Lockdown Week 1: Lock Downs And Toilet Paper
It’s been one hell of a week. You’ve probably been noticing a few small changes around this little blue ball we call the Earth. Lots of people are getting sick. The stock market is going nuts. Schools are canceled in the entire state of Washington, events and public gatherings are now canceled. Everyone who can is working from home.
Hourly workers are already starting to see pink slips, as many small businesses close. Many restaurants have already closed. Even my local public library is closed for a month.
The world has changed rather profoundly in the span of only two weeks.
Who’s to say how long these changes will last? Perhaps once the virus has run it’s course, large public gatherings will be anathema. Maybe no-one will eat out at restaurants anymore. Will working from home become the “new normal”? Maybe the world will permanently shun cruise ships going forward…. and toilet paper becomes the new currency…
All toilet jokes aside, it’s been nearly impossible to find toilet paper this week. It’s sold-out almost everywhere. When Costco gets toilet paper in stock, they sell out in matter of hours.
And the lines… Oh My God the lines! Check out this ridiculous line I snapped a picture of at my local Costco on Thursday….
That’s literally two lines of people that stretches from the front of the store all the way to the back of the store. Besides food, most people had filled their shopping carts with their limit of bottled water and toilet paper.
On top of all that, schools are now closed for the next six weeks here in Washington state. Which means the Daddy Daycare Death Star is now fully operational here in the Tako household.
I’m trying my very best to keep the kids occupied and still learning something, despite the quarantine.
The Sanity Test
Are these behavioral changes going to become permanent? Will our grand kids one day shake their heads in disgust because we’re the generation that stockpiles mountains of toilet roll, and has entire rooms dedicated to storing Top Ramen “just in case”?
Instead of worrying myself over all the potentially bad things that could happen, I’ve decided to treat this event like a kind of strange sanity test.
With no behavioral precedents in place, humans have free rein to behave in all sorts of odd ways until things get “figured out”.
People are already acting in ways that I would have considered crazy only a couple of weeks ago. Like all the people buying 5 years worth of toilet paper at Costco. The behavioral “norms” we’ve come to expect have been thrown completely out the window!
My goal is to stay sane and make as many rational decisions as I can over the next couple of months. I do NOT want to engage in any economic behavior that I’ll regret 6 months later (like buying enough rice to feed an army).
The winners of this little sanity test are going to come out healthy and ahead financially because they’ll have managed to act rationally in a irrational world.
We’ll see if I pass the test…
Is The World Ending?
No, the world isn’t ending! It’s just taking a little break from “normal” for awhile. That said, this virus and all the economic problems created by it, are far from over. According to epidemiological experts, COVID-19 has months left to go before the number of cases peaks around the world.
Logically we can infer that the drastic public health measures taken in recent days (lock downs, school closures, etc) will remain in place until the infected case numbers begin to drop.
When the virus finally slows, public gatherings will be allowed again, people will begin to travel, they’ll eat out at restaurants again, schools will re-open, and so forth.
Only then will the wheels of commerce truly begin to turn again. Until that day, the economy is going to be a very dire situation. When Q1 corporate earnings get reported in a month or two, the numbers are going to look bad. Really bad.
Should I Invest Now?
With the stock market down some 23+% from 2020’s February high point, many people are wondering if now is a good time to invest.
My advice is to kick back and relax — There will likely be tons of bad financial news ahead, and the earnings numbers from your favorite stock are bound to look absolutely terrible this quarter.
This is why I’m in no hurry to buy stocks with my excess cash.
Trailing 12-month (TTM) profitability numbers are NOT going to be a good indicator of current profitability during this “lockdown” period, and they most certainly will NOT be a good indicator of future earnings either.
I believe this is why capital markets are reacting with such incredible volatility in recent days. Nobody knows what’s going to happen. Uncertainty about the future is extremely high.
Volatility will likely remain elevated until the economic picture gets a little clearer. Again, it’s probably going to be a couple of months before all of this gets sorted. Prepare for a wild ride.
Will The Bubble Permanently Burst?
When it comes to investing in today’s troubled markets, there seems to be two camps of people — The “sell it all to preserve capital!” camp and the “buy this incredible dip!” camp. Which do you belong to?
For me, I’m not a fan of either camp. I think these two philosophical buckets ignore the giant pink elephant in the room — What if stocks are going to trade permanently lower, like some kind of Japanese Lost Decade?
Japan’s stock market was once the envy of the investing world — hitting all-time highs in the early 90’s. Growth prospects were once incredible. Most experts agree this happened due to excessive lending practices, which fueled a market bubble.
Now, two decades after the bubble, Japanese stocks still trade far below their all-time highs, and prospects for corporate Japan are still dismal at best.
To be fair, this is only one potential economic possibility. There are many others to think about…
What if certain sectors permanently slump in a response to the virus-shock? Like the travel industry. Or the restaurant industry. These industries are under severe economic pressure right now, and the new behavior the virus is causing could create permanent changes. We just don’t know.
I’ve been warning about such possibilities for years, but you know … people never listen. They look at the recent past and try to extrapolate what the future looks like. This kind of “predicting the future” works until it doesn’t anymore.
Final Thoughts
Human behavior is almost certainly going to change from this coronavirus lock-down time period — just like it did after many other life changing events in human history. The Great Depression is one such example.
If you talk to anyone who lived through the Great Depression you’ll begin to understand how these events can create long-term and lasting changes to human behavior. Those who lived through the depression era, went from boom-time-big-spenders to frugal-to-a-fault hardened survivors. They made due with whatever resources they could scrounge up.
The only certainty over the next few months is going to be a morbid one — A lot of people are going to get sick, and many will die. But, there will eventually be a light at the end of the tunnel… with a future that is going to look a bit different.
Be sure to pack your 10 cases of toilet paper for the journey.
[Image Credit: Flickr1, Flickr2]
As a fan of sociology and observing societal behaviors this is prime-time viewing hours for me 🙂 It’s fascinating indeed.
As I was reading your post one thing that occurred to me is the immense amount of food that will be wasted from this. Americans already throw out about 40% of the food they buy – yep, it’s that bad – and that’s before this crisis. What happens 8 months down the road after this has (maybe) normalized and the average house has 20 cases of mac and cheese or ramen noodles? They’re going to toss them when the spoil dates come. The “kind-of” good news is that most Americans eat toxic franken-foods that are stuffed with toxic preservatives, so the spoil days are often a year or two in the future, but I still expect tons of extra food waste from this which is really really sad.
So many angles to this that are tangential to money but directly affect it. One thing I can guarantee as a prediction, it will be fascinating to see it play out.
I wonder about how much food is going to be wasted too. Are people really going to eat all of that? Most working families I know don’t even cook at home (from scratch) more than three or four times a week.
I suspect most of the food is going to languish in the garage or storage until it gets thrown out in a few years.
Granted, I think many families are cooking and eating at home more (now that the virus has everything shut down), but I suspect within a couple weeks they’ll be eating takeout every night.
Went to a local Costco yesterday and the cashier said they had $1.6M of transactions the day before. At $250 per person that’s 6,400 people visited the store, which is pretty crazy.
I think the stocks will recover a little bit due to the interest rate cuts and other measures. But once we start seeing Q1 and Q2 reports, things will get a bit nasty again.
Stay safe!
Thanks Bob! I’ll do my best! 🙂
I seriously doubt this will be a long term problem. People are panicking too much. Once things calmed down, people will want to travel again. However, if this drags on for several months, some companies will go out of business. Liquidity is a big issue because many companies borrowed too much. The government will ride to the rescue. I wouldn’t worry too much. QE4!
Yeah, we’re in for a recession, but it happened before. We’ll get through it.
Fascinating. I’m watching this from afar in South Africa and its like observing a slow motion horror movie. We haven’t had any restrictions (yet) so I’m seeing what it might look like in a few days/weeks time, although even then I haven’t noticed much change in behavior at all here, self quarantine for those infected, lots of talking about it and a stock market shock from all the foreign sellers. No lockdowns or much prepper buying. Like I said, Europe, China and the US feels like a movie.
Good luck everyone!
Well that escalated quickly and we’re in full lockdown. No more visitors from high risk countries! So no more tourists or family visiting me from the US, Europe or China. Oh well, at least I can still use the internet, walk my dog and do some gardening, not too different to our day to day actually ☺️
Liquidity is a huge problem. Most corporations (other than a handful of rich tech firms) barely have enough cash on hand to meet interest payments and pay salaries for more than a couple of quarters without any revenues.
Now, I’m not saying revenues are going to be zero…but *significantly* down. Liquidity will definitely be an issue for hard hit firms.
These are definitely unprecedented times – at least in our lifetime.
I think the closest we can try to compare it to is the Spanish Flu in 1918-19. Initially the outbreak was under-reported for political reasons. The US had millions infected and hundreds of thousands dead. Massive quarantines were rolled in.
However, I think this crisis should be milder, not harsher.
First of all we live in a world that is not recovering from the worst war it has ever seen. Second I think the cover up now was incomparably smaller. For instance the Spanish Flu had nothing to do with Spain. It was called so because Spain was the only country reporting real numbers so it seemed like it was hit the hardest. And finally third – now the governments have a lot more tricks up their sleeve – from QE to enforcing work from home for many people.
So overall I think this, in terms of how hard we will get hit, will probably not be as bad.
It may change the way economy behaves, of course, but I think it probably will not. Let’s wait and see.
For now – stay safe, avoid public areas and wash your hands. Best of luck!
Don’t have to go back 100 years. The 1968 flu pandemic was really bad too and many alive today remember it. https://en.wikipedia.org/wiki/1968_flu_pandemic
An important factor is the case fatality rate. The Asian Flu of 57 and Hong Kong Flu of 68 both had fatality rates of 0.1%-0.5% which is much lower severity pandemic than the Spanish Flu that had a 2%+ fatality rate. The death rate for COVID-19 is most likely 2%+ (yes it is lower in Korea, but much higher in Italy and China). That’s why I think that Spanish Flu is the best comparison.
If it is more like the Hong Kong Flu – that would be much better…
We’re living in an interesting time right now (and we’re feeling it here in Panama as well). I’m sure that decades from now we’ll be telling the next generation of that small blip in the past that threw us all out of sorts for a while.
I like your thoughts on the market. I have bought in a couple of times so far and plan to buy more as the market drops some more.
The good news is that I was able to secure some toilet paper at PriceSmart (our version of Costco) earlier this week because we actually did need some (along with other groceries). The lines were crazy but everyone was civil and I got out of there with only some time down the drain! 🙂
I’m glad you’ve been able to secure some toilet paper. None of the stores I frequent seem to have any in stock. 🙁
Thank you for sharing your wisdom during this difficult time. I really appreciate it. Look forward to reading your posts.
Thanks Eric! 🙂
Can you share how your stock portfolio is doing? What is the balance now and your net worth compared to the beginning of the year?
Tough times for many and it would be good to get your numbers on the way down too.
Thanks
I only release my net-worth number once a year… because it really isn’t all that important. It fluctuates up and down with the market, and I really don’t pay a lot of attention to that number.
You can rest assured that my portfolio is down at least a similar amount to whatever the current market decline is.
Hi all, first time commenter and fairly new to the FI community. Just a thought and suggestion to those who have a concern for toilet paper. My wife, who is Asian, converted me and our household over to bidets years ago. Because of this our TP usage is almost zero. Using soap and water makes you “shower-clean” every time. We use washcloths to dry with and feel much cleaner because of this practice. You can order bidets that include a toilet seat or that fit under your existing seat. It’s a little expense up front but a good way to save in the future.
I’m over 65 and a California resident so I have been ordered to self-isolate so I’m staying home from work today. I’m praying for our country’s leaders and for everyone to do everything they can to lessen the carnage this pandemic causes. I hope you’ll join me in this. God be with you all.
Thank you for this post. You seem to be asking the same questions I have and have much of the same response to it. This is a truly life changing event
I live in West Seattle, so I am going through the same thing you are. My co-workers told me that there is a lot of TP in Gig Harbor and in Centralia. My Costco TP from January is down to 8 rolls. I’ll be doing a road trip soon.
I am sure that certain lifestyles will change. We will also see some investing practices change too. Very low debt, or no debt, will be a major factor IMO. Also, I would not be surprised if companies like JNJ and PG will appear much more appealing.
What may impact me the most during this crisis is the risk of seeing dividend cuts in my 100 company portfolio. Service industries are under the worst pressure imaginable .
Man, I hope we don’t have a lost decade, like Japan. For those of us in our mid forties that are right in the thick of saving enough to reach financial security, that would be a heavy, heavy blow. Oy.
Note: As far as I can tell, there is plenty of toilet paper here in flyover country (the midwest). Our local stores are pretty well stocked and the lines aren’t too far off normal. Come on over and enjoy the TP: single ply or double, quilted or not, we’ve got it all!