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The Best Interest » Preparing For a Second Wave

Preparing For a Second Wave

Millions of Americans are emerging from COVID hibernation. They’re going back to work. Socializing again. Dining in restaurants. Last week, a guy tried to shake my hand. While I hate to fear-monger, know this: we cannot say for sure that the worst is behind us. You should consider preparing for a second wave.

It’s not medical advice. It’s just logistical common sense.

“But it wasn’t that bad”—Mental preparations for a second wave

As of June 16th 2020, 118,000 Americans have died from the COVID-19 virus. If we try to compare that to seasonal flu, the statistics get murky. COVID has—at this point—killed somewhere between 4x and 50x more people than seasonal flu.

First, that’s an obnoxious range of possibilities—4x vs. 50x. It’s based on massive uncertainties and extrapolations surrounding the way that flu deaths are calculated. How many cookies did you eat? Somewhere between 4 and 50.

But more importantly, consider this separate idea. How would the virus have torn across the country if not for our collective social distancing efforts?

If social distancing is successful, it will be viewed by most people as unnecessary in retrospect. This is the essence of risk management, and why so few manage risk.

Adam Butler, March 2020

Don’t fall into this risk management trap outlined by Adam Butler. If a second wave hits, you will be tempted to think, “But the first wave wasn’t that bad. Why should I comply to all these depressing regulations all over again?”

Our society ran an experiment. That experiment chose one path—massive social distancing efforts, albeit weeks too late. And we know one result from that experiment—118K deaths and counting.

We cannot extrapolate how other paths in that experiment might have concluded. We do not know the road not taken.

In light of a second wave, you can prepare your mental approach right now. If given the opportunity, do you want to run a less strict social experiment? Do you want to run higher risks?

Have you considered the potential consequences? Are you prepared for them?

Logistically preparing for a second wave

Remember the biggest lesson from COVID-19?

Build slack into your systems. This applies across society. It also applies to you and your life. Start today.

Let’s remind ourselves of the timeline from early March. Let me cherry pick some messaging from the top: President Trump’s Twitter feed.

  • February 27: “One day it’s like a miracle, it will disappear.”
  • March 6: “I think we’re doing a really good job in this country at keeping it down… a tremendous job at keeping it down.”
  • March 13: President Trump declares a National Emergency

What’s my point? It took two weeks to go from a miracle to a National Emergency. Two weeks. What if that happens again?

Last time that flip-flop occurred, the populace panicked. We flocked to grocery stores, which subsequently ran out of basic foods and supplies. Businesses struggled to create contingency plans and unemployment reached historic levels. Fear and confusion laid bare our lack of preparation.

What can we do differently this time? Start preparing today. As in, stop by the grocery store on your way home. Today.

You don’t have to buy-out the beans and rice aisles. But you can make sure your home pantry is stocked with non-perishables. Buy some extra toilet paper, too.

Face masks, cleaning products, home entertainment. Think about your deficiencies from back in March. Shore those up.

Financially preparing for a second wave

There are two major financial preparations for the second wave.

The first hits close to home. Ensure your emergency fund and budget are in order.

You might get laid off or furloughed. You need to have a backup money supply. And you need to know how long that supply might last you. Budgeting is the only way to ensure that you have that knowledge.

The second financial preparation has to do with your retirement plans and the investments tied to them. The only surefire prediction about the stock market is that it will remain unpredictable.

If your investment goals are long-term, then don’t worry. Stay the course. Compare the 1-year plot above against the 40-year plot below.

Short term volatility has happened before and will happen again. The pandemic will ensure that. But over the long-run, people build stuff, the economy grows, and the stock market reacts positively to that growth.

I highly recommend this detailed analysis of stock market strategies. Convince yourself that panicking during a dip or recession is a stupid move. Because it is.

Hope for the best, plan for the worst

Regular readers know my affinity for Jim Stockdale and the Stockdale Paradox. We’ll get through this in the end. But right now we’ve got to face facts. Historical precedent suggests that second or even third waves of the pandemic might hit. It’s wise to plan for that possibility.

Or don’t. Your call. I hope you’re right.

But I’m not planning on it.

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