At What Cost

The cost of the Covid19 virus worldwide is huge.  Some, mainly from my generation, pay with their lives.  Others pay with their jobs, their businesses, or with their mental health.  The government is paying a fortune supporting people who have lost their jobs and can’t feed the family and pay their rent or mortgage.  Money is being pumped into the economy to prop up badly affected industries and to keep the economy afloat.  The heath service must be consuming vast amounts of money with staff costs, testing and other support.  Just 9 housing commission tower blocks in Melbourne have 500 police on guard, numerous interpreters, food preparation centers, and delivery trucks catering for 3500 people as well as medical and support staff.  The cost is blowing a big hole in the federal and state government’s budgets and having a big impact on industry and on the working population worldwide.

An economist on Q&A made a well- argued case that a lock down would cost just as many lives from stress and suicide as the virus in the longer term.  That it would therefore be better to let nature take its course. It’s a very high risk strategy relying on herd immunity. Some countries have tried it in part or in total but so far the results have not been good.

The UK’s first response was to take the herd immunity route, but modelling showed the death rate would be unacceptable and the hospitals would run out of capacity.  The UK turned to lock down too late and is still paying the price with the worst figures in Europe.  They also opened up early and now have returned to localized lock downs with no doubt more to come.

The US began with the idea that the virus could not affect a great and powerful country like the USA.  There was conflict between the President and many States which delayed lock down and the implementation of precautionary measures.  A significant proportion of the US population will not take precautions or respond to instructions, hindering efforts by health authorities to control the spread.  The result is that infection numbers continue to rise dramatically despite assurances from Donald Trump that “we have it under control”.

Brazil has experimented on a grand scale with the idea of herd immunity.  Total infection numbers are rivaling the US world record total.  Deaths in Brazil now exceed 65,000.  The country is in big trouble with the government warning that the economy is on the verge of collapse.

Sweden took a much more organized approach to keeping their society open and early on looked to be doing well.  They now have a much higher death rate than their Scandinavian neighbors and are beginning to question their strategy.  It has, of course,  been the elderly who have paid the price with a quarter of the residents of one aged care home in Gothenburg dying in just three months.  It is not a pretty story and I have not mentioned Mexico, India, Spain, and so many others.

For retirees the first problem is to protect our health.  The break out in Victoria shows just how virulent this virus is and how it takes advantage of even the smallest error.  Older people in particular need to be careful everywhere as the evidence is that a break out can happen anywhere anytime.  Part of the problem is people’s exuberance in celebrating the release from lockdown with big family gatherings and parties.  Unfortunately there are a significant number of people who think they know better than the health professionals and have chosen to ignore the advice.  All Melbournians are now paying for their behavior.

The second problem for retirees is preserving their superfunds.  Last year was tumultuous, and the coming financial year is not looking any easier.  I’m amazed that the NASDAQ has achieved record highs despite the US numbers running out of control.  Unemployment has improved in the US as states have opened up their economies, but second wave lock downs are starting to occur so the promising employment figures may be short lived.  Our stock market seems to slavishly follow the US regardless.

There is no comfort in any of our other trading partners with China experiencing new outbreaks after getting their first wave under control.  India is struggling and Europe whilst generally improving has new outbreaks requiring localised returns to lock down.

My natural optimism is struggling right now, but I did hear an encouraging comment from Chris Richardson of Access Economics who said “Australia is doing beautifully”.  That is by comparison to the rest of the world of course.  Long may that continue.  Hopefully the quite severe action being taken in Victoria will bring the virus here back under control and Australia will be able to look forward to opening all State borders.  We may be able to achieve a livable situation in Australia and even establish a bubble of a few countries with open borders but open movement across the world looks to be a long way off.  Until we have a cure or even better an effective virus the world will be a very different place and our investments will be vulnerable to sudden and dramatic shocks.

I will be keeping daily if not hourly watch on Marcus and the Marcus Today team for help.

I’m delighted to be living in Australia right now with our world leading health care and where hospital treatment does not depend on how much you can pay.  Maybe I would be better off in Queensland or South Australia but anywhere in Australia is good if we take care and follow the rules.  We were planning to drive to visit out son and family in the NSW Southern Highlands for a winter break but have just heard that the border is being closed from tonight.  We could make a ridiculous dash for the border but it’s better to wait and go with a clear conscience.

Keep well and hope for a vaccine.


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