Are you ready for the new normal? Plus our Weekend Reads.

To state the obvious, life has changed. The way we live and work and feel has likely changed forever. A pandemic can do that to ya. What may be up for debate is the degree to which things will change, and how long it will take to reclaim some of ‘how things used to be’. There are many pandemic phrases du jour, the ‘new normal’ is the phrase that is likely getting the most ink today. It’s here. It’s real. Are you ready for the new normal?

I think I’ve gone to the end of the internet researching coronaviruses, pandemics and vaccines, and then they load up more stuff. But I am trying to limit my obsession. My sister who is a teacher tells me I might ‘hyperfocus’ at times. Ya, just a bit, ha.

Most often that focus is on investing, ETFs, asset allocation and risk. That grouping has had to take a back seat, lately. But my hyperfocusing was necessary. I need to have a good idea of what’s going on and what’s likely to come. Of course, just as we learn from investing no one knows the future. But we can certainly draw some reasonable conclusions. Are you ready for the new normal?

This will take years.

Sit tight, this will not be over in a hurry. Many speak or write of a miracle vaccine. That’s possible. Most of my reading leads me to believe that a miracle is not on the way. Vaccines usually take 5 years to develop. Even the flu vaccine is only 45% effective. The vaccine would have to be highly effective, and safe. And we know that vaccines don’t work all too well with the elderly who we are tying to protect. But they are making progress and there are some positive rumblings.

My neighbours who are both are both neurosurgeons (I kid you not) both believe that a vaccine will be developed. They thought that because the virus is largely stable (it’s not mutating greatly) it makes it a good target. You don’t want a moving target when creating vaccines. So stay still (SARS–CoV–2). I hope they are right. But how smart could they be, after all, they are only brain surgeons. 🙂

Of course from the time we get a vaccine we would still need to produce billions of treatments and move those throughout the world. So again, sit tight, we might have to fight this the old fashioned way. We have to get it. That said, experts are still unsure if we humans build immunity at all, and then for how long if we do build immunity.

The Globe and Mail offered – Scientists explore, can people be reinfected by COVID-19? They simply don’t know yet. But most seem to feel that we will build immunity. It just might take a round or two. Obviously that will take time and we will have to continue to practice many of our social distancing measures during that process.

We will have to embrace new ways to work and play.

V-Shaped recovery? Forgetaboutit!

If you’re not up on your ‘economic terms’ this one is easy. It simply means that the economic growth and recovery will be quick and robust in the shape of the letter V. You might be able to guess where I stand on this.

Bloomberg would agree in about that V-Shaped recovery. On Business Insider this economist sees zero chance of a swift recovery.

Now keep in mind I’m not an economist, I just play one on the internet. And here’s how that economic recover chart might appear.

The skinny is we have Depression like numbers in the midst of the first modern pandemic. Perhaps it might be an endemic. That means it sticks around forever and eventually becomes a common cold. Yes this is where common colds come from.

I won’t bother you with a million links but the countries that are way ahead of us in this virus war are not having an easy go at the economic restart. Folks don’t want to congregate. We’re scared. And we’ve been trained not to congregate. And aggressive restart does not work. South Korea had almost squashed the virus and opened up the economy (and for entertainment) they even opened up bars and night clubs. That caused some outbreaks and clubs are now hanging closed signs again.

Many will not be so fast to rush to crowded events. A Reuter’s/Ipsos poll showed that most Americans will avoid sporting events and crowds in general until there is a vaccine.

And from China …

There are 47,000 retail stores just in the US. We already knew there were too many as closings were becoming more frequent. My friend professor Michael Pettis in Beijing (who has lived there for 20+ years) has been documenting the return of life in Beijing. He sees people on the streets but not many in the shops, except where the young go to hang out rather than buy. Will that be the case in America and Europe?

– John Mauldin

Imagine when we try to open up the economies in countries where the virus is still very prevalent. See North America. No this will not be easy.

We see the unfortunate outbreaks in the food industry where folks have to work in close quarters. We simply cannot congregate in large numbers without proper protection. Period. That seems obvious. To protect the health of workers, the vulnerable and the healthcare workers we will need to do this economic restart in very slow and measured fashion.

We cannot afford a failed restart. Of course south of the border they are a little more anxious. It’s likely they will have some failures to go along with the successes. This is a dangerous economic experiment. We will learn as we go. We will learn from our mistakes. I will be posting a broader and epic restart piece on Seeking Alpha, soon.

But we can only do this once, or all bets are off. Yes, I’ll then bring out the D word.

What about those stock markets?

Of course many write about the great disconnect. We have Depression like numbers and a new bull market in stocks. Many are counting on that V-shaped recovery. To make fun of it all, sarcasm would write that the stock market makers see the pandemic as the best thing to happen to stocks and company prospects in decades. OK, that wasn’t sarcasm, that was me. Being sarcastic.

So sell all of my stocks?

No, of course not. If you have a sensible plan and you are investing within your risk tolerance level, you keep on keepin’ on. Lower prices are great for those who are accumulating and perhaps for those who can rebalance as well from bonds to stocks. You may have some cash on hand as well.

Related post: Is this an incredible opportunity, or what?

I’d guess you’ll get your opportunity for some lower prices. You might get many opportunities. You might get some lower prices that come in waves for quite some time. Who knows? Markets might also continue to blow it all off and move higher thanks to the promise of endless stimuli. As they say ‘you can’t fight the fed’.

I manage risk with Canadian and US bonds and lower volatility stocks. I recently provided an update on our US Dividend Achievers. The prices are holding up much better than market and we’ve received some dividend increases. For my Canadian stocks I’ve taken the market pricing out of the equation and will rely on the generous dividends and dividend growth. So far, so good. But I know we’re early innings.

Investors might certainly consider the types of companies that they hold.

You might change your definition of risk.

Most of us suffer from recency bias. And that includes advisors. We manage the risk of stocks with bonds and we use the lens of the last 20 or 30 years. We do not consider the possibility of a major economic shift such as a deflationary environment, robust inflation or stagflation. This pandemic has been an eye opener for many investors and advisors. Many are calling for some deflation followed by stagflation. Again, who knows? But a traditional portfolio is not typically set up for that battle.

We might need to manage the risks for all economic conditions. I did hold gold and gold companies from 2000 or so. I sold them all off in the financial crisis and beyond. They treated me very well. For the record I’ve started positions in Gold ETFs and Franco-Nevada. I bought some bitcoin for the first time, yes after years at laughing at my millennial friends and coworkers.

I’ll be back with an article on why we might hold gold and precious metals and bitcoin; and how and where to hold them. All things we might consider when we ask if you’re ready for the new normal.

Weekend Reads.

We’ll kick off with the reads for the week from myownadvisor.

Weekend Reading – Black swan events, new realities, should you borrow to invest and more.

On MoneySense Bryan Borzykowski explains PE ratios for stocks.

For The Financial Post Martin Pelletier suggests that Pandemic relief is going to cost us a fortune, let’s make sure it builds the economy of the future.

Joshua Brown had a sobering look at Warren Buffett’s annual meeting and commentary.

On findependencehub Steve Lowrie, CFA, offers history lessons for managing market mishaps.

Mike, The Dividend Guy, offers a note to his future self.

And we’ll look south for 10 reads from The Big Picture and Barry Ritholtz.

John Mauldin calls it the figure it out economy. That’s a great read.

For stocktrades.ca our friend Mathieu Litalien offers 5 Gold ETFs Canadian investors can buy today.

And food for thought.

On the lighter side (finally?) Kyle Provost looks at Hello Fresh meals kits during the pandemic.

The post COVID-19 Budget is on The Canadian Personal Finance Blog.

And last but not least, here’s a blog and podcast update from Chrissy at eastsleepbreathefi.

We’ll see you in the comment section. Are you ready for the new normal?

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Happy Sunday, Dale