Lock-down and Your Long Term Wealth
There has been a lot of talk about how lock-downs impact the economy short term. What I discuss is how things could shake out longer term, and what it means for the average person and their wealth.
Hello ladies and gentleman welcome to the Elias Talks money v-log where I talk all things money. Today I'm going to be talking about the economic impact of the lock-down and what it means to the average person the longer that it continues.
There has been a lot of talk about how to economy could be impacted short term, but what I wanted to talk about is how things could shake out longer term and how the average person will be ultimately affected. But, you can't understand this without first understanding the businesses implications.
Many small businesses right now are on the verge of shutdown. Everything for retailers, restaurants, and doctors offices. But meanwhile there are certain set of large businesses that are thriving. A lot of this is evident when we look at the stock market. Amazon has had surging sales and correspondingly their stock has risen from about 1700 in March to now 2400. That is about a 40 percent jump in a month. The stock of telemedicine company Teladoc has gone from about 116 in the low of march to 193 now. Costco has gone from 280s in March to around the 310 level now. Walmart has surged from the low 100s in March to about 130 now. All these stocks I've mentioned are at or near all-time highs.
These are just four publicly traded companies who are obviously in the right place and at the right time that are benefiting tremendously as a result of lock-downs. The reason why these companies are benefiting is because either a) the competition is shutdown or somehow restricted. or b) the competitor provides their product or service in a traditional way that does not minimize social distancing measures and or does not have the infrastructure to do so effectively.
In the example of Walmart which sells all kinds of products. For some products say clothing. Most clothing only retailers are closed because they are not essential, hence this is a benefit to Walmart's clothing sales because their physical locations are still open. Unless the clothing retailer has a very strong online sales channel they are in a world of hurt right now.
The same can be said in the example amazon versus many traditional retailers. Or for example Teladoc versus going to a traditional doctor to fulfill a mundane prescription. While some will adapt and perhaps succeed to provide their services in an alternative format and compete many will not make that transition, and these secular trends towards automation, A.I., and contactless services will be accelerated.
So as the lock-down continues and some business succeed and others shutdown what happens is that there will be less companies to get our goods and services. What this means is less competition in the economy. So in the case of clothing Walmart, Amazon, Nike they will probably survive and smaller industry players will close. When there is less competition in the economy what happens is higher prices for goods and services, and hence the money that we earn won't go as far. Prices for things will become inflated, and in this example we can expect the price of clothing to increase in the long term. But the impact is not just on prices of good and services.
The exact same thing applies to labour. If we have less people employed at the end of this with the economy damaged and there are less employers this means that there is less competition for labour. Hence the wages that they will need to pay for the worker is relatively less. This are simple principles of supply and demand. The longer the lock down goes and small businesses are crushed the better is for many of the most powerful corporations of the world, as well as those involved in certain emerging technologies.
To summarize people will get squeezed from both sides as far as the cost of good and services and their real wages, and this sets up a potentially really bad situation and a rise in bankruptcies, foreclosures, and rampant poverty. These sorts of things also carry with them secondary consequences including alcoholism, spousal abuse, depression, and suicide. To give some context the YTD world wide deaths in suicide is 66 percent more than COVID 19, so it is a serious issue.
So while we look to come out of this problem and move we need to balance the health consequences with actual medical data, which has obviously changed in the past few weeks, especially as far as fatality rates. As a society we should follow data in this situation devoid of political bias or agenda.
I'm not going to go far down this rabbit hole, but I suggest you do your own research and look at data directly from the CDC or corresponding authority in your country with a critical mind. In the case of the CDC the deaths from COVID 19 are a fraction of deaths from pneumonia without COVID-19. You can also see that clearly half the deaths of COVID 19 do not have pneumonia. This is because a COVID death as listed is not necessarily causal, so for example somebody might have late stage cancer and gets COVID-19 their death would fall under COVID.
The challenge here is that the media picks up the total column not the one where they have pneumonia which is supposed to be the mechanism in which COVID kills people. This acts to propagate fear misinformation, and advocacy to pro-long the lock-downs longer than required. The CDC is providing the information but the data is not being interpreted and disseminated in a proper way. Below I've a attached a nice link which explains how COVID kills people.
Anyways that's all for today. If you enjoyed my video please like and subscribe to the Elias Talks Money YouTube channel or follow me on the Elias Talks Money Facebook Page. Keep your feet on the ground and your head in the sky over and out.