What COVID-19 do to the money in your pocket?


  • We’re facing of the worst economy depression human ever face, more than great depression 1930
  • Cash is king, especially in the middle of epidemic. It gives you more breath in hard time, and give you better position when the economy rebound
  • Stop buying things with debt, you need to start focus on survive, and survive only
  • Insurance become more important than ever, because it’s the only way to protect your cash
  • Don’t lower down your spending level to low, some people who live from daily income may need to survive as well, just like you do
  • Only invest when things are start getting better, that’s okay to lose bounce back momentum a bit, as long you can sure the market already reversed

Where all the money goes?

Something weird is happening, and I start to don’t know what I don’t know

Imagine if you’re a very rich person who have billion dollars of asset. To ensure your money value not diminished [because of inflation], you need to put your money in the market.

In the good days, you put it in the high risk market. And vice versa, in the bad days, you put in the low risk market. But you won’t never cash out and lose million of dollars without doing something.

So in simple, Stock and Bond [or gold] will always move to opposite directions. But something strange happen lately, all move in the same direction, going low and low with no indication it will start to stop or rebound yet

Below is all the comparison between high risk market [US stock] vs low risk market [Gold, US bond]

So if all the market are decline, where all the money goes? It goes to cash.

So why all the investor and super rich people are give up to maintain the value of the asset they have? Because the risk of losing money in the face of inflation [and tax] is lower than losing money in the face of market [even the low risk market]

Why things like this happen? Because the unknown and uncertainty is really high. Every crisis have their own reason and we know how to handle it:

  • 1930 great depression: Stock Crash in the US due to super boom economy in 1920
  • 2008 crisis: Another stock crash in the US due to sub-prime mortgage

Both crisis above is easy to see, easy to predict. We know what we face, we know how to handle it. So even in the hardest time, people know it just a matter of time until everything goes normal.

But COVID-19 is different. We’re not sure about many things:

1. Origin: is it from bats? or is it from super artificial lab in Wuhan? or Canada?

2. Spread: is it from droplet? or airborne? Latest WHO research showing the transmission of the virus can be from airborne

3. Solve:

Dr Anthony Stephen Fauci, an American immunologist who serves as director of the National Institute of Allergy and Infectious Diseases and as a member of the White House Coronavirus Task Force addressing the 2019–20 coronavirus pandemic
  • Is the vaccine available yet soon? Dr Anthony Fauci said the vaccine will be available in the next 12–18 months.
  • Is the antiviral drug available in the market now? from Tamiflu, Avigan to Chloroquine is still on clinical trial with no exact time when it can be mass used.
  • Do herd immunity really working? Now we know re-infection case are really happening, it can be from 2 things: 1) Human cannot make immunity for this virus [means vaccine wont work]. 2) the virus mutation happen so fast to the level it’s almost impossible for vaccine to catch up. 3) Human error when we do testing, so the patient basically still sick when we consider them as healthy [our safe assumption]
  • Do social distancing and lock down can successfully reduce the spread of the virus? YES, YES AND YES!!! flatten the curve is really working, it saves life! but it come with very high economy cost! we can’t afford this solution in the very long run

So in summary, we still know very little, and we might still don’t know what we don’t know yet. And the economy will rebound, only if the unknown level become 0%! or else, it will start new normal, and it never bounce to what we are today

Another 1 billion dollars question, who will get the most or first impacted?

  • Tech start-up who aren’t enable to generate profit yet. All start-up, always have “runaway”, in simple, Runway is the amount of money left in your pocket that will become 0 in certain time. So you need to ensure you will fund raise again before it become to 0, and repeat it until you can get profit. The luckiest one, is the start-up who are already get fund raise before epidemic. The unluckiest one, startup who need to have fund raising in this year or next year. So what this unlucky start-up will do? they will reduce expense,so in short, they will try to make the runway longer and longer. How? reducing marketing expense or other unnecessary expense, reduce hiring employee and the last is, start lay-off
  • Manufacture company. This epidemic will disrupt 3 things: 1) global supply chain, 2) lower aggregate demand 3) Employee, or basically, everything. Manufacture will get impact the most because of the global supply chain are disrupted, the demand are low, and because most of the manufacture are conventional, once the employee sick, they will lowering down the capacity
  • Travel [airline] and Tourism [Hotel]. People will stay at home…

What we need to do with our money now?

Cash is king, we need to protect the king at all cost

In the ancient era,when your territory get attacked by enemy tribe, what you do is very simple. Get your weapon and protect your king

In the modern era, the cash is the king. You need to ensure >70% of your asset are liquid in the amidst of crisis. Buy some foreign currency won’t hurt, dollar is still safe heaven for now, so you can allocate small amount of your money in dollar just for the sake the balancing your cash portfolio.

Why cash is important? because it gives you two advantage. 1) It give you more room to breath in the amidst of outbreak. We never know of what challenge we need to face in the future, maybe your family get sick and need money, maybe you need to move to other town because it’s safer for your family etc. 2) when the market rebound, you will be in the better position compare to others. You can start to re-invest again and build your portfolio again faster. Remember, some of rich guy you know today are people who riding the momentum after the crisis happen before

How to protect your cash?

  • Insurance: start to insured everyone who matters to you, spouse, kids, parents, brother and sister, with health insurance. Okay, now you already covered by your company insurance. But how if the crisis get worst and they start to lay-off? Hospital bills is the fastest shortcut from very rich to very poor. Ensure you and you’re family are insured right now
  • Stop buying things with debt. When crisis get worst, your income may get reduce [or even lost], and interest rate movement will be very unpredictable. If you already have one, try to renegotiate or postpone, if it’s still cannot, then focus on not to adding more debt. Buy home or car next year!
  • Reduce expense, focus on basic first: Start dividing what you need and what you want. In case for food, 30%–50% of our daily expense are for food. Science said, people only need 1500–3000 calories per day. You can start to ration your food and create meal plan to reduce the cost. The faster you understand your basic need to survive, the better. In modern days, basic need aren’t just food. it also internet, electricity, water etc.
  • Keep spending level as normal as possible. It’s look a bit contrary of number 3 [reduce expense], but it’s for greater good. Lets say your spending level when normal is 100%, and your basic expense is 50%, then I suggest you to keep spending level on 70%-80%. Why? because people out there, might not be as lucky as you, most of them need daily paycheck to live. It’s our responsibility as a community to help each other! Still buy some Boba or Nasi Padang once in a while, and don’t forget to give generous tips for the food delivery and restaurant, they need it most now more than ever!

And last, every dark tunnel have lights in the end. Once the crisis is done, you can start to aggressively invest again, and life might be back to normal again, for you and everyone. But you really need to ensure the market are already bounce back before you invest. Even in the bearish period, you will see some minor bounce back, usually driven by some company buyback stock or government intervention. Don’t get tricked, its okay if you come a bit late to the market, as long as you already ensured that the market are bounce. It’s better sorry than broke!

*Don’t forget to social distancing, wash your hand and stay at home. Let’s keep helping each other



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