The human capacity for burden is like bamboo – far more flexible than you’d ever believe at first glance. Jodi Picoult, My Sister’s Keeper.
Homo sapiens evolved from an ever-changing population of Hominids in Africa to populate every land mass on the earth’s surface and a manned space station with a full-time crew of six astronauts. As a species, we have survived wars, famines and plagues and adapted to thrive again after the passage of the threat.
The Black Plague decimated millions in China before arriving on Europe’s shores where it killed 30% to 60% of Europe’s population in the mid 14th Century. While the pace of change was much slower in the pre modern world, the recovery from the disease seeded the Renaissance which opened incredible new horizons in the arts and science. World War II caused 70-85 million deaths with many countries laid to rubble. However, within 10 years even Germany and Japan eclipsed their pre-war economies and the world began a period of expansion and innovation never seen before.
Resilience is baked into our DNA. Like all beings, we move toward pleasure and away from pain (which many times causes problems); however, we have figured out how to survive. COVID-19 infections, hospitalizations and deaths are growing at an exponential rate. We do not know when there will be good news regarding the number of cases but hope for positive developments in the coming weeks.
We have seen encouraging developments on the policy front. The Fed’s announcement on Monday essentially turned the Fed from a lender of last resort for banks to a commercial banker of last resort for all of US industry. For example, the Fed will be able to lend to corporations, purchase municipal securities and is planning to establish a small and medium-sized business lending program. The federal government is on the verge of putting together a $2 trillion economic package. While there is disagreement on how to allocate the resources, the size and acknowledgement that it is needed is positive.
Within the private sector, companies are beginning to allocate more resources to fighting the virus or providing consumer support. Industrial companies are expanding production of N95 face masks and car manufacturers are starting to build ventilators. Testing capabilities are expanding as major diagnostic makers get their tests approved. The two largest, Quest Diagnostics and LabCorp, will be able to provide 300,000 tests per week by the end of this week. Drug companies are exploring treatment options- examples include antibodies from blood plasma or experimenting with existing drugs. Banks are proposing mortgage assistance and offering bonuses to workers who can’t work from home during the pandemic.
We have organized ourselves within social structures such as governments, religions, educational/charitable organizations and business entities such as corporations. Common stocks represent ownership interests in companies backed by legal structures that will persist. Therefore, our human DNA is aggregated in the companies in which we invest. All the human capital at every company is now 100% focused on surviving. Corporate leadership will make difficult decisions and learn from their mistakes to survive this challenge posed by the virus. Similarly, Eagle Ridge is focused on meeting our clients’ investment needs now. Everyone’s situations are unique regarding their own financial challenges. We understand the unsettling nature of current events and encourage you to please call us to address your general or specific questions.