Things should never go back to the way they were, if we’re smart

The Thinker by Rodin

I suspect that in retrospect March 2020 won’t be remembered so much for the COVID-19 crisis, but as the catalyst for finally remaking our society into one that works for the people again.

It’s all pretty crazy and hellish right now, but it’s made crazier and more hellish because we’re trying to deal with COVID-19 and our economic crisis by using old rules that no longer work.

Take our Federal Reserve, for example. In reality, the Fed doesn’t have a whole lot of tools left in its toolbox. Its most effective remaining tool is that it prints the money. By effectively throwing out unlimited sums of money, it’s trying to keep our economy from collapsing altogether by underwriting our banks and businesses. It seems to be buying us some time, for example, by keeping banks flush with cash when in times before the Federal Reserve (the Great Depression) there would be a run on banks. But dropping the federal funds rate to 0% isn’t going to help at all. It did in 2008, but won’t anymore. Both businesses and consumers are already in hoc up to their eyeballs. We already can’t afford the debt we got. It’s hard to see how acquiring more of it will help the economy.

In just a few weeks our real unemployment rate is now likely over ten percent. Much of our economy has ground to a halt. It may prove to be ephemeral, which I first thought, but with some weeks to look at what’s going on, I no longer think so.

COVID-19 has thrown nearly the perfect monkey wrench into our economy, which had been hanging by a thread because it was based everyone spending beyond their means. Most companies made it worse. Instead of hoarding cash when times were good to get, they used borrowed money to buy back their own stock, which executives then sold to increase their personal wealth and their companies more fragile. Most people just get by, or have fallen behind, a victim of wages that rarely increase. Mostly, our productivity went into shareholders’ pockets instead. If they couldn’t afford the debt they had before the crisis, they won’t be able to now that it’s here.

All this was made considerably worse by our administration’s counterproductive approach to dealing with a pandemic. The $2.2T relief bill passed by Congress and signed into law won’t be nearly enough. A one time payment of $1200 per person and $500 per child won’t get us through this crisis. At best it will pay a month of rent or a house payment, plus a few other expenses. Expanded unemployment benefits will be a lot more meaningful to most people, if they can get them. It’s hard to apply for unemployment when so many others are doing the same thing. Until the U.S. Treasury bails out states’ unemployment funds, the funds in these accounts won’t last long.

Most likely COVID-19 will keep us at home for months, and when we are allowed to open businesses again, it will be tentatively. The doctors that Donald Trump refuses to listen to expect a resurgence of the virus later in the year unless we maintain strict social distancing. A vaccine is likely at least a year away, so things couldn’t go back to normal until those of us who don’t have it are inoculated against the virus. So most likely we can expect a year or more of doing what we are doing now, with systems under strain if not collapsing all around us.

But the economy really can’t come roaring back, not unless it works a lot differently. Those who get jobs back will be lucky to get what they had before and a wage similar to what they had before. Government cash will help, but it won’t be nearly enough, which will leave people more impoverished in general, and more financially fragile. Without laws requiring debt forbearance, or debt forgiveness, growth looks unlikely.

Which means the only way out is through political change, which hopefully will come in November. People generally vote in their own self interest, so there should be plenty of motivation. Then there’s Donald Trump doing the best to kill off his own supporters. Even if they are smart enough not to follow his advice, a lot of his supporters are poor white people, mostly in rural areas with health care networks that are already fraying at the seams. COVID-19 mostly hasn’t hit rural America yet, but it will, and it will make New York City look like a walk in the park.

These problems won’t solve themselves by a lack of government. You can see now what the lack of government has done: left us largely unprepared for a pandemic. Meaningful change happens through a government that acts in the people’s interests and works to proactively prevent exactly what we are going through now.

It won’t get better though if we keep doing things the way we have always done things. That’s why the Fed’s actions feel so toothless, at best postponing the inevitable. The Fed can’t innovate its way out of our crisis because it has a limited set of tools, and it’s used pretty much all of them. The Trump administration simply doesn’t have the imagination to do what needs to be done. It hopes for short term miracles, which is why Trump is promoting Hydroxychloroquine to treat COVID-19. People have died, are dying and will die for Trump’s bogus medical cures.

We the living who get through this by doing sensible things like staying at home and washing our hands regularly have an opportunity in 2021 to remake America into a country that meets our needs again. We could start to use money not to bail out companies, but instead to create a clean and green infrastructure. Then perhaps we can expect to see a real light at the end of our tunnel.

Welcome to hell, Republicans

The Thinker by Rodin

Here in Massachusetts, our blue-leaning state has elected a Republican governor twice. His name is Charlie Baker. He’s the kind of Republican I remember from my youth, before most of them went insane. Governor Baker is pragmatic and works across the aisle. In some ways he is more Democratic than Governor Andrew Cuomo next door in New York, supposedly a Democrat. He refused to vote for Trump and his main focus seems to be to just do things sensibly. Baker may be the only pragmatic Republican left in the country.

Baker has been busy with COVID-19 issues, of course, as have most governors. Governors, well, govern. They deal with the world as it is and no matter how messy aim to make it work better for their people. No wonder then that our blue-leaning state has put him twice in the governorship; we appreciate people who have these skills regardless of party. To get things done he has to figure out how to do it adroitly. Right now it’s a combination of bully pulpit, stretching what he can do under the law a bit and hunkering down with aids and our legislature to more intelligently allocate our state’s resources.

Trump though is ruling, not governing. Rulers don’t govern; they just tell other people what to do and don’t care about how if affects people. Trump is tone deaf to the needs of most Americans and listens only to those who give him money or keep him in power. He has no central strategy, no real plans. He ping pongs from moment to moment, hoping to find the words that strokes his ego. He really doesn’t care about governing; he just wants to rule. He’ll do it his way, or not at all.

It never occurs to Trump to try to work together with people unlike him to try to achieve his goals. He never learned the art of flattery; instead he expects everyone to flatter him. He’s quite comfortable short shifting New York state in its supply of ventilators because Governor Cuomo hasn’t flattered him sufficiently. He wants people to grovel and kiss his ring like he’s the pope. And he’s filled his administration with lackeys that know only how to chase after his constantly changing desires, rather than people who try to exercise the levers of government to achieve what people actually need. He not only expects tone deafness; he requires it.

So it’s no surprise that we were caught with our pants down on this COVID-19 crisis. It’s no surprise that it took months to start doing just a few of the things intelligent people do to mitigate these things. He has no experience in governing and has used none of his time in office to try to acquire these skills. Bullies never learn the art of negotiation. They just practice fear and intimidation because it’s all they know how to do.

With the exception of a few Republican governors like Charlie Baker, most Republican governors out there seemed more enamored with ruling rather than governing too. Take Ron DeSantis, Florida’s governor, who only recently decided to keep people home, allowing his state to contribute disproportionately to the spread of COVID-19. Now his solution seems to be to not allow New Yorkers to drive into the state. He is also bizarrely exempting churches from his social distancing rules, arguing that religious services are essential services.

By ruling rather than governing, he’s going to kill a lot more citizens of his state proportionately than most other states. By following the Republican Party playbook rather than by applying the resources of government to meet the needs of the moment, like Trump, he is seeking short term popularity and adherence to party dogma against the needs of his state.

It’s not a stretch to say that Republicanism is killing people in these states and all over our country. It’s a philosophy that says business is always right, and that government has no legitimate role to play beyond enabling extreme capitalism and promoting cronyism. Unsurprisingly, this is leaving states and the federal government without the tools and the institutional memory to adroitly handle the challenges we all face. It may kill millions of us.

Governing requires pragmatic people with a long term vision who not only need to adroitly shift resources to meet the challenges of the moment, but to imagine beyond their term of office and leave their jurisdictions better prepared for these events than when they have arrived. It’s called being a fiduciary. With the exception of a few Republican governors, they, our president and the Republican parts of our Congress have only proved to be miserable failures.

They swallowed Reagan’s KoolAid: that government is the problem. A government though that governs in response to the needs of the people is exactly what government is supposed to do. What we have now is a largely wholesale lack of governing.

Welcome to hell, Republicans. And if looking for someone to blame, look in the mirror.

God won’t save you from COVID-19, but science might

The Thinker by Rodin

Everyone’s feeling out of kilter these days. Most of us are feeling somewhat scared too.

It’s reasonable to expect that in the weeks ahead we will feel more scared, as the COVID-19 crisis gets much, much worse. When people we know, particularly family and celebrities, are felled by the disease we’re going to be looking for escape from this hell. For some it will be from a bottle of booze. For many perhaps it will come by praying to God that you or people you know will be spared.

There is nothing wrong with either prayer or meditation. Both have proven mental health benefits. It helps us feel connected to the larger world and helps many find solace in difficult times. Whether God saves you or not you’ll never know for sure, but science can probably save you, if you pay attention to what scientists and medical professionals are telling you to do and follow their advice. If God has a higher power at work, it’s the power of science.

What we are experiencing in 2020 is hardly new to mankind. Aside from the many wars mankind has endured over the years, natural disasters and pestilence have been periodic killers too. It’s been a while though since we’ve seen a pandemic, so it’s new and very frightening. In my 63 years, I don’t think we’ve had a proper pandemic here in the United States. Still, what we are going through now is hardly unplowed territory. Since the early 1980s we have been dealing with HIV and its AIDS disease. We’ve made progress but most of the progress has come through boring things like monogamy and practicing safe sex.

The religious among us seem to be in two camps on COVID-19. Some see it with the frame they gave to AIDS and HIV: God is punishing us for all our rampant sinning. Then there are others, like Jerry Falwell Jr., who swallowed the Republican KoolAid and reopened Liberty University after Spring Break. I’m guessing he figured his students were too godly to get COVID-19.

Falwell should be practicing penance at the moment, but if he’s not his students are. Some are likely to pay with their lives. For many younger people, catching the disease is no walk in the park. It will kill them. Heck, it killed the guy who first discovered the disease and tried to get the Chinese government to do something about it. Instead, he was punished. He was 33 years old.

I was on a cruise this month. Fortunately, no one was infected on the cruise. Two weeks later we show no signs of the disease, but while on the cruise we were meticulous about regularly washing our hands. The cruise line was meticulous about squirting our hands with sanitizer when we went to eat too. Before the cruise we spent a night at a Rodeway Inn in Fort Lauderdale, Florida. Eating their free breakfast in the morning, someone on the P.A. system was saying the way to fight the disease was to stop listening to the liberal news media.

He should have listened. There’s no more cruising going in and out of Fort Lauderdale and won’t be for a long time. He’s probably one of much of the hotel staff that’s been laid off because of the disease, made much worse because their Republican governor Ron DeSantis put profits over public health, doing much to spread the disease as spring breakers brought it back home. Florida still lags other states in keeping its populace at home. Maybe he’s figuring that God will save them.

God’s not coming to his rescue. He didn’t come to Jerry Falwell Jr.’s rescue and he won’t be coming to your rescue either. I can say it’s because God doesn’t exist, which is likely, but I can’t prove it. What I can say is that with if God exists, its a removed and impersonal god, that shows no interest in your life in particular. It didn’t keep people from getting the plague either. Even back then though the smarter ones inferred that it had a lot to do with people being clustered closely together. Today, others like my friend Tom are using the same strategy: flee to the country and hope to ride it out there. You can also do what health care professionals are telling us to do. That’s what we’re doing.

It’s human to be scared by all of this. For most of us it will be one of the major events in our lives, and a shared world trauma. Some of us cope with stress better than others. Religion is supposed to give us ways of coping with this kind of stress in particular. If so, I don’t see much evidence that it’s working. Part of the stress of the religious is their cognitive dissonance. They know what their religion is telling them is crap, but they can’t admit it to themselves.

The successful people are going to acknowledge that it is crap and move on. This is not to say that religion is necessarily bad, but certain flavors of it can be quite toxic, and a lot of religious Americans are in this camp. Most are evangelicals. If we are at the first stages of Armageddon, it’s going to be sending many more of these Christians to early graves. Of course, a lot of us less religious folk will be felled by it too. But fewer of us will because we will largely heed the advice scientists like Dr. Fauci are giving us.

To me, following their advice is something of a balm because it’s likely to actually work. It may also be my nature, but although concerned I am markedly happier than most of the people around me. It comes not through choosing ignorance, but learning what works to keep from getting infected and then doing it scrupulously. I’ve learned there are ways to be less afraid of COVID-19 and things you can still do an enjoy to give you pleasure and meaning.

Here’s some of what I’m doing. You might want to see if these strategies work for you too:

  • I stay mostly indoors
  • I keep surfaces I touch clean with appropriate disinfectants
  • When I go out shopping, I am careful. I bring sanitary wipes, stay calm, and keep a social distance. Since I am age 60+, I take advantage of special shopping hours for us more at-risk people.
  • I mostly succeed in not touching my face
  • Some face touching will happen anyhow. So I try to wash my face with soap and water once a day too. Keeping it clean means if I touch it I probably won’t get infected if I then touch my mouth or a mucus membrane.
  • I wash my hands periodically throughout the day, with soap and water, at least for twenty seconds, being very thorough to clean all surfaces
  • I try to get outside once a day and take a walk. Walking is quite safe if you maintain a social distance. There are parks and trails nearby. Seeing people makes me feel connected to them. The fresh air and sunshine feels good too. Hearing the birds and feeling wind on my face makes me feel alive.
  • When the weather permits, I open up the windows and enjoy the fresh air. There’s no coronavirus in the air unless someone coughs on you. Outdoor air is likely healthier than indoor air anyhow.
  • I keep busy doing stuff: consulting when it is available, indulge in my hobbies and try not to obsessively watch the news. Watching Star Trek Picard was a great distraction.
  • After going shopping, I wipe surfaces and things I touched, including groceries I brought in if possible. I leave stuff that’s not too perishable in the garage for a few days. And I wash my hands.
  • I count on layers of protection. The most likely way of acquiring the disease is from touching your face and then touching your mouth or nose. I keep both hands and face clean.
  • Realize this is not forever.
  • Chat with friends and family virtually. Be positive but realistic. Encourage them that by doing sensible things they are likely to be survivors.

In one way we are lucky: our finances won’t be stretched by this crisis, so that’s a huge relief. Most of you won’t be so lucky, but you will get some relief from the government. Hopefully it will let you ride the financial impacts for a while without feeling like you are in a financial crisis too.

By doing these things, you are also being virtuous. In addition to hopefully putting yourself in a healthier space, you are also helping society. You are helping to cut the transmission of the disease so others can survive it. You are making things less stressed for our overtaxed healthcare workers. Your actions may be boring, and make you feel lonely, but it’s vital. Staying at home helps not only you, but everyone.

Keep praying to God if that gives you comfort. We know what kills people now when pandemics occur. In the past, we didn’t know so we attributed it to the supernatural. Trust that God revealed science for a reason, and that it wants you to place your trust in our scientists. One to 3 percent of us who get the disease won’t survive it, but most of us will, but only if we stop doing the stupid stuff.

Stay safe and stay positive. This won’t last forever.

It’s time for a jubilee

The Thinker by Rodin

Seems like our world is going to hell in a corona basket.

I remember at the end of 2019 all my friends were saying they were never so glad to see a year end. 2019 was a miserable year. Now, most of us would prefer to be back to 2019. A recession that looks like it will become a depression and COVID-19, which may kill a million or more of us, seems like the beginning of the Armageddon that so many so-called Christians are looking forward to. Perhaps that’s why many of them were cheering Trump’s suggestion that everything go back to normal on Easter Sunday.

On that last point, I was going to make a blog post just on that, but I can’t possibly restate any better what so many others have already said about Trump’s unbelievable narcissism. Trump wants us to die so he can get reelected. The smart ones though are going to take a pass and will keep sheltering in place and obsessively washing hands and surfaces. I know we are. Evolution is not called “survival of the fittest” for nothing. For those happy to place emotion or devotion to an insane leader over rational behavior, well, you’ll be one of hundreds of thousands of candidates for the 2020 Darwin Awards. Clearly you weren’t reading my blog, but don’t say I didn’t warn you.

So rather than restate what so many others have already said, let me talk about something that isn’t being much talked about: the way our economy works appears to be crumbling. What do I mean by that? I mean the way we have been running an economy where the rich continue to get richer, the poor more desperate and in debt, and our government more dysfunctional is ripe. It’s not only not working, it’s not working badly for us. We are ripe for revolutionary changes. This upcoming depression (which it looks likely to be) should make us anxious for another New Deal.

It won’t look quite the same as the New Deal and hopefully any depression will be short lived. But our economy is loaded to the maximum with debt. Pretty much everyone, except the rich, holds it. That’s individuals and corporations, made possible by low interest rates since the Great Recession. The Federal Reserve’s recovery plan is to cut interest rates to zero or even lower, trying to coax us to take on even more debt. That’s because they don’t have any other tools to use. Trying to grow out of a depression based on taking on more debt that we already couldn’t afford doesn’t sound very sound to me. It feels desperate, as if we are desperately trying to keep the rules of our old sinking economy alive. The so-called $2T recovery bill signed into law today is an attempt to keep this hamster wheel turning.

I don’t think this will work. First, look how long it took us to emerge from the Great Recession. When we did emerge, our growth rate was always anemic. You’d be hard-pressed to find any quarter where our GDP increased by more than three percent annually. Our economy was like an overloaded subcompact running on three cylinders trying to merge onto the Interstate. It took a long time to get up to highway speeds. And while we technically recovered, we never really felt we recovered because we never fundamentally solved the problems that got us into it in the first place. The half-hearted attempts by Democrats in 2009 and 2010 were not nearly enough.

In fact, we went back and made the same stupid mistakes all over again, such as getting rid of much of Dodd-Frank banking regulation that was supposed to prevent it from happening again. The fundamentals of our recovering economy were never sound, but were propped up by low interest rates which had the side effect of causing markets to rise. Companies used cheap credit to buy back their own stocks, inflating their stock prices to surreal levels. The bubble would have burst anyhow; the coronavirus thing just made the hole gaping instead of possibly manageable.

What would really make the economy roar back when this pandemic is contained is a big haircut to a lot of creditors. Because an economy can’t roar back if overleveraged people have no cash to buy stuff. What we really need is a jubilee. This is where we force creditors to wipe their debt slates clean.

Take, for example, student loans. Last I checked, there were about a trillion dollars in outstanding student loans, owed by people the least able to pay them back. Desperate for an education instead of flipping burgers for forty years, they didn’t have much choice but to pay usury interest rates for educations whose costs were vastly inflated. Let’s declare all that debt insolvent. The creditors will scream, but a lot of people will have money to spend again on things that matter like food and housing.

It could be done for lots of debts. Write off, say, 25% of mortgage debt on housing purchased for up to $500,000. Wipe out 50% of credit card debt. If you want to encourage thrift, revert the debt if more is incurred over the next five years.

And tax the rich. They’ve been bleeding the rest of us dry for too long, in the process allowing infrastructure and services to degrade. Institute Elizabeth Warren’s proposed 2% wealth tax. Raise rates just to where there were for rich households during the Reagan Administration. Tax dividends the same as ordinary income, or higher. Make work pay again.

Then do what we all know we need to do: make Medicare available to all. Much household debt and personal bankruptcies are due to medical costs that are out of control. Controlling medical costs frees up all sorts of money for more productive use. Institute living wages for everyone with annual increases that keep pace with inflation. Overturn right to work laws.

This is probably beyond a President Biden. But without it, I suspect a President Biden will discover what President Obama discovered: the system will work in counterproductive ways against the needs of the people instead.

Our election, if it can be held fairly, will likely put Democrats in control of government plus give them the margins needed to make real change happen. The question is whether Democrats have learned their lesson, and can institute the changes we need to make the economy work for everyone again.

If not, election 2022 will look a lot like Election 2010, and the crazy cycle will continue to repeat and move us into second world status.

Coping by moping

The Thinker by Rodin

In the week since I last wrote, life has been wholly upended for most Americans. But in many ways, life is unchanged for us. There’s just the two of us (four if you include two cats). Being retired, we are minimally impacted by COVID-19.

For us, the biggest financial impact is our stock portfolio. It’s down $180K at the moment, or about 19% from its peak on February 19. It will probably go lower, but the good news is that we don’t draw it down much, just $1900 a month and that comes from selling bond funds. So the stocks inside it wait for a more prosperous time when share prices recover.

Those with money that survive it will be the winners. On Monday we met virtually with our financial adviser. We actually bought some stocks on the theory that they are historically cheap and over time will recover. It amounted to 5% of the portfolio so it wasn’t that risky. Since no one can time the market (although I got lucky), those with money buy incrementally when values go down precipitously should eventually reap nice profits. I think that’s what our financial adviser is doing. Since he is paid as a percent of our portfolio, if he’s right, then he too will be enriched some years hence. Meanwhile, a steady pension and social security provide the bulk of our income. I can’t see those going away.

The government may give all Americans money to get through it. If so, we are unlikely to spend it. Since we don’t need it I hope there is some means testing. I’d rather it go to those who do need it, which is most of us.

In truth, being retired already, things haven’t changed that much for us. Mainly there is a lot more washing of hands and cleaning of surfaces than there used to be. We shop minimally and go through an informal protocol of bringing sanitary wipes with us when we shop to wipe surfaces like shopping cart handles. When we get home we wash hands and clean things we touched. So far it’s working. Eight days ago we got off a cruise ship and flew home, and there are no signs of COVID-19 here. Some items were in short supply at the store, or not available. But so far coping hasn’t been hard. Coping is accomplished mostly through moping. I do have some consulting work that generally keeps me busy. It hasn’t dried up at all, for which I should be grateful. Thankfully, it’s all work that can be done remotely.

We have plenty of incentive to be sanitary, because the one thing we can’t count on now is our health care system, at least if we come down with something serious. We might get some advice from doctors over the phone. But if we need hospitalization, as this thing gets worse it’s unlikely that we will get it.

I got my hair cut yesterday. It was our last opportunity as our hairdresser is going on hiatus starting Monday. It was all done carefully, but there was some risk. It’s likely that my hair will get quite long before it is cut again.

As this drags on, we will miss things like going out to dinner and travel. There is no place to go, and it certainly won’t be on a cruise ship. Unless we want to take in a mountain vista nearby, we might as well stay home. All this of course will just feed the recession sure to come, which looks like it could easily topple over into a depression.

This would be a good time to spend some money to stimulate the economy, but that too has risks. I wouldn’t mind a bathroom on our upper level, but not at the cost of having construction workers in my house for weeks on end bringing in who knows what with them. I bought a new car last year and we really don’t need to replace my wife’s car. The house is well furnished, so there is no need to replace anything.

The YMCA is closed indefinitely so exercising with weights won’t be happening for a while. What exercise equipment we have at home is cardiovascular. My principle form of exercise is walking, and that’s at least still okay. When I go walking I see plenty of neighbors, so at some level it’s like nothing is happening. Generally they are keeping their social distance, but I see couples not doing so. The park across the street from us is closed, but that hasn’t kept people from parking in the part that isn’t closed and walking around it. There were a few hundred people in the park yesterday. Occasionally I do see questionable behavior. A group of kids on bikes on the local path were probably breaking protocol. I just don’t think they care and figure they won’t get it.

What I do know is that this is just ramping up. Its economic consequences are already evident and will get much, much worse. A month from now the threat won’t be so much not being able to find toilet paper, but from having a supply chain under strain. As grocery clerks and pharmacists get sick, things will get much more dicey. I’m already seeing cops parking along the sides of the road in places they normally wouldn’t, I think mainly to signal to the community that big brother is nearby. I expect in time we will see them guarding grocery stores and pharmacies. We may think this is the new normal.

I do believe all this is temporary and things will rebound nicely when it is over. But it’s likely to last longer than thought. Complacency may set it, bringing a resurgence of the virus. Clearly, it’s going to have huge ripples. When it’s over, society is likely to be reorganized in pretty fundamental ways. We probably will see this time as a period of great change where things we took for granted, like an abundance of local retailers, largely come to an end.

The wizards of Wall Street are no wizards

The Thinker by Rodin

During our recent cruise, we at least got grainy MSNBC satellite TV. When I watched it, I watched the stock market yo-yo back and forth pretty much every day: the DJIA down a thousand one day, and it would often recover it the next day. The general trend though was down, a lot.

In a way, it was good to be on one of the last cruises because I was mostly insulated from this madness unless I sought it out. (Our cruise turned out fine. No passengers developed COVID-19 symptoms, but berthing in Fort Lauderdale we learned that the half dozen ships in port weren’t going anywhere for a month. I felt sorry for the staff, many of who were likely facing unemployment and a one-way ticket home.)

Today though takes the cake, with the DJIA having its worst day since the crash of 1987, down more than 3000 points in just one day. It all feels so predictable by now. I’m just wondering why the wizards of Wall Street are so late to this party. All the signs were there for those with clear eyes. I’m no Wall Street wizard, but I saw it coming. And I took some steps before the crash to mitigate our risk.

Today’s crash was because Wall Street suddenly discovered that the Federal Reserve had essentially used up all its ammunition, which means in effect that there is no steady hand on our financial system anymore. On Sunday, it dropped the Federal Funds Rate to 0%. Soon predictably it will probably go negative, charging banks to temporarily give them money to insulate them from even graver financial calamity. It probably won’t calm markets.

These same wizards of course were cheering companies that bought back their own stock with borrowed money. It gave the market a sugar rush and made stock prices worth way more than they were actually worth. Now many of these same companies, in debt to the max, are discovering the downside: they don’t have a whole lot of liquidity to ride out an economic downturn. In short, expect a lot of these companies, including some of the biggest of the blue chips, to go into bankruptcy.

The coronavirus is going to cause a recession, if not a depression. The virus though is just the trigger that revealed the larger problem, which has been sinking markets. Margins are gone. Businesses are in hoc up to their eyeballs, as are most consumers. Layoffs have already started and are inevitable. When public gatherings of fifty or more are not allowed, restaurants and many public-facing businesses like theaters close down for the interim. This takes money out of the economy and with predictable results. People living on the margins won’t be able to pay rent, or afford to see a doctor, and there are plenty of them thanks to a gig economy that Wall Street just loved but which added immensely to our overall financial fragility.

Stock market declines show that people are sobering up. Donald Trump of course is making things much, much worse by his lack of leadership and counterproductive strategies. He’s also making it worse for himself by continuing to shake hands with people. Most of his supporters still haven’t figured out what a fraud the guy is and are doing really stupid stuff like licking toilet seats to “prove” coronavirus is a myth. Sadly, it is likely that in a few weeks they need to only go to their local hospital’s morgue to see how wrong they are, if they are not victims themselves.

Children are out of school, day care centers will probably just pass on the virus, so parents predictably will stay home with their kids and fret. For many of them, this will collapse their house of cards. Social distancing should help reduce the number of cases, but it’s likely that there will be far more patients in need of critical care than our hospitals can handle. Our wonderful private health care system will prove unable to handle the coming crush of cases, which will kill lots of people needlessly as well as probably feed a mostly downward economic spiral.

It’s Republican government that will prove bankrupt once again, as it did in 2008, in 1987 and of course during the Great Depression. We never learn. The fall in the stock market proves these stocks were wildly overvalued and did not factor in the risks that are now obviously manifest. Having come off a cruise ship on Saturday and now home, I got to experience it first hand at our local supermarket where the meat counter and frozen food aisles were mostly empty. So far people seem to be soldiering on, but there is the pervasive undercurrent of social disorder. Things could get ugly not just medically, but civilly. We may be seeing the partial collapse of civilized behavior.

So we’re doing what we did before: hunkering down. We can’t count on our medical establishment, so we have to look out for ourselves. We wash our hands regularly. We take calculated risks going to the store. We wipe surfaces. We reflexively do social distancing. We also try to handle things soberly, mindful of the risks but realizing that we’ll likely survive this; it’s not really the big one. Lots of people won’t though, mostly the elderly and infirmed, and we are approaching our elderly years.

We can’t stop all pandemics and likely we could not stop this one either. But it could have been managed much better. Similarly, the collapse on Wall Street was entirely predictable. We just chose not to keep in place the regulations we needed to cushion this fall. And in search of short-term profits we refused to provide sick leave for workers, raise wages, invest in our public health or do the sensible stuff that government is supposed to do. It’s all so pointless and unnecessary.

We can control only what we can control. We can hunker down. Our pensions should provide a steady income in good times and bad. Moving to bonds at peak market insulated our losses. We are fortunate. We will also likely thrive in this challenging time because we didn’t do the stupid stuff. Unlike Wall Street, we acted logically as best we could best on a sober assessment of the world as it actually is. It was smart of us to do it, but it didn’t have to be this way for the rest of us. As a society we chose to ignore the obvious risks right in front of us.

The long term impact of COVID-19

The Thinker by Rodin

Aboard the M.S. Nieuw Amsterdam, off Hispanola, May 11, 2020

We JoCo Cruisers don’t seem to be too upset about the coronavirus thing, here on Day 5 of our cruise. We have more pressing things to do, which is basically to nerd out with fellow nerds, something they don’t get to do much of once they are home. Life on the mainland is hardly like The Big Bang Theory. As best I can tell we two thousand passengers on the Nieuw Amsterdam have escaped the dread coronavirus and the COVID-19 disease.

The Dominican Republic let us into Santo Domingo yesterday where our activities went on without a hitch. Santo Domingo is the bright spot on the island of Hispanola: a chocolate city, thoroughly modern with crushing and relentless traffic. It’s a shining gem of a Caribbean city, despite being the oldest city in the Americas. Considering what Christopher Columbus did to the natives here (basically wiped them out, mostly through disease) you would think they would not revere him. But he is revered, and the current citizens of the Dominican Republic are mostly distant ancestors of slaves.

As for the Turks and Cacoas, they are giving our cruise ship a pass. We were schedule to stop at Grand Turk on Thursday, but that’s off. Instead, we’ll stop at Holland America’s private island, Half Moon Cay in the Bahamas on Friday instead. We can’t be kicked off an island that Holland America owns. We were scheduled to go there on Sunday, but stormy seas kept us from berthing offshore and tendering in.

I don’t blame the Turks and Cacoas for rejecting us, but it’s really kind of silly since no one on our ship is “presenting” signs of the virus. Another Princess cruise ship, one of those we saw leaving with us out of Fort Lauderdale, is sailing aimlessly off the coast of Florida. A cruise greeter at the Princess terminal apparently got COVID-19, so this ship is now suspect. Here on the Nieuw Amsterdam, we’re trusting to frequent hand washing and lots of Purell and doing our best to party on.

Our principle problem is there are lots of us in a confined space, so if one of us has the virus it is likely to get quickly passed on. It’s pretty clear that our government is clueless on how to intelligently manage this pandemic. There is some good news about this virus. Unless someone with the virus coughs in your face, you get it from touching surfaces that has the virus on it. The virus degrades with time, faster on certain surfaces than others. It looks like a virus could persist on a surface for 2-3 days. You shouldn’t get it from an air conditioning or heating system. Keep six to 12 feet away from people, wash hands frequently and avoid touching your face and most likely you won’t get it. Vigilance and regular hygiene are your friends. Act like a doctor who sees sick people every day and rarely gets sick because they wash hands before and after seeing you.

For us, success will be to make it home without the virus. Since incubation can take up to two weeks, if we make it then we probably won’t know for sure until two more week have elapsed. Even if not infected, getting home might prove problematic. Flights are being canceled. I had Wifi briefly in Santo Domingo (there is free public Wifi in much of the city) and so far no notices from JetBlue, our carrier home, on canceled flights. We’re getting a $50 per berth cruise credit, so my share went for Wifi here on the boat, where it is slow and costs a lot. Fingers are crossed.

We are fortunate to have Andy the epidemiologist and Tim the virologist on board. Both are paying passengers, but are spending some time giving us the straight dope, which mostly isn’t coming from the White House. My suspicion that we were probably safer on a tightly packed ship with lots of people doing proper sanitation than outside of it in a public that isn’t seems validated. Tim the virologist says even air travel is not that dangerous. Unless someone sneezes on you, the cabin’s HEPA air filters will keep viruses from hitting you. We’ve got sanitary wipes to clean nearby surfaces, in case the previous occupant was carrying the virus. Assuming authorities let us catch our flights, we should be fine. The dirty Fort Lauderdale airport we fly out of is more of a danger to us than this cruise ship is at the moment. We need to keep our distance from people there as best we can and wash our hands in the restroom frequently.

Markets though operate principally on fear, which is why they keep plunging. There’s no question though that this will all have an impact. A recession is a virtual certainty. Republicans and Democrats may come together to, temporarily at least, make employers pay sick leave for employees, at taxpayers’ dime most likely. The corporate welfare is likely to get larger as travel and other affected industries are likely to get bailouts. Maybe that will calm markets.

The long term impact of the coronavirus may be to convince people that looked unconvinceable to let government govern again. Joe Biden seems to be the primary beneficiary of coronavirus fear. Real relief may wait until January 2021 if he is elected, but in times like these sober people look a whole lot more vote-worthy than those at the extremes. That’s fine by me although Biden was never my first choice.

What I’m really hoping for is a political tsunami in November, so Democrats can regain all levers of government. Maybe next time we get a virus like this we won’t be caught so needlessly flat footed.

Post updated March 16, 2020 to indicate that coronavirus can persist on surfaces for up to a couple of days. Post updated again on April 12, 2020. It is now believed that in interior spaces the virus can persist in the air like an aerosol for an hour or more. So wear a mask and gloves when in these spaces.

Cruising in the midst of a coronavirus panic and economic upheaval

The Thinker by Rodin

Aboard the M.S. Nieuw Amsterdam, off Haiti, March 9, 2020

Markets are plunging and authorities are pleading for people not to get on cruise ships. So of course we are on a cruise ship. We merrily set sail on Saturday along with close to a dozen other cruise ships out of Fort Lauderdale. We’re on a Holland America ship again, but the difference this time is that rather than being one of the youngest passengers on the ship we are now one of the oldest.

Holland America passengers skews toward 60+, but it’s really more 70+, which is why we felt so young on our last cruise. The difference in this cruise is that it’s a themed cruise, a JoCo cruise to be specific. Having invested over $6000 in this cruise, we weren’t going to be deterred by the threat of coronavirus. We might have had we not paid all this money into it and had some way of getting it back. So armed with plenty of saniwipes in our carry on, we took our chances and boarded a JetBlue flight last Friday from Hartford to Fort Lauderdale.

There are hundreds of cruises still going on across the globe and last I checked only two had cases of coronavirus, both of the Princess Cruise Line brand. There were two Princess cruises going out of Fort Lauderdale with us. The two thousand or so of us passenger onboard the Nieuw Amsterdam may look odd. My wife is hardly the only woman around here with purple hair. In fact, it’s more normal to see oddly colored hair on this cruise than not.

This cruise is full of weird people and oddballs, the sorts of whom we used to meet at science fiction conventions thirty years ago when that was still a thing. Now there is plenty of evidence that the remainders of this tribe take this annual JoCo cruise instead. It’s aligned around a programmer turned nerdy song writer Jonathan Colton. There are plenty of polyamorous people on this ship, along with all sorts of other other odd people, but I’m betting they are much more a safe sex type than the general population at large. They are at least 90% white, average age probably somewhere around 35, the sorts that like to dress in costumes, decorate their cabin doors with quirky stuff, play endless role playing games mostly in the upper dining room, sleep little and frequently queue into long lines at the food court on the Lido Deck.

Time will tell if we suffer the fate of the two Princess cruise ships, but most likely we’ll be fine. Even before all this coronavirus started, sanitation has always been a high priority on cruise ships. Purell stations are everywhere and people are mostly refraining from touching each other and washing their hands thoroughly after bathroom stops or when leaving or returning to their rooms.

We’ve rented the whole ship so it’s been largely transformed for us. Generally, this is good. There is no annoying art auction and the shops and casino look eerily empty. Also largely empty is the promenade (Deck 3) which is usually full of walkers and joggers. I saw one lone jogger and a few others in deck chairs. It was the quietest place on this noisy ship.

Should I take it as an omen that we didn’t berth at our first port of call? It’s Half Moon Cay, Holland America’s private island in the Bahamas, and pretty much always the first port of call on one of their ships out of Fort Lauderdale. We weren’t spurned due to coronavirus fears, but because seas were choppy due to a strong low pressure system north of our ship. That’s why the captain changed course and this morning we found ourselves south of Hispanola where the seas are finally calmer.

Tomorrow we are expected to berth at Santo Domingo where we’ll have an outdoor concert. Last I heard, the Dominican Republic hadn’t refused our entry. That’s because no one was let on the ship sick. They took our temperature prior to boarding, and we had to assert we hadn’t recently traveled through suspect Asian airports.

Still, you never know. We don’t get much news on this cruise ship. Internet is prohibitively expensive, but we do get satellite TV and Holland America doesn’t block the New York Times site, in fact it subscribes to it for us. For the most part the passengers seem vigilant about hygiene but won’t let it affect their valuable social interactions. This cruise is a place to be your inner oddball, so it’s quite okay to be Corporal Klinger in high heels and hose around here. You are probably one of a dozen passengers with a similar theme. Klinger though was just vying for a Section 8. There are plenty of real trans people on this cruise. If you can’t figure it out from their somewhat manly appearance and breasts, their name tag suggests you use “they” as their personal pronoun. They look happy and liberated. For a week they can be accepted and be themselves. It’s going home to a much colder world that is the hard part for them.

If anything, I am the oddball around here. I’m dressed American-ish, my personal pronoun is He, and I’m not polyamorous, in costume, have a stuffed dragon on my shoulder or am particularly into the odd stuff most of these people are into. My wife is quite into this culture. I just kind of observe it all from the sidelines. I’m no redneck and believe in live and let live. In my sixty plus years, I simply don’t care what your color, age, body shape or your sexual orientation is. We all are here and should just get along. The only thing that gives me some heartache are self-identified Republicans and conservatives. I just don’t understand them.

And until Saturday when we return and are hopefully let off the ship, I don’t have to. We are living in a kind of private space on this cruise, mostly insulated from the real world which will probably come crashing back to us on Saturday. Any coronavirus is likely on shore, not here on the ship. There are board games and weird seminars and exclusive shows on the Main Stage every evening. It may be that for us the safest and friendliest place in the world, at least for the moment, is right on this ship with the coast of Haiti off the port side.

Expect a recession

The Thinker by Rodin

A recession is coming. It’s probably already here; we just can’t prove it yet.

The trigger was the emergence of the coronavirus and the resulting COVID-19 disease in late 2019 in China, but if it hadn’t happened it would have likely happened later in the year anyhow. As predicted it’s spreading all over the globe. People are already starting to hunker down. In some places it’s getting hard to find bottled water, toilet paper and hand sanitizer.

This is an overreaction. You don’t need bottled water unless the public water supply system goes out, which it won’t. And even if somehow the water is unclean, you can boil it. Fear of course makes people overly cautious, but it’s currently way overblown. It’s the fear that is driving down the stock market and making people buy too much toilet paper.

The world economy is now built on specialization and trade, so when China’s manufacturing sector takes an indefinite hit, it’s going to have large worldwide ripples. It’s already happening, but if you need proof you just have to look at Chinese ports, where little is going out or coming in. When items like rolled sheet metal don’t make it to manufacturing markets, value-added products can’t get produced. That will cause layoffs. But fear in general will cause people to be cautious with their money. The Fed can cut its discount rate by half a percent, but it won’t do much to solve the underlying problem.

Coronavirus was perhaps half the reason I sold twenty percent of my stocks and moved them into bonds on February 14, at just about peak market. Even then, it wasn’t too hard to see how this was likely to go. With the wholly inept response by the Trump Administration, it was clear that an intelligent response to the health crisis wasn’t going to be forthcoming. We could have been much better prepared than we were, but instead Trump cut the Center for Disease Control’s budget. Voters won’t forgive incompetence when it kills their family, friends and neighbors.

It’s also becoming clearer that this virus will not only put us into recession but turn into a pandemic. It’s pretty much there already. It’s not hard to catch and there is no vaccine available. Potentially 40-70% of us could contract it. For most of us, a bout of the flu will be much worse, but since it will spread so easily and has about a two percent mortality rate, it’s going to take a lot of lives.

There are 330 million Americans. It’s realistic that 10% of us will contract the virus this year, and there may be more next year. At a two percent mortality rate, it’s likely to kill about 660,000 of us this year, principally the aged and infirmed. This is just a ballpark figure, but it’s likely to be the biggest public health crisis since the 1918 Spanish Flu. I live in a 55+ community, with most of my neighbors probably 75+. If it gets me, it’s unlikely to kill me, but it’s likely to kill a few of my neighbors. Most neighborhoods will see at least a few casualties from this virus.

So of course we are going on a cruise. It’s hard to get out of as it’s paid for, but the cruise line won’t let in people cruise who fail a health check or who have traveled through certain countries recently. It’s unlikely to affect our cruise beyond perhaps being denied ports of call. But it’s still worrisome. 660 people on the cruise ship Diamond Princess out of Japan contracted the virus and 7 died, in part because Japan wouldn’t let them off the ship into proper quarantine facilities.

I’m not panicking. Prevention is mostly being vigilant, which means washing hands frequently. Still, cruise ships are great places to pass it on, as the Diamond Princess learned, because of the centralized air conditioning which can push the virus through the whole ship. In general, being in close quarters is not a good idea, and you can’t avoid that on a cruise ship.

Speaking of which, the travel industry will slump. Actually, it will go into a depression. And that will affect a large supply chain of its own, which will feed a downward economic spiral.

What can you do? Don’t overreact, but also take sensible precautions. Wash your hands regularly, particularly after touching foreign surfaces, with soap, for 20 seconds or more. A vaccine is probably at least a year away. This means you could easily get the virus anyhow, just realize that it probably won’t kill you, but it will be widespread.

With luck you can avoid it until there is a vaccine, but even when it’s available it will go to the elderly and infirmed first. One in 50 odds of dying is very good odds. Unfortunately, the way our society is ordered will make it worse here. So many workers have no sick leave, so they will come to work and spread it further. It’s the downside of a gig economy and our poor labor standards. Those who can will work from home. Those who can’t will bear much of the risk and be the principle carriers.

It also probably means that Trump will be a one-term president. He is managing this as ineptly as we feared. It won’t take too many MAGAers to die before their friends notice. It will help people put their prejudices aside and force them to understand the value of science again. At least I hope it will. It should.

Am I a financial genius?

The Thinker by Rodin

My recent post I’m betting on a recession didn’t get a lot of reads. There was no reason it should because I was just some nobody opining that a recession was imminent who decided to make a six-figure decision to lessen the impact if it happened.

We won’t know officially if we’re in a recession for about six months, but based on four days of major stock market declines and increasing numbers coronavirus cases, it’s looking like it will arrive sooner rather than later. In fact, it may be here already, we just can’t measure it yet.

Anyhow, yes, on February 14, I moved $106,144 in my retirement account from stocks to bonds. Before it was 60% stocks, 40% bonds. After it was 40% stocks, 60% bonds. My timing was just about perfect, as markets crested about a week later.

Mind you that all this didn’t make me any money. I am still invested 40% in stocks and those took a hit. We lost money overall. But if I hadn’t, we would have lost $89,439. Instead we lost $19,249, as of the close of markets today.

Perhaps I could get lucky twice. Just maybe when stock prices reach their nadir, I’ll move back to 60% stocks, 40% bonds and reap the rewards some years later. But who knows? Growth has been mediocre across the world for years. The main reason stocks were going up at all is because of the cheap credit the Federal Reserve made available. This caused a lot of stock buybacks, which due to supply and demand pushed up stock prices to artificial highs. Perhaps we’ll never go back to peak market again.

To answer my question: no, I’m not a financial genius. No one can time the market. What I did was likely very well timed but mostly luck. I shouldn’t count on luck twice in a row.

But I can watch the fundamentals of the overall economy, and periodically make decisions like this based on my analysis. If my assumptions are sound and I buy into categories of stocks, it could work again, this time on the way up.

With markets now officially entering correction territory due principally to coronavirus scares, a recession looks a whole lot more likely. It’s the supply chain disruption caused by the virus, not to mention its impact on the travel industry that is likely to take big hits that should make it official.

I did notice that someone recently read my Riding the recession’s wave post from January 2008, before stocks really tanked that fall. Back then I explained that a recession could be perversely good for those with steady incomes and significant savings. This definitely proved true for us. During a recession, prices come down, including inflated stock prices that can often be snatched at bargain prices, providing you hold onto them until markets recover. When money gets tight, you can get all sorts of deals. Already, home mortgage rates are dropping. That, with some decline in real estate prices, might make it a good time to buy a home.

If you are retired like we are, recessions make you appreciate the value of a pension, if you are fortunate enough to have them. This makes us recession immune. The portion of our income that comes from selling retirement assets though takes a hit while the recession lasts. You just have to hope that when markets recover your portfolio won’t be too severely impacted.

They say not to put all your eggs in one basket. By moving more of our assets to bonds, I can get a predictable rate of return, albeit half or less compared to what stocks have returned recently. To supplement our income, we sell some of these bonds periodically, husbanding the declining value of the stocks in the portfolio for a better day.

Meanwhile, while I hate the suffering a recession brings, I’m glad I bet on a recession. Let’s see if it actually arrives. We won’t know officially for about six months, but if we see the unemployment rate creep up, that will be a sign. Recent high stock prices have been signaling a false economy, but that appears to be changing.