn't been a lot of layoffs.
00:47:44.300 | And I think right now we're in a situation where everybody is kind of holding their breath.
00:47:50.060 | Now there are starting to be people laid off, but there are people who are at the very front
00:47:53.460 | end of the supply chain.
00:47:56.540 | There are people who are at the very front end, maybe some dock workers.
00:48:01.060 | I've read anecdotes of gyms laying off personal training staff.
00:48:05.540 | People aren't going to want to go to the gym, be exposed to people, and so they're laying
00:48:08.300 | off personal trainers.
00:48:10.300 | That's expected, but so far I don't think there's been a lot of layoffs.
00:48:14.500 | The reason is the most difficult thing that a company faces or an employer faces is how
00:48:18.780 | to figure out how to bring on good staff and get them trained.
00:48:24.180 | And so an employer does not want to lay off staff unnecessarily because it's hard to replace
00:48:31.580 | them.
00:48:32.840 | And so you have Apple, Apple computer, or I guess I should say Apple electronic product.
00:48:41.780 | Make a lot more than computers these days.
00:48:43.220 | So you have Apple that comes out and says, "We're closing all stores all around the world
00:48:50.060 | except in greater China."
00:48:51.580 | That's a pretty serious thing.
00:48:55.980 | But Apple is saying, "We're going to keep paying everybody their wages."
00:48:59.860 | Well Apple has been hugely profitable.
00:49:01.940 | Apple has a nice war chest of cash.
00:49:03.640 | They can do that for a little while.
00:49:07.780 | The neighborhood grocer wants to do the same thing.
00:49:10.980 | The neighborhood hardware store guy or whatever, the local businesses, our neighborhood restaurateur
00:49:15.980 | wants to do the same thing.
00:49:17.780 | He wants to keep his staff.
00:49:19.160 | He knows it's good for business to treat employees right.
00:49:22.020 | But we all have a limit to how much money we actually have.
00:49:28.140 | We all have a certain amount that we can dedicate to paying our staff.
00:49:38.640 | And everybody, all of us are sitting here with bated breath waiting to try to figure
00:49:44.140 | out what's going to happen.
00:49:47.020 | I'm sitting here late on Saturday evening trying to figure out what's going to happen.
00:49:51.180 | Every business owner is sitting there trying to figure out what's going to happen.
00:49:54.860 | We're all sitting down looking at our bank accounts saying, "Okay, what's my triggering
00:49:58.740 | point?
00:50:00.900 | When am I going to make a decision?"
00:50:02.060 | Which is why the next week is going to be crucial.
00:50:06.400 | And then probably the week after that.
00:50:07.900 | And then within two weeks probably the trajectory that we're on is going to be clearer.
00:50:12.380 | But still we're going to be waiting and waiting, watching, waiting, watching, waiting.
00:50:15.840 | What happens?
00:50:16.840 | What happens?
00:50:18.340 | But back to that viral outbreak, best case scenario, worst case scenario.
00:50:22.700 | If magically it's all cleared up in the next two weeks and we can get back to business
00:50:25.960 | as usual, maybe it's not so bad.
00:50:28.940 | But do you see any reasonable, rational analysis that would say that we're just going to magically
00:50:34.960 | get back to work and everybody be ready to go two weeks from now?
00:50:40.740 | I can't see it.
00:50:42.940 | And so economically I think most business owners are watching.
00:50:47.780 | They're probably giving it a week and they're probably getting things ready and they're
00:50:50.460 | calculating the cost of severance.
00:50:53.260 | If they approve severance, they're trying to figure out who it is.
00:50:56.940 | This has all come on so fast.
00:50:58.900 | They're trying to figure out who the best employees, who are they going to keep, who
00:51:01.900 | are they not going to keep, what tiers of employees are they going to lay off, et cetera.
00:51:07.180 | Because there are entire industries that are being brought down to nothing right now.
00:51:16.020 | This is very, very significant, but everyone's waiting with bated breath.
00:51:23.260 | So worst case scenario, companies lay off huge numbers of workers and outside of healthcare
00:51:27.980 | and maybe grocers or something like that, medical systems, entire industries are just
00:51:32.140 | brought to a halt.
00:51:34.380 | Working from home is great for those who can, but there are so many, many people who can't
00:51:38.980 | work from home.
00:51:42.620 | And then what else?
00:51:45.380 | The economic effects, the job layoffs lead directly to people reducing spending.
00:51:50.740 | Reducing spending leads to recession and it just has an ongoing spiraling effect where
00:51:54.780 | it goes down and down and down and down.
00:51:57.260 | Now the Federal Reserve is doing its very best to stave that off.
00:52:05.060 | Maybe they do it, maybe they don't.
00:52:06.060 | I don't know.
00:52:07.060 | Worst case scenario, the Federal Reserve is exposed to have done everything they can and
00:52:14.100 | they can't improve things.
00:52:16.820 | The era of free money and debt and it's all going to do is perhaps exposed to be the lie
00:52:25.260 | that it is.
00:52:29.420 | That would be a worst case scenario.
00:52:31.420 | And the worst case scenario there would just be it goes on for a long time.
00:52:35.740 | At some point in time there's going to be a major reckoning on government debt.
00:52:39.420 | I don't think we're there yet, but maybe I'm wrong.
00:52:43.420 | Maybe we're there.
00:52:46.260 | Some point there's going to be a reckoning.
00:52:49.460 | So that's what I see it.
00:52:50.620 | That's my kind of best case, worst case, best case, worst case.
00:52:55.340 | And my hope is of course that I'm too pessimistic and the best case is maybe it's better than
00:53:01.260 | the best case.
00:53:02.260 | I don't see how.
00:53:03.980 | If you see how, tell me.
00:53:05.860 | But I've talked myself through this for days and I don't see any arguments to say that
00:53:11.820 | my best case scenarios are really even possible.
00:53:18.140 | They just don't, I don't see how.
00:53:22.380 | Now the worst case scenarios I don't think are going to be here.
00:53:28.660 | I think it's probably going to be somewhere between them.
00:53:31.140 | But when the best case scenarios are bad enough, you don't need the worst case.
00:53:40.020 | So how do you know what's really going to happen?
00:53:43.020 | The only thing I say is just simply watch.
00:53:46.020 | You're going to have to trust yourself and trust your own analysis.
00:53:50.260 | You can't, you need to listen to experts obviously and I've tried to talk about where I'm an
00:53:57.620 | expert and where I'm not.
00:54:00.260 | We need to listen to experts and we need to listen to the experts' arguments and assess
00:54:03.780 | them to see are they compelling.
00:54:08.980 | We need to listen to the official data.
00:54:11.940 | That's important.
00:54:13.340 | There are genuine public servants.
00:54:17.300 | There are public health officials.
00:54:19.300 | They do know what they're doing.
00:54:21.520 | But it's hard for me to trust the info from the government.
00:54:25.740 | Just simply because the number one vested interest that a government official has is
00:54:30.620 | in avoiding panic.
00:54:33.780 | And generally it's very rare to find a government official who's willing to tell the truth because
00:54:38.820 | they're willing to trust people.
00:54:39.820 | I desperately wish they would.
00:54:41.300 | I desperately wish they would just stand up and say, "This is probably going to be bad
00:54:45.220 | but we're going to get through it together."
00:54:46.500 | But instead they lie and it's sad.
00:54:50.420 | So listen carefully, listen with a jaundiced eye because they don't really have another
00:54:54.100 | choice.
00:54:57.060 | But my method is just simply to say, "Let me do the analysis and then what can I do
00:55:06.100 | to prepare?"
00:55:11.860 | You have to do the same thing.
00:55:12.860 | We're all in different circumstances.
00:55:14.620 | We all have different businesses.
00:55:15.660 | We all have different things that we're capable of doing.
00:55:18.620 | But prepare for the worst case, hope for the best, and then lay out tiered plans.
00:55:29.740 | Hopefully Monday I'll talk some more about, we'll talk about stocks, we'll talk about
00:55:32.420 | the economy.
00:55:33.880 | Maybe Monday, maybe Tuesday I'll try to come with you.
00:55:37.300 | I'll work steadily this next week to bring you ideas and solutions and information to
00:55:42.980 | try to help you through.
00:55:44.740 | I hope to be able to host some Q&A calls.
00:55:47.620 | I'll do my best to help you and walk with you through this.
00:55:50.700 | But here's what I want to encourage you.
00:55:52.500 | In a bad situation there are always opportunities and there are always things that you can do
00:55:56.880 | to make a bad situation better.
00:55:58.620 | And the thing that is fantastic, at least about the American culture, is that Americans
00:56:04.960 | have often shown, and I think still can show, and you can do this from anywhere in the world,
00:56:11.820 | an indomitable spirit in the face of adversity.
00:56:15.680 | And I think that that is what is needed.
00:56:18.160 | This next week I'm going to do a show, it's on my outline, I hope to be able to do a show.
00:56:23.360 | I may be cautious with my words.
00:56:24.720 | We don't know what this next week is going to hold.
00:56:26.640 | I'll do a show on simply not participating in the recession.
00:56:29.360 | And then I'll do a show on changing your goals.
00:56:33.920 | Because when life changes you can change.
00:56:37.360 | And just because things are bad doesn't mean they have to be bad, bad, bad for you.
00:56:43.360 | We'll give you ideas, try to walk with you through it.
00:56:46.480 | We'll work with you to try to do things well.
00:56:52.120 | Don't panic, but do take stock.
00:56:56.360 | Don't do anything stupid, be careful.
00:56:59.200 | But I hope that by going through this if you see some error in my logic, then of course
00:57:03.880 | you'll know that.
00:57:05.000 | But if you don't see an error in my logic, then hopefully this will help you to have
00:57:08.600 | some idea of what's to come in the weeks ahead.
00:57:11.720 | The very least you need to be prepared to stay at home and be quarantined, or isolate,
00:57:17.480 | self-isolation or whatever it is for some weeks.
00:57:19.680 | And then what I'd say is make a plan on how to make that useful for yourself.
00:57:24.040 | I was talking last night, I did a live stream in the Radical Personal Finance Facebook group
00:57:28.840 | and I was talking about some information that I received from a friend of mine who lives
00:57:33.560 | in Italy.
00:57:34.720 | And she was talking about what she wished she had known before being locked down.
00:57:38.480 | And some of her comments were, "I wish that we had, there's so much time we could have
00:57:41.600 | done on house projects.
00:57:43.120 | So I wish that I had gone and I wish that I'd gotten paint and we could have painted
00:57:48.640 | our house and we could have, I wish I'd had flowers and we could have redone our landscaping
00:57:54.040 | and put the time to good use."
00:57:58.680 | And I thought, "That's a great idea."
00:58:00.360 | So if there's any house projects that have been on your list and you need lumber, you
00:58:03.440 | need paint, or you need flowers, or you need seeds, or you need shovels, then go out and
00:58:08.360 | get that stuff and just be prepared to work from your house.
00:58:11.880 | The other thing that I was thinking, I was wandering around Twitter and there was a Twitter
00:58:15.520 | trend on Twitter this afternoon about how Shakespeare wrote evidently King Lear when
00:58:20.040 | he was stuck home, working from home during a plague.
00:58:23.320 | Newton invented physics or calculus when he was off of university during a plague.
00:58:30.340 | And that's really my point, is that if you're going to be stuck at home and not able to
00:58:35.120 | leave, might as well make it productive, might as well make it useful.
00:58:37.880 | I'm intending to ignore the recession and I'm intending to work hard to serve you.
00:58:43.240 | And I'm intending my goal is to have the best year ever.
00:58:46.960 | Because at the end of the day, if you can serve people effectively in their current
00:58:50.000 | needs, you can help them.
00:58:52.000 | You may have to adjust your business, you may have to lay off your staff, you may have
00:58:55.160 | to hire someone else, but there's always a way to serve.
00:58:57.680 | And in the middle of a recession or in the middle of a crisis, there's always opportunities
00:59:01.280 | if you look for them.
00:59:02.680 | And so I want you to do your best to ignore the recession as well.
00:59:06.680 | I want to be realistic, but maintain a positive, optimistic attitude, because if you do that,
00:59:11.960 | you'll see the opportunities in the middle of it.
00:59:14.480 | Thank you for being with me.
00:59:16.080 | If you need more help on some of these practical things, remember that I have a number of courses
00:59:19.600 | available for you.
00:59:20.720 | Those are relevant, especially my radical preparedness course.
00:59:23.840 | You can still buy that at radicalpreparedness.com.
00:59:26.440 | The first one is on food, the next one is on water, or sorry, the first one is on philosophy,
00:59:31.880 | then food, then water.
00:59:33.440 | On Monday night, we'll be doing a live class on sanitation.
00:59:39.320 | And there are a lot of things that you can do to be well prepared in the midst of it.
00:59:44.160 | And so if you didn't think that was relevant before, it's relevant now.
00:59:47.840 | That course is an astonishingly low price of $29, and I guarantee you, you'll get more
00:59:52.800 | value from that.
00:59:53.800 | I'll be doing an extensive Q&A on Monday evening on the topic of preparedness.
00:59:57.680 | And so if you're trying to find something, you can't find it, and you need ideas of what
01:00:01.800 | is available, I'll help you with those ideas as well.
01:00:03.760 | So go to radicalpreparedness.com and sign up there.
01:00:06.760 | Thank you for being here.
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