March 2020

  • Unpacking The Coronavirus Relief Package (CARES Act)

    How much Coronavirus information can everyone take?

    Everywhere I look, the current crisis seems to be affecting everything.

    It has certainly impacted what we post – here are two recent examples:  

     

    Screen Shot 2020-03-27 at 5.37.23 PMvia Twitter

    Meanwhile, I am beginning to think about how we are going back to business as usual. 

    Just last week, 3.3 million applied for unemployment and companies have been freaking out. If my own social network is any indication, most people are finally taking it seriously and isolating. If you take my son's social network as any indication, some are still partying on beaches and boats without a care in the world.  As a reminder, flattening the infection curve greatly impacts our ability to treat COVID-19. 

    I am by no means an expert, but I know many of you are curious about the Coronavirus relief package that passed the Senate on Wednesday, and the House on Friday. It's the third package from Congress so far. Based on your background and your personal beliefs, you'll likely have varying opinions on the package, but overall, I believe this is at least a "passable" effort for most audiences. And (watching the struggle to reignite the stock market) it is likely very much needed. 

    As a final note, the goal is not to "fix" the Stock Market, or stimulate the economy (exactly), it's to rescue the economy. It's a relief package. The goal is to prevent the collapse of the economy due to stagnation and unemployment. 

    So what does the CARES ACT package entail for you:

    • Self-employed people (that includes artists, musicians, and solopreneurs)  are now able to apply for unemployment benefits up to their full salary. Unemployment is receiving a $260 billion stimulus. 
    • Small businesses will have enhanced access to federal loan dollars to help keep people on the payroll. If no one is laid off, the loans will be forgiven. If you're looking for capital to cover retaining employees, that's called the Paycheck Protection Program. There is also the Emergency Economic Injury Grant and Small Business Debt Relief Program.
    • There are many industry-specific bailouts, including for airlines and more to prevent them from failing
    • President Trump and Congress members are forbidden from using funds from this package to save their businesses. 
    • Most adults can expect a one-time payment of $1200 and each child can expect $500. Single-filers above $75K will receive a reduced amount, and single-filers above $99K can't expect anything. If you don't have a social security number, you can't receive a payment. 
    • Joint-filers above $150K can expect reduced payments, and joint-filers above $198K can expect nothing
    • You have until July 15th to fill out your tax returns

    7ji35fxrq4p41SevenandForty via r/DataIsBeautiful 

    There's a lot involved with the package that I didn't cover, but I covered most of what influences the average person. Big corporations, hospitals, and public health, and many government programs also receive various levels of benefits. 

    For a comprehensive look at the bill, NPR did a very good write-up. You can read it here. Verne Harnish and Scaling Up did a good write-up as well. You can read it here. 

    As a small business owner, in the midst of this pandemic, I'm not thinking about what's necessary to continue doing what I was doing yesterday. I'm focused on what I can do to prepare for tomorrow. Things won't go back to the way they were, but they will go back to normal. Only, it will be a new normal. It's a good lesson in being attached to a result, not a medium for a result. 

    Hope this helped.  

  • Here Are Some Links For Your Weekly Reading – March 29th, 2020

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    Here are some of the posts that caught my eye recently. Hope you find something interesting.

    Lighter Links:

    Trading Links:

  • 4 Secrets To Self-Isolation Success With Astronaut Chris Hadfield

    People are beginning to struggle with self-isolation as more states order people to stay home or at least attempt to restrict interaction. 

    Perhaps no one on earth has a better perspective on isolation than Chris Hadfield, who stayed in space for 166 days. 

    Here's his 2-minute video on staying sane. 

    via Chris Hadfield 

    His first takeaway is to know the actual risk.  We've seen a lot of amplified paranoia.

    There are real risks with COVID-19 and real steps you need to take. Panicking is not one of those steps. 

    For extra reading, here are more tips on surviving quarantine from:

    How are you holding up?

  • Turning Trials Into Triumphs

    Many of our best decisions, timeliest course corrections, or most significant innovations take place after a seemingly disastrous occurrence. That's why many psychologists and self-help gurus encourage people to focus on the hidden gift that many of these experiences provide.

    It's there if you look for it. That painful event becomes the catalyst for either something new, a better way, or a level up. 

    Of course, that's not the case for everyone or every event … It takes the right mindset and the right actions to turn a trial into a triumph. 

    As we experience massive real-world and market turmoil, I think back to 2008 and how a prior incarnation of algorithms fared against it (spoiler alert: not nearly as well as this time).  They say the things that don't kill you make you stronger. Here's my trial into triumph story about that. 

     

     

    Too many people become a victim of their circumstances instead of choosing to be the master of their destiny. 

    Life's harder for people that live a life of least resistance. Doing the hard things, and making the most of bad times, makes your life not only better … but, ultimately, easier. 

    Tony Robbins calls this Threshold of Control. If you push through the fear and the struggle … as you persevere, eventually, what was scary becomes easy. You've increased your threshold, and that's often a permanent improvement.  

    Examining several instances from my past, Here is a list of the seven steps I use to transform almost any situation.

    Seven Best Practices for Uncertain Times.

    1. Accept Reality: We are where we are. Focus on being complete with what happened before this, and think about this as a new beginning with an even bigger future.
    2. Do Something Positive: Take action and build momentum and confidence. Big wins are great. Yet, in scary times, even small items are worth noting, building upon, and stacking. Let progress build positive momentum for you.
    3. Take Care of Yourself: Increase your physical activity, meditation, and massage. Take time to eat and sleep well. Many studies show decision-making suffers when you're stressed. Taking care of yourself goes a long way to making a lot of other things better.
    4. Communicate More: The natural tendency is to hide or to recuperate in private. Instead, be open and receptive to help and ideas from friends, partners, or wherever it may come.
    5. Creative Destruction: The old game and the old ways of thinking are over.  Shift your energy to what is working. Commit to the result you want, rather than the process.
    6. Increase Your Options: It often takes a different level of thinking to solve a problem than the level of thinking that got you there in the first place. So, be open to new opportunities, new possibilities, and more ways to win.
    7. Choose a Bigger Future: Instead of resigning yourself to playing small and doing with less, recognize that a clearing creates space for something even better. Choose what you want and call it into existence through your thoughts and actions.

    They say everything happens for a reason. The secret is that you get to choose the reason, what it means to you, and what you're going to do about it. Choose well, and someday you could look back on this time as one of the best things that ever happened to you.

  • Here Are Some Links For Your Weekly Reading – March 22nd, 2020

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    Here are some of the posts that caught my eye recently. Hope you find something interesting.

    Lighter Links:

    Trading Links:

  • “Chart of The Century”: A Look At Inflation, Free Market Forces and Trade Wars.

    This post considers the “Chart of the Century” created and named by Mark Perry, an economics professor and AEI scholar. This chart has gotten a lot of attention because it’s loaded with information regarding the types of challenges faced by the Fed and other Washington policymakers.

    Perry’s most recent version reports price increases from 1998 through the end of 2019 for 14 categories of goods and services along with the average wage and overall Consumer Price Index.

    It shows that prices of goods subject to foreign competition — think toys and television sets — have tumbled over the past two decades as trade barriers have come down around the world. Prices of so-called non-tradeables — hospital stays and college tuition, to name two — have surged.

    From January 1998 to June 2019, the CPI for All Items increased by exactly 59.6% and the chart displays the relative price increases for 14 selected consumer goods and services and average hourly earnings.

    Lines above the overall inflation line have become functionally more expensive over time, and lines below the overall inflation line have become functionally less expensive. So, for example, housing has approximately kept pace with inflation. 

    Cpi2020-875x1024
    Mark Perry Via Carpe Diem

    There are a lot of ways to take this chart. You can point to items in red – whose prices have exceeded inflation as government-regulated or quasi-monopolies. You can point to items in blue as daily commodities that have suffered from ubiquity, are subject to free-market forces, or as goods that are subject to foreign competition and trade wars. Looking at the prices that decrease the most, they’re all technologies. New technologies almost always become cheaper as we optimize manufacturing, components become cheaper, and competition increases.  

    Compare “tradable” goods like cell phones or TVs (with lots of competing products) to less tradable “goods” like hospital stays or college tuition, and unsurprisingly they’ve gone in opposite directions. 

    There are a lot of complex economic relationships displayed in this chart, and we’ve only covered the basics. 

    What did you take from the chart?

    How do you think the Coronavirus will impact the future of policy – and the shape of this chart?

  • 7 Best Practices For Uncertain Times

    Mastery isn't measured by the number of bad things you eliminate …
    but by the number of times you eliminate calling them bad    .

    Many of our biggest innovations or course corrections take place after a seemingly disastrous occurrence. That's why lots of psychologists and self-help gurus encourage people to focus on the hidden gift that many of these experiences provide.

    It's there if you look for it. 

    Examining several instances from my past, Here is a list of the seven steps I use to transform almost any situation.

    Seven Best Practices for Uncertain Times.

    1. Accept Reality: We are where we are. Focus on being complete with what happened before this, and think about this as a new beginning with an even bigger future.
    2. Do Something Positive: Take action and build momentum and confidence. Big wins are great. Yet, in scary times, even small items are worth noting and building upon.
    3. Take Care of Yourself: Increase your physical activity, meditation, and massage. This is the time to eat and sleep well. Many studies show decision-making suffers when you're stressed. Taking care of yourself goes a long way to making a lot of other things better.
    4. Communicate More: The natural tendency is to hide or to recuperate in private. Instead, be open and receptive to help and ideas from friends, partners, or wherever it comes from. (Though you may want to do it digitally with the COVID-19 scares)
    5. Creative Destruction: The old game and the old ways of thinking are over.  Shift your energy to what is working.
    6. Increase Your Options: It often takes a different level of thinking to solve a problem than the level of thinking that got you into the problem. So, be open to new opportunities and new possibilities.
    7. Choose a Bigger Future: Instead of resigning yourself to playing small and doing with less, recognize that the clearing creates space for something even better. Choose what you want, plan it and stick to your process.

    They say everything happens for a reason. The secret is that you get to choose the reason, what it means to you, and what you're going to do about it. Choose well, and someday you could look back on this time as one of the best things that ever happened to you.

  • The Anxiety Antidote: Scary Times Success Manual

    The last few weeks have been pretty volatile in the Markets.  We've seen major indices rising and falling 10% in a single day – multiple times.  You can attribute some of the selling to fear surrounding COVID-19 (colloquially the Coronavirus) and some of the selling is the result of traders being forced to cover margin calls.  Whatever the reason, it has been unsettling …

    7w0cg978mem41via FinViz

    The NYSE halted trading twice this week. For context, the last time a trading halt like that was triggered was back on October 27, 1997.

    Adding to the agitation, Russia and OPEC are in a price war on oil, and the US both cut interest rates and is pumping $1.5 Trillion of liquidity into our financial system to try and cushion the fallout.  While that seems calming, people are worried about why they felt compelled to calm so grandly in the first place.

    There are lots of fringe symptoms sprouting up (and making people wonder how bad the root cause really must be).  The NBA put its season on hold, March Madness was canceled, Tom Hanks and Rita Wilson caught "The 'Rona," and Trump just announced that the U.S. is closing travel from Europe.

    Hospitality, travel, entertainment, manufacturing, small businesses, and a cavalcade of other industries are suffering. Ask yourself, is this it … or is there worse yet to come?

    With markets making new lows and volatility shaking out investors in both directions, I thought this would be a good time to talk about coping with losses and how to manage your anxieties in "scary times." 

     But first, I want to set the frame by reiterating that I believe the fears of the Coronavirus are overemphasized.

    Don't get me wrong, COVID-19 is very contagious and the incubation period is 2 weeks, so you have the possibility of getting people sick before you know it. But, the mortality rate is relatively low at 3% (according to WHO as of March 3rd). That means many people will get sick but most people will survive. 

    To protect yourself from the virus, wash your hands aggressively, avoid touching your face, and avoid communal spaces/items. You don't, however, need to stock up on toilet paper like the world is ending. 

    Coromnavirus-vs-fluvia TIME

    On a systematic level, we need a better response. More testing, more access to treatment, more social distancing.  If at the macro level we respond appropriately – and flatten the infection curve – most people have nothing to worry about.

    Slowing the spread and increasing the availability of testing (even if the same amount of people get sick) reduces strain on the healthcare system and will save lives.

    Now, on to the real point I want to make …

     

    The Anxiety Antidote

    "When the trough gets smaller … the pigs get meaner." - Dan Sullivan

    Many people are suffering from "I should have …", or "if I would have …", or "if I could have …" thoughts.

    The problem is that thoughts like those create more stress and distraction.  They are a lens focused on loss, difficulties, past events, things that are missing, and what you don't want.

    Think of them as an unhealthy reflex that wastes energy, confidence and time.

    All We Have To Fear Is Fear Itself  

    I often talk about market psychology and human nature. The reason is that markets are a reflection of the collective fear and greed of its participants… people tend to get paralyzed during scary times like these.

    But it's not the economy that makes people feel paralyzed. People feel paralyzed because of their reactions and their beliefs about the economy. Your perception becomes your reality. 

    A little examination reveals that most fear is based on a "general" trigger rather than a "specific" trigger. In other words, people are afraid of all the things that could happen and are paralyzed by the sheer scope of possibilities. These things don't even have to be probabilities in order to scare them.

    You gain a competitive advantage as soon as you recognize that it's not logical. Why?  Because as soon as you distinguish that fear as not necessarily "true", you can refocus your insights and energy on moving forward. You can act instead of react. You make better decisions when you come from a place of calm instead of fear… so create that calm. 

    Even a tough environment, like this, presents you with opportunities if you watch for them … or even better, if you create them. 

    The Scary Times Success Manual

    The goal is to move forward and feel better.  Strategic Coach offers ten strategies for transforming negativity and unpredictability into opportunities for growth, progress, and achievement. They call it the "Scary Times Success Manual", and what follows are some excerpts:

    Forget about your difficulties, focus on your progress.
    Because of some changes, things may not be as easy as they once were. New difficulties can either defeat you or reveal new strengths. Your body's muscles always get stronger from working against resistance. The same is true for the "muscles" in your mind, your spirit, and your character. Treat this whole period of challenge as a time when you can make your greatest progress as a human being.

    Forget about events, focus on your responses.
    When things are going well, many people think they are actually in control of events. That's why they feel so defeated and depressed when things turn bad. They think they've lost some fundamental ability. The most consistently successful people in the world know they can't control events – but continually work toward greater control over their creative responses to events. Any period when things are uncertain is an excellent time to focus all of your attention and energies on being creatively responsive to all of the unpredictable events that lie ahead.

    Forget about what's missing, focus on what's available.
    When things change for the worse, many desirable resources are inevitably missing – including information, knowledge, tools, systems, personnel, and capabilities. These deficiencies can paralyze many people, who believe they can't make decisions and take action. A strategic response is to take advantage of every resource that is immediately available in order to achieve as many small results and make as much daily progress as possible. Work with every resource and opportunity at hand, and your confidence will continually grow.

    Forget about your complaints, focus on your gratitude.
    When times get tough, everyone has to make a fundamental decision: to complain or to be grateful. In an environment where negative sentiment is rampant, the consequences of this decision are much greater. Complaining only attracts negative thoughts and people. Gratitude, on the other hand, creates the opportunity for the best thinking, actions, and results to emerge. Focus on everything that you are grateful for, communicate this, and open yourself each day to the best possible consequences.

     Click here to download the full PDF version.

    Final Thoughts

    The VIX (Cboe Volatility Index)  is regarded as the "Fear Index".  On Monday, it screamed "Fear" (jumping to levels not seen since the 2008 crash). Even more interesting than the one-day jump was the year-to-date increase in volatility. 

    MW-IB950_vix_03_20200310143929_ZGvia MarketWatch

    To me, this shows how uncertain and anxious the average "trader" is with various global trends. We can pontificate all day long on the short-term causes of the rises and falls of markets, but I don't think it does much good. I let the algorithms worry about those. It's the larger trends we have to be personally cognizant of.

    I sound like a broken record, but volatility is the new normal.

    • Markets exist to trade, and if there's no "excitement"  on either side, trades don't happen
    • Trades are getting faster, which means more information has to confuse both the buyer and the seller
    • You're no longer competing solely against companies and traders like you. It's like the cantina from Star Wars, you've got a bunch of different creatures (and bots) interacting and fighting with each other, trying to figure out how to make their way through the universe

    Pair that with all the fear and uncertainty and you've got a recipe for increased volatility and noise. That means that the dynamic range of a move will be wider and happen in a shorter period of time than ever before. You'll hear me echo this thought over the next few years as the ranges continue to expand and compress. Cycles that used to play out over weeks now take days or hours. The game is still the same, it just takes a slightly different set of skills to recognize where the risks and opportunities are. 

    Today's paradigm – both in life and in trading – is about noise reduction. It's about figuring out what moves the needle and focusing only on that.

    The crucial distinction is between adding data and adding information. Adding more data does not equal adding more information. In fact, blindly adding data increases your chances of misinformation and spurious correlations i.e. watching Fox News or MSNBC to listen to their news reports on COVID-19.

    My final comment is that there's a difference between investing and trading, and while humans can invest if you're "personally" still trying to trade – you're playing a losing game. If you don't know what your edge is, you don't have one. 

    If you're investing, then I'll advise you to act like a robot. If you removed human fear and greed from your decision making – what would you do?

    Keep calm and carry on.  

     

  • Here Are Some Links For Your Weekly Reading – March 15th, 2020

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    Here are some of the posts that caught my eye recently. Hope you find something interesting.

    Lighter Links:

    Trading Links:

  • A Sense of Scale: Understanding a Billion Dollars

    Humans are notoriously bad at large numbers. It's hard to wrap our minds around something of that scale. We're wired to think locally and linearly, not exponentially (it's one of the reasons I love AI so much). Here are a couple of ways to help you understand a billion dollars. 

    Million-kgcvia AskOpinion

    First, let's look at spending over time. If you were to spend a dollar every second for an entire day, you would spend $86,400 per day. If you have a million dollars, you can do that for approximately twelve days. With a billion dollars, you can do that for over 31 years. Ignoring the difference between net worth and cash, Jeff Bezos could spend $9M per day for over 31 years.

    If you make $100k a year, you can earn $1 million in 10 years. At the same rate, it would take you 10,000 years to make $1 billion.

    For another example, let's think about spending money.  Imagine making 50k a year as the base, and imagine buying a laptop, a car, a house. Now we're going to shrink the cost of those items, instead of increasing your pay. If you were a millionaire, a laptop might cost the equivalent of $100 dollars, a Porsche, $3,000 dollars, a house, $25,000. Now, let's say you're Mike Bloomberg and you're worth $60B. A laptop is literally worth pennies, a Porsche is less than 60 cents, and your mansion would cost around 500 dollars. You could have everything you ever wanted for a minute fraction of your wealth. 

    Okay, last one before I show a video … 

    Let's try explaining it through time. 50,000 seconds is just under 14 hours. A million seconds was 11 days ago. A billion seconds ago from today? 1988. Pretty crazy. 

    Here's a video from the 1970s that helps you understand scale through the power of tens, and an exploration of our universe. 

     

    Eames Office via BetterExplained

    Hopefully, that was helpful!