As we write this post, the first bouts of economic data have come out around the world and the first week of 1Q20 earnings season is in the books. Results are not so encouraging, pointing to a steep slowdown that is likely to shift the economic landscape for years to come.
We are writing this post with the goal of compiling practical ways to handle and overcome this situation. Our view is that navigating through these hard times requires more than concentrated effort in one front, which is why we are taking a holistic approach and stepping away from only finance/investing ideas. We welcome any of your comments and suggestions, as the more robust the compilation of advice, the better for all.
Health First (Physical and Mental): Just as when there is an emergency in an airplane, the advice here is to focus on our health first, so that we have ability to help others. Only by being healthy we are able to focus on any other area in our lives. Some key suggestions to keep in mind:
- If suspicious of contagion, we should follow instructions from a health specialist hotline, available in several states. Most insurance providers fully cover Covid-19 in their policies. If this is not the case, public healthcare systems are also providing guidance and support.
- When healthy, following a routine is the best ally. Be it that we work from home or at our usual workspace, following a rountine provides structure to our organism, allowing it to recover and remain healthy. Supplements such as vitamins are good, but if unavailable, sleeping well is the best immune system booster.
- N95 masks are recommended, if not available, a regular mask is better than none. While not conclusive yet, several studies point towards much lower contagion rates and faster recovery times in locations where masks were mandatory.
- While a drink or two are important, some studies point out towards a heightened inclination to drinking and drug consumption during lockdown periods. The World Health Organization suggests that alcohol consumption could lead to “health vulnerability, risk-taking behaviours, mental health issues and violence.”
- Eating healthy is vital. We can all continue supporting our local community by purchasing food via apps or phone. Also, it is now a good time to iterate and gravitate towards healthier options, given the importance of a healthy immune system and the constraints of typical exercise options.
- Working out has been proven over time to reduce stress, boosting our immune system and keeping our fitness. It is now time to be open to new options, YouTube, Instagram and many other applications are a great way to get ideas without spending extra on gym equipment.
- Don’t overdo it. While being at home sometimes makes it easier to put in long hours of work, instead, we should try to make regular breaks doing things we enjoy. For example, after a couple of hours of work, getting up and walking around while listening to a couple of our favorite songs (this is not recommended to Pink Floyd, Dream Theater, or Godspeed Yo! Black Emperor fans, since many of their songs are about 20-30 minutes long…). This will allow to regain gocus and tackle problems with a fresh mindset.
- Going easy on our favorite treats. Similar to the above, we should try to not go on a full Netflix or YouTube binge; the same goes for social media. Let’s remember that most of these apps are designed to keep us hooked, so it is important to monitor the hours spent on these, especially at night, since they can affect our sleep cycle.
Work, Saving, Investing – We understand these are difficult times and that we are likely to undergo an adjustment period, where layoffs are a possibility. We believe that the following suggestions can help ameliorate the situtation and find solutions, even if they are outside the box.
- Building an Excel file, including two columns, what we have and what we owe is a simple yet powerful way to look at where we stand financially. In our view, banks understand what we’re going through and are likely to provide grace periods and debt financing before seizing assets and/or writting off loans. We believe on the snowball method, which implies paying off completely the smallest loan, and moving into the next one. This method saves a lot of money in interest payments.
- In our view, Covid-19 has accelerated some effects of digitalization, and are here to stay. That means some jobs are likely to remain remote, while people will find out that the scale of digitalization is a great asset to have. We believe that adapting to it is vital, without looking back.
- Some ideas to diversify revenues are: teaching online (platforms such as Udemy/Coursera share revenues with you while they provide the platform and scale), and selling products online through retailers like Amazon, MercadoLibre, etc.
- In investing, it is best to focus on the long-term prospects and valuations of specific companies, rather than making macro forecasts on the economy. As any value investor would recommend, let’s use Mr. Market’s bipolar attitude to take advantage of him, not to guide our investing.
- Cash is and will always be king: Remember, economic weakness across the globe was already underway before Covid-19 (sure the latter will only make it worse). In times of uncertainty, it is best to remain mindful of our cash outflows; we don’t really know what the economic landspace will be, so it is best to be prepared and hold some cash reserves.
Suddenly There Is Time to Connect: We still live in a high-paced world. However. Covid-19 has created at least some time to pause and think about the importance of connecting with ourselves, our family and loved ones. Let’s use this time wisely. Proximity is sometimes as simple as a text message and offering some listening time.
Expanding & Learning: While we understand these are stressful times, we also believe this could be a great time to follow our curiosity and read that book, take that online course or simply re-take that pending topic that we left.
- Following curiosity: With probably more time at our disposal, it may be a good idea to start learning something new like cooking perhaps; there are tons of YouTube tutorials out there. Also, it might be a good time read lots of different stuff, or if we feel we are not the “reading type” we can always develop the habit. As Naval says: “Read what you love until you love to read“
A Sense Of Purpose: As we pause and reflect, we believe that this is a time that can define us as inviduals and society. The most important question is who we want to be? A lending hand to those in need or a selfish being? A ray of light amongst the darkness or viceversa? A soothing voice amidst the noise or a worry-raiser? It is important to dwell upon these questions and decide.
We finish with a direct quote from Roman emperor Marcus Aurelius, from Meditations:
“It’s unfortunate that this has happened.
No. It’s fortunate that this has happened and I’ve remained unharmed bt it- not shattered by the present or frightened of the future. It could have happened to anyone. But not everyone could have remained unharmed by it. Why treat the one as a misfortune rather than the other as fortunate? Can you really call something a misfortune that doesn’t violate human nature? Or do you think something that’s not against nature’s will can violate it? But you know what its will is. Does what’s happened keep you from acting with justice, generosity, self-control, sanity, prudence, honesty, humility, straightforwardness, and all the other qualities that allow a person’s nature to fulfill itself?
So remember this principle when something threatens to cause you pain: the thing itself was no misfortune at all; to endure it and prevail is great good fortune.”
Adastra Finance 