DEALING WITH A BLACK SWAN

Like classic black swan events Covid19 came as a surprise with massive economic consequences, and above all it will be inappropriately rationalized after the fact with the benefit of hindsight. Coronavirus is a zoonotic type of virus that is transmitted between animals and people. It originated in Wuhan and it spreads through close personal contact, coughing and sneezing, touching your nose and mouth, touching objects with the virus and most importantly through travelling and shaking hands.

Covid19 has moved from being an epidemic to a pandemic because of its global spread and with China being the world’s second biggest economy contributing 19.3% to the global economy it was bound to cause an economic frenzy. Recall that in 2015 Chinese leaders unveiled a vision of becoming the most powerful economic empire in the world by 2025, hence the country positioned itself as a manufacturing hub with the whole “made in china” strategy. The idea of the Yuan becoming more powerful than the US Dollar obviously did not sit well with America, besides the tariffs and trade deficit issues, it sparked the US/China trade war (story for another day).

The point is, when China sneezes the whole world catches the cold!

Picture Source: The Economist

According to the International Monetary Fund (IMF), about one-third of the economic losses from covid19 will be direct costs from loss of life, workplace closures and quarantines. But the remaining two-thirds will be indirect, due to a fall in consumer confidence and business behaviour, and a tightening in financial markets. It’s simple to advocate for the government stimulus but the impact of both monetary policy and fiscal policy lag for about 18 to 24 months, though one might argue that because we don’t know the length of the outbreak, it may be wise for the state to act now.

Picture Source: GIS and Data

I’d love to give you an economics lesson, but it’s more beneficial for you to know how to deal with covid19 on a personal health level, your finances and a possibility of replacing income.

  • Personal health: Please take care of yourself!  Social distancing is not a joke neither is personal hygiene. There are emerged countries with a shortage of beds problem, where they are starting to weigh who to treat in terms of assessing how important a life is. As much as the elderly have experienced most deaths, it is important to learn how to keep your immune system strong and stay alert as well as informed because ignorance and arrogance can cost you your life.
  • Finances: Protect your finances!  A risk tolerance assessment and asset allocation are key in times of uncertainty. Outliers have cash available, because in economic downturns cash is king! Where debt is concerned, interest rates tend to fall so use this time to settle short term debts. I’ve always advocated for dollar-cost averaging and its times like these that you’d wish you listened.
  • Replacing income: Economic downturns often lead to job losses! Companies will start restructuring and you want to have positioned yourself as an expert in what you do to retain your job. Alternatively, you need to be innovative in how you continue generating revenue as a business owner and look at how to best solve society’s problems. Whether you’re an employee, a business owner or student you need to learn how to make money and relay on your own income, no government nor financial aid is going to save you because they’re all looking at how to best protect themselves.

Covid19 has taught me that FEAR SELLS! Using coronavirus to manipulate the market via fear is how the game of control works. Never in my relatively short life have I seen financial markets so volatile, neither have I seen so many people fighting over toilet paper and hand sanitizers. There are many missed opportunities as we are busy overreacting and becoming slaves of imposed fear through exaggerated consumption. If there’s anything I hope this article sparks within you is your level of consciousness where fear is concern and most importantly how you can monetize fear. Covid19 will end eventually so make sure you live to tell the story of how you profited from it!

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