COVID-19: YOUR QUESTIONS ANSWERED
Well, here we are again. Of course, this is different from the other major downturns in my lifetime, but major downturns have happened throughout history and they always will. Sadly, the truth is we only get clarity with hindsight.
As usual, this one blindsided pretty much all of us. We all started hearing about the virus in China as early as January. Obviously we were all concerned, but would it be like swine flu, Ebola, SARS or MERS? The lives of most people and markets were not greatly impacted by these, though 200,000 died of swine flu.
HIV has killed 25 million to 35 million people – just terrible, but it did not bring the world to a halt.
So Covid-19 is no surprise to anyone. But its economic impact, as the world seeks to save lives, is.
The lessons we have learnt by researching the great tragedies of world wars, pandemics like the bubonic plague and many huge depressions are our guide now and into the future.
The world will recover
First, while far too many will get ill and die, the world will recover. The global population of 7.7 billion grows by around 93 million people a year. Global deaths are not predicted at anywhere near that level.
As we recover we will have a huge population of people who will want to rebuild and move ahead.
So I am unconcerned about longer-term property and share values. The trick is to try to stay healthy so that we and our money see the other side. The rule shown so clearly by history is not to panic and start selling quality assets like shares and property. When our mortgage hit 18.75% in January 1990, Vicki and I had to sell our car, cancel holidays, stay home, have a food plan and stick to a tight budget. The other option was to lose the house. The short-term pain worked. Our home’s value rapidly recovered.
Help is on its way
Today the principles are the same, except this is a pandemic and there are huge government packages to keep us afloat. Banks will defer mortgage payments, interest rates are incredibly low. Most workers who lose their job can access quite significant support, as can businesses.
Super savings are available up to $20,000 – but, please, only as a last resort. Retirees living on a pension will still have their secure pension. Self-funded retirees will be at home. No entertainment costs, no travel, no fuel costs. So spending will plunge, which is not good for the economy, but there’s no need to panic and sell shares and other good assets.
Never in the history of the many global pandemics and downturns has such support been available.
As a sailor, well used to storms in Bass Strait, one of the world’s most nasty pieces of water, I do know that panic leads to tragedy and poor decision making. My advice is to batten down the hatches. Make all the adjustments to your life, your business, the loss of your job and, for most of us, home confinement. Unlike a storm at sea, you can peer into the
