The possibly good idea would help tens of millions of Americans quickly at low cost, so please read on if you have time. But first:
In Hebrew. Ninety seconds. Funny.
And funny’s good, because the news is not:
[UPDATE] As some of you have suggested, I’ve deleted the 4-minute audio advice that appeared here, given that the New York Times debunks many of those tips as, at the least, unproven.
And now: investment perspective, followed by my suggestion for helping tens of millions quickly at low cost.
This, too, shall pass.
Had you invested in the early days of the 1918 global flu pandemic (that probably did not originate in Spain), you would have watched your portfolio soar over the next decade to famously crazy heights in 1929. Might this be a good time to invest, too, if your time horizon is five or ten years?
Had you invested just before the 1929 crash — with no global crisis in sight — it would have taken decades to recover.
We’re facing the prospect of a recession or possibly worse . . . there’s no way to know . . . but buying some shares today will not likely prove equivalent to having bought them in 1929 for three reasons:
(1) The market is already 30% off its all-time high.
(2) That peak last month (yes! just last month!) was not as famously crazy as the peak in 1929, when stocks were wildly overvalued.
. . . so between (1) and (2) the market has a lot less far to fall than it did in 1929, if it falls further at all, as I suspect it will . . .
(3) We have more mechanisms and safety nets in place now to avoid a depression (thanks, FDR; thanks, Dodd, Frank; thanks, central bankers) . . . or, worst case, to moderate its severity and shorten its duration.
This isn’t to say the sky can’t entirely fall. (Russian stocks and bonds purchased in early March, 1917 did not rebound . . . ever.)
But in America it never has and likely won’t now.
Though I’d be surprised if the bear market has bottomed, people buying stocks today will likely not be sorry a few years from now.
There’s even the possibility of surprises on the upside:
> China may have solved its pandemic crisis, allowing its huge share of the global supply chain to come back on line. Same for South Korea* and Japan and some others.
> So many smart people are working on a cure (just one example), we may not have to wait for a vaccine for life to return to normal — it could be safe for healthy not-old people to go back to work and restaurants and bars and concerts quite soon.
Some would argue that already makes sense, so long as seniors remain largely isolated and super vigilant. To say a total lock down will have proved worth it “if it winds up having saved even a single life,” as one prominent, well-meaning politician recently did, sounds good, but if taken literally is inane. (“If you lived for 650 years, as I know you plan to,” writes my pal and DNC/Elizabeth Warren donor Zac Bissonnette, whose off-the-charts analytical aptitude is matched only by his joyful hyperbole, “and spent every day of those 650 years compiling all the stupidest things you could find anyone in the world ever having said, you would not find a single quote to match that one for stupidity.”)
Shut down the American economy to save a single life?
Ban all driving to save 30,000 annual highway fatalities — let alone a single one?
I think we can all agree on this much:
Bold, sensible measures need to be hammered out — immediately — and adjusted nimbly as circumstances change — even as science rushes to develop, and our government rushes to make available, cures and vaccines.
And the same for the economic piece of the crisis.
So how about this?
Allow people to borrow with from their IRAs and 401k’s with no taxes or penalties, interest-free, with up to five years to repay. Uncle Sam covers those loans, in bulk, so the pension fund managers — Fidelity, Vanguard, etc. — don’t have to sell assets to fund the withdrawals. Almost no paperwork: you’d just make the withdrawal, clicking a box to characterize it as a loan (even after the fact, if need be, to avoid delays in changing websites); and Fidelity, et al, would daily tell Uncle Sam how much to cash to lend them, interest-free, to cover those withdrawals.
The cost to Uncle Sam — which can currently borrow for 5 years at less than 1% — would be minimal.
Not everyone has a retirement plan, to be sure; this doesn’t solve every problem.
But for the tens of millions who do, being able to borrowing a few months living expenses, as needed, would relieve a lot of the pressure on them and the economy. And to the extent the failed to repay the loans, well, that’s not the end of the world, either. After five years, whatever remained outstanding would be deducted from their retirement fund balance. But in the meantime, it would have been growing (one hopes) as if it had been invested the whole time.
Details could be added to encourage early repayment . . . to prevent rich people from taking giant interest-free loans they don’t need . . . and to address other issues I haven’t thought of. But the big idea is simple, and virtually cost-free.
*South Korea — a well-run democracy — registered its first case the same day we did but took drastic action immediately. They have had 8,800 cases, 102 deaths (a 1.2% mortality) and aren’t seeing new cases. Imagine if we had taken bold action two months ago, rather than follow this calendar.