March 18, 2020: An Open Letter

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It feels kind of odd to write any blog posts about early retirement, dividends, side hustling, or the financial markets at this point. It’s also not the time to *should* people, it is just too late to get out there and tell people they *should* have six months of living expenses saved. This fully sunk in late yesterday after exchanging messages and talking to friends who own companies and my former peers in banking. The situation is not good. With that in mind, I wanted to provide my list of gratitude and thoughts to those out there fighting today:

To those in healthcare: Thank you. You are on the front line. I can’t imagine what you’re going through, whether you are directly fighting this, preparing to fight it, or having your own specialty upended because of higher health priorities. Thank you for what you are doing.

Thank you to our business leaders, especially the small business owners. You have risked your own money and productive capital to build something. Now you are facing a period of limited to no revenue with an uncertain timeline for when revenue will return. You are having to triage cash and everyone is impacted. You will have to lay off employees who’ve been loyal and it will hurt. The employees are equally hurt and you’ve done everything you can for them at this point. Some companies have the capacity to keep paying people, but most do not. You are not alone. You have vendors you’ve made commitments to pay and will now struggle to pay them. There are financial partners who’ve invested with you that will also feel pain. Customers will have to delay their orders or part ways with you temporarily. This is difficult, but thank you for fighting.

To the employees laid off: Try not to harbor angry feelings towards your employer. This is an absolute emergency and everyone must fight this emergency. Sure, your employer probably did a number of stupid things you can count on one hand, but that’s not where to spend your energy right now. Immediately go out and sign up for a credit card with a 0% interest rate Your credit is still good today. Financial runway is important: Develop a cash budget: Cash just became precious. What are your inflows and outflows? How much cash do you have to handle them? What must be paid with cash vs. what can be paid with credit? What are the biggest outflows and what can you do? Call your mortgage company and landlord. Then call your car company and auto insurer. If you’ve had credit cards with annual fees, call and ask for them to be waived. You can’t use the travel benefits right now. Do you have a home equity line of credit? Consider drawing a couple months of expenses out on it and putting that money with another bank. Many lines of credit can be closed. This is financial triage and it needs to be treated as such. You are in the business of you first and foremost.

Thank you to our elected officials. I’ve been immensely frustrated about plenty of things you’ve done, but now is not the time for me to harbor those feelings or criticize. You are in the arena, fighting a battle that none of us can fully understand. While many of you chose to do this job in a pursuit of power, many more of you chose to do it out of service. Many of you sacrifice a nice private sector career in a job of service. You have to make decisions we can’t understand under immense pressure, and you have to make these decisions knowing your opponents will use them against you one day. And there will be mistakes. Corporate bailouts suck, but so does mass unemployment of their constituencies. Unfortunately there will be winners and losers. Some things will be done that I disagree with, but we are in an economic emergency. At this point, you are the firefighter fighting with a house that is on fire. Inevitably people who are not holding the hose will criticize how you put out that fire. They were not there holding the hose in the chaos. .

To my former peers and all bankers: Thank you. You were vilified twelve years ago, now is your moment. You are going to get the green light to experience an environment you’ve never experienced: You’re going to make venture-style debt decisions at bank loan rates. Can a company survive? Will they survive? Do you trust their management team? Is this the right thing to do for your shareholder and your client? You’re probably going to have losses higher than 1% on some of the loans you make, but you must do your best to deploy as much capital as you can. You are performing a critical role of rationally allocating funds to the businesses most likely to survive. You too must ensure your own survival in the process, as without a functioning banking system we do not have a functioning economy.

To my fellow investors: You have provided debt and equity to businesses in the world. It hurts seeing the daily value of your investments change. You have to remember that value is today’s value only, it may be worth less tomorrow or it may be worth more in the future. The long term intrinsic value of the business you own may or may not have changed, but its value today has. You still own portions of good businesses that will survive through this. Unfortunately you own an asset that at times will show you a distressed sale price. Why has the market fallen by 40%? Only for one reason, there have been more sellers than buyers. At times there are so few buyers and so many people who need to sell, the daily price has dropped by nearly 10%. Think of your investments like you would your house. How do you get the best price? A long marketing period with a set price you want to obtain, or walking out your front door, announcing you’re having an auction at 12pm, and only buyers with cash delivered today may bid. Oh by the way, half your neighbors decided this was the way they wanted to sell too….today!. Your purchase and sale decisions help set the price of stocks. If you need to get money out for living expenses, do what you need to do. Have the cash reserves to pay your bills. Outside of that, be patient. This too will pass. Sometimes things getting really uncomfortable and is when you want to consider buying a little. You might be rewarded

To my fellow Financially Independent and/or Early Retired folks, figure out what you can do. Some may be in a position to make monetary donations, some others may have seen their portfolio decimated at the same time the employment market is frozen for their skills. Figure out if you have any unique job skills that can help in this difficult time. You still have the benefit of financial runway and not worrying about monthly cash flow. Specifically I am helping a friend’s company figure out how to triage cash and what to tell what vendors/banks without expectation of pay. I have some capacity to provide similar advice to others if I can help.

Finally, those of you are still employed with job safety: Now is the time to do everything you can to help. Lookup your local human services not for profit and make your first donation. These are the organizations on the front line of the human tragedy that is upon us from mass layoffs. It takes time to get government assistance, these groups provide immediate access to things like a food pantry, rent assistance, and case workers to help get folks signed up for benefits. Acting fast to keep someone in their home is how they can avoid the downward spiral of poverty from an event. Yes, many of these people made stupid decisions in how they spend their money, but they are also productive members of society. Keeping them on their feet allows them to get back to work as soon as they are able. Someone being kicked out of their apartment or house with a family creates bigger and more immediate problems than “just being out of work”. I don’t talk about this much, but these organizations receive the majority of our charitable dollars because of moments like this. I saw this in 2009 and it is happening again, this time at a much faster pace. Please go support those organizations.

Wrapping Up:

We are living in unprecedented times. “This time is different”, but we’ve been through similar stresses in the market and the economy. The economy and the markets survived a bubble along with 9/11, survived the Great Recession, and survived this. The world has beat a number of pandemics before and will beat this one. This will not be without significant pain, but we will survive and be prosperous again. I’ll leave you with the closing line from the often criticized Suze Orman because it couldn’t be more appropriate than it is today: People first, then money, then things.

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3 Replies to “March 18, 2020: An Open Letter”

  1. I’m putting everything I can scrape up into the market except for a few years of living expenses in cash. Just rebalancing now to your target allocations will automatically buy you more stocks. The human toll is indeed sad. But the opportunities to buy stocks this low will likely never happen again.

  2. Beautifully put. Yeah, I’m really worried. Not so much for myself or the GovFamily, but for all of these marginalized groups who are facing very uncertain times. And concerned about what our future will look like if so many businesses go insolvent. I’m trying to take it one day at a time. But that’s easier said than done. Thanks for sharing your perspective.

  3. I am reading this 6 weeks after it was posted and it holds up well. I would add, being a “still employed with job safety” person, that your recommendation to FI folks also applies to us. Figure out what you contribute uniquely to your current workplace. Really showcase that skill set. Then you’ll continue to set yourself apart from your colleagues. If these conditions prolong and your “safe” job pivots, you are seen as more indispensable.

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