Mauled to death by a bear

Hi, Dr Doom here today. I still think we are going to be mauled to death by a bear… If you’d think this whole corona business through carefully. And you really don’t need a PhD for this either! You have to agree that it’s going to get really ugly in the future. Despite what recent stock market rises/corrections show us.

Death by a thousand million (or more)…..unemployed

It’s still kind of unreal to see how the corona virus is sweeping across the planet. The human suffering is already bad enough, and it’s only going to get worse (albeit not directly, hopefully). Yes, there are certainly good things about all this. But I don’t think it outweighs the negative ones by a long shot.

If you think about what large percentage of the population is hit by this in terms of employment, it’s just staggering! Just a few trains of thought.

Mauled to death by a bear….market

Restaurants & Bars

The obvious one… When there are no more people are going to out to a restaurant or bar, it directly affects the staff. They likely loose their job (temporarily or even permanently) as the owner can no longer afford to keep paying them. The owner looses ton’s of income, but still has expenses to pay (insurance, utility, rent/mortgage, communication, service memberships, etc.).

He/she could run out of cash at some point. This will affect his landlord/lender. But it also affects all of his suppliers, who cannot deliver any goods or services and/or might not see their outstanding bills paid.

There is obviously little to no revenue or profit. This will affect the amount of sales tax and corporate income tax. So besides the financial stimulus measures, which are expensive as heck, the government will likely also see a drop in tax income. At some point, this needs to be covered by….you and me (directly or indirectly). It’s just going to hurt.


Now that we don’t drive to work anymore, or at least a whole lot less, there are some significant impacts too (good and bad). Obviously, there is fewer gasoline consumption. This will affect all gas stations around the country/world, who will sell less fuel, but also all other items they sell at their stores. Double whammy. Again, also for the government, who in the Netherlands earns a ton of money from fuel sales in the form of taxation.

Next, fewer km driven is less traffic jams, fewer accidents and better air quality. Great! Right? Well not for all the tow companies and car repair shops out there. Fewer accidents are pretty obvious, but fewer km driven means less wear and tear, thus maintenance and service jobs are being deferred. This will directly affect the car repair shops and dealerships, but also all the supply chain behind it who sell parts and lubricants. It extends a long way down the supply chain…

But fewer car movements, and thus less petrol & lubricants, is also affecting every single oil and gas producer. I mean, have you looked at the price of oil? It’s the lowest it’s been since 2001 (at time of writing this post). Yes, there is a bit of bickering between oil producing nations, but ultimately the demand just dropped like a brick large block of concrete (I know, they virtually travel as the same speed πŸ˜‰ ).

This will obviously affect the bottom line of all these (major) companies, perhaps for a long time too (when economic recovery is slow). A lot of people will loose their jobs over this and investments are postponed. Many supply companies might not survive this. Heck, some oil companies might not survive this if it lasts too long. Again, the impact is massive on so many different levels.

Is no one safe?

When you think of almost any business, you can think of a reason why they are hit by the lock-down’s and/or social distancing measures in many countries. If I recall correctly, up to 90% of all businesses are negatively affected by this virus and it’s impacts. That is simply enormous, it’s almost likely to big to fully comprehend with our tiny human minds how far the effects reach. But to put this into perspective, this is the result of 4 weeks of unemployment benefits applications in the USA (week 5 was not any better either). It’s likely going ugly elsewhere too.

I think it safe to say that this time it is different… Albeit Goldman still says it isn’t.

Heck, even utilities might not be safe from all of this!

There are always winners

Despite way more losers, there are few winners in this day and age. Some include grocery stores due to everyone cooking at home. Insurance companies will see far fewer incidents and accidents (and thus claims), which will drop their expenses. Some companies have started to refund clients already, which is great. But at the end of the day, they might be net winners.

Many online service providers must be doing great too. Think Amazon, any company with a online networking/meeting/streaming platform, game developers and game console companies (there is virtually no game console available of any brand anywhere online or in the stores! I checked…all sold out).

That being said, this is only a small portion of the companies out there… But this does not mean that it isn’t an opportunity to look for these type of companies to invest in for the coming years. That being said, I’m curious how many of the dividend kings and aristocrats might lose that status…. hope to be wrong and that it’s only very few.

Mauled to death by a bear
Mauled to death by a bear…market

The Future

As you well know, my crystal ball has a major crack in it. But I can still see some of it nonetheless πŸ™‚

Mass unemployment is a big issue, both economically and socially. In the short term, and on personal level, it might not be too bad. Especially not as most governments have implemented all kinds of stimulus and financial support packages to prevent worse. This helps many people still get (some) pay/money and thus a means to have food on the table.

Looking at the measly $1200 cheque in the US (out of ~$6.000 per person based on $2 Trillion in stimulus money – and there is more!), I think the average American is getting screwed at the expense of shareholders and corporate leaders. Stimulating the economy from the bottom up, makes more sense to me at this time. But when you stuff the market with more free money, it will rebound nicely. Go figure!

But in the longer term, this is going to sting, big time. Even when the economy can start up again, it will likely be slow for quite some time. The virus is not going away soon. There are many studies suggesting that the effect and social distancing will need to continue (perhaps intermittently) for months or even years before we get back to a “normal” society. That means there will be major economical implications and challenges. Some sectors could really struggle big time in the future. My guess is that recovery is going to be slow and will take a very long time. But don’t take my word for it (something with a disclaimer)

Stock market Performance

With these massive unemployment numbers (worse then we have seen in decades, and not yet done rising), the economy is going to get hit very hard in the future. Less consumption, means fewer earnings, lower profits and this lower share prices. Well, in an normal economy at least. Not sure if we can still count on stock markets behaving normally when the government keeps interfering with it. Guess capitalism is indeed saved by socialism during the last few crisis, and now again… The irony πŸ™‚

That being said, there is an end to the stimulus packages, and stock market corrections should be inevitable in the future based on fundamentals. The market should thus go lower in the future, perhaps even lower than the dip we just witnessed.

In any case, I’m still glad that I converted all our stock market index funds into bonds. That way we maintained our wealth for this asset class (our dividend portfolio got hit hard though). Planning to slowly start adding stocks back into the mix, but will wait with converting bonds back into stocks for a while longer. We only started with this crisis, wanting to see where this is going after the second quarter results are in. The good thing about having multiple assets classes in your portfolio is that your can try to time the market with a small portion of it, just for fun πŸ™‚

Stimulus Packages & Debt

Interest rates where low already, which meant that money was flowing all over the place and inflated everything from real estate to the stock market (and beyond). In short, we already had a major amount of (cheap) debt before this corona thing started. It is now only going to get much worse in the coming weeks and months due to the stimulus and rescue packages being rolled out all over the place. See here to get some idea:

All this money needs to be repaid, compensated, reduced in value by inflation, etc., etc. At some point all of us will need to get this big band-aid taken off. If we let it sit, the wound might just start to fester and become infected and inflamed. On the other hand, the wound might heal perfectly and all of us will continue happily with our lives. My guess is the first…. There is no such thing as a free lunch! Sorry if you were eating during the reading of this last section.

Suggested further reading

Since these are unprecedented times, and no one has the ability to see into the future! It’s thus hard to know what’s right and what’s wrong. But the following pieces have some interesting insights:

Am I too bearish?


  1. You project quite a bleak outlook into the future.
    I certainly see that the corona virus is a very different sort of crisis than we had seen before – e.g., rapid and enormous growth in unemployment. At the same time, I am not sure why and how the now following recession will be different from previous ones.
    On the assumption that mankind is very adaptive and ingenious, let’s hope for the development of a vaccine and/or cure for COVID-19. The economic implications of the lock-down as well as the recession we will likely have to work through irrespective.
    Hoping to provide a somewhat more positive outlook πŸ™‚

    1. Thanks Lukas, appreciate the positive outlook. I think we need one! It will all work itself out, as it always does (albeit there definitely is an end in sight for growth on a finite planet). I just think it might take a very long time before it does. that’s all. I think the markets are so detached from what is currently happening to the fundamentals, it’s just not good. Time will tell what is going to happen.

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