The Sky is Falling: Lessons from the Coronavirus

Happy Monday! What a week! The coronavirus is spreading like southern Kudzu and is now officially a pandemic. Social distancing is suddenly the new order, flaming a wildfire of fear and panic, crippling the economy. The stock market is currently down 20% from its February high. The S&P 500 dropped 9.5% in a single day. And then the very next day the market bounced back 9.3%. We have entered bear market territory, ending the historic 11-year bull market run. OPEC meddling crashed oil prices. And I just quit my job. We have (had?) big plans for a new way of life. So, what’s changed?

Do you know how many times I’ve had to write and rewrite this post this week? The events of late are turning me into some sort of breaking news journalist. Aren’t I supposed to be lounging on the couch and catching up on Netflix or something, putting on “training weight”?

Enough About Me

I’m sorry, so rude. I started off just immediately talking about myself.

How are you doing?

Seriously, I want to know. These are times of great anxiety, right? There’s really not a whole lot of good news in the world these days. It’s hard to listen or read about any sort of global affairs and not want to scream into a pillow, or perhaps a towel. Whatever is handy and muffles sound ought to do the trick.

And to add insult to injury, every time I step outside into my backyard—which is more frequent these days; I don’t have a job—I face another reality. The neighbors’ three ankle-biting demons from the depths of hell lose their small minds in a torrent of hateful, throaty gargles for at least ten minutes.

We could all use some mental space, huh?

Fear Still Runs the Show

I’ve mentioned several times my fascination with fear. Fear, an incredibly powerful emotion, is the true conductor of our lives, often defining life trajectories. We are woefully unaware of how many of our decisions (and indecisions) are rooted in providing a warm blanket of safety, even when the fear is irrational. We all do it in some capacity.

But your feelings are understandable. After all, there are incessant voices of panic around you, from your health to your money.

So how much of this current situation is rational?

A Few Thoughts on the Coronavirus

I’ll admit that I’m changing my tune on the coronavirus, at least a little bit. I do not fear an infection myself, but I am concerned for those that are older or in some other way immune-compromised. I have a heavy heart for those that have been infected, and I know more will join in the ranks as this virus continues to run its course.

If you ever struggled to understand the concepts of compound growth as it relates to debt or market growth, we are now seeing a real-life biological case study unfold in real time.

However, what I fear most is the rising sense of panic in our society.

For God’s sakes, what’s with the toilet paper hoarding?! Seriously. Buy the things you need when you need them, cover your mouth, and wash your damn hands. I’m sick of seeing cell phone videos of people acting like wild animals or children around a blown-out piñata.

Worst case scenario, please understand that a good chunk of the world doesn’t use toilet paper, coronavirus or not. Left hand folks, left hand.

Here’s some good news: the new confirmed case numbers in both China (ground zero) and South Korea are falling sharply.

Why? Those countries are limiting human contact and immediately testing nearly anyone with symptoms. The rest of us are playing catch-up.

Our Experience with the Coronavirus

We came back from Sicily amongst a major outbreak in northern Italy. There were also confirmed cases in Sicily, overlapping in space and time with our trip.

Alarmingly, Mrs. CC started to exhibit cold-like (also coronavirus-like) symptoms on the flight home. We asked twice to be tested and were denied, despite obvious links to breakout areas. This was three weeks ago. We now know the virus was likely spreading quickly in the U.S. during this time, largely undetected due to restrictive testing protocols, among other issues.

Mrs. CC is fine now, and we’ll never know if she was infected with coronavirus. More likely, she caught a cold, which is still a thing this time of year.

But let’s be real: opportunities were missed weeks ago to curb the spread of this virus in this country, and the too-little-too-late game of catch-up is accomplishing little other than creating a pervasive fear-state.

A New Normal, For Now

We’re now being asked to stay home—which suits my new life just fine—but is causing major disruptions in our society and economy. The NBA season is suspended, we now have a European travel ban, and college campuses are shuttering across the nation. I’m getting a barrage of emails daily from local and national businesses discussing their changes in hours, practices, or policies as it relates to the virus. And for someone who is anal about their inbox, it’s exhausting to keep up with all the deleting.

We can expect more of this until the new case numbers begin to decline.

This is Not an “End of Days” Scenario

I might one day have to eat crow on that, but I somehow doubt it.

People, especially those glued to cable news, tend to let themselves get pumped full of toxic anxiety. The manifestation is high blood pressure, an eight-month’s supply of rice and mac n’ cheese, AN ENTIRE STORE SHELF OF TOILET PAPER, and realized losses on the retirement accounts due to an itchy trigger finger on the computer mouse.

Panic doesn’t look good on you folks.

The more you believe the hysteria, the more you become a victim of something far worse than flu-like symptoms. The more anxious you become, the more you watch the news. The vicious cycle they planned all along, with very real and unfortunate outcomes for the global economy and mental health.

Fear is the true virus lurking in our society.

A Discussion of Money Amongst the Coronavirus Pandemic: Our Plan

So yeah, the market has tanked. We’re in a bear market, so we can quit worrying about when that day will come. It’s here.

Are we screwed?

We’ve always had a plan, and I’ve always stressed the importance of having a financial plan on this website. It’s so easy to become complacent during the heady times of economic expansion and low unemployment. Surely, this could go on forever! Right??

When we decided to pursue financial independence years ago—and especially when I decided to forego finding another job after my company was acquired—we had to face the realization that these days could and would come again.

Surely you didn’t think that a bad economy wasn’t high on my list of potential near-term outcomes, did you?

Here’s a few selections from this website on my thinking since late 2018, many of which directly discuss the potential for a coming recession and/or bear market.

We Lost Thousands of Dollars in the Stock Market and That’s Okay, October 2018

Keeping the “Safe” in Safe Withdrawal Rate, December 2018

Five Ways to Recession-Proof Your Life, December 2018

Fear: Here’s How It’s Holding You Back, August 2019

Retirement? Don’t Worry, I’ll Be Fine!, October 2019

A Decade in Review: Reflection and a Look Ahead, December 2019

You Know a Recession is Coming, Right?, December 2019

I Have Cash! Is Now a Bad Time to Invest?!, March 2020

This is Normal Market Behavior

And honestly guys, this is nothing yet. In 2009, the S&P 500 was down 50% off its previous 2007 high.

The change has been sharp and dramatic, but the magnitude is still well (well) within normal market behavior.

Our plan, discussed here, is fairly simple and hasn’t changed. To Mrs. CC’s full credit, we saved more than we need, going well beyond the often-cited 4% Rule strategy for retirement fund drawdown. We also have lots of spending flexibility, able to cut about 40-50% if needed.

Leaving a job with no saving or spending margin is a great recipe for looking for another job. Not to suggest that I’ll never do paid work again in some capacity (I most certainly will), but I don’t want my tail between my legs in three months with a resume in hand.

Despite the fall in equities, we are still financially independent, still able to live within the 4% Rule if we so choose. But none of that matters yet, because…

We Are in Transition

We are not living on our investments, and we may never fully fund our life with investment income. Mrs. CC is still working her same ole’ corporate job.

Seeing me moan and groan and sort of keep sleeping at the 6:00 am alarm has made it more difficult for her, but she’s still going. I’ve actually encouraged her to leave, but she can’t yet wean herself from the biweekly direct deposit teat. It’s understandable, especially in light of the last few weeks of “uncertainty,” if we want to say it nicely.

As discussed last week, we’re still investing through this downturn. I actually feel very optimistic that we—and all of you—will come out ahead when the dust settles. That’s how it’s always been.

And no, this time is not different.

What’s Next?

Despite the madness around us, we are full-steam ahead on planning out our “life by design.” I’m not able to comment on the details of that yet, but stay tuned for more in the weeks and months ahead.

The Downturn: Are Any of Us Any Better Off?

There has always been a contingent of folks dismissive of financial independence in general, and early retirement in particular.

The most obvious point of criticism is that if an early retiree is not working and the market collapses, the result could be irreversible asset depletion. In simple terms, we could run out of money on down the road. I’ll now address that criticism.

I worked in the oil and gas industry until early February of this year. Mrs. CC still works in that industry. If you haven’t heard, oil prices have tumbled fantastically, adding high strain to an already stressed industry, burdened by a decade (or more) of debt. Job security is hanging by a thread in the oil and gas industry, as it is in a growing number of other industries.

Job Security Might be in Jeopardy for Many Americans

I see the oil and gas industry as a metaphor for Americans at large. Spend freely during the good times, take on debt after debt, refuse to “deprive oneself” and put away money for a rainy day. Never learn to live more simply.

Unfortunately, it’s kind of starting to rain, wouldn’t you say? Are there leak-points in your financial habits?

A laid-off employee and an early retiree are in the same boat as it pertains to W2 income. Neither have money coming in, but the early retiree has decades of living expenses (at minimum). The laid-off employee may not be able to make rent or pay a car payment. And to add insult to injury, now there’s no toilet paper!

So, no, we have no regrets about our financial choices. We always chose this path for financial security, and that picture hasn’t changed in any way. This is all baked into the plan.

Be fearful when others are greedy and greedy when others are fearful.

Warren Buffet

Protect Your Money and Your Mental Health From the Coronavirus

Financial

Limit spending and focus on your debt pay-downs. Layoffs and/or reduced pay could be coming down the pipe for many Americans. Don’t get caught with your pants down with mountains of bills that can’t be paid.

Keep investing and don’t sell. The market sucks, but it sucks in a normal and predictable way. These cycles always happen, just for different reasons. This time the trigger is a virus, but this time still isn’t different. Carry on with a dollar-cost-averaging investment strategy and do not sell. Despite the hysteria, I’m seeing nothing to suggest that the long-term market fundamentals have changed. This is a short- to medium-term disruption.

Mental Health

Reduce or eliminate social media completely. You aren’t missing anything but more anxiety.

Limit news to 30 minutes a day, max. You can become informed of the latest in 30 minutes. Listening to hours and hours of discussion on plummeting markets and rising numbers of virus cases isn’t helping. Stir in election politics and you’ve got a 4-star recipe for high blood pressure. I suspect the toilet paper people watch a lot of news.

Go outside* If you are a climber, go climb. But be diligent about choosing your partners. Go on a hike, or at a minimum, take a walk. Embrace nature as much as you can. Out there you will find no panic. The birds know nothing of bear markets or coronavirus. The wind and the sun don’t care. The sun still rises, and the sun still sets. Everything is as it’s always been.

Of course, if you are sick, stay home. Them’s the rules.

(*3/17/20 Update: Per the rapidly-evolving CDC and WHO guidelines, it is highly important that we maintain social distancing both indoors and outdoors. As the situation unfolds, the best course of action might be to simply stay home. Do not hang in crowded places.)

Meditate. I’m not kidding. I spend only 10 minutes most days with my eyes closed and focusing on my breath. That’s it, and it’s been a game-changer for my perception of the world in the last three to four years. In a time of great anxiety, any mental space is worth its weight in gold.

Along those lines, I’ll repost a video by the legendary JL Collins I posted some months ago. It’s amusing, and most importantly, it’s relevant. Damn, that voice.

That’s It

How are you guys feeling? let me know in the comments below.

Stay safe and keep cool as a cucumber. You got this.

With love, Mr. CC.

---

Remember, the best laid plans mean nothing if you can’t take action today. Have questions? Need some feedback? Hit us up on the Contact page.

If you enjoyed this post, please subscribe below for much, much more.

Thanks guys, see you next week.

We talk about investing and investment strategies here. Please remember, we are not financial professionals and only speak from our own experiences. We are not responsible for any decisions you make from information gathered on this site. More over at the Disclaimer Page.