Hello everybody, it's Sam from Financial Samurai and it is March 11, 2020. And it is officially a bear market in the Dow Jones Industrial Average. And we're basically almost in a bear market with the S&P 500 down about 19%. Now down 20% from the high is an arbitrary number, but that's something we've arbitrarily used since the history of the stock market.

So the last bear market for the S&P 500 ran from October 9, 2007 through March 9, 2009. So not that long, but the index did fall about 57% in that 17-month period as the US housing downturn and mortgage crisis erupted, triggering a credit crunch. This time, a recession is not being triggered by a financial crunch, but obviously the coronavirus and the paralysis of consumers to spend money to go out and so forth.

You're going to see massive knock-on effects with freelance workers getting hurt because they simply cannot deliver food or drive cars and so forth. So on average, bear markets have lasted about 14 months in the period since World War II, while market corrections have lasted on average about five months.

The S&P 500 index has fallen an average of about 32-33% during bear markets in this time period. So if you want to do a not-so-fun exercise, take whatever equity exposure you have in the markets right now and then lop off another, let's say, 12-15%, and then you're going to have the average decline in the average bear market.

So if you can withstand that other 12-13% hit, hopefully you should be okay. And that hopefully means you have the proper risk exposure. Now, history has also shown that the faster an index enters into a bear market, the shorter they tend to be. Historically, stocks take 270 days to fall into a bear market.

Now this market, well, we got here in under 30 days. So hopefully we're going to see a faster recovery. So when the S&P 500 has fallen 20% at a faster clip, which is what we're experiencing now, the index has averaged a loss of about 26%. So to do some not-so-fun analysis, take whatever your equity exposure is and lop off another 6% and you're going to get to that average.

Now of course, nobody knows what's going to happen in the future. But if you look at China, China first quarter GDP is in the dumps, obviously, but you're seeing a resumption of economic activity because there's been a drastic slowdown in coronavirus new cases and deaths. So what you'd expect to see is a V-shaped recovery in the China market, which is kind of what you're seeing right now.

And you also see in the China equity markets, the local markets rebound quite nicely. So let's say we are one month behind China. Hopefully we can see and experience what they are seeing and experiencing right now. But the problem is, Americans, we are a democracy. We like to do whatever we want.

I was at the tennis club the other day for three hours playing tennis and it was packed. It was packed between 3.30 and 6.30 p.m. Whereas in China, it's just a much quicker directive. Stay inside, don't do this, don't do that. They built a thousand bed hospital, what, in like two weeks or something like that.

Whereas if you try to get that done here in San Francisco, it would take maybe two years. It's just so much bureaucracy, so much individualism, which is part of what makes America great. But it's also one of our weak spots. When people start telling us what to do, nobody likes to get told what to do, especially here in America.

I will say that this time period right now feels quite similar to the 9/11 tragedy. I remember that quite clearly because I was at the top of the World Trade Center for a conference, a Latin American emerging conference, just two weeks or three weeks before. And I lived at 45 Wall Street, which is only a couple blocks away or so.

And it was a devastating time. But I remember the country came together on both sides of the political party. Yes, there were some ugly incidences of racism and a lot of fear mongering. But I remember New York City, Manhattan, especially coming together to help everybody in need. And I think and I hope this is exactly what's going to happen in the United States today.

You know, there's still a lot of denial about the coronavirus negatively affecting people. And look, chances are high that you won't get it. And if you do get it, chances are high that you will survive. It's only after about the age of 60 and 70 where the death rate starts to massively tick upwards to the 5% to 8% level.

What's interesting to note is that during the SARS outbreak, I was reading that no kids under five or 10 died from SARS. And it does look like so far in 2020, children are not as affected by the coronavirus for some reason, maybe it's the developmental process of their lungs or whatnot.

I'm not a scientist, but that's just what the facts are. If your kid is under five or 10, he or she is safer than the rest of the older population. And speaking of toddlers, I took my son out of preschool this week because it just didn't make sense that many companies around the Bay were encouraging or actually forcing their workers to work from home.

So why the heck am I putting my child at risk to be in a school of 50 other kids and teachers? It just felt bad. I felt really, really guilty. So I brought him home and we've been spending a lot of time at the park in the playground. And I was talking to one of the mothers the other day, and she said she just has no other choice.

She drops her daughter off at 730 in the morning because she has to get to work by eight in the morning. And she picks her daughter up at 530pm. And it was interesting. And it's kind of sad because I usually spend about 20 minutes during transition period when I drop off my son.

And I saw her daughter there on Monday morning and she was coughing and it was clear she was sick. But the mother had no other choice. She had no way to take care of her own child. So she dropped her child off at preschool. And unfortunately, she's probably going to get a lot of the other classmates sick, who are then going to get their parents sick.

And it just never ends. It's a never ending cycle, because of money or the desire for the money, or the need for money. So I'm assuming that this coronavirus pandemic is really going to spur the conversation forward on universal basic health care, sick leave, vacation day policies, and help for freelance workers.

Freelance work is totally booming and it's going to overcome normal day job work sometime in the near future. However, there's probably a speed bump happening right now because freelance workers simply cannot make enough money to get by when there's no work. They don't have the luxury to keep on earning, keep on growing vacation days if they're out sick.

So this is something that we definitely have to bake in if you want to do freelance work. I did a calculation a long time ago that you've got to earn about 35% more as a freelancer or as an entrepreneur to replicate your day job income. And it's in an article on Financial Samaritan if you want to Google it, basically asking how much money do you have to make as an entrepreneur to replace your day job income.

And I hear my son climbing up the stairs now as I work from home. And this is one of the troubles of working from home is there's nowhere to hide unless you live in a big, big mansion. Speaking of big, big mansions, I think one of the knock-on effects of the coronavirus is that homebuyers are going to look for bigger houses now to accommodate one or two people working from home.

So a bigger house will hopefully have an extra bedroom that can be turned into an office or a dedicated office and then maybe there's an extra bathroom. If you look at the data, the average home size is something around 2,500 something square feet. It's been declining steadily since 2014.

So maybe, maybe that trend will reverse as we look for larger and larger homes. Huh? What do you want Daddy to do? Play. You want Daddy to play? Do you like these cool pictures? Yeah. Whoops, I'm back. Gotta do a little timeout, right? Take care of my boy. So maybe I will write a post on working from home survival guide because it can be really, really tough folks.

And just going back to real estate, I think real estate is very attractive now. And I'm doing some research on how much the stock market has to go down before real estate starts getting in trouble. And the preliminary research and the preliminary thought process is that the stock market down by up to about 20%.

I think people are just really going to want to gravitate towards real estate because it's more stable and it is a steady cash flow. And also because mortgage rates are collapsing, the affordability has increased tremendously. And so a lot of people are refinancing their mortgages or doing cash out refinances or getting a loan to try to buy real estate.

Unfortunately, inventory is still quite low. So I think real estate is really going to outperform the stock market in 2020. How could it not, right? I mean, the S&P 500 is down almost 20%, whereas real estate is probably flat up a little bit, just like the bond market. But at some point, if the stock market gets too terrible, there's going to be tremendous fears of a recession, which might override the demand and the desire for property.

In conclusion, I hope this bear market has taught us more about risk tolerance, taught us more not to confuse brains with the bull market, and has taught us more about the importance of diversity and the importance of investing in risk-free assets and a diversified number of assets. It's really sad after 11 years that the bull market is officially over.

But I think like always, it's good to focus on the positives, on how much we've learned since 2009, how much we've made since 2009, and how much we've grown as people. I'm on my fatherhood journey now, and it's going to be for another 18 years, since my daughter is only 11 weeks old.

And I'm looking forward to getting better as a father, better as a writer, better as an investor, and better as a communicator. And I hope all of you guys focus on one or two things you want to get better at as well, besides just accumulating more money. Because money at the end of the day is a means to an end, and hopefully that end is a better life for you and me and for everyone.

Thanks so much, everyone. Please stay safe. Please stay hygienic. And take a look at your assets and make sure you have the appropriate risk tolerance and risk exposure out there. It could get very, very dicey. Again, the average bear market declines about 32%, 33%, and we're only down about 20%.

So fingers crossed, hope for the best, but expect the worst, and I'll see you guys around.