[REN #870] Real Wealth: Saving Ourselves and the U.S. Economy

Real Wealth: Saving Ourselves and the U.S. Economy, Real Estate News for Investors Podcast Episode #870

There’s nothing more unifying than a common enemy, and that’s what the nation is facing right now — a fast-moving virus that can be as mild as a common cold or flu for most people, but absolutely deadly to others. The Federal government and the Federal Reserve are taking drastic steps to shore up the economy, while individuals and families are going into survival mode. It’s not the end of the world, however. Good things will come out of this. As exponential tech entrepreneur and futurist Peter Diamandis said in a blog about the virus, “with pause, comes opportunity.” (1)

The news hasn’t been good. The stock market has been tumbling in response to the impact of the virus on the economy. The losses have erased about 80% of the gains since the 2016 election, basically eliminating most of what was originally called “The Trump Bump.” The Dow was down almost 3,000 points on Monday, March 16th, and that’s after the announcement about an emergency rate cut by the Federal Reserve which made investors nervous. (2)

Emergency Rate Cut

The Fed cut rates on Sunday to a range of zero to a quarter percent. That’s where we were back in 2008, at the start of the global financial crisis. The lower rate will certainly make it cheaper to use our credit cards. It will also make adjustable rate home loans cheaper along with car loans, student loans, and home equity loans. However, low rates don’t always do the trick. For example, I’m not jumping on a plane or cruise just because it’s cheaper.

Massive Stimulus Package

The Fed also announced a massive stimulus package that could top one trillion dollars. Lawmakers were debating the details as this podcast was put together but the rescue plan is expected to be the largest in U.S. history. (3)

Under discussion is emergency funding for businesses hard-hit by the virus including airlines, hotels, and small-to-medium-sized companies. A huge part of the plan would be some $500 billion that’s sent to individuals in the form of a cash payout or payroll tax cuts. The Trump administration is reportedly in favor of sending the checks, quickly, within the next two weeks. Politico cited sources that say the payments might be 500 to $1,000 each. (4) Millionaires wouldn’t get them.

On a side note, it’s aggravating to me that airlines who recently bought up their own stocks and probably took big bonuses are now potentially getting a bailout instead of selling stock like other companies. But alas, that’s how it will likely go so potentially some airline stocks could be good buys now.

Also on the radar right now is earnings season. Companies will be reporting their first quarter earnings in the coming weeks and many are expected to miss their forecasts. The second quarter will likely be worse. And, several economists are saying the recession has already begun. Though many economists believe a global recession was already in action last Fall before all of this.

Reality Sinks In

Not everyone pays close attention to economic news however, so for many, reality started to sink in when cities began shutting down bars, restaurants, fitness centers, public gatherings, and asking people to “stay home.” That’s led to panic-buying in stores and the hoarding of essentials like toilet paper and hand sanitizer. You can’t find an N95 mask anywhere. 

President Trump even acknowledged that it’s “really bad” when he issued guidelines to help stop the virus from spreading. Those guidelines include staying home if you’re sick, your children are sick, if someone in your household has tested positive for the virus, or if you are older or a person with underlying health conditions. It also asks people to work from home and attend classes from home whenever possible, to avoid social gatherings including bars and restaurants; get take-out food from restaurants or have it delivered; avoid discretionary travel, shopping trips, and social visits; and practice good hygiene with hand washing, sneezing or coughing into a tissue or your elbow, disinfecting frequently, and not touching your face. (5) 

Other than the good hygiene advice, this is a big change from “normal.” Many of us are now hibernating, and are being told to stay at home for as long as it takes to “flatten the curve.” That’s when the infections start to slow down, and there’s less danger for a fast spread of the virus, like we’re seeing now. This helps protect people, and also gives medical facilities and hospitals a better chance at being able to keep up with demand.

Spending Time at Home

So it’s a crazy time, and something that many people didn’t see coming. Although if you google Bill Gates TED talk, you’ll see he has been warning about this threat for years. He has recently stepped down from Microsoft’s board to be more active in social issues like this. 

But we will get through this. It’s important to understand that no matter how big or small the curve is, it does eventually wane once enough people get the virus. Most people won’t even know they had it, or the symptoms will be similar to a flu or mild cold. And then they will likely be immune — so that’s the good news. And that’s why it’s important to stay healthy. 

Those most at risk are of course, the elderly. We’ve been closely watching Italy and realizing that’s one of the reasons the country is being hit so hard. Italy has an aging population, with the median age at 47.3 years. One in four Italians is over the age of 65. According to Gatestone Institute, Italy also has a large fashion industry with as many as 300,000 workers from China. Many from the Wuhan area had gone home for the Chinese New Year on January 25th, and then flew back to Italy presumably with the virus as the epidemic emerged in Lombardy, one of the capitals of the Italian textile industry.

And finally, Italy’s government-run health care system was unprepared for such an epidemic.  There were just 2.2 acute-care hospital beds per 1000 residents, as compared to Germany which has six beds per 1000 residents. Plus the number of doctors are limited, which is one of the reasons their health care system is now collapsing.

And of course, the virus has now spread throughout Europe since borders were not closed in time. And most of Europe also has an aging population. 

While we do not know how we will be affected here in the U.S., hopefully our health care systems are more prepared. But there are also more of us. 

I, personally, have been protecting myself and our family for two weeks now. l have been self-quarantined at our home and not allowing visitors. Our daughter returned from her Spring Semester in Prague, thankfully, the day after travel from Europe was suspended — except from London. So she flew from Prague to London and then home. And since she was on an airplane and at airports with hundreds of people for 17 hours presumably with people from all over Europe, we have her fully quarantined for two weeks in our guest house. 

I’m not taking any chances, as I have asthma and am high risk. I haven’t even seen my baby grandson for two weeks, which is heart wrenching, but until I can be assured that their family has also been quarantined for two weeks, I can’t take the chance. So, we FaceTime a lot. This virus can be highly contagious for at least two weeks, without the carrier even knowing. 

“With Pause, Comes Opportunity”

I mentioned Peter Diamandis at the beginning. He is an amazing individual. He’s been named by Fortune as one of the “World’s 50 Greatest Leaders” and is ahead of the curve in many ways. He talked about the severity of this pandemic in his blog, but he’s also one who recognizes opportunities. He said in one blog that the downtime we are experiencing because of the virus gives us an opportunity to expand our own personal horizons.

He lists five topics that he’ll be focusing on in the weeks ahead. Number one is spending more time with family and having meaningful discussions about what’s happening. He also plans to focus on his physical and emotional health because the key to surviving this virus is having a strong immune system. He says the extra time is also a great opportunity to reinvent your business in light of opportunities presented by the coronavirus. That includes the use of digital platforms or the creation of a new business or service that could help the world — maybe one that would help prevent future pandemics. He says: “The world’s biggest problems are the world’s biggest business opportunities.” It’s all food for thought as you ponder the extra time on your hands, and work hard to keep yourself and your loved ones healthy.

Links:

(1) Diamandis Blog Article

(2) CNBC Article

(3) Politico Article 1

(4) Politico Article 2

(5) The President’s Corona Virus Guidelines

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