Modern WisdomWhat Has Covid-19 Done To The Economy? | Morgan Housel | Modern Wisdom Podcast 151
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130 min read · 26,407 words- 0:00 – 15:00
(wind blowing) Hello, friends. Welcome…
- CWChris Williamson
(wind blowing) Hello, friends. Welcome back. My guest today is Morgan Housel, and that should be a name that you're familiar with as I published an episode with him only a couple of weeks ago, one of our top ever played in Modern Wisdom history, so why is he back on? (inhales sharply) I brought him back because the current state of the financial markets and the global economy is really confusing. I have no idea why the market is 25% down and whether it's as bad as the Great Depression from 1928 or the financial crash of 2008 or whatever it is. So I needed someone who knows what he's talking about, and Morgan is the man who has taken that task on his shoulders. So today, expect to learn just what is going on with the financial markets, why prices have dropped, just how this does compare to previous financial crashes, what some of the signals would be that the market is at least starting to calm down in terms of volatility. Also, at the very end of this episode, I give my best advice for how to be antifragile during this situation if you are under containment, if you are potentially in lockdown, or there's some social distancing procedures that you have to follow where you can't leave the house as much. Stay until the end to find out mine and Morgan's best suggestions on how to not only avoid boredom but perhaps even flourish and develop yourself and your family/home during the process. In other news, I know that this is the second in seven days of podcasts regarding the coronavirus. I promise you that this is not going to become the COVID-19 podcast, but I do think that as someone with a platform and an audience who is prepared to listen to long form, in-depth discussions and also someone who has access to the kind of guests that I do, there is a little bit of a duty for me to try and provide the best quality of information that I can. The episode with Dr. Feigl-Ding from last week, which you should definitely go and check out if you haven't already, t- teaching us about the virus and what it actually does to the human body, et cetera, et cetera, um, it is the most played of all time, and I think that that is because people are desperately searching for information at the moment, and if I can in some way help to create some signal through the noise that's going on at the moment then, (inhales sharply) yeah, it feels like a, a pretty good use of my time. That being said, I also appreciate that giving you interesting and different topics which actually help to distract you and remind you that- that there is a world out there aside from the virus which is running rampant across the globe, I'm, I'm gonna do that as well. So normal service will be continued to be resumed soon, but for now please welcome the wise and wonderful Morgan Housel. Oh yeah, P.S., if you enjoy this episode with Morgan, you will love his new book, The Psychology of Money, and it is available for pre-order now by following the link in the show notes below.
- NANarrator
(instrumental music)
- CWChris Williamson
Ladies and gentlemen, welcome back. Morgan, we said we weren't going to have to speak until your new book comes out at the end of summer-
- MHMorgan Housel
(laughs) .
- CWChris Williamson
... and look at us now, two weeks later and we're talking again.
- MHMorgan Housel
That's how fast the world changes. And I think that's, I mean, and let me just jump right into it, I think that's been the interesting thing of what's happened in the, uh, uh, in the last two weeks is how it's not what happened, it's how fast it happened. Like, if you look at the long history of stock markets, markets falling 25% is not uncommon at all. It's something that on happens, happens every four years or so going back to the last 100 years. For it to happen this fast is unprecedented. This is literally the fastest it's ever occurred. So I think that to me, if there's anything that's shocking that's happened in the last couple weeks from a financial perspective, the health perspective is a different, is a different topic altogether, but from an investing perspective, it's the, the, the speed in which this has occurred that's amazing.
- CWChris Williamson
What are the headlines? What's the headlines in terms of financial activity over the last two weeks? What has happened?
- MHMorgan Housel
Well, here's... Uh, let me, let me start by saying this, in a normal recession, in a bad recession, you might have sales in certain industries down 5%, 10%, maybe if it's a really bad recession in a specific industry, 20%, that's bad. What we're dealing with here is a different magnitude. You have entire geographic regions where sales are down 80%. You know, and so there's, there's really no modern pres- precedent for that because it's not like a recession where people pull back a little bit. This is j- just shutdown. And it's almost like the only precedent for that in recent, somewhat recent times is literally, like, World War II. Now, I don't wanna equate those in significance but in terms of just an economy shutting down, just stopping overnight, uh, you know, that's not really something that we have much experience with. And I think it's important to say that since we don't have a lot of precedent for what's going on, no one knows what's gonna happen next. There's really just n- there's not a playbook that we can learn from history that's gonna tell us r- what, a lot of what's gonna happen next. We always say the next recession is never like the last one, and when we say that, we always feel like, well, it's gonna be a little different-
- CWChris Williamson
Yeah.
- MHMorgan Housel
... but all recessions kind of have a similar trajectory and whatnot. But this is just a different, a different thing altogether. And of course, we don't even know what's gonna happen next in terms of shutdowns and lockdowns, let alone what the recovery afterwards might look like.
- CWChris Williamson
So we're recording this March 13th. Yesterday, on the 12th, was that the biggest move that we've seen so far? Was that the largest market move from top to bottom or-
- MHMorgan Housel
Uh, y- yes. Uh, in, in percentage terms, the US stock market fell just about 10%.... which, uh, the only other, uh, single day that was worse than that, uh, was 1987, the crash of 1987, and some days during the Great Depression in 1929. Uh, in the, in 1987, I think the market fell 22% in one day, and in the Great Depression you had about three consecutive days where it fell 10 to 15% each day. Um, but other than those two episodes, yesterday was-
- CWChris Williamson
(laughs)
- MHMorgan Housel
... was the worst. So, if you've lived through it and you survived it, congratulations. This is what, this is, this is the big leagues now.
- CWChris Williamson
Wow. Yeah, th- it's squeaky bum time, I think, as my dad, as my dad would call it.
- MHMorgan Housel
(laughs)
- CWChris Williamson
Um, so-
- MHMorgan Housel
It's the real deal, yeah.
- CWChris Williamson
Yeah. So we've talked, uh, about what's actually happening in terms of some of the businesses, right? So the economy within countries, and the market move as well. Which one of these is gonna have the biggest economic impact, do we think?
- MHMorgan Housel
I think, uh, you would have to say... Well, it, it's interesting 'cause here's the two sides of it. You know, China, just kind of because of its political, um, structure, was able to effectively create, uh, firm lockdowns across a very large swath of its country. 50 million people were on 100% lockdown, more or less. Uh, so that's gonna be the biggest economic hit, because everything just came to a stop. And you have these statistics, like gambling revenue in Macau was down 90% month over month, and Chinese car sales were down 90% in February from the previous year, because everything just came to a stop. So I think China's gonna have the biggest hit, but they also might have one of the fastest recoveries because they kinda took their medicine really quick, and now they got the curve under control, and now maybe they can start going back to something that looks like normal. Whereas in the United States where, and Italy and other countries in Europe, where just because of the, the, how the politics are structured and how the government is structured, you cannot just come in and shut the economy down and tell people to stay in their houses and you'll be arrested if you leave.
- CWChris Williamson
(laughs)
- MHMorgan Housel
At least that has not happened yet.
- CWChris Williamson
Yeah (laughs) .
- MHMorgan Housel
Therefore, you know, our, our, the, the short term hit that we might take might be less, but I have a feeling it's just gonna be a much more draggedio process to, uh, both experience the downturn and then a slowness in the recovery afterwards. I think one analogy for that is also people are familiar with the Great Depression of the 1930s, and what was bad about the Great Depression was that it was not only deep, it was very long. It lasted for several years, from about 1929 till 1933 or '34 b- things started turning around. There was also another depression in 1920 in the United States, and basically it was, uh, World War I had just ended. We were kinda switching the economy from wartime footing to normal footing, and then there was a lot of disruption. So there was a very bad depression in 1919, 1920, uh, and it was extremely deep. It was actually deeper than the Great Depression by some measures, but it was fast. It was, uh, two or three quarters of a big, big hit, but then things kinda bounced back really quickly. Uh, and that, and, and since it bounced back pretty quickly, like it didn't make history like the Great Depression did, 'cause what was so bad about the Great Depression was the length. And maybe that's an appropriate analogy for maybe China goes through something like our 1920 depression, and maybe for other people, I, I do not think that we're gonna be, you know, looking at something r- uh, that's equitable to the Great Depression. But maybe that's a, a, a similar analogy, that it's gonna be maybe not quite as deep as China's but just more drawn out. Uh, and the other thing that's so different about what we're dealing with right now relative to past recessions is that this is a, being caused by biology. It's not being caused by business problems, which is very different from all past recessions that we've been through. If you think about 2008, a lot of the reason that the recovery after 2008, you know, and as we got into 2010, 2011, 2012, a lot of the reason it was so slow to recover and there was not just a fierce bounce back was because the, 2008 was caused by business problems. Whereas this, what we're going through right now, is being caused by biology. And so that also, it brings an element that I think people who study these things just don't really know what, you know, what's gonna happen now because we don't have a lot of experience with that. But it also means, like, that, let's say, and I, I, I'm not a doctor or a biologist, so I have absolutely no authority to say this, but let's say that in the next four months, six months, one year, whatever, there is some effective treatment or even a vaccine if we're looking out the next year, year and a half. You know, there was no equivalent of a vaccine in 2008.
- CWChris Williamson
(laughs)
- MHMorgan Housel
We just had to grind through it. We just had to take the medicine and just have to sort of just like, "Okay, we just gotta do this."
- CWChris Williamson
Yeah.
- MHMorgan Housel
But you could see that if there was an effective... And again, I need to preface this so hard with th- you know, I have no idea what I'm talking about here, but-
- CWChris Williamson
Mm-hmm, yes.
- MHMorgan Housel
... let's say in three months there's a headline that says, uh, "So-and-so laboratory has discovered an effective treatment," or that, you know, "A vaccine is looking really, is looking really good." That could bring back so much economic activity, because the problems right now are not business, they're not economic, it's biology. So I think this has the potential to spring back faster than previous recessions that we've been through. And I say potential 'cause I don't know if that's exactly what's gonna happen. But it has potential that did not exist in 2008 for this to be ver- more severe than 2008, but also recover quicker and faster than we did in 2008.
- 15:00 – 30:00
Mm-hmm. …
- MHMorgan Housel
that even if things do not get any better and, and this keeps spreading, I wonder to the ex- to what extent are people just going to say, 'Look, I cannot live in my basement washing my hands 40 times a day anymore.'"
- CWChris Williamson
Mm-hmm.
- MHMorgan Housel
"We have to just accept the risk and go back on with our lives." I don't know if that's true.
- CWChris Williamson
Yeah.
- MHMorgan Housel
But I think there is precedent for, at some point, people just, uh, start getting accustomed to the risks in their life, even if those risks are very large.
- CWChris Williamson
If so-
- MHMorgan Housel
Once they get accustomed to them, once those risks are not new anymore, then they're willing, more willing to just say, "Look, this is risky. Some of us are gonna die. Like, that's true, but we need to go about our lives. We just need to go do this." I don't know if that's the case, but it's an interesting thing to think about.
- CWChris Williamson
I couldn't agree more. Yeah, uh, it's, um, it's like a reverse hedonic adaptation, isn't it?
- MHMorgan Housel
Exactly, yeah.
- CWChris Williamson
Like, I've got used to this new... The last podcast that we did was talking about people getting accustomed to their new levels of wealth, NBA players who this, that, and the other. Whereas now, it's almost the opposite of that. One way in which I can see this situation being very different to the Blitz, in terms of people's response, is that you going outside and putting your own life in danger during the Blitz did not endanger the lives of anybody else. Whereas-
- MHMorgan Housel
Good point, yeah.
- CWChris Williamson
... the, um, ancillary, analogous, kind of the, the orthogonal problems that you're going to come up against by leaving, let's say that you leave the house because you're just gonna get on with your day, but you get infected, then bring it back, then infect the rest of your family. That, I think, is playing on so many people's minds, you know, like the social cost, the, what is it that Naval says where he talks about, um, uh, privatized gain versus socialized loss.
- MHMorgan Housel
Yeah.
- CWChris Williamson
And you know, that's what, that's what the person who decides to go to work just so that they can continue to get money despite having a cough, that is the situation that we're playing ourselves with. And there's no, you, you're totally right, the UK and America, there's no martial law implemented. There's nothing stopping me if I get a (coughs) I get a dry cough and I think, "Oh no, it'll be fine, I'll be okay. I could do with making some money this week. I'm just going to crack on and go to work."
- MHMorgan Housel
Right.
- CWChris Williamson
If I decide, if I decide to do that, that's putting other people unnecessarily at risk, and that is-
- MHMorgan Housel
It's a great point.
- CWChris Williamson
... I think that's where the, the difference lies.
- MHMorgan Housel
Yeah, totally. I think that's totally true, especially when the biggest risk that you're going to be, uh, if, if you go out and catch it yourself, and then you come home and you're with your spouse and your kids or your parents, your in-laws, whoever it is that's living with you, it's like the people you're going to put at risk are, are the people who are closest to you and, and you love the most, which just adds a different element to this.
- CWChris Williamson
It's a very vicious-
- MHMorgan Housel
You're totally right.
- CWChris Williamson
Very, very vicious situation.
- MHMorgan Housel
It is, it is. It, it's different in that sense, yeah.
- CWChris Williamson
Yeah. Um, so I want to talk about the, the markets and, and sort of how and why they've responded in this way. We've spoken about the fact that they've moved, what did you say, 25% down? Is that right?
- MHMorgan Housel
That, that's, that's roughly right. It was, it was 27 this morning, and now we had a big up day, so yeah, let's, let's, let's call it 25.
- CWChris Williamson
Okay, cool. Yeah, we'll even it out nice round 25% in the red. Um, why has that happened? For people who maybe have only basic understanding of economic theory, have people, have investors just said, "I'm going to pull my money out." What are they doing? Is it sitting in their bank account at the moment? Are people deciding... Are they literally going out and trying to buy bars of gold? Like, what's happened?
- MHMorgan Housel
Well, the, let's, let's keep two things in mind here that I think are important, is that, one, whenever there's been a tremendous amount of, uh, selling, very quickly, very vicious selling, like we've seen in recent weeks, there's, there are several kinds of investors that might be causing that. One is, that I think is really important, that has grown in importance over the last 10 or 20 years are these computer algorithms that are literally just automated programs. It's not a person typing in, uh, sell orders into their, into their, uh, E-Trade account. It's literally these computer algorithms that are making the trades by themselves, by the, the knowledge that is invested in the algorithm. And a lot of those algorithms can, especially during very volatile times, can go kind of haywire. And so how much of what's been going on in the last couple weeks is not necessarily human fear, but just computers saying, "This isn't right, sell, sell. No, no, that's not right. This correlation looks weird to me, so sell, sell, sell." We don't know, but I suspect it's quite a bit. Uh, we, we don't know what the measurement of that is, but that, there's, there's that element to it.
- CWChris Williamson
And to in- to interject there, Morgan, that's the first time that we'll have had such a proliferation of, uh, expert advisors/algorithmic trading, right? You know, in 2008-2009, we would've had some, but it's now going to be ratcheted up even more so. So, this is, again, another parameter, another variable that is affecting the current economic, uh, uh, market, which we haven't seen before.
- MHMorgan Housel
I, I think that's probably right. It was, it was actually fairly large in 2008, but it, it, you're, you're right that it is bigger, and I think it's, it's definitely more sophisticated today.
- CWChris Williamson
Mm-hmm.
- 30:00 – 45:00
(laughs) …
- MHMorgan Housel
There's a financial advisor named Carl Richards who writes about this and he ... I'm paraphrasing here, I'm, I might, I might butcher this-
- CWChris Williamson
(laughs)
- MHMorgan Housel
... but he says-
- CWChris Williamson
(laughs)
- MHMorgan Housel
... you know, it, it, i- i- it's, it's about exchanging, uh, the opportunity to m- to make, to make a killing in exchange for making sure that you don't get killed.
- CWChris Williamson
Yeah.
- MHMorgan Housel
That's, that's really what I'm going for. I, I just want to make sure I don't get killed as an investor, and I'm willing to exchange not making a killing in order to make sure that I never get killed.
- CWChris Williamson
I wonder how many people will be learning that lesson right now, you know? People who-
- MHMorgan Housel
Lots.
- CWChris Williamson
... have v- have entered-
- MHMorgan Housel
I'll tell you, a lot.
- CWChris Williamson
Yeah.
- MHMorgan Housel
Yeah. And I don't, there's no schadenfreude in there, is, I, I feel bad for those people but, it's a, it's a lesson that a lot of people will learn.
- CWChris Williamson
Well, I noticed, so Sam Harris tweeted one of the cleverest things I've seen so far, which is totally not to do with finance but is analogous to what we're talking about here, where he said, "The mortality of this virus," it's between two and 4%ish, we can say it's between there, um, "This is a dry run for something that's a lot more vicious and has shown us just how poorly prepared we are for it." And the interconnectedness and fat tail probability and all that stuff, all the reasons as to why it's, it's been able to spread so quickly. But imagine if this was MERS or Ebola with mortality of 30% or 50%, but the infection rate was still people being able to infect others whilst being asymptomatic, and it dragged out over a long period of time, and blah, blah, blah. You know, that would be ... That, you're talking existential, like, end of humanity type stuff. So again, with that, you know, one of the things that people can take it ... There's not many positives to take from this situation, but one of them is, it could be worse. There are, by a number of parameters that this could be worse. Um, just looping back as well to what you said there about your survivability and that long-term thing, I'm just gonna start to read from something you tweeted earlier on today which I absolutely love, and it's Charlie Munger in 2009 asked, being asked how worried he was that stocks had fallen by 50%. And this is his quote: "Zero. This is the third time Warren and I have seen our holdings go down top tick to bottom tick by 50%. I think it's in the nature of long-term shareholding of the normal vicissitudes of worldly outcomes of markets that the long-term holder has his quoted value of his stocks go down by, say, 50%, and essentially, if you're not willing to react with equanimity to the market price decline of 50% two or three times a century, you're not fit to be a common shareholder and you deserve the mediocre result you're going to get." Oh my God! (laughs) That guy has got-
- MHMorgan Housel
Yeah. It's ga-
- CWChris Williamson
... balls of steel.
- MHMorgan Housel
And of course he's known for his, he's known for his blunt language, but I think that gets back to another kind of point, what I was saying, is that these major hits, and they always, they always look different and come in different forms, come from different areas, but to take a major hit, to lose 30%, 20%, 50% of your money, is something that you, as, if you're a long-term investor, you should expect with 100% certainty that that's going to happen. These are, these are not, these, they should not be surprises. It's not to say that they're fun when they occur, but you should not expect ... The whole reason that stocks are capable of producing great long-term returns is because these things happen. If you don't want to deal with this, then you can put your money in a savings account and earn half of 1% and you don't have to deal with any ups and downs. But if you want to earn 10% a year over- on your money over the long haul, you need to put up with the fact that every couple of years, you might lose 20 or 30 or 50% of it for a somewhat short period of time, who knows how long, and then it'll come back. That's the price of admission to the markets. And it's, uh, i- it's, it's unfortunate, of course, when people are reminded or they learn the cost of admission after they've entered the theme park, so to speak.
- CWChris Williamson
(laughs)
- MHMorgan Housel
But this is th- this is the cost of it, this is th- this is the payment that y- that the market requires that you pay in order to, uh, go on this glorious ride over 10 or 20 or 30 years. And if you're not willing to pay it, you're gonna have a real hard time.
- CWChris Williamson
Well, I mean, for the people who haven't heard my first episode with Morgan, it will be linked in the show notes below and I implore you to go back and listen to it, because so many of the lessons which you gave us then apply now. What was it that we talked about? We, we spoke about the fact that so few people in the West have at least one month's salary in the bank, that they're living paycheck to paycheck, people are very highly leveraged, through talking about the fact that you need to ensure that you earn more than you spend on a consistent basis. And all of these things, right now, this is the situation, this is where you get down to brass tacks and you see who has that, th- that in reserve. And those lessons, if people had heeded those lessons for the last 10 years, they'd be fine. If people who haven't heeded those lessons for the last 10 years are gonna be a little bit less fine. So I, I wanted to, to talk about ... You, you can't give a Morgan Housel's How to Survive a Financial Apocalypse, but have you got any tips for what people can do, some of the, the ... Even if they're just mental strategies rather than financial strategies, how would you go about it?
- MHMorgan Housel
I, I mean, it's so different for everyone because everyone's got a different financial situation, a different job situation, different family needs and whatnot. I mean, I, I, I can just tell you wh- how I'm coming at it from my own perspective.
- CWChris Williamson
Sure.
- MHMorgan Housel
I'm, I, I'm ... You know, I've ... Well, I mean, the first thing I did was just to have a lot of preparation for this event. Now, that's, that's not advice for someone who did not prepare for this, but I, I have a lot of cash, we have some flexibility, um, you know, and a lot of this stuff is just unique to our financial situation, it's not gonna be that applicable to other people, but ...
- CWChris Williamson
Yeah, yeah.
- MHMorgan Housel
You know, the other thing, and this is a different personality as well, too, but my family can live very, very cheaply and still have a good time. We can have a good time going for a walk, going to a park, re- going to the library and checking out books. We do, we, we do not, we're not a big low and a big high maintenance family, and that becomes such an important asset if economic times get rough. Because if you have to, if you ... This gets back to the camping versus homeless thing.
- CWChris Williamson
(laughs)
- MHMorgan Housel
If you are forced to cut back your lifestyle, it hurts if you're forced to do it. If you wanted, you wanna drive the nice car but you, you can't afford it anymore, that, that, that's a painful thing if you're forced to do it. But if you have the kind of situation where it's like, no, honestly, if my wife and I, if my family and I, you know, were billionaires, and we never will be, but if we were, we would still spend our Saturday going for a walk down by the river. It's just what we enjoy doing and it doesn't cost any money. So I think to the extent that people can find hobbies that do not cost any money-
- CWChris Williamson
Mm.
- MHMorgan Housel
... that, it sound- it sounds trite but that's probably the best thing that you can do during a tough economic time. I, I know that, that sounds silly, that's not exactly financial advice, but I think it's honestly the most powerful thing you can do, is to keep your expectations low, but do it in a way that ...It doesn't feel like you're being forced to cut back. You're just finding new hobbies that don't cost a lot of money, if that makes sense.
- CWChris Williamson
Couldn't, couldn't agree more. I think the, that resetting of the hedonic set point, you know, um, uh, I wonder how many people in this situation will actually be, um, given renewed vigor or re- renewed love for simpler pleasures, you know? Like-
- 45:00 – 1:00:00
Oh, so you just…
- MHMorgan Housel
is going to rebound well before the real economy rebounds. That's always how it happens. The stock market bottomed and then started rebounding in March of 2009, after the financial crisis. The real economy really didn't start getting better until early 2010, even into 2011. So the stock market, uh, always happens way before that. So if people wait for businesses to start recovering, the stock market's already in a g- going to have been recovered. That's, that's always the case, that will be true this time. So my recommendation for that is to say, look, you should really think hard about how much cash and liquidity that you need. Everyone's different, they have different job prospects, different job security, different cost structures, et cetera. But think about how much cash you need, and then once you have that secured, uh, just dollar cost average into the market. That's always what I do, and I don't think that's gonna change. So that would, that would be my advice to people is i- i- it gets dangerous if you say, "I'm gonna look for signs that business has hit bottom." That's, that's not a winning investment strategy. You gotta get in well before that. And the only way you're gonna get in before that is just kind of make it systematic and just say, "I'm gonna invest X dollars every month," and then that's it. Just keep it simple like that.
- CWChris Williamson
Oh, so you just piece into the market slowly over time. Is that right?
- MHMorgan Housel
Just slowly over time. That's it, yeah. And I, I, I have my cash on the side, that keeps me safe, it's my security blanket at night, and, uh, after that, it's just dribbling in consistently over time. That's it.
- CWChris Williamson
I get it. So is that, uh, uh, I saw a, a comment someone had sp- it was Anton Kreil, actually. So Anton Kreil had tweeted the other day that he'd been asked, how does he feel ethically about making money in a situation like this, and I wondered what you and potentially some of the people that you're exposed to, your friends, if they ever have, um, an ethical consideration. You know, this is, any movement in the market is an opportunity for people to make money, and drastic movements in the market are drastic opportunities for people to make money. Do you ever think, like, "Oh God," like, you know, there's some friends that you'll have in there that will have been rubbing their hands together because they've been able to play the stock market in a good way and this opportunity's come to them. Do you think that people have a, a little bit of guilt in that? I don't know.
- MHMorgan Housel
Well, I think there's two separate things, and I know this is not what you're referring to, but there's a story today about a guy who went around to every Costco he could and bought out the Clorox wipes and he's selling them for 100 times markup. Like, that's, that's, that's a profiteering that I would feel morally corrupt about, of course.
- CWChris Williamson
Hmm.
- MHMorgan Housel
But I think if you were just saying, "This stock is cheap and I'm gonna buy it because I think it's gonna go up," no, I think there's absolutely noth- no moral guilt in that. Because especially markets going up, to the extent that you are a buyer and you are doing your, your, your marginal part to help markets go up, that affects a huge swath of the population. That's not just rich people. That's goes down to pensions and endowments that affect a large chunk of the population. So I, I don't think there should be any moral guilt about buying when stocks have plunged, and if anything, I'd say it's the other way around. It's almost like, look, this is not your, your full patriotic duty, but I do think there is a patriotic duty to pay, like, you know, to play your part in keeping the financial system together. A big part of that is not participating, like, in a bank run, which we don't have many of anymore because we have, we have insurance on our deposits. But that, you know, that's ... A, a bank run is an example of how you can be, uh, you know, going against your patriotic duty to keep the financial system together. So, and look, uh, uh, if, if people need to sell their stocks, I don't think they should feel guilty about that either. You gotta take care of your own needs, and a market is a market. You can buy or sell whenever you want. But no, I, I definitely don't think people should feel guilty about it, particularly if their wealth is gonna help them secure their family's future, their family's foundation. I think it's a wonderful thing that we should be proud of.
- CWChris Williamson
I get it. So is this an opportunity for somebody who has a solid amount of liquid cash to make money over the next year, the next few years?
- MHMorgan Housel
I would, I would say, uh, yes, but I, but I would put a caveat on the last part of what you said, which was over the next year, next few years, I don't know. I don't know if this is going to clear up next week. I don't know if this is going to take 10 years. I, I don't know.
- CWChris Williamson
(laughs) Yeah.
- MHMorgan Housel
As a long-term investor who's looking at truly the next generation, I'm investing for the next 30 years. I hope to pass along assets to my children. You know, when- when- when that is my time range, then I don't necessarily care whether this is going to take six months or a year or 10 years. It's not really a factor that's gonna materially change how I invest. Um, so that's the only caveat I would put onto that. I think this, this is an opportunity, as long as you have a very flexible time horizon in front of you.
- CWChris Williamson
Yeah.
- MHMorgan Housel
And that, and it's also, it's also not to say that even though it, this might be an opportunity today, that does not- that- that is not to say that this might not get much worse from here. Those are two separate things. It might get much worse from here.
- CWChris Williamson
There's just so many unknowns, isn't there? You know, like, uh ...
- MHMorgan Housel
Yeah. And having an unknown is so, like, having a very bad known thing does not hurt as much as having a little bit of uncertainty, if that makes sense. Like, I mean, he- here's an example. I'm just making this up. If I, if I punched you hard in the leg right now-
- CWChris Williamson
Mm-hmm.
- MHMorgan Housel
... uh, it might hurt, but it's just like, it's a known thing and it's over. Whereas if I said, "Chris, at some point in the next 24 hours-"
- CWChris Williamson
(laughs)
- MHMorgan Housel
"... unexpectedly, I'm gonna punch you with medium strength in the leg."
- CWChris Williamson
Yeah.
- MHMorgan Housel
That would bother you more than if I hit you really hard really quickly and just got it over with. Like, having an unknown and question mark is so much more painful than a known pain.
- CWChris Williamson
But-
- MHMorgan Housel
And so it's, it's hard for everyone, and it really affects your long-term thinking. It's hard to, it's hard to think about the next year when the world as you know it changed in the last 48 hours. Very difficult to do that.
- CWChris Williamson
Well, you can-
- MHMorgan Housel
So it's like, that amount of uncertainty just means that when people are looking ahead in their future, it used to be, if you go back two months ago, people had, you know, I think most people had a pretty good view of what their next year would look like. They know that they're going to do this, they're going to live here, they're going to work there. And now people are like, "I don't know what's gonna h-" and like, "Are, are we gonna be on lockdown tomorrow?" I don't know.
- CWChris Williamson
(laughs)
- MHMorgan Housel
I just have no idea.
- CWChris Williamson
Yeah.
- MHMorgan Housel
So that lo- that uncertainty is ver- is very hard just mentally to deal with.
- CWChris Williamson
There's that Larry Summers quote which you tweeted the other day, which was, "A good rule of thumb for many things in life holds that things take longer to happen than you think they will, and then happen faster than you thought they could." And there's that other one, I can't remember what the other one floating around, which is, um, "It takes decades for nothing to happen, and then sometimes decades happen in no time at all."
- 1:00:00 – 1:02:40
That's good. You got…
- CWChris Williamson
that's a way to do it. Definitely books. Like, buy a Kindle. Like, you know, if, if w- you've got to prepare for the absolute worst, and potentially Amazon shipping becomes reduced, buy a Kindle. It's like £79, probably less than $100, and you'll just have o- essentially unlimited books. Get an Audible subscription as well. Netflix, maybe get an Xbox or a PlayStation or something like that. Uh, Amazon Prime for movies. (sighs) You know, a, a kettlebell. A kettlebell, a couple of resistance bands and a couple of cheap dumbbells from anywhere and that, that's y- you know, like, what else do you need? I don't know what else you need. That's me happy. I'd be happy living like that for a year.
- MHMorgan Housel
That's good. You got your intellectual health, you got your physical health. What, what more do you want?
- CWChris Williamson
Couldn't agree more, man. Look, Morgan, I, um, I, I genuinely, genuinely don't want to have to speak to you again until your book comes out, because if we do, it's because there's another financial crisis. Um ...
- MHMorgan Housel
I'll, I'll, I'll try not to take that as an insult, but that sounds good. Let's, let's, let's, let's plan on it.
- CWChris Williamson
(laughs) It's been so good. Um, twitter.com/morganhousel, H-O-U-S-E-L, will be linked in the show notes below. I implore you to go and follow Morgan for some good updates about what's going on with the market. Final thing, where would you suggest people go, Morgan, for a bit of news if they want some, um, accurate, sort of non-sensationalist news with regards to the current state of the financial market and economics? Is there anywhere that you'd suggest that they go?
- MHMorgan Housel
I h- that's, that's a great question. I don't know if I have a good answer, other than, um, I, I think you can, you can tell who's being sensational and who's not very quickly, and it's ... I, I, I don't, I, I don't know if I have a good answer for that. Just, uh, there's some people who I follow on Twitter and some of them seem to be taking a rational stance and some of them seem to be just hyperventilating about a lot of stuff.
- CWChris Williamson
(laughs)
- MHMorgan Housel
Uh, (sniffs) but, you know, there, there is a very good dashboard put out by Johns Hopkins, I believe, that just has a world tally of coronavirus known, uh, known carrier, carriers, deaths, recoveries, where they are, a map of the world, and there's a really good dashboard to follow just to kind of track the progress of what's going on that's really interesting.
- CWChris Williamson
Awesome. Morgan, thank you so much, man. I really appreciate it. Um, everything that we've spoken about, linked in the show notes below. You know what to do, like, share and subscribe. If you've got any questions, feel free to hassle Morgan on Twitter, or me, wherever you follow me. Morgan, thanks man.
- MHMorgan Housel
This has been fun. Thank you.
- NANarrator
(music)
Episode duration: 1:02:40
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