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Thursday, May 21, 2020

Sell Stocks Now


I own and track the Vanguard Total Stock ETF, VTI.  It invests in all the stocks in the US markets: small, medium, large cap.  It is a great way to invest in all US economic activity.

Right now, the price of VTI is approximately the same as it was in May 2019.  
  • In May 2019, unemployment was about 3.5%.  In 2019, GDP grew 3%.  There were no major global crises and all major industries worldwide were operating successfully.
  • In May 2020, unemployment is over 15%.  A global pandemic is happening and over 60,000 people have died in the US.  Oil prices went negative a few weeks ago and the world is overstocked with oil.  The global travel industry (hotels, airlines, cruises, rental cars..) is not operating.  JC Penney, J Crew, and Neiman Marcus just went bankrupt.  The FED is printing money, buying securities and the US government is blowing money on people, corporations, and healthcare.  You cannot eat in a restaurant in over half of North America.
Why is the price of VTI the same as it was in May 2019?  I don't know.

Maybe Aliens are controlling our minds, Bigfoot has taken over the Fed, Elvis has left the building, and everyone is drinking Lysol and will be fine, but I don't like this situation.

Disclaimer: this is not professional investment or retirement advice and should be used at your own risk. The author is not a licensed financial advisor. You should not believe everything on the Internet including this blog and should check multiple sources possibly including a professional financial advisor before making decisions.

Thursday, May 14, 2020

What is The Real Issue with Reopening?

There is a lot of disagreement about "reopening", lockdown, quarantine.  Armed protesters in state capitols, the President playing both sides against the middle, threats against epidemiologists, and a lot of misinformation.

But what is the real issue?  I will say it because few reporters and NO politicians will say it.

The issue is the death rate.  How many people should die from COVID?

When generals plan a battle or campaign, they look at the value of objectives versus casualties.  Is it worth it to conduct the D Day invasion if we lose 10,000 men in the first day?  The answer was yes.  If the expected casualties were 100,000, the answer would likely be no, and the plan revised.

It is the same with COVID.  We know that if we stop most economic activity, casualties will be low, but the long term standard of living will suffer badly, so we cannot lockdown forever.  We also know that having no restrictions on activity, "normal activity", will likely result in the loss of 1 to 4% of the world's population, as almost everyone will get COVID and 2 to 8% of people will die.

So the questions are:
  1. What is an acceptable death rate?  Is it OK if 200,000 Americans die over the next 2 years, primarily 60+ and infirm?  If not, what level of death is acceptable?
  2. Once you determine the death rate, you can ask expert professionals (health, business, law) to craft a plan that maximizes economic output while staying under this death rate.
Alternately, you can do what the USA is doing now, fumble along, do different things in different places, get people to fight, and then see what happens.  If this is written up as a disaster by historians (e.g Vietnam war), then you got it wrong.  If this is written up as a triumph in spite of the losses (WW2), then you got it right.  But I like the generals' approach to battles better than the current mess.

P.S. I once stayed at a Holiday Inn