Thoughts on COVID-19 and the economy

By | March 9, 2020

I just sent the following email to the parents’ email list for the K-8 school that all five of my kids have attended (my youngest, in sixth grade, is the only one left there). I’m sharing it here because it fully captures my current thinking on COVID-19 and on where the economy is heading and what people should be thinking about doing for both.

Personally, the way I cope with uncertainty in the world is to consume a huge amount of news. I know others cope by consuming less news, and of course that’s an equally valid approach, but I’m a little worried that as a result, some people in our community may not be fully up-to-speed on what’s going on with COVID-19.

The other way I cope with uncertainty is to try to find ways to help, because I feel better about the world when I am being helpful (which, by the way, is a huge part of why I’ve actively volunteered for the school for the past 17 years). I am therefore sending this message to caution people who may not be paying full attention about what’s going on with the virus. It’s important.

What I’m writing here is, as far as I can tell, accurate and in my opinion not unduly alarmist. Of course, I am not a doctor. We have plenty of doctors at the school, and perhaps some of them will want to weigh in here, especially if I’ve gotten something wrong.

The risk

The data we have right now indicates that COVID-19, the novel coronavirus that’s currently spreading across the globe, is much more lethal and contagious than the seasonal flu. It is less deadly but more contagious than SARS or MERS, the last two significant coronavirus outbreaks that the planet has had to deal with. SARS and MERS were both for the most part successfully contained in the United States before they became widespread, both because they were less contagious and because the U.S. government responded more effectively.

Here’s a rough description of your likelihood of being seriously harmed by the virus if you are infected: roll a six-sided die, and if you get a 1, your symptoms are severe enough to require hospitalization. Roll again, and snake-eyes means you don’t survive it. The elderly and people in ill health are at particular risk.

Just to give you an idea of what potential magnitude of crisis we’re talking about here: Italy just placed around 17 million people under quarantine in a last-ditch effort to slow the spread of the virus there, and they are so worried about their healthcare system being overwhelmed that they are planning for the possibility that they may need to ration which symptomatic people get hospital beds and which ones don’t, even though “doesn’t get a hospital bed” could mean “dies.”

Also: an expert in emerging infectious diseases, Dr. James Lawler, gave a presentation at an American Hospital Association gathering in February, where he said that as many as 96 million Americans could be infected by the virus and 480,000 of the infected could die. There may also be a significant number of ancillary deaths, e.g., from people with other illnesses who are unable to get care they need because the healthcare system is overtaxed by the virus.

Typically, the fight against an emerging infectious disease has two phases: containment and mitigation. Containment means trying to stop the spread of the disease, and mitigation means trying to minimize the harm caused by the disease to the extent that it cannot be contained.

We have failed to contain the virus in the United States. There were significant containment steps that the federal government could have started taking months ago, but they didn’t. Now it’s probably too late.

The statistics for the number of infected people in the U.S. being reported in the media are almost certainly vastly lower than the actual number of infected people, because the U.S. isn’t doing nearly enough tests. For example, as of a few days ago, South Korea has tested approximately 140,000 people for the virus, whereas the U.S. has tested a couple thousand; exact numbers are unavailable because the CDC is refusing to publish them. Pause for a moment and think about what that probably means.

People often deal with frightening situations outside of their control, especially situations they haven’t encountered before, by saying to themselves, “Oh, it can’t be that bad,” and continuing to live their normal, everyday lives as much as they can. We do this because it’s psychologically easier, and we do it because we’re afraid that if we appear to panic more than other people and then our fears are not realized, we will end up looking bad and being embarrassed. Nobody wants to be the boy who cried wolf.

What the community should be doing

I am going to be blunt here. We are in the midst of a pandemic. Things are going to get much, much worse before they get better. Our government has completely botched their early response to the virus, and we are therefore far behind in combating it. Drastic action is 100% justified and called for, and the less drastic the action we take, the more people are going to die. This is not idle speculation. I believe that what I am saying is fully supported by the available data. Anyone telling you to remain calm and hope for the best at this point is denying the science.

I’ve heard people saying how much of a pain it’s going to be if schools start closing and switching to remote learning, or major public events (like the Israel Folkdance Festival, or college graduations) start getting canceled. In my opinion, people who are saying that are missing the point.

Schools should be closing. Major public events should be canceled. Companies should be telling everyone who is able to work from home to do so. And you, and I, and everyone else who is able to understand the data and the science should be demanding these things, not grumbling about how we hope they don’t happen because we don’t want our kids underfoot all day or don’t want our kids not to get to march in a graduation ceremony.

The “boy who cried wolf” thing is a problem for institutions as well. I imagine some school administrators are thinking things like: what if we close the school and switch to remote learning and then the pandemic “fizzles?” All that hassle will have been for nothing, and the kids’ education will have suffered, and parents will be furious with us.

Frankly, I do not believe it is alarmist to say that this kind of thinking is going to get people killed.

In my opinion, institutions need to do the right thing here, the sooner the better, and the customers of these institutions — e.g., in the case of the school, we parents — need to tell them we support them in doing so. I, for one, will be forwarding a copy of this email to the headmaster at all my kids’ schools telling them I believe closing the schools is both necessary and appropriate. The company I work for has already canceled all international travel and greatly restricted domestic travel and canceled our attendance at upcoming conferences and events, and I plan on lobbying my CEO hard to have everyone start working from home as soon as possible and to keep doing so until the virus is well past its peak in the U.S.

One could make the argument that closing the schools is not yet appropriate because there is not yet any evidence of community transmission in the Boston area; I’d accept that, though frankly I strongly believe it’s only a matter of time before there will be community transmission and the schools will have to close, and I’d rather see us get in front of it than trail it.

Having said all that, what would not in my opinion be legitimate is sticking with plans to hold graduation ceremonies to which people, many of whom are elderly and therefore at particular risk from the virus, travel from all over the country. Such events would be a perfect vector for the virus to be spread. For example, around 15 people have tested positive for the virus after a recent Biogen meeting of only 175 employees at the Boston’s Marriott Long Wharf Hotel.

There’s a graph by Drew Harris, DPM, MPH, which has been floating around the internet, which starkly illustrates why it is so important for us to do as much as we possibly can, as soon as we possibly can, to minimize the spread of the virus:

The point here is simple: we’re probably not going to be able to exercise much control over how many people get infected with the virus, so our only hope for minimizing deaths is to spread them out, so that our healthcare system isn’t overwhelmed, so that the people who do get infected and suffer from serious symptoms can obtain all the care they need to help them recover. If the healthcare system is overwhelmed, then a lot of people are going to die from lack of care.

I believe that doing everything we can to slow the spread of the virus is a moral imperative.

What individuals and families should (and shouldn’t) be doing

Taking care of yourself

WASH YOUR HANDS. With soap. At least every time you use the bathroom, and you know, maybe even more often than that.

Wash your hands properly. That means: (1) get your hands fully wet; (2) put soap on them; (3) scrub all over your hands for at least 20 seconds (sing “Happy Birthday” to yourself twice); (4) rinse; (5) dry your hands with a clean paper towel if at all possible, and avoid touching the towel dispenser with your wet hands if possible; (6) use your feet or the paper towel to open the door instead of touching the door or knob with your bare hands.

Some hand sanitizers don’t have enough alcohol in them to kill the coronavirus, and even the ones that do are less effective than just washing your hands properly. While there’s certainly no harm in using hand sanitizer when it’s available, and it may provide some benefit if the alcohol concentration is high enough, you should not use it as a substitute for washing your hands frequently with soap.

Don’t touch your face. Yes, this is very hard. Try.

Don’t shake hands. Don’t hug people outside your immediate family. Don’t touch the Torah when it comes around on Shabbat. Don’t touch mezuzot when kissing them. Etc. You get the idea.

Wearing a facemask will not protect you from the virus in any significant way, unless perhaps if you are immunocompromised and have been taught how to wear masks properly by medical professionals. Furthermore, because people are buying and hoarding masks in huge numbers, hospitals, which really do need them, are encountering shortages. This means that doctors and nurses are going to get sick, which will reduce the capacity of the healthcare system and make it more likely that it will be overwhelmed. Therefore, please do not go out and buy masks unless your doctor tells you that you should be wearing them.

If you experience symptoms which could be the coronavirus, contact your doctor by phone and ask what you should do. Unless your symptoms are extremely serous you should not just show up at the ER without calling your doctor first. Doing so puts unnecessarily strain on the ER’s resources and puts you at increased risk because if you don’t have the virus you could catch it from someone at the ER.

Social distancing

It’s probably a good idea at this point to start thinking about minimizing how much you’re going out in public.

If you believe you have been exposed to someone who may have the virus, then for the love of God and the good of your fellow human beings, please, stay home for two weeks to make sure you don’t have symptoms. The incubation period of the virus is two weeks and during that period you could be asymptomatic while shedding the virus and infecting other people. Whether this applies to your family as well depends on how likely it is that you were exposed and how extensive the exposure was. Please consult with your doctor.

Preparing for quarantine

At this point, it is very much within the realm of possibility that you and/or your family may be required to self-quarantine at home in the next few months. Heck, it is very much within the realm of possibility that our entire community may be required to self-quarantine in the next few months.

I know this is a very hard thing to do a month before Pesach when those of us who keep the holiday are desperately trying to draw down our chametz foodstocks rather than increasing them, but (a) you can sell your chametz for Pesach, and (b) if you don’t stock up now on the foods you need to outlast a quarantine, you may find that the shelves empty when you go to stock up, because everybody else is panicking. I’ve been at Costco twice in the past week, and it was more of a madhouse than I’ve ever seen it, with lots of things out of stock.

The Washington Post recently published a good article about what you should do to prepare for quarantine.

The economy

I’m not a professional investor, or a financial planner, or anything like that, so you would be totally within your rights to dismiss the following as the ramblings of an ignoramus and disregard them. But this, too, is important, and so I’m going to share my opinion, for you to do with what you will.

The stock market has lost nearly 9% of its value since February 21, wiping out a year of gains, or two years if you count the dip of December 2018 as temporary, which is a reasonable interpretation of the data.

Even if the U.S. avoids all coronavirus the doom and gloom I’ve predicted above, the rest of the world, and in particular China, hasn’t. In my opinion, the stock market is going to go down a lot more this year, and when it turns around the recovery is going to be slow. I don’t think this is a little blip; I think it’s the beginning of a world recession.

Also bleak is the recent crash in the price of oil. The stock market does not like it when the price of oil goes down. It may be good for our environment and the habitable future of our planet, but at least in the short term, it is not going to be good for the stock market.

A couple of weeks ago, coincidentally immediately before the marked dropped, Andrea and I made the following calculus. We were both convinced that there was going to be a huge correction in the market within the next couple of years, and that when it happened it would wipe out 1-2 years of gains. We reasoned that while we couldn’t predict with certainty when it would happen, we were confident that it was going to happen and that when it did the recovery would take a long time.

We therefore decided to move all of our retirement savings out of the Vanguard “Retirement Target 2040” mutual fund we had it in, and into a money market account, and leave it there until after the crash we were anticipating.

Our reasoning was as follows. In the worst-case scenario, we would be proven wrong, i.e., the market would keep going up for all that time, and we would only make a return of ~2% on our savings rather than the more robust return we would have gotten from the market. We felt that was rather unlikely. On the other hand, in the best case scenario (for us, not for the country!), the market would crash and our money would stay safe and then we would buy back into the market somewhere near the bottom, and our savings would end up growing much larger than if we had left it in the mutual fund and rode out the turbulence.

We put in the orders to move our money on February 24, the day the current dip started. As of Friday we were 6.14% ahead of where we would be if we hadn’t. If we’d acted just one business day earlier, on the 21st, we’d be over 9% ahead. Alas, our timing was a day off.

I want to be clear here that Andrea and I are not aggressive investors and we are not the kind of people who try to “time the market” on a regular basis. This is literally the first time since I started saving for retirement 28 years ago that we’ve done anything like this.

Conventional wisdom says that if you aren’t close to retiring, you’re better off riding out dips in the market than trying to time the market. Generally speaking I believe that, but I do not believe that sticking to precedent is necessarily the right way to go during unprecedented times. I believe there are many unprecedented things happening nowadays.

Conventional wisdom also says that the biggest danger of market-timing is that even if you guess right before a dip, if you fail to get back into the market at the bottom of the dip you still end up worse off than before. That’s true for small dips that recover quickly. But 9% isn’t a small dip, and I don’t think it’s hit the bottom yet, and when it does hit the bottom I don’t think it’s going to recover quickly. There’s plenty of time to reenter the market during a slow recovery and still come out ahead, even if you don’t nail it precisely at the bottom.

Now, it’s entirely possible that the 9% drop in the market we’ve seen since February 21 is the entire correction, and the market is now going to resume its climb. It’s entirely possible that Andrea and I just got lucky this time around and moved our money at the right time, but that avenue is closed off to others, at least for now, because the market is done dropping for now.

Yes, that’s possible, but I don’t think that’s what’s going to happen. Consider that as I write this late Sunday night, The Dow is down nearly 5% from its previous close in pre-market trading. And sure, it’s possible that even if the market does drop tomorrow, then that will be the end of the drop, and after that it’ll resume its climb. But I don’t think so.

I’m not going to tell you what to do with your money. All I am doing here is suggesting that you might want to be thinking about it. Some additional data points to consider:

  • There are people who know a lot more about finance than I do who are seeing things the same way.
    • As one Boston venture capitalist put it, “I don’t know the answer. Often just telling friends and family that I pulled out of the stock market weeks ago and may take my kids out of school has helped.”
    • Here’s what Austan Goolsbee had to say: “Remember when we had to break the glass and pull out the emergency bourbon during the ‘08 campaign that day when the whole world fell apart? The market wasn’t as scared as it is right now.”
  • The pundits who are always telling people not to panic when the market dips also worry about being the boy who cried wolf. They are terrified of being the person who tells people to pull their money out of the market, only for it to bounce back quickly and cause them to lose a lot of money. Like most of the media, they are too timid about acknowledging that we are living in unprecedented times.
  • A lot of the people advising people to ride out the market downturn are not disinterested parties. They have a lot of money in the market themselves, so they have a vested interest in people not pulling their money out of the market, because when a lot of people do that, the market goes down.

Just to reiterate, I am not a finance professional. The viewpoint I’ve described above may be worth even less than what you paid for it. Please do your own research and make your own decisions. I’ve offered this as my own point of view, not as financial advice. This message will self destruct in five seconds. Etc.

“Wow, this is a ridiculously long email.”


If you’ve gotten this far, I salute you. I hope you’ve gotten something useful out of it.


Jonathan Kamens

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