In today’s episode of The Invested Dads, Josh & Austin are talking about the coronavirus. Due to the recent news of this virus spreading and its impact on the stock market, this episode is dedicated to helping you understand what exactly coronavirus is, the health concerns, the possible solutions, and its impact on your investments. We know the news of this virus has many people concerned, so we want to bring you some peace of mind in this week’s episode. Listen now to get the full picture of the coronavirus and what kinds of effects it’s having across the globe.
The economy will continue to grow over time. There's going to be some bumpiness and growth for the first quarter and probably 2020 in general, but overall this should have little long term lasting impact to your portfolio. Click To TweetMain Talking Points
So What is the Coronavirus? [0:53]
How Much has Coronavirus Spread? [6:11]
Impacts on the US and Chinese Economy [8:58]
Dad Joke of the Week! [12:53]
Should You Be Worried About the Coronavirus? [13:29]
What Kind of Treatments Are Out There Right Now? [15:54]
How Will Coronavirus Impact Your Portfolio? [19:18]
How Will Coronavirus Impact Your Long-Term Financial Plan? [21:24]
Keep on Track with Your Financial Goals with Our Free Guide [22:35]
Links & Resources
Mapping the Coronavirus Outbreak Across the World (Bloomberg)
China Braces for Inevitable Big Hit to Economy, Say Xi (Reuters)
Coronavirus Credit Crunch Hits Millions of Chinese Firms (BBC)
“We are at a turning point”: The Coronavirus Outbreak Is Looking More Like a Pandemic (Vox)
Officials Scramble To Contain Coronavirus Outbreaks In South Korea, Iran And Italy (NPR)
Coronavirus Disease 2019 (COVID-19) in the U.S. (CDC Website)
How does Coronavirus compare to Ebola, SARS, etc? (YouTube video)
Social Media
Full Transcript
Intro:
Welcome to The Invested Dads Podcast, simplifying financial topics so that you can take action and make your financial situation better. Helping you to understand the current world of financial planning and investments, here are your hosts, Josh Robb and Austin Wilson.
Austin Wilson:
All right. Hey, Hey. Hey. Welcome back to The Invested Dads Podcast. As Josh and I sit here on Monday, February 24th, 2020, we see the US stock market is currently reacting in a very negative way to the continued spread of the coronavirus outside of China. Major US indices are currently down about 3% in the Dow at one point was actually down over 1,000 points today. So that is definitely impacting what we are thinking about, what we’re reading about, what we’re seeing today. So Josh coronavirus, what is it?
[0:53] – So What is the Coronavirus?
Josh Robb:
Yeah, so I had to do a little research on that because I myself was not too familiar. I mean I saw the news and the headlines and thought that was a new name, the coronavirus. But it turns out there’re actually very common coronaviruses that go around. Kind of what we refer to as the common cold. A lot of those fall in that category where you had the symptoms of a common cold. In fact, when I looked on the CDC’s website, they said that most people will experience a coronavirus throughout their lifetime or multiple ones. So I was like freaking out, what’s going on? Well this new one is actually titled C-O-V-I-D-19.
Austin Wilson:
COVID-19.
Josh Robb:
COVID-19. Which stands through the CO’s the Corona and then the VI is virus and the D is disease. C-O-V-I-D. It follows their protocol for naming. And the 19 guess why.
Austin Wilson:
That must be for… 19 different ones?
Josh Robb:
Nope. Showed up in 2019.
Austin Wilson:
So this is like naming a hurricane but different.
Josh Robb:
But the reason for that is there’s a lot of coronaviruses out there. In fact, SARS and MERS, M-E-R-S were both coronaviruses that originated from animals and then transferred to human spreading. Which is what they believed is COVID-19, which by the way, in the future we’re just going to refer to coronavirus throughout this episode. We’re referencing this current one that’s happening right now.
Austin Wilson:
Correct, correct.
Josh Robb:
So the coronavirus now they believe came from bats, which is exactly the same as SARS and the MERS came from as well. It’s known that these coronaviruses, there are some that only impact humans, some that only impact animals and some that crossover. And they think this is a new one that’s crossed over from animals to humans.
Austin Wilson:
So that was from the consumption of the animals or from the animals-
Josh Robb:
Well, they’re not sure exactly.
Austin Wilson:
Because I heard a rumor. Then I don’t know, I cannot put any validity because it’s probably been all around the internet. But I heard a rumor that it was because of some eating of bats. I’m unsure of the validity of that.
Josh Robb:
So the CDC just says that the original cases happened with contact from a large seafood and live animal market in Wuhan, China. So they’re not really stating whether it’s contact, whether it was from handling, eating, who knows what. But it appears to be very contagious and it has moved from, originally the contact was limited to people who had gone to that market, but now it has spread.
Now it’s person to person spreading. And so this coronavirus, which again the symptoms are similar to what you consider the flu or a cold, you have a fever, cough, shortness of breath. There’s sickness involved there. Now they’re seeing, I just read in an article today that upset stomach can be part of it. Yeah. And so there’s a lot of things, but then as a result of that you can have more complications and that’s what a lot of people are dying from. Is especially that coughing and shortness of breath can lead to other issues like pneumonia or things like that. Especially if your immune system is compromised it can really, cause problems.
Austin Wilson:
That’s what I was just thinking. It’s probably most impactful for the old, the very old or the very young or those with compromised immune systems like you said. Yeah. That’s a big risk that’s kind of scary. But I guess for most people it would probably feel a lot like the flu.
Josh Robb:
Yeah. And that’s part of the problem is we’re in flu season right now. And so a lot of people will come in with symptoms. And so take countries right now that don’t have a lot of exposure from the coronavirus, someone will come in and say, “I have X symptoms, I have these problems.” And they’ll say, “Oh, you have the flu.” And they’ll diagnose them with the flu because it matches. Unless they actually do the testing, they won’t know what virus they have, whether it’s a coronavirus or just influenza. And that’s a problem.
Austin Wilson:
So speaking of testing, there was actually just something on the news today. So how you see all the videos going around of the Chinese officials or whatever are going around with thermometers and testing people’s foreheads. They were actually saying that the Chinese government, who’s running all of this, they’re using like an industrial hand thermometer for this, is the state issued one. And they can be off by like seven degrees Fahrenheit.
Josh Robb:
Oh that’s a lot.
Austin Wilson:
And if you are banking on 98.6 being your bogey and you have seven plus or minus, that’s not a real great. So one of the guys on the news was like this, we’ve got to find a better way to… Because they’re probably letting people go who have it and bringing people in who don’t have it and then they’re going to be in a hospital full of people who have it and they’re going to get it.
Josh Robb:
And one of the things we’ve found through this timeframe, I mean it’s been going on since the end of last year. The symptoms actually show up after your contagious.
Austin Wilson:
Like 10 days or something like that.
Josh Robb:
Yeah. So up to two weeks right around there that you could be contagious without actually knowing you’re sick. And so that’s the problem is more often, not a lot of viruses you show signs before you’re contagious a lot of times to say if you don’t have a fever, you’re not contagious. You hear that a lot about flu or things like that. Well in this case, this coronavirus, you could be spreading the disease before you even realize you have it, which is what makes containment so hard. Is it’s not so much that China’s struggled with containment, it’s that people are leaving, showing no signs, and then after they show the signs, they’ve already had contact with multiple people and they’ve spread it inadvertently.
[6:11] – How Much has Coronavirus Spread?
Austin Wilson:
Wow. So Josh, kind of where’s the spread gone for this? Where did it start and how is fatality looked at for the specific disease?
Josh Robb:
So right now we are looking, we’re February, 2020 in February 24th, Monday. We’re going to use the stats that we have right now. So it’s changing daily. But there are over 2,200 cases outside of China. That’s up from 500 just over a week ago.
Austin Wilson:
Wow. So It’s spreading quickly outside of China.
Josh Robb:
Part of that is reporting. So again symptoms and stuff. So, and I read an article too about the testing. Not a lot of countries have the ability to test for this yet because it’s a new disease. They need the kits and all that. So that’s part of why there’s a jump. The other part is viruses grow exponentially because the more contact, the more people that are. There are over 79,000 cases in at least 29 countries.
Austin Wilson:
Wow.
Josh Robb:
So there’s a lot there. A lot of people and again, a lot of those cases are in China. That’s where a lot are, but there’s a lot outside. South Korea has the most cases outside of China. They have 833 as of today. Monday.
Austin Wilson:
Really close to China.
Josh Robb:
Yes. And that is up from only a 30 a week ago. So again, big jump and again they could be monitoring people then they finally show the test results or the symptoms and then they classify them. And then outside of Asia, Italy, which was just in the news over the weekend, they have over 220 cases and they have actually six deaths in Italy.
Austin Wilson:
That’s crazy. There’s actually multiple towns quarantined, in Northern Italy specifically going in and leaving is very, very restricted. And I think that I’m obviously really into fashion.
Josh Robb:
Yes. Of course.
Austin Wilson:
As an Invested dad.
Josh Robb:
Is that big in Italy?
Austin Wilson:
Crocs and socks, right? So Milan, fashion central of the world. It’s fashion week apparently. So like all the big shows are happening this week and there’s pictures of people going to these things in like masks and stuff because it’s amazing.
Josh Robb:
Are they like bedazzled masks?
Austin Wilson:
Like got like peacock feathers on them or something.
Josh Robb:
And then the one other big case has been in the news is the cruise ship. So the Diamond Princess cruise ship has 691 cases out of, I think there’s like 3,000 people on the ship or something like that.
Austin Wilson:
This was docked off of Tokyo, off the coast in Tokyo.
Josh Robb:
And so I think their original intention was to try to quarantine and protect the people. But what they ended up doing was creating kind of a big incubation for this disease and cause a lot more people to show symptoms. Because they did not follow up proper quarantine procedures and they didn’t realize how person to person contagious this virus was. And so that was part of the issue is that it’s spread quite a bit among those people on that ship.
[8:58] – Impacts on the US and Chinese Economy
Austin Wilson:
Yeah, for sure. So I guess next we should probably talk about the impact to whether that be the economy or the government or whatever that would be. So let’s look at it in two different ways. Number one, the US, we’re in the US here, currently 14 confirmed cases in the US. 12 were travel related, two person to person related. And then also there were 39 repatriated people, which 36 of them were from that cruise ship and three from Wuhan. So that is a lot of people, a lot of cases. But comparatively speaking, relatively small compared to-
Josh Robb:
Yeah for now.
Austin Wilson:
Yeah. For now compared to some of the other areas of the world. Now economically speaking, this is going to have some impact on GDP growth in the first quarter specifically. Maybe it could trickle out a little further, who knows? Experts really think it could trim about 0.1% off of GDP in the first quarter and that it’s really likely that this first quarter GDP number is going to come in at or below around a 1% growth rate for the US specifically.
Now, some of those numbers came from an NPR article that we will link in the show notes. Now let’s take a step back and look at things globally. China specifically, according to a BBC article, the government in China has actually asked banks to offer more credit to this economy because it’s really been stunned by this virus spreading rapidly and businesses have had to shut down and change a lot of the way that they are doing things. But honestly, I mean a survey of small and medium Chinese firms found that millions of them really are on the verge of a collapse, really unable to really consider moving forward very far with the things going the way they are. And actually about 60% of them said that they could only cover regular payments for one or two months before they run out of cash. So definitely having an impact on them. Only 10% of those smaller medium sized companies said that they could hold out six months or longer with this really continued at the sustain level that it is.
Josh Robb:
And in China they’re not anticipating this recovering until late 2020 at the earliest.
Austin Wilson:
So it’s anticipated to be going on for a while. So a lot of these smaller Chinese companies are really a pretty good size risk. And Chinese GDP obviously is going to be very much impacted much more so than the US. So we’re only talking about trimming at less than a tenth off of our quarterly GDP growth or whatever year over year. But Chinese GDP, their growth for first quarter is estimated by most experts, according to Reuters, to about cut in half. So 6% is kind of… 6% for the US would be unheard of. 6% in China is where they’ve been running and that’s even slower than where they’ve been in the last 30 years. But 6% is where they were at last quarter. First quarter is estimated to come down to about 3% growth year over year and that is half, that is substantial for China. And a lot of experts are actually saying that there could be complete contraction like, GDP could go below zero for the quarter if the exports are down as much as many fears.
So with the US seeing some impact but limited and China seeing substantial impact, the top two economies in the world are going to have impact and that is going to definitely really slow down the economic growth of the world for specifically the first quarter. But probably you’ll see trickling effects throughout 2020 for all of this. So big impacts overall. These are things that tend to and historically have worked themselves out over time and there have been cures and treatments and all of these things, but we’re definitely seeing an impact in the first quarter of 2020 and that is going to continue for the foreseeable future. Josh it’s pretty heavy, right?
Josh Robb:
Yes. It’s-
Austin Wilson:
I don’t really like talking about this. It kind of makes me feel icky.
Josh Robb:
Yeah, it’s not fun. We thought it would be especially with going on the market today very insightful for listeners, something that we wanted to learn a little more about but it’s not fun to talk about, especially when you look at these deaths. I mean these are real people, real families impacted and, we’re talking about over 70,000 cases of people experiencing the sickness.
[12:53] – Dad Joke of the Week!
Austin Wilson:
We don’t want to make light of the situation or the fact that over 2,000 people have died. But… Josh, I want to make you smile during this episode. Okay?
Josh Robb:
All right.
Austin Wilson:
So I got something for you. I have the dad joke of the week. We’re going to have a not so somber dad joke of the week in a light of a somber… podcast.
Josh Robb:
Yes. We need real light.
Austin Wilson:
Josh why?
Josh Robb:
Why?
Austin Wilson:
Why didn’t the skeleton go to the dance?
Josh Robb:
I do not know why the skeleton did not go to the dance.
Austin Wilson:
Because it had no-body to go with.
Josh Robb:
no-body to go with. I like it.
[13:29] – Should You Be Worried About the Coronavirus?
Austin Wilson:
So Josh, now that you’ve laughed, should you be worried about the coronavirus?
Josh Robb:
As of now, fatality rates outside of Wuhan area are still relatively low, about 1%. And even in the center of the outbreak, which is Wuhan, fatality rates for this disease hovers right around to just above 2%. So from a standpoint of contracting disease to passing away 2%, that’s, it’s not a high compared to other diseases.
Austin Wilson:
Even when you compare it to something like the flu, which has almost a 2% fatality rate, I think by itself. And there was an interesting video and we’ll throw a YouTube link in the show notes below. But there was an interesting video talking about like deaths per day on some of these things and flu was way more than coronavirus.
Josh Robb:
And then you go back to like Ebola, which has a very high mortality rate but not quite as spread as an epidemic. You look at that and got to put in perspective, it’s a very new disease. It’s scary because it is spreading quick and it’s not something that we were prepared for. But with the 2% fatality, keep that in mind. For the average healthy person, there’s a risk but not quite as big of risk.
Austin Wilson:
Right.
Josh Robb:
And of course we’re not health professionals in any way, but at least here in the US it looks like washing your hands, covering your mouth when you cough, avoiding generally how you would avoid the flu, right? Rub your eyes, don’t put your hand in your mouth. The idea is that just keeping germs away from yourself. It’s a good precaution, especially during cold and flu season anyways, I don’t like germs. So, those are kind of the things that I’ve been pushing along. I was helping in our church’s nursery and I was washing my hands about every 35 to 40 seconds. There’s lot of running noses in there.
Austin Wilson:
Every time I see my daughter put her hands in her mouth, I’m like. I mean you can’t stop them. But we can stop ourselves, I’ll keep my hands out of my mouth.
Josh Robb:
In general here in the US, with that limited and if you kind of look to see where those are at in general for most people the chances are small, you’re coming in contact with this disease. But if you’re taking the normal precautions and if you ever are worried about that dude, seek help professional and say, you can get tested and say, okay, just to put my mind at ease, what am I experiencing?
Austin Wilson:
And I’m sure the CDC is going to let… If things really change in the U S and we start seeing very, very fast spreads of things, they’re going to let us know and bring some public health attention to this.
[15:54] – What Kind of Treatments Are Out There Right Now?
Josh Robb:
And what about treatments? Do of anything out there?
Austin Wilson:
So kind of yes and no. So companies like Johnson & Johnson and Gilead are among a handful of companies that are involved in creating treatments and vaccines. Now a lot of these treatments and vaccines are at various levels of testing. So that’s kind of the issue. So like obviously this started at the end of 2019 and we’re still at the very beginning of 2020, usually treatments and medicines for this stuff take years.
Josh Robb:
Yeah, take a long time.
Austin Wilson:
And all kinds of approvals and testing and all that to happen. But because this is spreading so fast, a lot of this is being kind of fast tracked and then which is good. And there has been, so Gilead specifically is one company that actually has had some good testing come out of this. And I’m actually looking at an article from February 10th, 2020 from Bloomberg Business Week. And the article is titled, We’re Not Ready For This. So it’s talking about Gilead specifically. It says, “Since the outbreak of SARS and the often fatal ebolavirus, US federal money for developing drugs and vaccines for emerging diseases has increased. And drugs that may combat coronaviruses are ready for trials.” One is, my medical language is not very good.
“Remdesivir, a treatment from Gilead Sciences, that failed tests in people with Ebola. The first US coronavirus patient in Washington state received the drug after his condition worsened. He improved the day after he was infused according to results report in the New England journal of medicine. Gilead says it shipped enough of the drug to China to treat 500 patients and is working to produce more if the trials starting imminently in China are promising. Gilead says we have an army of people working 24 seven now opening up manufacturing lines and doing whatever we can to get as much available as quickly as possible.” So, this is a good thing. We’ll always say this is not saying go buy Gilead stock, but that is a publicly traded company that is working with the US and with China to try and treat this. Now this is not a vaccine they’re talking about. This is talking about treating people who already have this.
Josh Robb:
So it’s not something to prevent you from getting it. It’s a medicine to help you while you-
Austin Wilson:
Correct you have the symptoms. So other companies are working on vaccines as well for this, that pending on how this continues to grow and roll out could be discussed more in the future.
Josh Robb:
And I think like I mentioned early on being related to a lot of other coronaviruses, there’s kind of the framework there that they’re looking at. How does this differ and then how is it similar that to the viruses we’ve already kind of tackled in conquered, so.
Austin Wilson:
I’m sure there was like a formula and they were like, “This is not quite the same as we’ve seen before, but let’s just tweak part of this.”
Josh Robb:
Similar to the flu virus that they’re constantly adjusting and adapting. But like you said, this isn’t a recommendation on what company to go buy. But within there, there are companies working on this cure and-
Austin Wilson:
And the ones that are, so on specifically days like today, February 24th when the market is down pretty substantially, when you have a company that is working on treatments for the thing that’s driving the market down, it’s typically done very well. So Gilead today’s up to 3-4% on a very, very, very down day. So interesting. Not saying go buy Gilead. Always work with your advisor. But that is a company that’s working on something pretty beneficial for the world, I think so. That’s great.
[19:18] – How Will Coronavirus Impact Your Portfolio?
Austin Wilson:
So I guess taking a step back, how will this impact your portfolio? I believe in the short term, there’s going to continue to be a lot of volatility. There’s going to be a lot of choppiness and any company that either has a supply chain with China exposure or direct revenue exposure to China specifically, it’s going to be greatly impacted. The whole economy is pretty much shut down. Retail, people aren’t buying stuff. Food, people aren’t buying stuff. I think that’s like Starbucks and stuff like that. People, they’re shutting things down.
Josh Robb:
And they can’t find, even in the stores, I mean hand sanitation, all that stuff has gone. You can’t buy like Clorox wipes. That’s all gone. It’s been gobbled up.
Austin Wilson:
Even the face masks, they were saying that like the prices of those things just shot up, which is incredible. Which I mean it makes a lot of sense. It’s supply and demand, but yes. So the short term is going to be greatly impacted. This is unfortunately spreading beyond China as well. So other Asian markets in Europe are next level of being impacted by this and the US though thus far has been pretty sheltered from that side of things. Not that our stock market hasn’t because our stock market has definitely seen its fair share of volatility, but the overall economy is being impacted a little less than the others. In the long term however, we believe that with modern technologies in medicine and our smartest people from the US and around the world, we’re all working on this, that we are going to be able to treat and prevent this virus going forward. Just like other things that we’ve been able to overcome as people over the time.
So this is not a good thing at all, but it is a good thing that it is happening in 2020 when we have this technology at our fingertips, at our disposal. And we can really come together as a world, as a globe, and push forward together to accomplish this. So I think the economy will continue to grow over time. There’s going to be some bumpiness and growth for the first quarter and probably 2020 in general, but overall should have little long term lasting impact to your portfolio.
[21:24] – How Will Coronavirus Impact Your Long-Term Financial Plan?
Josh Robb:
And then when we go farther our bigger picture, not just your portfolio, but your financial plan, this should not impact your financial plan at all. Because your financial plan is a long term plan and it has many pieces to it. And the goal is that you and your advisor have come up with a course of action. And something like this hopefully will not disrupt your commitment to that course of action.
Now you may have questions on it, “Am I in the right holdings?” and you may need to adapt your underlying investments. But again, from a short term and a long term perspective, the plan to get from where I’m at to be financially independent and able to obtain all my goals, this is in a sense irrelevant to that plan because, over the course of the rest of my working career in wherever you’re at, even if you’re planning on retiring next year, the idea is even in retirement, I still have years to invest before the end of my plan. And so this is small, it shouldn’t have an impact. If you are concerned about certain things, obviously talk to your financial advisor. That’s what they’re there for. But if you think back to the other like bird flu, swine flu, SARS, all those other ones, they came and went and with like you said, our technology, we were able to overcome those.
And so I think this coronavirus will be the same in that your financial plan is based on your long term goals and just like anything else within the market disruptions, this should not impact those goals.
[22:35] – Keep on Track with Your Financial Goals with Our Free Guide
Austin Wilson:
And to keep you just kind of on track with your financial goals, obviously continue to work with your financial advisor, but if you’re interested check out a brief list of Eight Timeless Principles of Investing on our website. Those are kind of eight overarching investment themes that are meant to keep you on track and meet your long term goals even in the face of these very difficult global outbreaks or market volatility, all of these things, so check it out. It’s free on our website, free for you, check it out.
Josh Robb:
And also if you want to help us out and to grow our podcast, the best things you could do is subscribe if you haven’t already. If you’ll like to leave us a review on Apple Podcasts, we always appreciate that. We check out all the reviews, but it also helps us show up better on search results. If you have any topics you’d love for us to talk about, send them to us at hello at theinvesteddads.com we love hearing from you guys and we’d love to talk about topics that you’re interested in.
Austin Wilson:
And in case you missed it, check out our last episode where we interviewed Ben Carlson, the author of Don’t Fall For It: A Short History of Financial Scams where we talked about really some things that investors can look for in some scams that are out there and be able to guard themselves and protect their wealth from.
Josh Robb:
It was really great talking with him.
Austin Wilson:
Yeah, check out that episode. So thanks for being here today. Hope you learned something, and we’ll keep an eye on this and you guys hopefully will not be too scared.
Josh Robb:
Yep. Talk to you later. Bye.
Outro:
Thank you for listening to The Invested Dads podcast. This episode has ended, but your journey towards a better financial future doesn’t have to. Head over to the investeddads.com to access all the links and resources mentioned in today’s show. If you enjoyed this episode and we had a positive impact on your life, leave us a review. Click subscribe and don’t miss the next episode.
Josh Robb and Austin Wilson work for Hixon Zuercher Capital Management. All opinions expressed by Josh, Austin or any podcast guests are solely their own opinions and do not reflect the opinions of Hixon Zuercher Capital Management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Hixon Zuercher Capital Management may maintain positions in the securities discussed in this podcast. There is no guarantee that the statements, opinions, or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. Securities investing involves risk, including the potential for loss of principal. There is no assurance that any investment plan or strategy will be successful.
