Do you remember what life was like just a few weeks ago? I pulled out my calendar to check, and this was my life in the week of 9th March:
- Monday to Wednesday were full of meetings. My colleague and I drove 40 km to give talks to a government agency. We met about 40 new people and shook hands with as many as possible. (Washed them afterwards of course.) We had heard about the increasing number of coronavirus cases and wanted to be as safe as possible.
- On Thursday afternoon, my employer’s leadership team sent a message saying we would be testing “work from home” for just one week: 16th to 20th March. We left work together at 7:30 p.m. and went to play badminton like usual.
- On Friday evening, I chaired a meeting with six colleagues, setting ground rules around how we’d work remotely. Someone mentioned the words “will miss you all” and everyone laughed.
Four weeks later, and the world has completely changed:
The Great Breather
Most of us are stuck at home now, reading numbers about how the coronavirus (COVID-19 if you prefer) is still running wild. National healthcare systems are still at risk of being overwhelmed, and nobody wants to become the next Italy.
I have faith we’ll get the health part right. That eventually we’ll slow down the spread enough and our hospitals will be able to manage. Let’s be clear — there’s nothing more important than saving lives, so this IS the priority right now.
But what happens after? What happens to a country where the majority of people earn below RM 3,000, have less than RM 1,000 for emergencies, and almost every form of business activity has shut down for a couple of weeks? Are we gonna starve? Am I gonna lose my job? How fucked up are things gonna get?
Of course, nobody knows for sure. Prediction is a tricky thing. But there’s also value in studying history, looking at data, and using that to plan for the future. Here’s what I think is coming, and more importantly: what to do about it.
The Biggest Crash Hasn’t Happened Yet
In investing circles, a crash has already happened. Global markets (including stocks, bonds, Bitcoin, or whatever people normally invest in) crashed badly in early March. It’s the fastest dip of >20% in history. Most investors are filled with fear.
But that’s just the start. Remember how the coronavirus has put most countries into shutdown? If you think “no jogging” is the worst thing of 2020, I’ve got news for you. The economy is a complex thing where every part is intricately linked to other parts, like a delicately-balanced spider web. But because we’re all stuck at home right now, multiple parts of our sensitive economy are shutting down. In other words, the spider web is on fire.
When you can’t visit your favorite mall to buy new shoes, your favorite shoe shop doesn’t make money. The boss — let’s call her Karen — is in deep shit. First, Karen still needs to pay her employees their salaries, because she’s not a heartless bitch. Next, she’s still gotta pay for rent, and any other debts she owes. Karen will try to survive; so among other things, she’ll call her leather supplier: “Sorry Ahmed, I can’t pay you for last month’s leather until things get better.”
Ahmed puts down the phone with a sigh; it’s the 10th such call he’s received this week. He looks at Sara, his employee of 15 years and says, “We’re out of money Sara. I’m gonna have to close shop, and this is the last salary I’ll ever be able to pay you. I’m so sorry.”
Dramatic, I know. But it’s a scenario that can easily play out in tens of thousands of small businesses over the next few weeks — crippling the economy.
The question now is: how long can those businesses last?
Isn’t the Government Gonna Help?
They’re definitely trying to.
Governments everywhere are coming up with massive stimulus packages to try and prevent catastrophic shutdowns in the economy. Here are some crazy numbers from across the world (in US dollars):
- USA: 2,000,000,000,000 (2 trillion)
- Japan: 990,000,000,000 (990 billion)
- UK: 398,000,000,000 (398 billion)
- Singapore: 42,000,000,000 (42 billion)
- Malaysia: 59,600,000,000 (260 billion Ringgit over 2 packages)
That’s a lot of zeroes. I’m not trying to scare you, but when you see governments pumping record levels of money, you know they’re trying to prevent something really fucked up from happening. Or rather, it’s already happening — and we’re just tryna limit the damage.
Just remember that even though the government tries to help every part of the economy, it has limited resources. Some people will inevitably get more help than others. Like how when the first PRIHATIN stimulus package was announced in Malaysia, most small businesses complained there was nothing in it for them.
Alarming. Because small businesses (a.k.a. SMEs) are actually the backbone of the economy. If too many Ahmeds shut down, then we’re all fucked. Every government’s throwing money left and right to avoid a recession, but it looks like we might already be there.
WTF Is a Recession?
The last two times a recession happened was during the Asian Financial Crisis in 1997, and the Global Financial Crisis in 2008. Remember how that was like?
Don’t worry if you don’t — you’ll know it’s here when people around you constantly complain about running out of money. When fear lingers in the air. Some predict millions of people might lose their jobs.
Tourism and travel have already been badly burned. Airline staff are getting salary cuts, hotels are closing, and people who rent out Airbnbs are struggling to find tenants. How are they gonna pay their loans? Next up: industries like property, events and sports.
You might be lucky enough to work in a rich tech company, so your job is safe for now — but understand a recession burns all of us. No amount of bonus will make you smile if your sister loses her job and your best friend’s car gets repossessed.
Besides, when people have no money — there’s evidence that crime increases.
And everyone’s favorite white knight PETRONAS isn’t gonna have tons of money to bail us out this time either, because along with everything else — oil prices crashed too.
How Long Will the Pain Last?
Things probably aren’t gonna go back to “full normal” for a long time. Actually, prepare yourself to adapt — because they might never.
We can take all the social distancing measures we want, but what happens if some irresponsible person brings the virus to another mass gathering? BOOM! Movement Control Order Round #24 and another headshot to the economy.
The best case scenario is if doctors find an already-available drug to treat COVID-19. Or if a vaccine is created quickly. But that might still take one to two years if everything goes perfect.
Here’s billionaire Ray Dalio on the crisis:
“It seems to me that this is one of those once in 100 years catastrophic events…”
Scary eh? I’m scared too — mostly for my older folks, but also about the broader effects to the country. I’ll probably be fine, but I don’t wanna see anyone run out of money. I don’t wanna see anyone starve.
What can we do to protect ourselves?
The mr-stingy Guide to Surviving the Coronavirus Crash
1. For now: stay at home as much as possible. Wash your hands regularly and don’t touch your face. Listen to the authorities; let the coronavirus run out of people to infect. Leave the hospitals for vulnerable people who really need them.
2. Make sure you build up emergency savings. CASH IS KING. Financial advisers usually recommend saving 3-6 months worth of monthly expenses. In difficult times, some say save up 1 year. If that’s too daunting, just aim for improvement: having 2 months is better than 1. And don’t even think about risky investments until you’ve got those savings.
3. Make wise use of whatever goodies the government is giving you. Personally, I’m leaving my EPF intact. But I’m taking the moratorium on home loans to help boost my emergency savings. Probably makes sense for most people to take it too.
4. IF you’re privileged/wise/lucky enough to have built sufficient reserves over the past few years — the upcoming crash (or current crash depending on where you think it might go) is the time to invest. Some brave people made fortunes in the last financial crisis of 2008. Just be prepared to hold for the long term — recovery might take years, if not a decade.
Still afraid to invest during these fearful times? Check out Nick Maggiulli’s articles at Of Dollars and Data — they never fail to inspire me.
How to Be Good With Money (And Not Be an Asshole)
Everyone’s hurting now, and we’re all probably gonna be hurting more soon. So don’t make insensitive statements about people you don’t know, and don’t judge people on how they spend their money.
“Thanks Aaron! That will teach those smug rich people who look down on average people.”
But of course, I’ve seen plenty of presumably B40 people make broadly unfair statements against T20 people too.
Here’s a suggestion: Instead of getting triggered by endless classist arguments, consider how you can help others, like:
- Donating any extra money to people affected by COVID-19 e.g. medical workers, hospital cleaners, other frontliners, and homeless people. Spending time and energy to fundraise would be amazing too.
- Helping friends and family who’ve lost income or their jobs. Note: this doesn’t have to be monetary help. If you don’t have any money to lend, you can offer to review their resume, or teach them moneytizable skills you have.
- Supporting local small businesses. You’re still gonna need things like groceries and food. Try to support someone who runs a small business as much as possible. McDonald’s will probably be fine, but Makcik Kiah who sells goreng pisang needs your business more than ever. She was probably already struggling before; this recession might just kill her.
My appeal: Please keep spending if you’re a rich person. Think about how important your contribution is for everyone else. Maybe I’m a left-leaning socialist. But even if you’re a hardcore capitalist, you’ll know that hoarding wealth isn’t good in the long term. Historically it only leads to pitchforks and the guillotine.
I’m putting my money where my mouth is. I’ll probably make RM 20,000 this year from mr-stingy. I’ll donate at least 80% to charity (the rest is just to cover my costs). And as long as my day job holds steady, I’ll commit to spending as much as I was before the crisis.
Don’t thank me. There are plenty of others (see billionaires like Bill Gates and Jack Dorsey) who’ve done infinitely more. I’m kinda ashamed to “announce” my small contribution, but I wanted to send a message: as long as we all help and look out for each other, we’ll be okay.
– – –
One day, our lives will return to some semblance of what it once was. One day the sun will shine brightly across the land, and we won’t be afraid to leave our homes anymore. We will not only bask in the warm rays of sunlight, but also in the embrace of those whom we miss so dearly now.
On that day, I hope we don’t forget the lessons of what we’ve been through. Through our struggles we find strength. I hope we will never more be ungrateful for the blessings we have and take them for granted. And that we will honor those who’ve left us by leading our best lives.
It is loss of freedom that helps us recognize the privilege of liberty. It is loss of health that teaches us to appreciate life. And it is loss of human connection that reminds us how we all need each other.
I can’t wait to see you on that day.
– – –
Pics from Pexels: Snapwire, Pixabay & Pok Rie
First of all, I just want to say that I really enjoy your blog. Would it be possible for you to share your thoughts on Stash Away and how effective it is for you? I am especially interested in your risk profile on it and whether or not you think the 30% tax withholding affects someone’s decision to invest in it.
Hi Ian, thanks so much for your kind words.
To me Stashaway is great because it takes away all the difficult work in investing. I currently use the lowest risk profile as I have a bunch of super risky investments elsewhere.
The 30% witholding tax is only on dividends. Stashaway mentions they’ll try to claim as much of it back. Also, I’m not super concerned about it because I’m investing for capital gains, not really dividends.
In view of the current “new normal”, do you think it is a good idea to start investing now or should I wait for the situation to stabilise in the coming months? FYI, I am a total newbie in investment, and do not have a particular investment in mind, just a general question. Would love to get your feedback on this, thanks and stay safe!
Thanks for dropping by Cal,
I wrote just the article for you, and it’s hot off the press here:
All the best!
This is my first visit to your site. My ex student shared it on Facebook.
I enjoyed reading your article and agree with you that we need to accept the new normal. I once told my students that we have long talked about the need for IQ and EQ but few have talked about AQ, and encouraged them to leave their comfort zones and adapt.
I would like to ask your permission to share some of your points (minus the nasty bits. Haha) with my students as part of my ongoing online lessons.
As a teacher, I’m struggling with Google Classroom and Google Meet. As great as they are, they lack the personal engagement that a live classroom session brings. Oh, how I miss being in class.
Take care and thank you for your contribution. I only wish I could afford as much.
Thanks so much for your kind words and support. For Sure, please feel free to share. Hope things will improve and we all get to see each other physically again soon. Take care!
Great article! It was a really good read and i just wanted to say, thank you for it.
Thanks Lynette. Appreciate your support. 🙂
Good read 👍🏻
Truly the economy is a web and parts of it are on fire now. It’s pushing us into new ways of living life, at the same time stimulating growth in new sectors while others decline.
Just looking out at the bright spots: ecommerce, logistic which support eComm deliveries, tech companies (counters are bucking the trend as investors are shifting funds to these), health and hygiene products, medical supplies, etc.
Coronavirus is forcing a change in all facets of life. Some companies might consider really downsizing their offices and make 80% of work time from home after realising due to this forced MCO that hey, we really can make it work. In fact teams don’t even need to meet up in office physically, there’s always the co-work space rent for a day, or a hip cafe. A-Grade offices and REIT’s might retract while Cafe, co work spaces, and tech like Zoom grow further.
Job opportunity will open up in these growing sectors.
So I guess we all need to be open to new opportunities, and be adaptable.
But the transition is gonna be painful with the job cuts and all.
Stay safe Aaron.
Stay safe too bro. Yeah, it’s gonna be some rough times ahead, but I’m confident we’ll come out okay at the end.
We still haven’t really recover from the Great Recession of 2008 either.
Funny if small businesses are the backbone of any economy, I certainly don’t recall the small businesses taking up the slack when American corporations took much of their manufacturing jobs overseas for the last 40 years. Where were all the new textile, steel, automobiles, copper, shipping building and repair jobs, medical supply equipment, and drug manufacturing jobs, etc. created by small businesses during the last 40 years?
You also have companies like Walmart coming in and putting small businesses out of business in many towns particularly in the rural communities.
I hope you are doing well. Yeah, we will recover; however, too many people will die unnecessarily when they didn’t have to thanks to China trying to cover up the whole affair and Trump ignoring the intelligence reports from his own people and wasted 4-5 months of not doing anything plus America being hamstrung because American companies took their medical supply equipment and drug manufacturing factories overseas particularly to China for the last 40 years.
Thanks for dropping by; hope you’re doing well! So this was written from a Malaysian perspective — I haven’t studied the breakdown of the US economy, but most of our economy here are the small businesses. When I have time I’ll look into that.
I’m praying for the world. Know that things are probably gonna be uncomfortable, but hopefully we can help each other and make it through. Take care man!
Beautifully written, Aaron!
I do agree with you that the “real” crash is yet to come and it will be long before we’re back to “normal” again. Maybe we have to embrace this normal as the new normal.
Thank you so much Mat Kewangan. Hope you’re doing well and we will all recover soon!