Things are looking grim. As economies across the globe are setting record after record on rescue-efforts for companies and individuals alike, more people get infected and are dying by the hour. Here where I live in South East Asia, things look currently like this:3580795

But, this is not a medical blog, it’s about personal finance. So let’s talk briefly about the spread of the virus as shown above, and what it means for our personal finances.

Unemployment is on the rise

Two weeks ago, I had one of the most difficult moments of my entire career. I sat down with 25 team members, explained to them what is happening with the tourism industry, and then told them that I have no choice but to let them go. They were not full-time employees with my hotel. They worked for an outsourced supplier on a temporary contract. I worked with them since the hotel opening last year and they proved to be a dedicated and hard-working team that would always do their best.

And yet I had no choice. With the operational losses mounting up day by day, a full hotel closure became a realistic expectation, which would put all of my 60 employees on the street. No matter how many tears I would shed, there was simply nothing else left where I could cut costs to keep the ship afloat.

It was hard. But I also know, I am not the only one. In my area here in Pattaya almost 20 hotels already closed their doors. 20 hotels that I know of. On top of that, bars, restaurants, coffee shops, massage parlors. Empty. Thousands of people are now either unemployed, on leave without pay, or on leave with reduced salaries.

In the USA, last week alone more than 3,2 million people filed for unemployment – within a week! Just imagine that. A country that just celebrated being once again the strongest economy in the world, had a sudden jump in unemployment by the millions.

The same is happening all across the globe. And my industry is being hit the hardest. Hotels, restaurants, and bars employ 1 out of 10 people worldwide. We are the single largest employment industry across the globe. And we are being hit the hardest by people staying at home.

No Money, No Spending, No Income, No Taxes, No Profits

Don’t get me wrong. We need people to stay at home. Because we also can’t afford to get sick. Most of us work on minimum wage. Many of us have limited or no insurance. And many of us have no savings. No financial security to speak about.

This means that once people are sick and unemployed on a large scale, they obviously stop spending money. This leads to other businesses losing income, scaling down and ultimately profits across all industries start to dwindle. If this lasts for as little as even only a few weeks, chances are high that this turns into the beginning of a recession.

No money means no Spending. No spending for some means no income for others. This will result obviously in no taxes paid and cripple public budgets. It also cripples private businesses cash-flows and profits. Investors will therefore start observing a lot of companies losing value. Stocks start to slide and portfolios turn red. Except in China, where the colors for positive and negative are reversed.

Unchartered Waters

We had recessions before and so far, we always found a way out of it. After every recession there was a bull market that would usually rise higher and beyond expectations.

History is a great advisor, but there are no guarantees. There are just so many things that we don’t know. We don’t know how long this pandemic will endure. We don’t know, how a shut-down of the economy on such a large scale will affect our economy in the long-run. We also can’t reliably estimate which sectors will be dragged down together with the most obvious losers.

But there are reasons to be optimistic. Every recession is like a clean-up. Bad and mismanaged companies get quickly in trouble and are either bailed out or forced out of the market. Great companies adapt, adjust, and come out stronger than before. The clean up also creates ample space for new players and new competitors. This is why markets usually come back stronger and better after every crisis.

So let’s stay positive, observe, and get ready to continue investing. Preferably, when some stability comes back to the daily news, and when expectations from all market participants start to become a little less speculative, and more solid instead.

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