Hope for the best – prepare for the worst
I’m not here to be the doomsday guy. I’m simply here to tell you to be prepared.
Most people still seem to think this is a transitory event that will be over as soon as the quarantine ends… right back to our normal lives we go! No, probably not. And the longer we remain in isolation the less and less likely our previous “normal” will find us again. Like many economists, I believe we will be lucky if this ends up being a recession. COVID-19, or the perceptions of it, is having a global impact and chances are we are looking at a depression on a global scale – it’s time that each of us take the necessary steps to plan for that, just in case.
On March 21st the US was projecting to report jobless claims of around 1.5-2 million. Which would have been all time highs and 2-3x the level we endured during the 2008 financial crisis (our previous high). But that was grossly underestimated – jobless claims came in at 3.3 million, and the following week (March 28th) an additional 6.6 million people filed – resulting in 10 million people losing their job in just two weeks (behold CNBC’s chart – what a sight to see). Regardless of the actual severity of this virus on humanity, its impact on the economy is already being felt and will be lasting for some time.
George Staneov, wrote in a recent article:
“This is poker, not chess
We think we can see all moving pieces and assess all future moves, but we’ve been playing the wrong game…We’ve brought a chess board to a high-stakes poker game, where odds change all the time and you have different players with different incentives playing against you, everyone is making decisions in real time, with real money on the line. Oh, and the dealer is drunk!
At the start of the month everything was fine…fast forward to today and the developed world is locked at home and half the economy is not operational…
The GREAT reset
In many ways this will be a great reset. Many businesses and industries will simply not come out alive on the other side. While others will thrive and new ones will be started. Through tremendous pain, loss and sacrifice we humans will be pushed to the edge and will have to rebuild, rethink and reinvent.”
Having said that, let’s remain hopeful this doesn’t get worse – hopeful we get out of our corona-isolation-cave and can emerge anew, and reunite with our fellow humans. But when that reality doesn’t manifest, what then? Did you ONLY remain hopeful? Taking no action to prepare yourself, your business, your family? Regardless of your financial situation I highly suggest we all consider every option we have before it’s too late to act.
I want to start by sharing a very helpful link to a NY Times article – HERE – which has a ton of information about the CARES Act and other government programs that can help us all during this time.
Get Defensive
Liquidity is king
We’ve all heard the expression “cash is king” – but even more true, liquidity is kind. Being able to pivot quickly is your greatest ally right now. If you’re holding illiquid investments you better hope they are real, tangible and needed after the dust settles. Otherwise, identify assets you can liquidate quickly and get the process set up if the time comes where you need to make a move.
Be patient & gather information
Look around at your landscape – don’t just start selling investments. Talk with your CPA, your financial advisor or other credible sources. Understand, as best you can, what your options are.
Property owners – create leverage
If you have property, open up a line of credit. Use your leverage to your advantage before it’s too late. The more credit you have available the better you’ll be positioned to take advantage – or even just keep you head above water.
Save your cash – get rid of high interest credit cards
If you have debt maintenance that is a burden on your cashflow do whatever you can to get rid of it. Open another card – seek out a balance transfer situation with zero or low interest for a period of time. Don’t forget: cash is king. You don’t want to be sending your cashflow to a creditor if you can help it.
Reduce non-essentials
Get rid of the non-essential services that are reoccurring. You know what they are – cancel them. Read a book if you can’t afford Netflix or Disney+.
Get Offensive
Seek out opportunity
This isn’t all about being defensive. Many of the world’s most successful companies and entrepreneurs started or expanded their impact during 2008. Now is the time to look to the future – how will our economy be structured? What services will be needed in a work remotely society? Are there businesses that were over-leveraged or poorly managed that now need a new partner or need to sell? Look to find opportunities that align with your strengths and passions – now might actually be the time to start that business you’ve always wanted have! Get creative.
George Staneov also shared a quote from Timothy Gallway’s The Inner Game of Tennis that I found very impactful which I will leave you with:
Perhaps the most indispensable tool for human beings in modern times is the ability to remain calm in the midst of rapid and unsettling changes. The people who will best survive the present age are the ones Kipling described as “those who can keep their heads while all about are losing theirs.” Inner stability is achieved not by burying one’s head in the sand at the sight of danger, but by acquiring the ability to see the true nature of what is happening and to respond appropriately.
Author: Mark Sauer
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