Covid is expensive!

A few of my friends have taken quite a financial hit these past few weeks/months. It’s upsetting for me and devastating for them. They do not deserve this. The ones I know all worked very, very hard for a long, long time to accumulate more wealth than they needed but it was what they were programmed to do. They complied by the system and it failed them.

You know how it is….stock portfolios, investments, holdings, money. All that paper-value is now down and some of it is way, way down. One friend had an inclination to oil investments and I hope like hell he was not playing the futures market because that ‘game’ went bottoms-up pretty majestically. One minute you are juggling a whole bunch of $50 barrels of oil and the next you are holding barrels worth MINUS $50.00. That is a hard pill to swallow. Easy to explain. Hard to accept. The problem of risk management, even break-even is exacerbated greatly when that happens. Fortunes are lost and will never be recouped.

But it is also true that the ordinary working Canuck has lost a large chunk of paper-value as well. Real estate is where the ordinary citizen saves up wealth in this country. It’s a crazy system of course but that is where we have all ‘lived’ for a long time. Buy a house you can’t afford, pay interest to the bank for twenty-five plus years and you finally pay off that $200K house that now is worth $1.2M. And we all sit there as old people thinking we are geniuses. In reality, we are just old.

A lot of people lived their entire lives for a house.

Of course, they have to sell that home to realize that increase and the next place they buy into will also be inflated by the other old geniuses that previously owned it. And everyone climbs up a bit on the back of the next generation trying to find a place to live. Crazy system.

The Canuck-buck is also down. Most people don’t notice it when that happens…except that it shows up as increased costs for food and imported items virtually 90% of all products sold in Canada are imported or ‘world-priced’. Maybe more.) When your dollar loses value, you lose buying power and less buying power means that you are with less power (duh). So a diminished buck costs you directly but you only see it as ‘inflation’. The government is OK with that. “Hey, we try to fight inflation by increasing interest rates. Not our fault.”

In a global economy, it is not all their fault but much of it is.

Canada’s economy is hit even harder than many in the first world….because the economy is really just the collective attitude of the people. We do not have enough people to keep the momentum going. You can count cows or houses or paper money and think you have metrics on the economy (Stats Can-type thinking) but the truth is that the number of cows and such is simply not as much of a factor as is our collective mood. If we are keen to consume and spend and have fun, make babies, buy new cars and houses, then the economy booms. If we sit at home with a mask on our face, the economy stalls. Attitude is everything in economics.

And our collective attitude right now is depressed and angry, fearful and cautious. We are not looking at a boom just around the corner. Even if Canada ‘bounces’ back from C-19, the disease, the economy will not. It cannot. Many of the middle class have been wiped out – or hit very hard, anyway. Their HUGE RRSP is no longer huge. Their savings are being used to pay down new debts. Their house (houses, cottages, condos and time shares) are all worth less. Many older investors are also leveraged to be playing that game – and now they are on the losing side with the lever working against them. They are facing margin calls and demand loans. Their energies and productive creativity is on life-support.

And many of them are too old to start over.

Covid-19 is more than just a virus, it should be a wake-up call.

11 thoughts on “Covid is expensive!

  1. yep.
    My portfolio took about a 200k hit in early March.
    I’m back about 100k so I’m still down about 100. Sucks but there it is.
    Everyone took a hit. Some much worse than others.
    I’m expecting the markets to have conniption fit when the April numbers come out at the end of this week.
    US unemployed= 20 million
    Canada = 4-5 million.
    Biggest one month drop in history. Makes the Great Depression look like peanuts.
    Car sales down 90% (Car companies are more concern about their financing divisions…the real money makers)
    Housing sales down 65% ( the major driver of the Canadian economy for years. House flippers will get burned big time)
    I expect both to get worse as the summer shutdowns continue.
    The housing meltdown is just getting started.
    Tourism cancelled for the summer? The peak “make or break” season?.
    How will hotels, restaurants, caterers, taxi drivers, Uber, AirBNB survive?
    The brutal answer? They wont without a huge mortality rate of either staff or business..

    The govt flicked a switch and shut the economy off.
    If they expect the economy to restart just as quickly???? Dream on.
    Trudeau has promised $235 BILLION this year and every time he appears on tv he’s giving away billions more…..
    Tax payer promissory notes as it were.
    And if the economy shuts down and the tax revenue crashes….?
    Bye bye, Canuck buck.
    I moved a chunk of our Canadian business money into US cash in early March because i buy all my stock from the US and I watched in horror as Trudeau promised billions he doesnt have……..
    I dont expect that US cash to last more than a few months.

    There are tons of Mom and Pop operations with people in their 50’s, 60’s that will not have the energy to start over from scratch. They will never restart.
    The other businesses will struggle and many will die.
    The Canadian banks will shut down many branches, never to reopen.
    bank by wire or telephone doesnt require expensive buildings or staff. Get used to it.
    My company has laid of 90% of the workers. Skeleton staff. The phone hasnt rung in 3 weeks.
    I have some jobs starting later this month and next so I’m not worrying yet.
    I have 5 more years of this before I pull the pin
    Perhaps more if the stock market craps its pants later this week when the “fugly” economic numbers “drop their pants” and reveal how bad it is.
    I expect this to be much, much worse than the early 1980’s….and it will last much much longer.
    Be glad you’re retired and living “off the grid”.

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    • Sorry to hear of the effects on you and your company. Good move, tho, to mitigate it somewhat with a currency buy. Still, the system is rotten and the rot has benefited the rich up until now but I suspect that they, too, will take a big hit. They have proportionately more in paper-value so their paper-numbers will be worse. But a BIG hit is a lot easier to take than suffering total annihilation and a lot of decent, hard-working, main-streeters are going down over this. T’ain’t right.

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      • Market melt Sux for sure but c’est la vie.
        Nothing “ventured” nothing gained.

        I just think its going to get a lot worse as the summer rolls on with a major down shift in tourism…… Lots of people will not be going back to work for many many months….if ever……….and God help us if there is a resurgence in Covid in Nov. – Dec.

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  2. Well, I agree, except for the real rich guys…they will come out better (as always) as even now they are buying cheaper stocks. Where as a lot of middle class simply can’t, because they have already lost too much. Middle class has been taken hits for the last 20 years, and we are becoming an extinct species. And we let the banks create a whole system to make banks and the really rich even become richer and richer, by setting up all kinds of “dummy” systems and junk bonds and futures and swaps and…..THAT is NOT real economy.
    But I agree, this will hurt us all for many many years to come, because all the cash they are giving away now, will have to be paid back by us…lower and middle class, who have already been squeezed a lot like lemons. So we will suffer BIG TIME for the next 15 or 20 years. And like me, middle 50, we will never recuperate and see all our hard work go down the drain!
    And there will be no holliday season this year, so again a lot of people will suffer and whole industries will go bankrupt, which again will have a huge impact….the downward spiral has started and nobody knows yet how deep we will fall….but for sure it will be a loooooong drop.
    I just have restarted the business I work for, but sales has dropped to 0, and soon we will have to let people go because there simply is not enough work, and there will not be for at least another 1 to 2 years.
    Kinda wish I had taken the leap to go OTG a few years ago!
    And if there is another resurgence of COVID…god help us then!

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  3. And you know what really makes me angry? 10 years ago, our government (read WE) had to save our banks because they had been playing around with OUR money with junk bonds. They went bankrupt and were saved with our money. Now WE are in trouble, but guess what the bank says when you knock on their door to get an extension of your loan?? They say…well dear long time customer…well, this may be difficult for us and so we will not do this, and if you ask us this, in the future when you apply for another loan, we will remember that you asked us, and your credit rating will drop…bankers are just f…. bandits and thieves!!

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    • It is THAT point that should make you angry. The system is greedy and corrupt. It is the unequal playing field that benefits only the few. But it ruled over us serfs having to pay for a house or car or education for decades. You were almost born into servitude to the banks and the government. They were monopolies, bullies and sociopathic. They system they offered ate people up. But then, when that spoiled PIG of an industry faltered, it was the little guy who bore the cost for the ‘too big to fail’. He/she supported the banks. When I say Covid is a wake-up call, I mean it is a cry of foul, it is a whistle for the game to be called on account of unfair rules and consequences. It is time to review modern day capitalism. In fact, it is either time for THAT or it is time to quit the game you cannot win. I chose the latter. I got out. It is working for me. But, you see, when you go OTG, you go lean, you go with cash and guns and food and you don’t look back. There will be no path back. Go OTG and start anew but, of course, dragging a lot of baggage. It ain’t easy but it’s doable.

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      • I suppose if everyone left then the idea to go OTG would be unworkable. Can’t have everyone being happy, now can we? But, you see, I urge OTG when I really mean: do NOT live 100% in the system. The system is NOT working for you. I don’t care if you just have a cabin somewhere or a really good tent and site on which to pitch it. I just think that people dedicated fully to a dysfunctional system get hurt. The ‘money’ world (here to stay or not) is one lacking love, family, health, nature, moderation and balance. We should all work to live but none of us should live only to work.
        Guy workin’ hard?…good. Guy workin’ hard to get what he wants? Great. Guy workin’ hard to get more than what he needs, working alla time, taking on huge debt, aspiring only to make more money? Well, that’s just crazy, that is.
        And OTG does not really have to mean way off the grid. It only means that the urban-intense, city cores are NOT the heavens and paradises, they are NOT even necessary anymore. Work from Cranbrook or Nelson, Ladysmith or some dinko village somewhere. City Central District is NOT the work or living place of the future.

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  4. All the foregoing is true. Governments everywhere went on this crazy lockdown spree, then took to handing out out money from the public purse like it’s endlessly deep.

    There will never be a “cure” or a vaccine, and they know that. In the end, they’ll be forced to do what should have been done in the first place – simply let nature take its course, never mind a “flat” curve, since that would take years and years to allow the virus to spread by baby steps. All restrictions should be lifted and let ‘er rip. I am an old guy, so I’ll probably go, but I am expendable. Leave some world for the young ones who survive, instead of leaving them as paupers in perpetuity. Even now, so much damage has been done. If we tried tomorrow to attempt an immediate return to “normal”, it would never come.

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    • Well, I disagree with you. I am an old guy, I am likely very expendable, too. But I ain’t going and I sure as hell ain’t going quietly. Secondly, the lock-down was necessary – when you do NOT have a clue what you are doing, at least stop digging the hole you are in. And that is what they did. The real criticism is that they KNEW a Covid was coming. What did the leaders do? They fired the scientists and Trump disbanded the infectious disease control unit. They did many many more stupid things but those stand out. It is as if we looked at the options and chose the stupidest ones. Then we looked into our toolbox and decided we only had money with which to address this problem so they started giving that away to who?…..not the really poor, not the marginal, not the homeless, the lower and middle classes or the even the ill. They gave it to the already rich, the oil companies, banks, landlords and businesses.
      Giving money away is stupid. Unless they can do that for 30 years for everything, all they are doing is buying time and paying a fortune for each minute. This is gonna take a hard fix under the present system and so earlier is easier than later. In fact, the easiest way to buy time without the hole getting deeper was and still is simple: suspend interest. Five years of everything being interest free and you will have a generation of students free of debt, a generation of parents free of debt and companies investing hugely in the future.

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