A Case For Optimism

As a result of a period of isolation, our lives may be forever changed… for the better.

This morning as I was still free to walk my dog through a park, I saw a beautiful scene. A young father playing with his daughter. Not on his phone, as is often the case when I see parents at playgrounds with their children, but actually giving her full attention.

As it was about 8:30 am I asked if he would normally have been at work at this time. He confirmed that he would. He and his wife are both setting up to work at home for a while, and he is going to have a period where he will not have a 3 hour commute each day.

He and his wife have already flagged having the conversation with their employers that they might want to do this permanently, even if it means dropping back to 4 days per week.

I suspect a lot of us are going to start questioning whether the ‘old way’ is really making us happy. Do we really want to outsource parenting? Do we really want that horrible long commute? Would it in fact be better to have business meetings from home even after flights resume?

It seems to me this isolation is all about time. There is no escaping that somewhere between 20 – 60% of us will get COVID-19. 1% of that number will die. I am asthmatic so maybe I’m a higher risk than most, but as a society, we’ll recover and move on from that.

It’s about trying to keep our health care system coping. Trying to spread out the timing of when we present with the symptoms, and indeed deferring things in the hope that a vaccine is created.

The number of cases is going to be a bell curve. The tip of the bell curve in Australia is expected to be in May or June, so we will come out the other side in a few months.

So, for the majority of listed companies on the share market they just have to manage cashflow for a few months. They are well managed, have large cash reserves and can easily do this. You wouldn’t want to speculate, because some individual companies may go under, but something like an ETF giving a broad exposure should spread that risk.

Let’s look back to a time when BHP was fined billions of dollars for an environmental problem at Ok Tedi. Their share price was hammered. Down over 30%, I don’t remember the actual figures. BUT the point is, that level of fine was about 6 months of their annual profit.

Wait… a company’s overall value was reduced by over 30% just because they were going to miss out on 6 months of earnings? Doesn’t that sound like an over-reaction?

Well aren’t we looking at something similar here? Isolation will hit mum and dad businesses hard, because they don’t have the same levels of cash reserves, and can’t easily reduce their overheads for a short period, but the majority of larger listed companies will lose about 6 months of profits, then there will be pent up demand for the products in my opinion, and they will be firing on all cylinders, in a market where some of their competitors did not survive!

So I encourage everyone to not get too focused on the media’s soap-story which is grabbing our attention, keeping advertisers happy and disturbing too many of us. Look for opportunities, feel optimistic, think about the incredible benefits to the environment right now, enjoy having more time with your family and I’ll see you on the other side in a few months!

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