No, You Didn’t Just Lose Half Of Your Retirement Savings

Unfortunately, I don’t see any point of growth within next few years. Not only US, the world economy is decimated and it’s going to take decade to be rebuilt with entire industries being wiped out. There is going to be a lot nationalizations, bailouts etc to the point where gov’t has to take over the entire automotive industry etc. Or end up with major unemployment and societal near-collapse. Even future of US Dollar as a currency seems to be at stake now. We’ll see if Weimar republic hyperinflation is to follow these odd monetary moves.
There is going to be a lot more deaths due to societal issues (hunger, depression, bankruptcies, lack of healthcare access) than virus would bring if gone unchecked completely. Unfortunately, most will understand this only in the hindsight and time will prove these “quarantines” very wrong…Most likely, a major war is to follow within 6-12 months, because of all of the imbalances in the world and being even more aggravated.

Unfortunately, with all due respect to MMM’s approach – I would much rather see more polluted world with less people suffering hardship than cleaner world with deep and lasting human suffering this crisis brings to everyone.

And I’m also negatively impressed (nearly disgusted) by the people behavior – it is unbelievable that almost everyone who called themselves part of “free world” (US, Europe) showed they will gave up their rights and liberties in a drop of a hat after being scared by media and after not being able to do a basic research and math about the virus and its impact. This will have profound effects and end up in totalitarian rule and beginning of “digital concentration camp” in the very nearest future.

> And so far, we have not been performing like a best-case country so these numbers will probably be higher.

Well, that’s putting it mildly! The exponential curve of active cases is just starting to really pick up speed in the US, and it’s almost three times higher already than China’s, which has now flatten. Although I agree that index funds and human society as a whole will come out of this crisis stronger, I do hope the US will take note that liberalism and individualism made it a hell of a lot worse.

I hear of states having to outbid each other for medical supplies, of gig workers having to go on strike to get a mere 14 days of paid sick leave, of unemployment benefit sites going down from too much traffic, of people not even being able to access those sites at all because they used to go to their local library (now shut) to have access to a computer, of people being enticed to tip more because companies can’t pay their workers a decent wage…

I sincerely hope the US finally realises what it’s missing… A global health care system, a decent minimum wage, well funded public services, nationalised infrastructures … the list goes on.

Stay home and stay safe.

Best post I’ve seen from you in a while. I’m on the front lines and diving back into hospital medicine from outpatient to help with the Covid 19 surge. I think FIRE will survive but it will be a leaner crew and more focused. Hats off to you for your prospective of this entire situation. It is an uplifting message. If you make masks from surgical drapes Haylard 600 out of a design from university of Florida anesthesia dept (I’ll post it on my blog) , it’s a complicated design but passed their fitmask testing. A local sewing group is doing it for me. $0.04 a mask. $90 worth of surgical drapes , using left over bits of fabric and pipe cleaners . They cut enough fabric to make 2000 masks. We are going to give half to first responders in our area and half for clinic. Whereas surgical masks even in bulk are selling for $0.75 a piece and forget n95 – can’t find those anywhere

Thanks for what you do, MMM. Refreshing perspective as always.

I couldn’t help but notice a contrast between your vision of technological growth and another author I recently read, Charles Eisenstein. His first book, “The Ascent of Humanity,” is published for free on an eponymous website. In it, he discusses the idea of a technological utopia and makes the case that striving toward that end is ultimately a destructive tendency, because it furthers the perceived separation between people and nature. But I think it’s also fair to say he doesn’t advocate throwing the technological baby out with the societal bathwater; rather, that our technological priorities have gotten out of alignment with our true nature and need to be reoriented.

I’m an engineer by training, and I can see truth in the vision you articulate here. But Eisenstein’s arguments also resonated strongly. I’d love to know what you think of the ideas presented in The Ascent of Humanity and how you square your views with his (if at all).

I understand the point of not despairing but:
– What does not kill you sometimes to often leaves you weaker or scarred.
– There can be value destruction.
– Building on what Mark Rush noted, the globalization and lean/just-in-time practices that have helped growth and innovation also increase the impact of crises.

Thanks MMM. As a “math guy” I do appreciate some of the numbers and graphs. But it’s also those things that simply don’t add up.

The 70% number of people getting this is correct based on an R0 of 3. (1 – 1/R0) * 100% = 66%. The good part is that this isolation and social distancing is lowering that number, but it’s simply not enough. Unless you get that R0 below 1.0, the spread will continue. It is very possible we are getting it below 1.0 now, but if the virus isn’t eradicated completely, the R0 goes back to nearly 3 once you lift the restrictions. This eerily reflects what has happened in other pandemics, such as 1918, which had 3 waves. The 2nd have by far had the most deaths.

The worst-case scenario then is that we flatten the curve, but don’t eliminate it. Then a 2nd wave hits simultaneously with next winter’s flu season. Under that worst-case, we’re looking at numbers far higher than 2-3 million. In that case, everyone with the regular flu suddenly has a “pre-existing condition”. Tack Covid on top of that and that’s when many normally healthy people don’t make it.

The first graph is great in showing the overlaps of the deaths. The second graph though assumes this is flattened and eradicated within ~1 year, so basically no 2nd wave. Let’s hope that is correct. Keep in mind that the more you flatten the curve now, the higher the odds of a second wave.

MMM, growing a garden seems like a very Mustachian thing to do. Do you have a garden/kitchen garden?

Last year I decided to expand my garden and add several more raised beds. So glad I did as this activity is so soothing during this time. I’m growing extra food for my local food bank this spring as well. I also started extra seedlings for friends and family, so I’ll be dropping off some tomato seedlings at my friends’ doorsteps for now, since we can’t socialize in person.

Thanks for mentioning gardening in your last paragraph! I highly recommend this activity for everyone right now (even if you only have a small window and kitchen counter for a pot of herbs).

I have long admired the MMM website. It shows people another way of living with confidence on their own terms. The FIRE community is probably the best prepared, at least financially and to some extent mentally, for this pandemic. I am sure most in the FIRE community have accounted for their worst case scenario and should be able to ride out this pandemic.
I would however like to give a Malaysian man’s perspective in regards to the various Government’s handling of this pandemic. Today in Malaysia, which has a population about a tenth of the US , we have 3,333 positive cases and 53 deaths. We have been ordered to stay home since March 18. The order remains till April 14th. We have flattened the curve so far. By contrast the US has 250,000 cases with more than 5,000 dead. The US Government has failed its people in not taking the proper precautions when they had the time and prior warnings. I hope your Government bucks up now because going by the Malaysia’s experience so far , it is unacceptable that you can calmly accept a death toll of more than 100,000 and not feel aggrieved. The US is a first world country, Malaysia is a middle income country, it doesn’t make sense that your total deaths are 100 TIMES more than ours ? ( Btw I do trust Malaysia’s numbers. We are not China 🙂) . You need to hold your Government accountable for the many thousands of unnecessary deaths to come. I pray that your health services will not be overwhelmed and you will be able to flatten your curve soon and avoid unnecessary deaths.
I am sure that there will be a vaccine and even a cure. I just don’t know when exactly. Maybe 12 to 18 months? In the meantime, we need to keep people safe. In Malaysia, we stay at home and practise social distancing if we really need to go out for provisions. I wish MMM and the FIRE community all the best during this challenging period. Stay safe.

Quick question for MMM
Did you buy health insurance ?

Situations like this and attitudes like the one you outlined above remind me why I don’t visit this blog or many financial blogs anymore. This whole situation exposes in an instant every governmental shortcoming and institutional rot that has been made in the name of austerity and privatization. It lays bare the class divisions in our society, and we will unfortunately have a body count to point to in order to demonstrate this inequality. Current estimates indicate a quarter million dead in the US. There’s no optimism to be had there. You mention 80% of people can work from home? For how long? And what about the other 20%? Did those 20% just suddenly get a case of complainy-pants? Those 20% are not a statistic, they are a substantial percentage of the population and American workforce. They are the bottom quarter of the American economy, and they have been given no life line to weather this storm. They will not be immediately re-absorbed into the workforce. Those are MILLIONS of people who are being financially devastated right now, through no fault of their own. But at least you’ll survive and a majority of your acolytes will survive and be “humbled” by the experience. Bravo.

Now, we could reasonably get through this with a competent government that cared about its human workforce more than corporate profits. But we don’t, so we’re going to be forced to go through this national trauma and prolonged economic recession in order to maintain our decrepit economic system that only enriches a select few.

A few things that would go a long way to flattening the curve:

1) National moratorium on mortgages, rent, and property taxes for the duration of the crisis. The only reason why people will leave their homes in the midst of a global pandemic is because they need to pay for their living situation. Same applies to businesses who need to cover their rents. A moratorium on this removes the single largest expense for every citizen and incentives them to stay home. It’s the beginning of April. How many people of the 10 million recently unemployed missed their rent payments How many of them will come out the other side of this crisis with 3 to 4 months of back-rent that they are unable to pay? As soon as the health crisis ends, the economic crisis will begin, and the poorest among us will be thrust into a debt hole that they’ll never be able to crawl out of.

2) Monthly payments to each citizen to cover food and basic needs and the deployment of state services to deliver food to the vulnerable (turning public schools to community kitchens, having meals delivered by the post office, etc). This would be far more effective than a one time payment that is unnecessarily means tested. You can always tax it at the end of the year if it’s too much.

3) Medicare for all. Look, this pandemic is going to rip through vulnerable communities and leave a wake of destruction, both physical and financial. How many of those 10 MILLION (and still rising) recently unemployed people just lost access to their healthcare because it was previously tethered to employment? How many of those uninsured who recover will now be forced to pay a hospital bill that they can not afford because they have no income and no insurance? Those people now unemployed, uninsured, and now housing insecure. They are the ones most likely to get infection as they are forced to find income during a plague when nobody is hiring. How many hospitals have been shuttered this decade alone because they are not deemed profitable? There are major US cities that don’t have a public hospital because they were sold off as assets for cash strapped municipalities. Hospitals will not expand, because it is not PROFITABLE to do so. Our healthcare system is designed to run as streamlined as possible to expand corporate profits. Guess what? That is directly at odds with saving human life.

4) Nationalize key industries, even if only temporarily. This pandemic has very clearly shown that are 40 year drift toward hyper capitalist privatization has thoroughly hollowed out the infrastructure needed to keep our society functioning. We are going to learn that the federal government has been forcing states to bid against one another to drive up the price of necessary medical equipment and personal protective equipment as well as using agencies such as FEMA to outbid state governments to funnel equipment to party loyalists and agencies such as ICE (this should be an outrage that forces a regime change, but we’ll be so disoriented from this ordeal that it will go largely unnoticed.) Even energy and telecommunication industries should be democratized, as it is now apparent that they are now essential infrastructure items needed to maintain any semblance of our economy. Instead of having companies foot the bill for these items, it will be offloaded onto the backs of their workers. A negative outcome of this pandemic will be the “uber-ization” of the private sector, where companies learn to cut costs by having their workers pay for most of the key overhead needed to run a business. This is the “innovation” you are going to see.

5) Immediately release all non-violent offenders in prisons and ICE concentration camps. An outbreak of a deadly infectious disease in these closed quarters will devastating. And if we honestly and soberly assess the communities who are targeted to fill these detention centers, then the question must be asked: Will this be a genocide? It’s important to remember that Anne Frank did not die in the gas chambers. She died along with 17,000 other prisoners from a typhus outbreak. These people will be left to rot. That is an outrage.

6) Shelter for the homeless. Similar to above, but without a guarantee to housing, the people most likely to die in the streets will be the poor, the mentally unstable, and those with addiction or victims of domestic abuse. And without a moratorium on rents, the number of housing insecure will go up during this plague.

But we won’t do any of these things. Instead we’ll do what we always do: Infuse the markets with liquidity and bail out industries with no strings attached (looking at you, Mnuchin) even as those same industries hemorrhage their workforce. And the result will be more and more people thrust into poverty and economic insecurity, with their entire existence dependent on their ability to provide productive value to a new boss — at a reduced wage.

So let’s add these up and guess who will be most targeted by this pandemic: The poor, the elderly, minorities, the homeless. In short, those who have been deemed economically un-productive.

Our government is not making efforts to protect the most vulnerable, as you falsely and naively claim. On the contrary, the government is sacrificing the most vulnerable so that those with capital can retain their economic privilege. This was quite evident when leading members of the government floated the idea of re-opening the economy to please the stock market. They are not pausing the economy to prevent 3 million dead, they are pausing the economy because they know 3 million dead would lead directly to violent revolution. But at least you can buy in at a discount!

And as for your positive by-products? You flirt dangerously close to endorsing a form of eco-fascism. Yes, millions may die, but hey, less pollution! People are dying from the criminal negligence of our government, but hey, at least you can enjoy a nice sunny walk in the park! This suggests that it is the existence of humans (mainly the poor and afflicted) that are the cause of climate change, rather than the economic model that forces them to work and maintain good standing in the workforce in order to retain the privilege of being housed and fed.

And why? Why neglect to address the items above? Because to actually solve these issues, the state would have to admit that our current economic model is ineffective by design. That it always has been. Solving these issues would spread the idea that collective ownership of production of necessary industries is not only feasible, but morally responsible. But instead we are left with a false choice between re-opening the market balanced against an acceptable body count. Apparently we’ve settled on a quarter million dead. And if at least 200,000 people have to die in order to maintain this system of extreme privatization followed by a deep and prolonged recession where more and more people are thrown into the streets, then that is what the government is going to do. Because screw you, poor people.

We are in the deleveraging stage now, the market probably won’t bottom for another 2-3 years. See: https://youtu.be/PHe0bXAIuk0
If you have a never sell philosophy, you can just ride it down then back up on the other side of the deleveraging. You should expect to lose at least half of your current stock holdings’ value by the time we hit bottom (just like in the 2008 deleveraging), but since this is hard to time, I get the idea of riding it out. Warren Buffett raised a lot of cash last year and hasn’t put it to work yet as far as we know, one thing you could do is buy when BRK shows they have put most of the 100+ billion into stocks. Another signal of the bottom seen in 2009 was massive insider buying (right now there is just massive insider selling).

The big picture. As always… Thank you :)

Every time I’m at a crossroads in my life, I come to this blog to hear advice like this. Every time I feel better. No one knows what the future will bring, but all we can do is hope for the best and do everything in our power to make that happen. These are trying times. I hope as many people as possible stay safe and healthy.

Thanks MMM. A kind and positive post. I’m planning no working again this year ( for an income) and thanks to your blog among others, that is just fine for us.