How bad are things going to get?
I’m talking about both the coronavirus and the economy.
The economy has been remarkably strong, but that will change as the virus forces more activities to be called off. In the U.S. travel is being curtailed and a host of meetings and other gatherings have been cancelled, while school is being postponed in numerous places.
Around the world sports teams are calling off games. Professional sports in this country is monitoring the virus, while reportedly giving consideration to postponing or cancelling games, or playing the games without fans.
Consider this. The Los Angeles Angels have a contract with their star outfielder Mike Trout, in which Trout is guaranteed $430 million for 12 years. With that kind of money on the line, the Angels will do the best they can to protect their investment – whatever that might be.
College basketball reaches frenzy proportions this time of year, with the onset of March Madness. Will there be an NCAA Tournament this year? I’m not saying there won’t be, but can anyone say there definitely will be?
In many countries all kinds of businesses have been shut down.
Will the virus get as bad here as in Italy? Let’s hope not. Italy is a nation with about one-sixth the population of the U.S., but as of Monday that country has suffered almost 20 times as many deaths. The streets of Italy appear to be empty. Think of the impact that is having on the economy of a nation which was already in bad shape. In Italy we can get an accurate picture of how bad the virus can get. The same cannot be said for China and Iran.
Italy is one of those European nations that was teetering on the brink of insolvency in the not-too-distant past. Will this push them over? How about Greece and Spain? The list of financially-troubled nations is quite long. Two others with huge debt are China and Japan. It’s going to be quite a show. I wish we had a story-teller we could trust.
Probably more than anything else, I like a best-case scenario, a worst-case scenario and a likely scenario.
In the U.S. both political parties are leveling a multitude of charges against each other. Regardless of how these charges shake out, there is one incontrovertible fact that people need to recognize. The retirement plans of Americans (and also others around the world) are in much worse shape today than three weeks ago when stock markets began collapsing.
State employee retirement systems in Illinois and California realistically were beyond hope before the market dive. The plans of many other states were also in trouble, but take trillions of dollars off the value of U.S. stocks, and the assets of all retirement plans are greatly diminished and retirees see their incomes threatened. There is one irony in all of this: the state employee system of California – which is controlled by the radical politicians of that state – has invested huge amounts of money in Chinese companies. These will not be great investments.
There is another serious financial negative. Government revenues will suffer. Owners of stocks will pay much less in income tax in 2020. Reduced income tax revenues put even more strain on Social Security and Medicaid. Expect debt to spike worldwide.
Is there any good news out there? As far as I’m concerned there is one really bright spot. Kids under 15 seem almost immune to the virus. While we don’t have many grandkids under 15, all of our kids, their spouses and our grandkids are under 55 and that bodes well for them.
