The Audacity of Hope
Hope is a curious thing. Without it, most people cannot function. With it, people give themselves a chance by pursuing their goals against odds they are sometimes better off not knowing. Hope is vital in sports, for example, because it supports continued group effort and it gives the other team a chance to give the game away. It forces the other guy to execute, to make plays—to overcome his own fears.
Hope as an investing strategy is full of flaws. It’s basically a full-fledged “risk-on” strategy. Of course, hope is often rewarded over time, if hope is wedded to patience, in part because of the magic of compounding. But of course, naked hope is foolish. While speculation is a necessary part of markets because no one is working with perfect information (at least they’re not supposed to be), speculation is at least informed by reason. Speculation’s jagged edges are smoothed out by probability. Hope is fueled by the belief that circumstances will magically improve, that someone will come along and save the day; that someone will bail you out.
In the market, that someone has historically been a buyer whose hopes for the stock are higher than those of the seller. One could increasingly make the case in this market that that someone is the federal government, and specifically the Fed, whose job is to help maintain healthy financial markets. While we don’t know the extent to which the Fed will bail out investors who are losing hope, the existence and persistence of quantitative easing suggests the Fed will do quite a lot.
That’s pretty good news, because hope is not going to cut it against COVID-19.
The United States will eventually be rid of the virus—there’s no question in my mind about that—but the question is when. Will we be rid of it in time for schools to open and for sports to resume? Will we be rid of it before workers deplete their unemployment benefits and business owners run out of cash? Unclear. However, it is becoming increasingly obvious that getting back to “normal” is a long way off. Neither hope, nor political rhetoric, nor desire to watch college football in crowded stadiums, is going to make the virus go away. We’re going to have COVID-19 until there is a vaccine and until then there will be significant health risks to the older population and non-zero risks to others.
Again, the country will survive and will remain strong and prosperous, but the speed with which we recover is up to us. As Winston Churchill is said to have remarked, “Americans will always do the right thing, after exhausting all the alternatives.”
Most Americans simply cannot afford not to work, so there is no stopping the shift toward a resumption of economic activity. However, we will be stuck in COVID-19 purgatory as we continue to reinfect ourselves.
That’s why we need to be wearing masks in public.
I admit it, I am not a natural mask-wearer. It’s not because I don’t trust health officials or because I heard a rumor that Bill Gates and George Soros and Dr. Fauci are in a cabal to take over the world. It’s because I’m a creature of habit and my habits don’t include keeping masks in my car. It’s also because I’m a little bit vain and I think they look weird. But the main reason I haven’t been wearing a mask (except to the grocery store—I mean, come on…) is because I am a hopeful person. I am an optimist. I believe that things have a way of working out for the best over time. But the thing is—this coronavirus is not going to go away because of my hope, or because I am a nice person or that I go to church from time to time. The coronavirus doesn’t observe the Sabbath. It doesn’t take weekends off. It doesn’t care who your favorite team is or that you haven’t seen your friends in a long time. COVID-19 doesn’t care about your business, your career, your savings, or your parents. The virus does not miss free throws. The virus does not turn the ball over. The virus will not give the game away. That’s why hope will not work. In fact, it will work against us.
On the other hand, facemasks will not work against us. They’re not the cure, but it is becoming obvious that they help. Masks don’t keep the wearer from contracting the virus, but they dramatically reduce the wearer’s ability to spread it.
I cannot help but think of the parable of the long spoons, in which there is a sumptuous feast, but the table has been set only with extremely long spoons. In order to enjoy the feast, the guests cannot feed themselves, but must feed each other.
As Charlie Munger might observe, we know masks don’t accelerate the spread of the virus, which suggests they probably slow it down. So, if we are not going to shut down the economy again, we’ve got to proceed with an abundance of caution. This buys us time, time we won’t have to pay for in the form of additional borrowing from the Fed, no matter how many bailouts it stands ready to dispense.
In addition to other common sense measures such as washing hands and avoiding crowds, wearing masks gives us a much higher probability of slowing the spread and getting it under control. That’s good for us and it’s good for the markets. We should wear them when out in public. It’s our best hope.
Any opinions are those of Burke Koonce and not necessarily those of Raymond James. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Burke Koonce is a financial advisor at Raymond James & Associates, Inc., member New York Stock Exchange, member SIPC.