“A scam is a scam. A fraud is a fraud.” – Emily Thornberry

Protect Yourself From Corona Scams (and All Scams, for That Matter) 

Those damn scammers.

On Wednesday, I listed some of the cyber scams out there aimed at people working from home. And the scammers don’t stop there. I’ve been getting government notices and reading newspaper articles about the measures we should be taking to protect ourselves from the many coronavirus-related scams that are burgeoning today.

Some give sensible advice – like this, from Medicare:

* Only share your Medicare Number with your primary and specialty care doctors, participating Medicare pharmacist, hospital, health insurer, or other trusted healthcare provider.

* Check your Medicare claims summary forms for errors.

Problem is, this applies only to Medicare scams. To defend yourself against every possible scam coming your way during the Corona Crisis, you’d need a list of do’s and don’ts a mile long. And even if you had such a list, you wouldn’t use it because the advice would be too specific – too difficult to remember.

Getting scammed sucks. I’ve probably been scammed dozens of times. I can’t say for sure, because I don’t like to carry grudges.

But there is one that I can’t forget…

His name was SS. He was recommended to me by a trusted colleague as a credit repair expert. We were creating a course on that subject, so we hired him to help us develop it. He worked for us remotely for a few months. Although I had only a few conversations with him, he seemed knowledgeable, agreeable, and friendly.

He told me that he had attended a three-day seminar I gave on entrepreneurship. He said he left early for some reason. Now I know why: He wasn’t interested in what I was teaching.

Some months into our relationship, he came to town to work with our editors. He stopped to visit me at my house one weekend morning. Within five minutes, I knew he was going to hit me up for something. I went inside to get us some coffee and told K, “This guy is going to ask me for money.”

“Don’t even think of giving it to him,” she warned.

“Don’t worry,” I said. “I know what he’s up to.”

A half-hour later, I agreed to lend him a hundred grand.

A week later, I wrote him a check. It was done as a formal loan through our legal office.

Almost immediately after we closed the deal, I felt queasy about it. I researched him on the internet. There were, as I would have expected, criticisms of his books and programs – but nothing about him and his business practices that concerned me.

I told myself not to worry, that I had a legally binding contract and collateral. But as the days passed, I couldn’t shake that uneasy feeling. Finally, I asked one of our research geniuses to do a deep search. Sure enough, he was a scammer. A charming, clever scammer.

He made his living by borrowing money from people he met through his business and welching on the loans. He would string out his creditors long enough to put a couple million in his pocket, and then he would declare bankruptcy. He had gone bankrupt something like seven times.

I remember this particular scam because (a) it was a lot of money, (b) I knew better, and worst of all (c) I had to admit my stupidity to K.

It was an immensely embarrassing mistake. And that’s why I’m still mad at myself. Ten years before it happened, when I started writing about wealth building, I had already thought and written about scams. I had ideas. I even had rules. Had I followed my own rules, I would not have made that “loan.”

Here are the rules – a simple five-part protocol for defending yourself against most scams – coronavirus scams, business scams, investment scams, telemarketing scams, whatever:

  1. Never invest in (or make a loan to) any business you don’t thoroughly understand. And by understand, I mean being able to look at a P&L and balance sheets to detect any irregularities.
  2. Never give money to someone or some business that you don’t have an existing, longstanding relationship with.
  3. Never invest in (or make a loan to) any opportunity that is “urgent” or has any sort of deadline.
  4. If you have any doubt whatsoever about the deal, say no.
  5. If you decide to violate any of these four rules, don’t write a check for more than you would care to lose. Because there is a chance – maybe even a good chance – that you will lose it.
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“Quick decisions are unsafe decisions.” – Sophocles

Tough Decisions 

Most of my coevals are retired. In the past several weeks, the e-chatting among them has increased. It’s clear that they, like so many unemployed Americans, are experiencing boredom, anxiety, and the need to be in a sympathetic social environment, even if it is a virtual one.

Since I’m not retired, my involvement in the businesses I own and work with has dramatically increased in the last six weeks. My partners and I have been putting in 12-hour days trying to do all the things you’ve got to do to in times like this.

This extra work has one certain benefit: I am not bored. Each day is a crush of phone calls, teleconferences, and email correspondence. Time is flying by. I am struggling to find time to write these essays and to exercise. It’s exhausting, but it’s also exhilarating. The work feels important. It is important.

With each passing day, I look at the numbers – the CDC numbers, the Dow, and the business sales reports – and I ask, “Will things ever get back to where they were?”

Cycle Theory: once the domain of nerds and technicians, and now a topic of concern for every sentient being 

Since the outbreak of the coronavirus made front-page news at the end of January, the mainstream and social media have been reporting on its growth and making projections by using charts and diagrams.

We’ve learned a good deal about the rise and fall of pandemics from these graphic simulations. We’ve learned that they can spread fast and wide. But we have also learned that, eventually, they flatten out and decline. Most importantly, perhaps, we’ve learned that there are things that we can do, individually and in common, to retard the spread and thus flatten the curve. Doing so can greatly reduce the damage.

When the virus became front-page news, I found myself looking each morning at charts that tracked its uptrend. After the market crash, I started checking the Dow. As business shutdowns were mandated and unemployment shot up, I started looking at the daily sales reports of the businesses I own and work with.

In each case, I’m doing the same thing: I’m trying to figure out the trend.

What can we do now? 

On Monday, we talked about how adaptive behaviors (washing hands, social distancing, etc.) can reduce both the infection rate and the death toll.

The same, to some extent, is true for business. There are things that can be done now to reduce the financial impact of the current crisis. One of the first things that comes to mind is reducing employment costs – i.e., firing people. In most businesses, labor is a significant cost – and in the US, a cost that can be cut quickly. From a numbers perspective, it’s the rational thing to do. But making good business decisions takes more than digital thinking. You’ve got to include your emotional intelligence, the deeper and wider intelligence that stores the lessons you have learned from a hundred thousand large and small experiences and shapes them into intuitions that can help you evaluate and sometimes reject the “definitive” numbers that make rational sense.

My business intuitions are mostly the result of my business experiences – but those experiences were partly shaped by movies I saw as a child. These movies made heroes of business owners that took care of their employees and customers at considerable personal cost.

So when faced with downward markets and declining sales, my instinct has always been to do whatever could be done to continue providing the same level of service to our customers and to keep our employees working. I’ve probably had a dozen discussions of this type in the past 40 years. I’m pretty sure I’ve been successful in getting my partners to side with me.

When the Corona Crisis became an undeniable business threat several weeks ago, I had those conversations again. I made my usual arguments, and we came to the same conclusion: Keep everyone employed and ride out the storm.

I believe that will work for a few of the companies… but not all of them.

Consider the rental real estate business 

I’m writing this on Tuesday, March 31. Tomorrow, rents come due on most of the rental properties I own. It’s obvious to my partners and me that it’s unlikely we will be collecting all of those rents. Some of our residential tenants will have lost their jobs. Virtually all of our commercial tenants will be dealing with collapsing sales. I am inclined to be lenient toward all of them, and initially took that position. But after looking at the spreadsheets, I realized that there is a limit to how much rental income we can forgo.

It’s simple math, really. Depending on the property, we have net profit margins of about 20%. That means we can afford to go without 20% of our rental income before we start losing money. Anything more than that would mean that we could not fully pay our taxes and utility bills. Nor could we fully pay our employees’ salaries. Since we retain most of our earnings (i.e., we don’t spend the profits as we get them), we have enough cash banked so that we can spend down to keep paying those bills and salaries. But there’s a limit.

And that limit is when we run out of money.

Maybe you are thinking: “Well, you’re loaded Mark. Take the extra money out of your savings!” Again, I’m emotionally and even theoretically inclined to agree with that. But there are two problems.

  1. I have partners in almost all of these properties that aren’t in the same financial position as I am. They depend on the monthly distributions to pay their bills. What I’ve done in those cases is tell them that I won’t take my distributions for now. And that will help them. But only if the rental income doesn’t drop by 50% or more… which is perfectly possible.
  2. Rental real estate is a significant part of my investment base. (It represents about 25% of my net worth, but 10% of my income.) And because of the general business shutdown, I’m expecting that my other businesses, too, will be suffering. Those businesses have millions of customers and thousands of employees that I have to consider. I have to think about all the businesses I own and all of the people they employ.

So what are we going to do? 

We’re going to do pretty much what everyone else in the rental real estate business is doing now.

First, we are going to do our best to keep revenues from dropping. That means having one-on-one conversations with our tenants, trying to identify those that are able to pay their rent, those that can pay, say, half of their rent, and those that can pay nothing at all.

We also have to prepare for the possibility of a rent moratorium. That would be zero income coming in. And that would mean no cash to pay the people that maintain those properties and no cash to pay the utilities, and so on.

What do we do as the rent roll shrinks? Do we stop paying for landscaping, let the grass grow, and put the landscapers out of work? And what about routine maintenance? Do we stop paying our maintenance guys that repair the AC units, windows and doors, plumbing, electric, etc? And what about utilities? Surely we have to keep the lights on and the water flowing?

We have to make some tough decisions. And we can’t wait till these businesses start losing money. We have to start making “adaptations” right now.

These are a few of the actions we are taking:

* We have temporarily put off all capital investments – i.e., new roofs, new AC units, painting, etc.

* For the several properties that have mortgages, we have asked (and received) permission to move to interest-only payments while this crisis lasts.

* We are speaking to all of our tenants individually, figuring out what they can do and making plans accordingly. We are asking them to help out by reducing their use of the common utilities.

* I am extending a line of credit to some of my partnerships to cover shortfalls that will keep the bills paid for several months.

* We will be reducing landscaping and other services, but not eliminating them altogether.

* If it becomes necessary, we will try to get reductions in our utility bills.

There is nothing on this list that is novel or clever. These are the low-hanging fruits of survival for rental real estate entrepreneurs. Every sector of every industry has one of its own.

If you are an entrepreneur or an executive, you might want to think about making your own list.

What you don’t want to do is proceed as if you believe our economy and your business will come “roaring back” in the summer or fall. The chances that that will happen are about the same as the chances that the virus will peak in the next few days or that we’ll have a vaccine for it in the next few weeks.

Make your survival list now, while you have the presence of mind to explore the options and plan the details. Prioritize it according to your business (and moral) intuitions- starting with easier decisions and moving to harder ones. Imagine yourself  making those tougher decisions (because you may have to).

Doing all this now, when your business may be running smoothly, may seem unpleasant and premature. I promise you: You’ll think differently once you do it.

Hope for the best. Plan for the worst.

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“The oldest and strongest emotion of mankind is fear, and the oldest and strongest kind of fear is fear of the unknown.” – H.P. Lovecraft

Like so many bloggers, I’ve been reading lots about the coronavirus, puzzling over numbers, looking at charts, double-checking facts. I don’t usually spend this much time studying secondary and tertiary sources. Since my beat is business and wealth building, I prefer to conjure up my ideas and advice from my personal experience.

But in this case, I have no choice. If I’m going to write about the virus, I’m going to have to study it. And that means relying on information I am not qualified to evaluate. Are the data accurate? Is the logic sound? Are there missing pieces? 

Reading the News Again: How Many Could Die? 

For 20 years, I’ve read what news I read in the evening. I never wanted to deplete my morning energy by focusing on problems that were beyond my control. But for the past month, I’ve been starting each day by checking two charts: one that tracks the stock market and another that tracks the coronavirus.

I have a detached curiosity about the stock numbers. But my interest in the coronavirus numbers is visceral and strong.

By next week, if not before, everyone in the United States will know someone who has been infected. I already know a half-dozen. The pandemic and its economic aftermath is going to have a psychological effect on Americans that will last for the next 50 years.

Since I began tracking the data, the number of diagnosed cases has gone up every day. So too, happily, the number of diagnoses. But the data point I find myself stuck on is the number of deaths.

It has gone up every single day – and in the past week, at an increasingly alarming rate. So every day, I wonder: How many will die?

Will it be millions? Will it be hundreds of thousands? Or will it be less than 100,000, putting the coronavirus pandemic in “bad flu” territory?

Thirty days ago, the numbers were small but the projections were big. Based on the “consensus” opinion then, the virus had an infectious rate of 3 (one person infects an average of three others) and a case fatality rate (CFR – the number of deaths compared to the number of cases diagnosed as positive) of 6 (6% of those diagnosed die).

Putting these numbers into probability calculations, the mathematical models I was looking at were projecting an infectious rate of nearly 100% of the population and a death rate of 6%.

That amounted to a projected US death toll of about 20 million people (6% of 330 million). And that wasn’t counting the many more that would die indirectly from heart attacks, strokes, and car accidents because access to hospital beds and ventilators would be so limited.

That was the direst study I found. Others projected the number infected would be 200 million, with a death toll of 12 million. The most optimistic projection as to number infected was 60 million, with a death toll of 3.6 million.

On March 16, the Imperial College of London issued a report based on slightly lower infectious and case fatality rates. This report projected that the US death toll would reach 2.2 million by the end of August. Again, that wasn’t counting the indirect deaths.

The most optimistic projection I saw at that time was a death count of 1.8 million (based on a CFR of 3 and 60 million cases).

All of these projections were being reported in front-page stories and on every TV news show. And hundreds more were being discussed online, along with heart-wrenching human-interest stories and all sorts of conspiracy theories.

I was spending four hours a day reading. And every day, I felt like I knew less than I did the day before.

And Then I Figured Something Out… 

What I didn’t know then was that most of those early death tolls were projections of what would happen if the virus continued to spread and kill at the speed and rate it had been spreading and killing up to that point.

What those early calculations didn’t take into account was what epidemiologists call adaptiveness – the ways a population changes its behavior as awareness of a significant danger spreads.

This includes all the things people are doing now to lessen the chance of catching the disease – washing hands, disinfecting surfaces, social distancing, and isolating.

These behaviors slow the rate of contagion. With social distancing, for example, the infectious (or reproductive) rate declines. Instead of each victim infecting three others, that rate might drop to 2.5, then to 2.0, and so on. Once it falls below 1.0, the number of people that get infected starts going down. So too does the number of deaths.

Another problem with those early mortality estimates was how they determined the lethality of the disease. The early numbers – first from Wuhan and then from Seattle – were very high: 6% and higher. The mainstream interpretation was that 6 or more of every 100 people that caught the virus would die from it.

But that was wrong for several reasons.

First, the deaths in the USA in the first two weeks were concentrated in nursing homes and cruise ships, where the average age of those infected was considerably higher than the norm. Since, as is the case with most viruses, this one is much more likely to kill older people and people with compromised immune system, one would expect those early fatality rates to be disproportionately high.

In the state of Washington, for example, the first cases were in nursing home residents. That produced a highly distorted CFR. (At one nursing home, 34 of 81 infected residents died. That is a CFR of 42%!)  This anomaly, along with the data coming from Wuhan, is the reason the early projections for the US were between 6% and 12%.

So that was the first problem: an overstated estimate of how infectious the virus is. The second problem was the way the early media coverage misunderstood the data the CDC (and other groups) were publishing about the lethality of the disease that coronavirus causes: COVID-19.

The lethality of COVID-19 was expressed in terms of the CFR, which, as I said, is a ratio that compares the number of deaths to the number of diagnosed cases.

It doesn’t take a degree in statistics to figure out what’s wrong with that:

* Since the symptoms, for most people, are similar to the flu, many people that get it wouldn’t go for testing and, thus, wouldn’t be diagnosed.

* Of those that would go for testing, any that didn’t have advanced symptoms and a connection to a carrier would be turned away because of the scarcity of testing kits.

I asked a doctor friend of mine about this. My hypothesis was that if you could know how many people were actually affected, and compared that to the number of deaths, you would have a real fatality rate that was lower than the 3% figure being talked about then.

He agreed. He said, “They call it the denominator problem.”

It works like this: When you underestimate the denominator, you overestimate the numerator. Thus, for the reasons cited above, the denominator (cases diagnosed) is likely to be a gross understatement of the meaningful statistic (the number of people that actually have the virus).

So why were they using this faulty ratio?

“Because,” my friend said, “you cannot measure what you don’t know.”

To make a scientific measurement, you must stick to the facts. In the case of measuring lethality, there are only two relevant facts: the number of cases diagnosed as positive and the number of deaths.

In the beginning of the outbreak, the CFR will give you a rate that is higher, even considerably higher, than the real death rate for the reasons pointed out above. But as the days and weeks go by and you get a larger percentage of the population tested, this distortion will diminish. And that’s what has happened since I’ve been looking at it. The CFR in the US has dropped from 6% to 3% to about 1.7% today.

Will that continue to drop? Definitely.

Up to now, we’ve had just a fraction of 1% of the US population tested. As tests ramp up quickly, so will the diagnosed cases. And as the ratio of diagnosed cases to deaths increases (as it will), the CFR will continue to go down.

To get to a realistic lethality rate, we have to take another guess: We have to guess how many Americans have the virus but have not yet been diagnosed with it. This is the denominator problem I mentioned above.

Considering that 80% of those that get COVID-19 have mild symptoms, and that we’ve been able to test so few, my guess has been that for every person diagnosed, there were 10 others that had it but had not been diagnosed. A recent report I read that summarized estimates from top epidemiologists concluded that the percentage of diagnosed cases versus actual cases is 9%.

Close enough. So let’s use my 10% guess to keep the arithmetic simple. What that means is that the number of Americans that have the disease right now (as I write this) is about 10 times larger than the diagnosed cases. Ten times the current diagnosed cases (139,061) is about 1.4 million.

So now we have an “adjusted” infected rate of 1.4 million and a death count of 2428. And to get a realistic fatality rate, all we have to do is divide 2428 by 1.4 million. Right?

But wait… there’s more

Alas, no.

There is another problem with the CFR: It doesn’t make sense to compare the number of deaths to date to the number of cases to date. That’s because people that die from COVID-19 don’t die overnight. Based on the numbers so far, it seems to take 10 days to two weeks.

Therefore, the correct ratio should be the number of deaths to date over the number of cases diagnosed 10 days to two weeks earlier.

This sounds like a problem that could be easily solved: Simply compare today’s death count against the number of cases diagnosed 10 to 14 days ago. But if you try that for several days in a row, you will see that the number you get keeps moving because you are working with two sets of numbers – death rates and diagnosed cases moving at the same time.

So, no, we can’t arrive at a precise number. But we can arrive at a range. The comparisons I did since the beginning of the month increased the CFR by a factor of 2.5 to 4. That would make the lethality rate somewhere between 0.85% (0.34% x 2.5) and 1.36% (0.34% x 4).

Okay, so that gives us a real fatality rate of as a range of 0.85% to 1.02%.

How many will be infected? 

Let’s move on to the other metric we need to estimate the death toll: the Ro or reproductive rate – i.e., the rate at which the virus will spread from one person to others in close contact. Like the case fatality rate, this one has been going up in the past month. Since I’ve been tracking it, it’s gone down from 3.0 to 2.3.

A reproductive rate of 2.3 means that each person that gets the virus will infect 2.3 more.

2.3 might not sound scary, but take a look at how fast it turns into 2.4 million:

  1. 3 x 2.3 = 5.29
  2. 59 (5.29 + 2.3) x 2.3 = 17.4
  3. 0 (17.4 + 7.6) x 2.3 = 57.6
  4. 6 x 2.3 = 189.9
  5. 6 (189.9 + 82.6) x2.3 = 626.9
  6. 5 (626.9 + 272.6) x 2.3 = 2068.9
  7. 2,968.4 (2068.9 + 899.5) x 2.3 = 6827.4
  8. 9,795.8 (6827.4 + 2968.4) x 2.3 = 22,530.3
  9. 32,326,1 (22,530.3 + 9795.8) x 2.3 = 74,350.0
  10. 106,676 (74,350.0 + 32,326.1) x 2.3 = 245,355.1
  11. 352,031.1 (245,355.1 +106,676) x 2.3 = 714,623.4
  12. 1,066,645 (714,623.4 + 352,031.1) x 2.3 = 2,453,304
  13. 3,519,949 (2,453,304 + 1,066,645) x 2.3 = 8,095,882

And that gets us to 11.6 million in just 14 exponential steps! That’s just 14 degrees of exponential growth to get from one infected person to more than 10 million.

In a crowded city the size of New York, that could happen in a few weeks. In a city as dense and populated as Wuhan, it could happen in just a few days.

That is the frightening part. With a Ro of 2.3, the coronavirus is a scarily fast moving bug. But that rate is not fixed. It’s dependent on its ability to move freely from one host to another. Without any barriers, it can grow at these rates. And that’s why some of the earlier articles on social media, the ones that were predicting that half to 100% of Americans would get COVID-19 were wrong.

The way Homo sapiens adjust to threat is through adaptive behavior. This has been true since paleolithic times.

In the case of the coronavirus, those adaptive behaviors include everything we’re being told to do: hand washing, social distancing, and isolation.

Only a week or 10 days ago, the projections for how many Americans will contract COVID-19 ranged between 20 million and 200 million. Today, after accounting for the adaptive behaviors that are taking place, the upper end has come down to 60 million.

The final calculations:

And this brings us to our final bit of arithmetic. We simply multiply our estimate of the range of true fatality rates (0.85% to 1.02%) against this estimate of the number of Americans that will be infected.

At 60 million and a 1.02% true fatality rate, we will have 612,000 deaths. At a fatality rate of 0.85%, the death rate would be 510,000.

At 30 million, the death toll would be half of that – as many as 306,000 to as little as 255,000.

At 20 million, the death toll would be as much as 204,000 or as little as 170,000.

At 10 million, the death toll would be as much as 102,000 or as little as 85,000.

That’s quite a range – high of 612,000 to a low of 85,000. Putting it in perspective:

* The Spanish flu of 1918 killed an estimated 50 million worldwide.

* The Asian flu of 1956 to 1958 killed an estimated 2 million.

* The Hong Kong flu of 1968 killed about a million.


Although assuming this estimated real fatality rate of 0.85% to 1.02% is correct and remains constant, how many Americans will die in 2020 depends on how many will be infected.

And that means that all these drastic measures to reduce the number of people that get infected make sense.

This is not the only possible strategy. Another idea, considered and abandoned in England, was to isolate only the most vulnerable and let the rest of the population get the virus since their chances of surviving it are very high – more than 99%. (Remember, the high true fatality rate of 1.02% included a good chunk of the population that is older and health compromised.)

The reason that was rejected was because it would overwhelm the health care system, since some portion (maybe 10% to 20%) of that younger and healthier population would still need medical attention.

Since we are implementing behavior adaptations and since the health, scientific, and business communities are working nearly 24/7 to provide the materials we now lack and come up with treatments and vaccines we need, I’m guessing that the death toll will be at the lower end of this range: somewhere between 85,000 and 205,000.

So what can you conclude from this? That you’ve wasted 20 minutes paying attention to the arithmetic of a self-admitted know-nothing?

That’s on you.

I did this because I wanted to answer my own questions, as best as I could, rather than relying on some reputable institution or someone with a title and a degree (that may also have an agenda).

My conclusion is that the response we are making – as drastic as it is – is the right decision if our goal is to avoid crashing our health care system and allowing hundreds of thousands of Americans to die that would otherwise not die.

I feel sure we will get through this, but there will be – and has already been – a price to pay.

The social shutdown we are living through will almost certainly change the hearts and minds of every person old enough to be aware of what is going on. As I said, we will all know someone that has been infected by – or has died from – COVID-19. But the impact of isolation and submitting to what amounts to police-state governance may be worse, leaving us with fears and trust issues that will not disappear soon.

Then there is the financial impact. Our economy has virtually collapsed. And it may well slip into a general depression that will last for many years. Millions have already lost their jobs. And hundreds of thousands of businesses that are shuttered now will never again open for business.

Our political system will change. I don’t know how. But you can see changes taking place already. Much of it will be bad as politicians from both sides try to take advantage of the situation to further their own political ideas and personal goals.

But it’s not all going to be bad. There will be many that begin to understand some simple truths about the world we live in. That we are all, in the end, responsible for taking care of ourselves and our families. And that responsibility is not just about loving and caring but also about providing the financial resources that we need. That it is foolish to trust anyone or anything to take care of these responsibilities for us. And, as I’ve said before, that our government is not, and cannot be, our savior. For despite its efforts to do so, it cannot guarantee us anything that nature will not guarantee. And nature guarantees us nothing.

One more thing… 

In case this piece is syndicated to a large audience, which is possible given what’s happened in the past, I have to say this: My knowledge of epidemiology is a month old and an inch deep. And my math skills are rudimentary.

I’ve shown you my calculations not to persuade you that they are right but to prompt you to do your own thinking. That’s why I’m spelling out the numbers. So you can review them, make your own calculations, and plan accordingly.

To assist you in that, following are links to a few of the many studies,  articles, and models I’ve found helpful in researching this piece.

* “The Doctor Who Helped Defeat Smallpox Explains What’s Coming” – Epidemiologist Larry Brilliant, who warned of pandemic in 2006, says we can beat the novel coronavirus… but first, we need lots more testing. Click here to read the article.

* “Will Coronavirus Ever Go Away? What a Top WHO Expert Thinks” – Click here to read the article.

 * Bill Gates has spent much of his recent life working on global health issues. He’s now focusing some of his attention on the coronavirus.  Here he answers some of the most common questions.

* Alex Tabarrok is an economist at George Mason University and blogger at Marginal Revolution. Click here to watch him speak on the official responses to past pandemics, which countries are doing things right, and how the government can get a better handle on stopping the spread of this disease.

* “The COVID Tracking Project – US Historical Data” – Here is the tracking service I’m using. [LINK 3/26]

* WorldoMeter is another data tracking service that’s following the pandemic. Click here.

* Here are some early estimates based on China’s early results.

* “Why coronavirus antibody testing in one town could provide a way forward” – click here to read the article.

* While most of the countries in the Western world are mandating shutdowns and isolation, Sweden is taking another approach. It will be interesting to see how they fare. Click here to read a NYT article about the way they’re handling it.

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 “O Gold! I still prefer thee unto paper,

which makes bank credit like a bark of vapour.” – Lord Byron

 What’s Going On With Gold Prices? 

When the stock market crashes, gold prices skyrocket. That, at least, is the common wisdom. And there is good reason to believe it. Fear of losses in “paper” assets sends many investors running towards tangible assets – precious metals, art, and real estate. Anything of value that you can touch and hold.

But when the Dow began to tank early this month, the value of gold went down. Within a few days (March 16), the price for an ounce of gold bullion had dropped by $160, or 9%, bringing it down a total of 11% over 30 days.

(The price of silver went down even more – by 34% over the same 30 days.)

Several readers wrote to ask: What does that mean?

As I try to say each time I speak about investing, I am not an analyst. And I don’t pretend to have any expertise in understanding the financial markets, other than the experience I’ve had in running and consulting with businesses. I’ve made my investment decisions based on the logic of business, combined with the advice of investment analysts and specialists that I know and trust.

In this case, I turned first to  Tom Dyson, my former partner at Legacy Publishing, who helped design my stock portfolio and whose current work centers on the ratio of gold to stock values.

Tom said he was initially as baffled as I was with the drop in gold prices. Especially so since he had spoken to several gold and bullion insiders. In a recent blog post, he highlighted some of those conversations:

From Kenneth Lewis, the CEO of Apmex, one of the major American gold bullion dealers:

 “We are having record-breaking sales and demand across all channels; Apmex, Wholesale, OneGold. Apmex/OneGold Sales and Customer Service both handled more than 1,400 calls Friday, as compared to a typical daily volume of 390, and Monday’s calls are even exceeding Friday’s volumes.”

The demand for silver, Lewis said, is even higher:

“We have not seen volumes like this in more than 10 years. You have to go back to 2008. These are crazy times in our world and I believe we will be in tight supply for several months.”

Tom checked with two or three other dealers and got the same report.

Tom calls it an “upside-down pyramid.” At the bottom is physical gold. At the top are futures, gold options, and other gold derivatives.

The market for physical bullion is “tiny” compared to the demand for all these stock plays, which Tom calls “notional” gold. The volume is a thousand times larger. “If this is true,” Tom reasoned, “then it’s the supply and demand in the notional gold market that sets the gold price… not supply and demand in the physical gold market.”

This could explain the anomaly, Tom said. But he expected bullion prices to go up eventually.

That was then. This is now. 

He was right. In the last week, gold prices spiked by 10%. In a single day, they rose by 5.6%, an historical record.

As Tom pointed out, this was caused primarily by a lack of liquidity in the bullion market. There was more demand for it than supply. The coronavirus caused some of that – bullion manufacturers shut down. But there are myriad possible reasons.

Goldman Sachs attributes the run-up to “inflationary concerns”:

“Combined with the fiscal nature of the current policy response to Covid-19, we believe physical inflationary concerns with the dollar starting near an all-time high will for once dominate financial asset inflation that was a feature of the past decade.”

Another analyst, Anita Soni, had this to say:

“Near zero interest rates, market uncertainty, and ongoing liquidity injections provides a bullish setup for gold and silver…. This has created an excellent opportunity to buy the dip across the sector.”

Brien Lundin, editor of Gold Newsletter, had a different perspective:

Gold’s big move on Tuesday “isn’t due to worries over a greater economic fallout from the coronavirus, but rather in anticipation of the flood of central bank stimulus that is all but guaranteed by the effects to date.”

When the price of gold bullion moves up, the price of equities based on gold usually moves up even faster. As I’m writing this, shares of Royal Gold (NASDAQ-RGLD) have risen almost 14%, while shares of Yamana Gold (NYSE-AUY) are up nearly 17%.

As you know if you’ve read any of what I’ve written on gold over the last 20 years, I’m not worried.

As I said in an essay published four years ago, I did not buy gold to double or triple my money when the stock market crashes. I bought it to insure myself against the possibility that the USA economy might one day collapse.

If things really went to hell in a hand basket, I explained (and all my brokers and bankers closed shop), I wanted to have a stash of gold coins – something of value to barter with, something tradable that I could use to get my family to a safe place and then support them.

I said that when I bought gold in 2004, I thought the market crashing back then was very remote. But “since the price of gold at the time was in the mid $400s, I figured the downside was very limited. In other words, I believed that the premium for insuring myself against a class-4 financial hurricane was quite cheap.”

Most analysts that write about gold don’t think about it like that. They usually describe it as a “chaos hedge.”

Now you may think that the difference between “chaos hedge” and “chaos insurance” is a matter of semantics. It’s not.

“When you buy a hedge,” I wrote, “you are making an investment to counterbalance another…. Corn farmers, for example, might buy futures contracts that will pay them handsomely if the price of corn will go down. The money they make from the futures contract offsets the money they would be losing on selling all their corn at a discount.”

In other words, a hedge is an investment meant to maintain your net investible worth. So if stocks tank due to some major political, economic, or (in the case of the coronavirus pandemic) social event, the gains you make in gold would offset those losses.

“In a financial collapse accompanied by hyperinflation,” I wrote, “the price of gold could easily quintuple. If 20% of your assets were in gold, you could maintain the same investible net worth even if the rest of your portfolio (in stocks, say) went down by 80%. I’m not attracted to that idea. And I’ll tell you why. If we really did have a financial collapse of Armageddon proportions, I would expect the entire financial world to fall apart, including all the major banks and brokerage houses.”

I then pointed out that if we have a collapse of that magnitude, it is quite possible that gold stocks (and derivatives and so on) could go down too. “I can’t reasonably imagine a situation where the rest of the stock market dives by 80% and gold stocks soar by the same amount,” I wrote. “In that sort of situation, I’m thinking every financial institution will close their doors – and even digital money will no longer work.”

I concluded that buying gold stocks as a chaos hedge was not for me. I wasn’t willing to have 20% of my net investible worth in assets that produced no income.

On the other hand, I liked the idea of buying gold coins as insurance against chaos. In the highly improbable event that the ATMs really do stop working, I said, I wanted quick and easy access to gold coins that I could trade for food and shelter and transportation and protection.

As for the price of gold bullion, I said, “I have no idea whether the price of gold [in such a scenario] will rise or fall or remain the same. I only know that if it drops all the way down to $450, I will still have the coverage I need.”

So I never liked buying gold stocks as a chaos hedge because I believed that if we had such a level of chaos there would be a good chance the entire stock market would be down and dysfunctional. And I didn’t like the idea of buying gold coins as a hedge because, “although I think it is probable that the price of bullion might increase in chaos, I can’t be sure.”

And that’s why the premium I paid for my gold coins was not 20% of my net investible wealth, but 2%. That was then, at $450 an ounce, enough to take care of my family for five years. Today, with gold trading at about $1,500, my family should be good until well after I’m no longer here.

But again, the insurance I have against financial disaster is not gold but my other income-producing assets, and especially the tangible ones like rental real estate. That income will certainly decrease while this current crisis continues, but it will not disappear.

If you have no gold but are thinking of buying some, I wouldn’t trade in Legacy stocks to buy it. Gold could double. But Legacy stocks will definitely come back.

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“Taxes are not paid on profits not made on sales of products never produced by workers not working, truckers not trucking, and buyers not buying. And we are just at the beginning.” – Bill Bonner

The Stock Market Collapse, and What We Can Learn About Economics

I have been thinking positively.

Maybe, when all of this is over, we will all have a better understanding of how economies work. Perhaps, after we get through all the naming and blaming, we will realize that the cause of the collapse was not the coronavirus but the overspending, the speculation and the accumulation of mountainous debt that which have been at the root of just about every economic collapse in history.

If, as is likely, the government’s current bail-out package doesn’t help, and all the follow-up bail-out bills don’t work either, perhaps we will realize that our government cannot solve financial problems, large or small, unless it can tap into the only source of wealth available: the profits of private enterprise.

We are on the verge of what could be a recession as great as that of the Great Depression. If the virus subsides quickly and businesses are allowed to reopen quickly, our economy may survive. Not in months, but perhaps in a year or two or five.

But if we continue to have our businesses shut down for months into the future, what we will likely see is a collapse of the economy followed by a collapse of the tax base followed by a collapse of the government’s ability to do much of anything.

Let’s hope not. Right now, governments all over the world are passing relief programs costing trillions of dollars.

Let’s hope things get back on track before we run out of money.

The ABCs of Economics 

The cause of the current financial crisis is the same as every financial crisis we’ve ever had. What’s different is this widespread government shutdown of businesses. This didn’t happen in any of the other virus outbreaks. It didn’t happen in 1987 or 2000-2002 or 2008. It didn’t even happen in 1929.

What happens when you have a widespread shutdown of private enterprise?

The answer is pretty obvious: You have a widespread shutdown of revenues and profits, which causes a domino effect that spreads throughout the economy with alarming speed. Just like a virus can.

A local restaurant shuts down. The owner can’t pay the bills and lets his staff go. All those companies that the owner is no longer paying – the cleaning company, the maintenance company, the suppliers of not just food and beverages but everything from paper towels to light bulbs – go without their revenues.

This is now happening with thousands of small private businesses all over America (and the rest of the world).

And many large businesses, too.

US unemployment rates a month ago were at all-time lows. Today, they are skyrocketing. It’s quite possible that they will soon be at 20%.

Yes, this is a real economic meltdown. And things are likely to get worse before they get better. But one day, things will get better and the economy will recover.  The question I’m asking is: Will we have learned anything from all of this? Will this help us understand the basic fundamentals about economics – i.e., how an economy works?

Government Intervention 

The current remedy in the USA – the $1.5 trillion bailout that is being argued about as I write this – will soon be passed. Will it help?

Certainly, government checks for $400, $800 ,and $1200 will give short-term relief to millions of unemployed tax payers. But unless the virus subsides very soon (possible, but not likely) and the economy revives quickly (unlikely), the future value of this relief to individuals will be naught.

One could argue that the proposed bailouts to businesses will have a longer-term positive effect. If these subsidies allow businesses to stay profitable during the duration – and if these companies use the aid to continue production and employment going –there would be a longer-term benefit.

But that won’t be the case with most companies that are bailed out. Many of them will use the relief to protect their shareholders. And many of them, even doing the right things, will fail.

But the bottom line is that our government – no government – can solve large and extended financial crises, because governments themselves do not create wealth. The wealth they acquire comes to them in the form of taxes. And tax revenues come from personal and corporate earnings. And all of those earnings are dependent on business profits.

This is Lesson One in the Economics of Business: All wealth ultimately comes from private enterprise – the profits generated by private businesses. Governments are not designed to create profits. They are designed to tax profits and distribute them to social enterprises like fighting wars and policing crimes and social welfare. Whenever governments have tried to run businesses, those industries have failed.

But when governments allow businesses to grow their profits, their economies expand and so does the tax base. With a growing tax base, governments can provide more of those services. This is what happened with the US and other Western economies in the Industrial Revolution, in the post-WWII expansion, in the Information Revolution in the late 1990s. And it is how Denmark and other Scandinavian countries were able to pay for their lauded social welfare nets.

But this can only happen if there is a tax base that is growing. When a tax base shrinks (as happens during recessions), the ability of a government to do its basic work shrinks too.

And if you have a situation where a large portion of an economy’s businesses become unprofitable – either because of the nationalization of industries or because of forced shutdowns like we are having now –  the government’s revenues dry up very quickly.

What options do governments have, then?

There are only two: They can borrow money (from their citizens or from businesses or from other countries) or – if they are not on a gold standard – they can print paper money and spend that. But the second rule of the ABCs of Economics is that every dollar of fake money decreases the value of the currency by the same one dollar. Quantitative easing and its economic siblings is just another form of borrowing – i.e., borrowing today that will be paid back later by inflation or recessions. But the debt will always be paid. And the payment must be made by real losses in the real income and real net worth of the entire population. Except those people and those businesses that refused to overspend and speculate and saved their profits for a rainy day.

The USA has more debt than any country in the world. The same is true for American consumers. Right now, the stock and bond markets are crashing, oil prices are falling, and even gold is moving down. (Though this will eventually reverse.)

You cannot increase your debt forever. Sooner or later, lenders will stop lending. The Chinese have been the USA’s largest lenders in recent decades. Will they come to our rescue? Can they?

As for the current bailout, it will, at best, be temporary relief. And temporary relief can work if the recession is temporary. But when businesses are not making profits for an extended period of time, the dominoes will start falling.

So if businesses can’t get back into profits in the next month or two, we will likely see a second bailout in weeks or months, and perhaps a third later on this year. But none of that will fix the real problem – that our credit system is collapsing on its foundation. Sooner or later, the twin towers of federal and consumer debt will collapse on themselves.

I’m hoping this doesn’t happen. I’m hoping the virus will soon slow down and our businesses will be allowed to operate again. Recovery won’t be immediate. It may take a year or five or 10. In the meantime, I’m hoping that the nature of this crisis – accelerated by the closing of so many thousands of businesses – will make it clear to every Americans this simple truth: All real wealth comes from the profits of private enterprise –  and without those profits, our government cannot be of any help.

This is such a simple fact that you’d think everyone with a high school education would understand it. (Ironically, it seems that the more education one gets, the less likely he is to comprehend.)

Another way to grasp this fundamental truth of economics is to understand that no government can forever provide what nature is not willing to guarantee. And nature guarantees nothing.

So that’s what I am hoping – that we will all come to understand this simple truth.

But I’m not holding my breath.

Most of my liberal friends have decided that the crisis we are living through is the fault of Donald Trump. And when they lose their jobs, they will blame that on him, too.

My conservative friends will point out that the delay in testing kits was the fault of regulation. That instead of using the kits that were available, the CDC decided we needed to use FDA-approved kits, so they tried and failed to create one of their own.

All of that is beside the point. The fact is that Black Swan events do happen. And when they create recessions, thousands of businesses go belly-up and millions of workers lose their jobs. The only survivors are those people and businesses that have not allowed themselves to overspend, speculate, and get into debt.

If we do move into a major and extended recession, I’m hoping that we will come out of it with the recognition that no government can guarantee its citizens anything that nature itself doesn’t guarantee. And nature guarantees nothing.

The silver lining would be a general recognition of the reality that we – each country, each company, and each person – are responsible for our own financial well being. And that to achieve financial security, we must work hard at jobs that create profits and save those profits for a rainy day.

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A Challenge That Every Business Owner in the World Is Facing Right Now 

JS has a dilemma.

“Right now,” she writes, “I strongly believe in self-isolation… which brings me to a question about the young woman who cleans my apartment. I want to tell her to stay home. And I want to tell her that I will pay her even if she doesn’t clean. But for how long? I don’t want her to think that this ‘offer’ (if I make it) is open-ended. What is the right thing to do? I don’t really know. What do you think?”

This is what I told her…

You are a caring employer. You have decided that she shouldn’t continue working for you because of the potential dangers. You are taking responsibility for that decision (which she may not agree with) by offering to continue to pay her salary – thus transferring the financial burden from her to you. But you cannot afford to gift her salary indefinitely.

Recognize this: Tens of millions of business owners, large and small, have to grapple with the same problem. Some have more in the treasury than others. Some can afford to hold out longer than others. But none can afford to do so forever.

The advantage you have is that this is not a business but a personal service. You aren’t risking ruining your business by giving away too much. If it were a business, it would likely be a much tougher question. You’d be faced with “firing” her, knowing that she can’t get another job. And knowing that any check she gets from the government isn’t going to help her for very long.

I’m in that same situation – both as a business owner, the principal donor of a charitable foundation, and as the employer of several dozen people that maintain my properties (that are not income-producing properties).

As a business owner, my partners and I are doing everything we can to keep our employees employed. How long we can do that depends on sales. If sales crash, we will be laying people off in a matter of months. If they continue at a reasonable pace, they will stay employed.

As a donor of a charitable foundation, I have a responsibility not only for the several dozen people that work for us, but for the thousand or so people we provide assistance to. I will continue to support that foundation as long as I possibly can. But that depends on the income I get from my businesses. If that dries up, all these people will be negatively affected.

The people that work on my non-income-producing properties are in the same situation that your house cleaner is in. My plan there is to keep paying them as long as I can.

In every case, I am willing to reduce my net worth to help these less fortunate people survive. But the limit to that is the responsibility I feel for my family and friends. So there is a limit there too.

For the moment, I don’t have to make the decision you have made, because I have the opinion (from everything I’ve read)  that social distancing is more effective than isolation.

Were I in your shoes, I would continue to provide that assistance for as long as you can… but let your cleaning lady know that your largesse may end at any time in the future and that she should do whatever she can to prepare for it.

What everyone is discovering these days – I hope – is that there is a limit to how much charity all of us are willing to provide out of our own pockets. This is a very important realization. In accepting the truth of that, we must also recognize that this is true for everyone else.

All those who feel virtuous for taking the position that other (wealthier) people and the government should take care of wealth and income inequality will hopefully see the hypocrisy in that position. And perhaps (although it may be doubtful) that all wealth and therefore all financial charity comes not from the government but from the profitable efforts of private enterprise.

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Pain is important: how we evade it, how we succumb to it, how we deal with it, how we transcend it.” – Audrey Lord

What I’m Telling My Business Partners 

Sitting on the front porch, looking at the many people walking on the beach, it’s hard to imagine that we are on the edge of what could become the greatest economic disaster since the Great Depression.

It doesn’t feel that way when I get in the office. I’m spending half of my day on the phone and emailing colleagues, trying to narrow down plans of action to deal with expected production and delivery bottlenecks and a possible collapse in sales.

I’m not terribly worried about my investments. (I wrote about that on Wednesday.) But I am worried about the dozen businesses I own and/or consult with. And their thousands of employees.

The enormity of the crisis most businesses are facing right now cannot be underestimated. This supply-chain problem the media is talking about is real. Most of my businesses are dependent on internet services, telecommunication services, delivery services, etc. And some are dependent on manufacturers all over the world, including China.

All have either sent their employees home or have given them the choice to work from home. All of the CEOs are drawing up contingency plans for three-, six-, and one-year scenarios. All of them are asking their CFOs for suggestions for cutting costs dramatically. All of them are worried about the unhappy possibility of large-scale layoffs.

Most of these companies are high-margin enterprises, with net revenues of more than 40% and net incomes of 15% to 25%. So you’d think that they wouldn’t be concerned about cash flow. But the nature of good businesses is to reinvest profits in growth. That may not be the best strategy for 2020.

So what does that mean for you and your business? The business you own, supply, consult for, or work at?

It means you must be making plans right now for the obvious contingencies. As a leader, you must demonstrate confidence and calm. But you don’t want to do that by ignoring the elephant. You have to keep the captains and their troops alert but not panicked. And you must ask them to work harder now than ever.

This is not a time for enjoying a quarantined vacation. If you’ve been accustomed to working 50 hours a week, you should plan on working 60 or 70. And you should expect your best people to do the same. If they aren’t willing – no, eager – to do that, you should reconsider whether they are, indeed, your best people.

And although you should plan on a significant drop in sales, you should not relax your expectations of what your sales and marketing teams can do. In crisis, good people become stronger and more creative. Encourage them to find ways to encourage your customers to stick with you as the economy declines.

I had a conversation with Number Two Son tonight about our rental real estate properties. We anticipate that some of our tenants will have trouble keeping up with the rent. We agreed that we should not forgive monthly rental obligations, because doing so could send the wrong message. What we will do is accept percentage payments on an as-needed basis, with the understanding  that what is not paid is not forgiven. Renters will sign contracts to that effect. What I’ve learned from living through a half-dozen stock market crashes and recessions is this: Free rent, even on a temporary basis, is like free anything in life. It’s a feel-good, bad-outcome bargain. We will be flexible, but we will not be foolish.

I am very much in favor of not being greedy in business. And that applies as much in bad times as in good. Where my businesses have accumulated profits, I have been arguing that we should prioritize needs. The first priority is not short-changing our customers.  We can ask for their patience in certain areas. But we cannot ask them to expect inferior products or services from us just because times are tough.

Next on the priority list are our employees – especially the hardworking and loyal employees that have for so long helped our businesses grow. We should try our best to keep all of them fully employed, and use our spare cash flow to do that. And if we have to make cuts, we should do it as generously and humanely as possible. Of the three actors in business – shareholders, employees, and customers – it is the shareholders that should take the brunt of the hit. Not the customers. Not the employees.

That said, we don’t want to deplete the treasury to the point where these businesses could fail. A bankrupt business, however kindly it has acted towards its customers and employees during a crisis, will do no one any good if it goes belly up.

I’m sure I’ve said nothing here that you haven’t thought of yourself for your business. Smart people faced with the same problems usually arrive at the same solutions. But thinking about solutions and executing them are two different things. If you haven’t acted on any of these obvious but important strategies, waste no time. Time is running short.

There is one more thing I can say that you may not have thought of, especially if you are new to business downturns: Don’t allow yourself to believe that what has worked in the past to build your business isn’t going to work any longer. Changes will be necessary, but the fundamentals of business do not change in a crisis. On the contrary, they become more important than ever.

And one of those fundamentals is the trust that your customers have in you and the products and services you provide them. This is, along with cash, the most important financial resource you have. Don’t make the mistake of going quiet with your customers and hoping to ride out the storm. And don’t market as if things are normal or will be normal soon. They won’t buy it. If you don’t stay honest and in constant contact with them, that trust will be degraded. Now is the time to up your game. Now is the time to show your customers that they have, in you, a trustworthy fellow traveler that is eager to make their problems and worries less severe.

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I have learned over the years that when one’s mind is made up, this diminishes fear; knowing what must be done does away with fear.” – Rosa Parks

What I’m Doing (and Not Doing) to Safeguard My Wealth

It’s a scary time. The coronavirus is scary. Being in the stock market is, too.

Before I tell you what I’m going to do about my stock portfolio, let’s take a quick look at the biggest crashes in the last 100 years. I think it’s important to remember that we’ve experienced financial hardships in the market, and we’ve been able to rebound from them.

The Crash of 1929

By almost every measure, the stock market crash of 1929 was the biggest and most devastating crash in world history.

It occurred after nearly 10 years of economic expansion from 1919-1929 (the Roaring Twenties). This was a decade of steady, dramatic growth that created a sense of irrational exuberance among investors who were happy to pay high prices for stocks and also leverage those investments by borrowing money to do it.

By August of 1929, word was getting out that times were changing. Unemployment was rising. Economic growth was slowing. Stocks were overpriced, and Wall Street was hugely overleveraged.

On October 24, the market dropped. It dropped again on the 28th. And by the 29th (Black Tuesday), the Dow had dropped 24.8%. On Black Tuesday, a record 16 million shares were traded on the New York Stock Exchange in one day. Investors collectively lost billions of dollars.

Financial giants such as William C. Durant and members of the Rockefeller family attempted to stabilize the situation by buying large quantities of stocks to demonstrate their confidence in the market. But this didn’t stop the rapid decrease in prices.

Twelve years of worldwide depression followed, and the U.S. economy didn’t recover until after World War II.

The Crash of 1987

Like the crash of 1929, the crash of 1987 occurred after a long-running bull market.

On October 19 (Black Monday), the Dow dropped 22.6% – the biggest one-day drop, in percentage terms, ever.

Theories behind the reasons for the crash included a slowdown in the US economy, a drop in oil prices, and escalating tensions between the US and Iran. But the financial reasons were similar to those for the crash of 1929: speculators paying crazy prices for overpriced stocks and purchasing junk bonds leveraged mostly through margin accounts.

On top of that, something new was happening: computerized trading. It made selling easier and faster and, thus, accelerated the sell-off.

When the dust settled, the market was down 23%. But unlike the crash of 1929, Black Monday didn’t result in an economic recession. In fact, it began strengthening almost immediately and led to a 12-year bull run.

The Dot-com Bust of 1999-2000

In the 1990s, access to the internet started to shape people’s lives. Easy access to online retailers, such as AOL, Pets.com, Webvan.com, Geocities, and Globe.com, helped drive online growth. It also gave investors a huge opportunity to make money.

Shares of these companies rose dramatically – in most cases, far beyond intrinsic values.

In March 2000, some of them started folding, and investors were shedding tech stocks at a rapid pace. The tech-focused Nasdaq fell from 5000 in early 2001 to just 1000 by 2002.

The “Great Recession” Stock Market Crash of 2008/2009

Besides the crash of 1929, the crash of 2008 was in many respects the most serious financial collapse of the last 100 years. Many investors don’t realize how close the US financial sector came to collapsing.

Like every crash I’ve mentioned, this one followed a long-term bull market (from 2002 to 2007). Also like the others, it was instigated by speculation. Not so much by speculation in conventional stocks, but by the widespread use of mortgage-backed securities in the housing sector.

These products – which were sold by financial institutions to investors, pension funds, and banks – declined in value as housing prices receded. (A scenario that started in 2006.) With fewer American homeowners able to meet their mortgage loan obligations, mortgage-backed security values plummeted, sending financial institutions into bankruptcy.

With investment risk in the stratosphere, investors were unwilling to provide much-needed liquidity in the nation’s financial markets.

And we all remember what followed. The bursting of the US housing bubble and Lehman Brothers’ collapse nearly crushed the world’s financial system and resulted in a damaged housing market, business failures, and a wounded global economy.

A Few Facts That Might Make You Feel Better

None of the four major stock market crashes permanently damaged the US economy. In every case, the markets climbed back up and then went on to new highs. But the duration of the downturns varied.

The 1929 crash was the slowest to recover at 10 to 12 years. (Depending on how it is measured.) It took seven years for the market to fully recover from the crash of 2008. And the crash of 1987 began recovering after a few months.

Even where full recovery took years, the upward trend began in months or just a few years.

Those crashes happened because of a combination of economic imbalances, flaws in the banking and financial sectors, a period of manic investing that brought market values to unrealistic heights, and panic.

In other words, they were caused by economic and financial crises.

The current crash was precipitated by a health crisis. In stock market language, that’s considered an event-based crash.

Past health scares have shocked the market, too. In 2013, for example, the MERS outbreak caused the market to drop by 6%. And in 2003, the SARS outbreak caused a worldwide panic, taking the market down by 14%. But both of these event-driven crashes were followed quickly by a surge back to past highs and then beyond.

On the Worrisome Side

Is what we are experiencing today just another event-driven crash?

I don’t think so. There’s no doubt that fear is the force behind this fall. But the fear we have today is much greater than any in my lifetime. And it is already negatively affecting businesses, banks, and other financial institutions worldwide.

And that’s not to mention the fundamental factors of a history of high debt (both government and consumer), years of increasingly expensive stocks, and lots of speculation.

 As I pointed out in my February 17 blog,

* Half of all investment-grade debt is teetering on the edge of becoming junk. And more of these risky loans are being owned by mutual funds than ever before.

* The national debt continues to grow. It was $5.6 trillion in 2000. Today, it’s estimated to be more than $23.3 trillion.

* As a percentage of the country’s gross domestic product, the debt looks even worse. In 2000, that $5.6 trillion in debt represented 55% of our GDP. Today’s +/-$24 trillion represents nearly 110% of our GDP.

It’s certainly possible that the Corona Crash could be the beginning of an economic downturn as big as or bigger than any the US economy has ever had. The collapse of the stock market is already greater than any crash before.

I’ve written about the stock market at least a dozen times over the past 10 years. And in each of those essays I’ve reminded readers that I don’t have a crystal ball and that my guess about the market’s future is as valid as your next Uber driver’s.

In my lifetime as an investor, I’ve seen several serious bear markets. Had I been able to predict their tops and bottoms, I would have cashed out my stocks early, moved into cash and gold during the descent, and put back that and some more at the bottom.

But since I’ve never had a crystal ball, I’ve never tried to time the market. I’ve always taken the view that, while I can’t know how steeply the market may drop or how long the recession might last, sooner or later prices will return to their pre-crash peaks and then continue to move up from there.

I should say, though, that this strategy makes sense only when the stocks you own are in large, profitable businesses that are “antifragile,” that have the resources a business needs to survive a crash and even an extended recession.

As long-time readers know, my Legacy Portfolio is populated exclusively with companies like that.

 What About Buying Gold?

I bought a fair amount of gold back in 2004, when it was selling for $400 an ounce.

I didn’t buy it as a hedge against the dollar or the stock market. I bought bullion coins (mostly) as a “chaos” hedge. A stockpile of tradable hard assets that might come in handy if the world economy moved into another depression like we had in the 1930s.

If we do see that economic era repeated, the value of my gold will almost surely continue to increase. But I’m not counting on that. Its purpose isn’t to compensate for the paper wealth I’d lose in stocks but to be a form of insurance – “just in case” currency that I could use to buy necessities for family and friends.

Which raises the question: When and how do you buy gold? And the answer is, you buy it just like you buy any sort of insurance. Figure out the likelihood of the risk. Determine how much coverage you would need. Then decide if the premium you have to pay is worth it.

When I decided to buy gold coins, I bought enough of them (at an average price of $450) to sustain my family and my core business for a good length of time. I didn’t buy enough to cover historical expenses for many years. I bought enough to pay for the basics. And that helped me feel more secure.

But that was hardly all that I did to protect my family’s wealth against a stock market crash and a recession. It was just one piece of a financial structure that I began setting up 40 years ago and began writing about in Early to Rise nearly 30 years ago.

What About Stockpiling Cash?

I like having a portion of my net investible assets in cash for all the obvious reasons – doing my own banking, using it for fast moving investment opportunities, and as part of my insurance program against crises like this one.

But that feeling is counterbalanced by the recognition that cash is generally a low- or no-return asset class. Therefore, having a lot of it means that I won’t be taking advantage of the historically high returns of the stock market, the real estate market, private equity, and private lending.

I don’t have a fixed number in my head for how much cash I should have at any one time. I let the markets make those decisions for me.

I don’t, for example, invest in rental real estate properties when I can’t find properties I can buy for less than eight times gross rent. Likewise, I don’t buy additional shares of Legacy stocks when their P/E ratios are expensive by historical standards.

By adhering strictly to these sorts of value-based investing strategies, I am effectively prevented from putting my new earnings into any one of them. And that means I end up accumulating lots of cash while these markets are expensive.

In the past half-dozen years, most stocks – including most of my Legacy stocks – have been so expensive (relative to earnings) that I have not allowed myself to buy them. This means that the dividends I’ve been receiving for the stocks in my Legacy Portfolio have been going into my cash account. And that is okay with me.

I normally put a good chunk of my earnings every year into real estate. About 10 years ago, I began selling off my individual units and buying apartments, where I could get better yields with less hassle. But the number of such deals that I could find diminished to a trickle in the last three or four years. So, again, by sticking to my valuation standards, I’ve been effectively locked out of these markets, too.

I have put some money into private debt and private equity. But only when I knew the borrowers and the businesses very well and felt sure my lending was secure.

 In past essays on the stock market, I’ve said that – to make my wealth as antifragile as possible – I did my projections based on a stock market crash of 50%. When I picked that number nearly 15 years ago, it seemed like quite a long shot. Today, it doesn’t feel so crazy.

My Version of Antifragility

 As I’ve indicated, my core investment philosophy mimics Nassim Taleb’s concept of antifragility.

In his bestselling book Antifragile, Taleb defined antifragility as the ability to not only survive but also benefit from random events, errors, and volatility.

My version of that is very simple:

* I invest primarily for income, not for growth. That means rental real estate, bonds, private debt, income-producing equity, and dividend-yielding stocks. Depending on the economy, not less than 80% and sometimes as much as 90% of my net investible wealth is in income-producing assets.

* I invest in what is proven today, not what might happen tomorrow. Investing in income-producing assets means investing in current facts, not future possibilities. This is, admittedly, a conservative approach to wealth building. I am willing to give up the potential for cashing in big on the upside for a smaller but virtually guaranteed return.

* I don’t gamble. I am as tempted to invest in attractive speculations as the next person. But I’ve learned from experience that is a bad idea. My historical ROI for the speculation I’ve done is nearly perfect. I’ve lost almost all my money every single time. I will occasionally invest in a friend’s business. But when I do that, I consider it a gift. I expect no return and usually get no return. So I limit those “investments” to how much I’m willing to lose.

* I pay attention to value. I invest exclusively in income-producing assets, but that doesn’t mean I don’t pay attention to how much they are worth. As I said above, I invest in stocks when they are well-priced relative to their P/E ratios (among other metrics). I invest in real estate when I can buy properties that are inexpensive relative to their rental income. I buy debt when I can get a yield that is at least better than inflation. Etc.

* I hope for the best but plan for the worst. In terms of antifragility, nothing is more important than planning for the worst. Planning for the worst in good times allows you to survive and even thrive during the bad times. My worst-case planning began by imagining almost everything going wrong at one time. The market collapses. The economy moves into a deep recession. My businesses fail. The whole nine yards.

When you think that way, you have no choice but to include all the fundamental asset-protection strategies in your financial planning, as well as a few more. Most notably, diversification and position sizing.

I won’t waste our time talking about the importance of diversifying financial assets. I don’t look at it as a theory. I see it as a fact. To achieve maximum antifragility, dividing your financial assets into different classes is rule number one.

But in my humble opinion, position sizing (limiting how much money you put into any particular investment) is almost as important. When your investible net worth is relatively small, you might have to limit individual investments to 10% of your portfolio. The goal, as you acquire wealth, is to reduce that percentage as you go along. These days, I rarely put more than 1% of my net investible wealth in any investment.

So What Am I Doing?

Here’s a look at my portfolio:

Stocks: I came into the stock investing game late. And cautiously. When I set up the Legacy Portfolio about 14 years ago, I invested what was at that time 10% of my net investible wealth in those stocks. Thanks to the bull market that followed, my stock account doubled and stood, at the beginning of the Corona Crisis, at about 20% of the portfolio. That’s a good deal. But it’s still only 20%. So when the market is down 30%, like it is as I write this, that means my net investible wealth is down by 6%. If the market continues to fall to 50% – my worst-case scenario –I’ll be down 10% overall. Not good, but not bad either.

My strategy for stocks is to hold on and wait for the market to recover. It might happen in six months (unlikely). It might happen in a year (possible). Or it might happen in 10 years (safe bet). I’m hoping the return will be sooner rather than later – but I’ve planned for later, so I’m not going to fret about it.

Debt: About 10% of my net investible worth is in debt instruments. My debt portfolio is diversified among bonds and private lending. Because of the private debt, I’m getting decent returns – from 4% to 12% on most of my deals. For a while, I’ve not been able to buy good debt at good prices. But that may change. If so, that’s where some of the cash will go.

Ongoing Enterprises: About 20% of my net investible wealth is invested in about a half-dozen private companies, ranging form $10 million to $1 billion. This is where I get the lion’s share of my current income. I’m very concerned that this income may slow or dry up completely in the next year. If it does, I will have to turn to other income sources. Meantime, I’m working hard to keep those businesses afloat.

Real Estate: About 40% of my net investible wealth is invested in real estate, and 80% of that is in income-producing properties in various locations. If all of these properties were leveraged, I’d be worried. But my debt on them is less than 5%. I may see diminished income. But in the worst-case scenario, it will be a 25% drop, which would still be acceptable.

Hard Assets and Cash: About 5% of my net investible wealth is in hard assets like bullion coins, rare coins, and investment-grade art. These are last-refuge resources. For the time being, I have not thought of tapping into them. That could change.

Cash: As I explained above, my cash position has grown in the past several years because my preferred income-producing assets have gotten pricey. I’m expecting that some time before this crisis is over, cash will be king again. I’m waiting for that.

Basically, I’m doing just about nothing right now. I am actively working to protect my businesses, but I’m not selling stocks. I’m not selling real estate. I’m not selling my businesses. I’m not even selling my debt.

We are going to get poorer. That’s for sure. But – for the moment – I don’t feel that I need to make any changes. The way I diversified my assets 20 years ago seems to giving me the protection I had hoped it would today.

But What About You?

If you have been reading my writing these past 20 years and even loosely following my investing strategy, you should be in more or less the same position I am in. If you feel good about that, as I do, you will probably want to do exactly what I’m doing: mostly nothing.

But if you aren’t diversified and have the lion’s share of your money in cryptos or growth stocks – well then, you are going to have to listen to the advice of the people that persuaded you to put so much of your money in those deals.

And while you are doing that, don’t despair. Double down on your day job. Things will (eventually) get better – and when they do, you’ll invest smarter.

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Kevin, one of the men who climbed Mount Kilimanjaro with me 10 years ago, sent me this photo:

It was taken at Horombo Hut, the night before we were going to make the final ascent. After barely surviving the experience, this is what I wrote about it…

Kilimanjaro – 10 Years Ago 

I never wanted to climb Mount Kilimanjaro. In fact, I never wanted to climb anything.

Still, I couldn’t say no to Dr. Al again. He is a good friend and an important client. And I’d been demurring on all sorts of hiking and climbing invitations from him for about two years. Besides, since the event was eight months in the future, it was hardly more than a note in my calendar. It wasn’t real. It was subject to cancellation. What did I know about Kilimanjaro?

But even then, I never had any illusions that I would actually like it.

There is a lot to talk about here – including the fact that within 48 hours of accepting Dr. Al’s invitation, I had invited two other people to come with us. One was a colleague. Another was a high-school chum.

Why did I bring two more people to the party?

For one thing, it allowed us to have a climbing group of our own. We could plan our own itinerary. We could have our own cabins. But mostly, I felt that by bringing together three people whom I liked and admired we could all have an experience that was more than just a climb. And I was right. Our group of four become fast friends – and I think that friendship will endure, because the deepest friendships are always forged in misery.

More about that misery a little later…

The Making of a Working Team 

Dr. Al was the one with experience. He had hiked several of the most challenging mountains in the world. It was his idea to hike this one.

Daryl, an executive with my largest client, was our technology expert. Inside his solar-paneled backpack was every electronic device a mountaineer could ever expect to need in any sort of situation. As it turned out, we needed all of them.

And Kevin, my high school buddy, brought the good humor and stiff upper lip of a retiree who had dealt with and defeated just about every physical infirmity that middle age thrusts upon us.

As for me, I’m not sure what I brought to the table. I was the guy who had promised Kevin and Daryl that they would have a really great time. So if Dr. Al was the idea man behind this thing, I guess I was the promoter – which made me feel somewhat responsible for its outcome.

We worked well together. And that made a big difference. Because we were about to endure six days of living hell. I know for sure that I would have failed, and might have even perished on that mountain, without my team.

A Great and Stupid Myth of Leadership 

The success of our team got me thinking about leadership.

The conventional view is that success in business is a one-man event. A man takes a look around and thinks, “I can build a better mousetrap.” He builds it and everyone beats a path to his doorstep.

That’s not the way it happens. Most successful businesses are formed out of partnerships. The partnership includes the innovator who gets the idea, and the actuator who makes it real by connecting the innovator with the rest of the world.

Steve Jobs has always been the charismatic face of Apple. But it was founding partner Steve Wozniak who had the programming prowess to create the company’s signature computers.

Thomas Edison was, of course, a genius. But his inventions wouldn’t have spread so far so fast if his work hadn’t been bankrolled by JP Morgan and the Vanderbilt family.

Bill Gates is Microsoft. But as the company grew, his childhood friend Paul Allen was with him every step of the way. In fact, he urged Gates to start the company.

One man is the innovator. The other is the actuator. Both are equally important – but since the media believes in the myth of the Sole Creator, only one of them gets the credit.

There are some advantages to being a lone dog. The biggest one? You don’t have to share the profits. But the advantages of having a partner are many and great.

Without the actuator, the innovator is an eccentric shouting in the void. Without the innovator, the actuator is a wasted talent.

This is a subject that deserves a book. But I will make this point and then get back to Mount Kilimanjaro. If you are an actuator, don’t settle for an executive position. Become a partner. If you are an innovator, don’t think you are being smart in hiring an employee to take care of business. Look for a partner.

Fear of Flying 

I managed to ignore the trip almost entirely until about two weeks before our departure date. Only then did I look at our travel itinerary and agenda.

We were to begin with a 17-hour series of flights from Palm Beach International Airport through Newark and Amsterdam to Tanzania. We would get to our hotel near the mountain by around 10:00 pm, check in, get to bed by about midnight, and get started at 7:00 am.

I’ve spent thousands of hours in planes. But I’ve never enjoyed them. It has to do with altitude. The higher you go, the less air pressure there is. That’s why they pressurize the cabins in jet planes – but only to about one-fourth the air pressure we’re used to on the ground. (It has to do with fuel consumption.) So you wind up with about the same amount of air pressure – and oxygen – as you’d find on a ski run in Denver, which is about a mile above sea level.

When I’m in Denver I get mild headaches, nosebleeds, and have difficulty breathing. Walking up a short flight of steps gets me huffing and puffing.

So that’s one reason I don’t like flying. It beats up my body. But there is another reason too: I’m sensitive to airborne viruses. If I spend hours confined in a locked cabin with 150 other people, there is a good chance I will wake up with a cold or the flu the next morning (which, indeed, happened on this trip).

Ready, Fire, Aim 

I had agreed to fly to Tanzania and climb the mountain, but I was not ready to do so. Not at all.

Aside from needing a visa (which my assistant was able to get for me before I had to leave), there was the question of gear. According to the literature from the organization in charge of our trip, everything I needed had to fit in a single duffle bag and weigh no more than 40 pounds.

My solution was to throw in a pair of hiking boots and a Swiss Army knife, along with a bunch of golf clothes and skiing clothes. But when K saw what I’d done, she had me unpack everything and start from scratch. We spent several hours identifying the items I had, buying those I didn’t have, and double-checking everything against three separate lists she had culled from hundreds on the internet.

It seemed like a terrible waste of time but, as it turned out, I needed every single item K packed.

As you know, my motto in business is Ready… Fire… Aim. Same thing goes for anything big that you want to accomplish (like climbing a mountain). Don’t worry about making everything perfect. Get ready. Then do it.

But be sure to get ready. If you are inclined to shoot from the hip, as I am, you need to find someone to make sure your pistols are clean and loaded before you walk into the bar.

And I Was Off 

Finally, the day arrived.

The trip to from West Palm Beach, Florida, to Moshi, Tanzania, was about as good as a 17-hour series of flights could be. Apart from some bumpy air and one of the worst landings I’ve ever experienced, the majority of the trip was routine.

We were met at the airport by a nice young African man who spoke no English but carried a sign with our names on it. He cheerfully helped us with our luggage, got us into an SUV, and drove us to the Keys Hotel. The ride took about 90 minutes. It was dark and dusty. We were tired. I remember almost nothing about it.

I do remember my first impression of the hotel. It looked like a military compound – a walled structure made up of half a dozen two-story cinderblock bunkers. My room was as bad as I thought it would be – with painted concrete walls, a stone floor, a cold-water shower that dripped rather than poured, and huge holes in the screening to let the bugs in – but I was too tired to care. I got under the sheets and fell asleep.

The Death March Begins 

The next morning, I woke up with what felt like the beginning symptoms of bronchitis.

I dragged myself out of bed and joined my friends in the hotel lobby at 7:00 am to meet our guide. He introduced himself as Raymond. “Do you have any questions?” he asked.

I had about a million, starting with “How can you call this a hotel?” – but I bit my tongue.

Then he had his assistants weigh our duffle bags. And that is when we found out that the limit was not 40 pounds, as we’d been told, but 33 pounds. Something apparently had been lost in translation.

So we had to sort quickly through everything we’d brought and leave about 20 percent of it behind.

The vehicle that transported us to the mountain can only be described as a jalopy. Halfway to our destination, it overheated, and then broke down completely.

It took about an hour for our replacement vehicle to arrive, one that was only slightly less ancient. Several porters loaded our bags on top of it and we got on board. In 45 minutes, we were at the Marangu Gate, our adventure’s official starting point.

How to Sell Anything to Anyone 

But before taking us through the gate, our driver pulled into a funky strip of four or five “shops.”

The first group of merchants all seemed to be selling things we might need. Ponchos. Ropes. Walking poles. If we didn’t have them, they assured us, it would be catastrophic.

Next came the purveyors of T-shirts and wristbands and necklaces. They didn’t pretend their products would save our lives. But they were quite certain that if we didn’t buy them, we would miss out on the “experience” of Mount Kilimanjaro.

Raymond looked on from a modest distance. He was clearly amused.

One fellow in particular impressed me. I bought a T-shirt from him and then he sold me a bracelet. The moment he got my money in his hands, he tried to sell me a necklace. I told him that I don’t wear necklaces. He kept at it for a few more minutes and then went back to selling me T-shirts. So long as my heart was beating, this guy was going to pester me for a sale.

I’ll tell you one thing about third-world merchants. In terms of guts and persistence, they are equal to the best salespeople in the world. Perhaps it is because they are so desperate. For them, constantly hustling to make sales is not about owning a nicer car. It’s about putting food on the table.

The Odds Were in Our Favor, but Just Barely 

We got back on the bus, went through the gate, and rode up to the registration office. While we were waiting for Raymond to sign us in, we talked about the challenge that was before us.

K had told me that the particular route we were taking, Marangu Route – or the “Coca Cola route,” as the locals called it – was one of the tougher ascents. According to what she’d read, only 6 out of 10 people who attempted it made it.

‘That’s nothing,” Daryl said when I mentioned this fact to my friends. “Did you know that 60 people a year die trying to hike to the top?”

I hadn’t known. And I wished he hadn’t told me.

Then he pointed out the signs posted nearby – large brown placards on which all sorts of warnings were printed in yellow. We read, for example, that:

* Hiking above 15,000 feet could cause sudden death. (We were hiking to 19,650 feet.)

* If we got seriously injured above 12,000 feet, we could not be rescued by helicopter because helicopters can’t fly that high.

* Anyone with a cold should not ascend more than 9,000 feet. (I had developed a definite case of bronchitis by that time.)

Words Cannot Convey the Bliss… [BOLD]

Raymond came back with the required documents in hand, and stuffed them in his chest pocket. “Ready?” he asked.

“Ready!” we said, putting on our sunglasses and adjusting our walking poles. And with that, we were off.

I was mildly surprised that there was no little prep speech from Raymond or words of advice or something more to transition us from wannabe hikers to the real thing. It was simply that one word – “Ready” – and we began what became our predominant activity of the next four days: walking uphill.

How can I describe the walking?

If you’ve never hiked Mount Kilimanjaro, I can say this: It is nothing like what you may have imagined. It is not exhilarating. It is not majestic. It is not rapturous or transcendental or any other adjective that outdoorsy people use when they attempt to entice you into their lifestyle.

A much better set of adjectives would be:

* Hellish

* Painful

* Unbearable

* Insane

The drill is this: You begin your climb at 5,000 feet (about the altitude of Denver) and walk about 52,000 linear feet (10 miles) every day. That would be nothing if you weren’t going uphill. I can cover 10 miles in less than two hours without breaking a sweat. But when, in addition to covering those miles, you are ascending 4,000 feet, everything changes.

For one thing, the demand on your heart and lungs surges. For another thing, as you ascend there is less oxygen in the air to feed your heart and lungs.

Each step becomes a physical challenge. Each inhalation is labored. After an hour, you are ready to quit but you cannot. If your guide is kind, he may allow you to stop for five minutes to have some water and adjust your equipment. But then it’s up and at it again. For a second hour. And then a third hour. And then a short lunch. And then three hours more.

Cold As a Witch’s… 

And while this is happening, it is getting colder. Mount Kilimanjaro stands at the equator. In February, the average daytime temperature at the base of the mountain could be 80 or 90 degrees. But at the summit, the temperature ranges from 0 to minus 15 degrees.

As you ascend, it’s about 15 degrees cooler during each day. And there is another 10-degree drop – at least – at night.

By the time you are at the top, it is well below freezing. And with wind. And rain. Or sleet. For us, it was sleet.

That kind of cold isn’t extreme if you have a way to get warm. But when you’re climbing Mount Kilimanjaro, there is no way to do it. Your inner garments are soaked with sweat from six hours of exertion. You can strip them off at night, but don’t expect to be able to wear them again. They will stay cold and wet until the day you leave.

Is this beginning to sound like a litany of complaints?

I’m Saying This for Your Own Good 

I don’t mean it to be. I just want to convey to you what the experience is like – in case you might one day want to climb Mount Kilimanjaro.

So let me share a few more details.

The ascent takes four days. The descent takes two. The ascent is unbelievably hard on your heart and lungs. But the descent can be crippling to your hips, knees, and feet.

You will be in some form of pain the entire time you are hiking. And even when you are resting, you will be cold and wet.

Actual toilets with toilet seats exist only at the first campsite. Thereafter, you will be using open bowls and holes in the ground. The floors and often the latrines themselves will be covered in shit. You will not care, however. You will be happy to use these “facilities,” because the food you will have eaten will have given you diarrhea.

Oh, by the way. Don’t forget to bring your own toilet paper. None will be provided for you.

As for the living quarters along the way, most of them are small A-frames that contain four “beds.” They are not really beds at all. Just wooden rails that hold mattresses so thin that you could feel a pea through them even if you weren’t a princess. The space is so small that only one person at a time can get up and get dressed. And the structure is entirely without insulation. Even with four bodies in a tight space, the air temperature is just a few degrees warmer than the outside.

Our Itinerary – How Does This Sound? 

Day One: The trail itself was well maintained and not especially steep. Yet it felt steep. “Surely the trail will flatten out in a while,” I thought. But that never happened.

After about five hours of hiking, I was exhausted. “What the hell am I doing here?” I asked myself. But I wasn’t going to quit. I vowed to push on. That is when it suddenly became cold and dark and started to rain. I had been sweating. Now I was freezing. Then, just as suddenly, the rain stopped and the sun came out. We made it to the campsite, known as Mandara Hut. Altitude: 8,000 feet.

Day Two: I woke up tired. We had a good breakfast and set off again. The trail was steeper this time and, as we ascended, rockier. The rocks made walking more difficult. We had to pay attention to our footfalls. It would be easy to turn an ankle.

Under the lightweight jacket K had packed I wore a cotton shirt. It became soaked with sweat and, as the temperature dropped, I could see that cotton was a mistake. I eventually took it off and wore the outer jacket only.

We didn’t talk as we walked. We couldn’t because the hiking was too difficult. We were breathing hard and wondering when we would have our next break.

Although Day One felt very hard, Day Two was much harder. Not unbearably hard, but as hard as something can be and still be bearable. We bore it. But just barely.

I wondered later whether the people who designed the trail didn’t purposely create the first leg the way they did. It is challenging but nothing like the rest of the climb. Every day was harder than the one before. Had it been otherwise, we might have given up. Altitude: 12,000 feet.

Day Three: At 12,000 feet, Horombo Hut is about as high as a ski lift will take you in Colorado. People don’t normally live at 12,000 feet. The air is too thin. And so, to make sure we could acclimatize to Mount Kilimanjaro’s 19,650-foot summit, we spent the day at Horombo and took a three-hour hike to about 14,000 feet.

I learned something that day about hiking in high altitudes. It is much, much easier to hike three hours than it is to hike six hours. And not by a degree of 100 percent. It is much more like 1000 percent.

As I mentioned earlier, there are other approaches to the peak that are considerably easier and, thus, have a much higher success rate. Why we took this one, I don’t know. But I’ll say this: If anyone says they climbed Mount Kilimanjaro and it wasn’t that hard, they are either lying or they didn’t take the damned Coca Cola trail.

Spending the third day at 12,000 feet and taking that hike to 14,000 feet was a good move. It gave us a little rest, and we went to bed confident that we could make our next goal: hiking up to Kibo Hut, which stands at 15,500 feet.

Day Four: And the next day, that is exactly what we did. But it was colder and harder than we expected. The terrain became very rocky with lots of switchbacks and hundreds of opportunities to twist an ankle or fall off a crater rim.

Yes, you can fall down the side of the mountain at any number of places on the climb. But by the time you get to those trails, you no longer care whether you fall or not. You are putting one foot in front of the other. You are staring at the ground. You are thinking about nothing. You are trying not to think. Because the only thing possible to think about is your pain.

From Hades to Hell and Back 

Day Five: We had heard that Kibo Hut was terrible – crude, rude, etc. But we actually liked it better than the other campsites. Because instead of those stupid A-frames, it has one big barracks with bunk beds. We had a room that could accommodate eight people. Desperate for a little space after being cramped for so long, we resorted to bribery in order to be allowed to occupy the room by ourselves. There was even a table and chairs in the room so we could have our dinner without leaving the building.

You wouldn’t want to leave the building. It was freezing and windy and before long it was hailing. The hailstones weren’t big but they hit hard. We huddled inside, eating our tasteless soup and abominable stew and drinking canned coffee. At 7:00 pm, we were in our sleeping bags trying to get some sleep.

At midnight, we were awakened to start the ascent to the peak. We had some biscuits and tea and were outside climbing again by 1:00 am. The hail had been replaced by a steady snowfall. It was very cold and very dark. We wore our warmest jackets and used headlamps to guide us.

It didn’t seem possible, but the ascent to Gillman’s Point – which is technically the summit – was even worse than the ascent to Kibo Hut. My bronchitis had only worsened on the climb. I had a runny nose and a fever. Every step felt impossible to take. Yet I took them.

We climbed in the cold, over the snow-covered trail and upward along narrow switchbacks of stone and gravel. My breathing was loud. Everyone in our group could hear it. Daryl had charged up my iPhone and I was listening to music, which helped a great deal. If I had any thoughts in my head, I can’t remember them now. I remember only putting one foot in front of the other and telling myself that eventually it would be over.

Finally, after six hours, we reached Gillman’s Point. But some two hours away stands a higher summit: Uhuru Peak – the one that is Mecca for hikers.

When Yours Truly Fell Apart 

At this point, everyone knew that I was on my last legs. Raymond had a device that measures oxygen in the tissues. Dr. Al used it to examine me. A good count is 97 or 98. If it falls below 90 in the States, you are usually put on oxygen. When you are at extremely high altitudes, a lower count is expected. Raymond said that as long as the count was about 80 he had been told not to worry.

My count was 73. “If it drops below 70, you could be in serious danger,” Dr. Al said.

To make sure the little device was working, he tested it on Raymond. It read 93. He then tested it on himself: 86.

“See that,” I thought. “We’re all hiking under duress. And I have bronchitis besides. No wonder I am dragging.”

“If you want,” Dr. Al said, “We can all go back now. We’ve reached the summit.”

“But it’s not the highest point,” I said bravely.

I looked at Daryl. He seemed beat. Then I looked at Kevin. Like me, Kevin is nearing his 60th birthday. So I expected him to be in my sort of shape – meaning bad. But he looked kind of okay. “He doesn’t have bronchitis,” I thought. I asked Dr. Al to test Kevin’s oxygen.

Big mistake. He tested at 70.

Dr. Al couldn’t believe it. He retested him, and it was 70 again.

“You should be gasping for breath,” he told Kevin.

“I feel pretty good,” he said.

“There is no medical explanation for this,” Dr. Al said.

“Let’s get going,” I said, pulling myself to my feet. “I don’t need no bloody oxygen.”

“Are you sure?” Kevin asked. “What do you think your chances of finishing are? Better than 60 percent?”

“Ninety-nine percent,” I told him. But I was bluffing.

The next two hours were not as difficult as the previous six had been, but I was getting weaker. Every once in a while, I began to cough, and my coughing was deep and exhausting. We pushed on, poli poli(slowly slowly) as the locals say. And finally, Raymond put his hand on my shoulder and motioned for me to look ahead. There it was. The sign on top of Uhuru Peak. We had conquered Mount Kilimanjaro.

I was very happy but I was too tired to enjoy it. I sat down and settled into a blur. Some time later, I got together with the guys for a group photo. Then, looking at me as if he were concerned, Raymond urged us to start our descent.

The descent was not the relief I had hoped it would be. I had completely exhausted myself going from Gillman’s Point to Uhuru Peak. I had nothing left in me but I did my best to keep up with the others. I couldn’t. They moved ahead. I slowed down. Raymond stayed with me.

It took three hours for us to get down to Kibo Hut. The last hour, I was walking like a zombie. Like I was dead.

Raymond said, “After a good meal you’ll feel better.”

I didn’t say anything but I knew what he meant. We couldn’t stay at Kibo Hut for more than an hour. We had to hike another three hours down to Horombo. But I didn’t have the energy to take another step.

I did my zombie shuffle into our room and, with my teammates looking on slack-jawed, walked passed the table of food and crawled into my cot.

When the guys started getting ready for the hike to Horombo, I told them I wasn’t going with them.

Dr. Al called for Raymond to get him a stethoscope. He examined my lungs and took my temperature and used that oxygen-measuring device. In every department, I was in bad shape.

This guy can’t go on,” he told Raymond.

Blessed Relief 

“Can we get a stretcher?” Dr. Al asked.

“It won’t be easy,” Raymond said, “but I’ll try.”

A half-hour later, I was strapped to a stretcher – really a metal rack suspended on a bike tire. And with four men, one on each side, I was transported from Kibo Hut to Horombo, 4,000 feet below.

It was a very bumpy journey. I was half-delirious but happy to be headed toward a lower altitude.

Back in our first A-frame, I curled up in bed and stayed there until the next morning. When I woke up, Dr. Al examined me. I was considerably better in almost every regard. “One thing, though,” he told me. “You have to get a complete exam when you get home. I think you have walking pneumonia.”

I hadn’t wanted to go on that climb. But I went. And even though I had made jokes about how I had no intention of finishing it, I did feel, deep inside, that I would make it or die trying.

Mandatory Philosophic Speculation

What does this say about me? I don’t know. Dr. Al and Kevin and Daryl all had their own reasons for pushing themselves to the top of that mountain – and they had their own difficulties along the way. I hardly saw the landscape, beautiful as it was, because I was looking at the ground. I don’t have funny stories to tell, because there were none.

But I will say this about climbing Mount Kilimanjaro. If there is a better way to test the limits of your endurance, I don’t know it.

Dr. Al, who has climbed half a dozen tough mountains, told me that, as time passes, I’ll forget about the pain and remember only the fun. “What fun?” I asked. He just smiled.

By the time I’ve told this story a dozen times, it will sound much more dramatic than it does now. If I live long enough to tell the tale to my grandchildren, my feat will seem mightier than Jon Krakauer’s in his book Into Thin Air. (If you haven’t read it, I recommend that you do.)

There is a saying among Tanzanians: “If you have never climbed Kilimanjaro, you will never know what it is like. If you have climbed it once, you do. If you have climbed it more than once, there is something wrong with you.”

I won’t climb Kilimanjaro again. But I will be proud that I did it for the rest of my life. And nothing I’ve done so far in business (or ever expect to do) will take that kind of willpower.

Which is a good thing, when you think about it.

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“The best work is done with the heart breaking or overflowing.” – Mignon McLaughlin

I’m sitting on the edge of a dirty planter box at the back of the five-star London hotel in West Hollywood.

I have to sit here because I want to smoke a cigar and read. I’d prefer to smoke on my balcony, but the “welcome” brochure of this $500+ a night hotel made it very clear that smoking anywhere but in its two cramped, dingy designated smoking areas is prohibited. Violators are fined $500.

Until the last five or six years, all of the five-star hotels I’ve stayed at provided pleasant places for smokers to sit, relax, work, whatever. These were retreats with the same level of comfort, elegance, and ambiance as you had in the hotel. The only difference was that they were away from the common areas where, understandably, non-smokers should be able to congregate smoke-free.

The smoker retreats were separate but equal. They made you feel like an honored guest with a right to smoke in your own corner of luxury. And that felt good.

But here at The London in West Hollywood, both of the smoking areas appear to have been designed with a very different message in mind: “You may be our guest, but you are nonetheless a deplorable.”

Designated smoking areas like these have been popping up in airports, hotels, and other private-public places all over the world, but they are nearly ubiquitous in Los Angeles. LA, in its evolved wokeness, provides sanctuaries for illegal immigrants and humiliation zones for legal smokers.

But that’s not what I wanted to talk about today. I wanted to talk about a comment I came across while sitting here, smoking and reading, on this dirty planter box…

Good to Great in Art: Noticing What Has Changed You 

The comment was by Anne Lamott. The subject was art – literary art, in particular. But what she said applies to film and theater and perhaps other art forms, too. She said:To be great, art has to point somewhere.”

I think that is a very useful idea.

Steven Spielberg, for example, has produced many good films and several very good films. But he has also produced one great film – and that was Schindler’s List.

 Spielberg’s ET: The Extra-Terrestrial was a cinematic blockbuster and a work that was brilliant in many ways.  It was entertaining. It was moving. And it was undergirded by an admirable though Hollywood-common moral perspective (that what matters most is not our superficial differences but the goodness of our hearts).

I saw it many years ago, and still remember it as being good. But definitely not great.

Schindler’s List, too, had great commercial and critical success. It was more serious than ET, but that is not what made it a better movie for me. The difference between ET and Schindler’s List is that the former entertained me but the latter changed me.

Schindler’s List not only entertained me, it allowed me to recognize what a purposeful life could be. I remember slipping into a protracted bout of self-criticism after seeing it that eventually led to making some important life-altering decisions.

There are other movies that have had a similarly powerful effect on me. A short list would include The 400 Blows, Apocalypse Now, Taxi Driver, and Sunrise: A Song of Two Humans.

You can apply the same standard to novels. I’ve read lots of good and very good novels, but only about a dozen or two that have changed me. Heart of Darkness, The Sun Also Rises, To Kill a Mockingbird, and The Adventures of Huckleberry Finn, to name a few. Crime and Punishment is a particularly good example. It was a riveting story that forced me to reexamine some convenient truths I had come to accept about social systems and human nature.

To be great,” Anne Lamott said, “art has to point somewhere.” I take that to mean it has to point me at something – at some truth about a part of the world I did not understand or some deeper part of the world I thought I did.

I have a half-baked theory of what it takes to go from good to great in film and fiction: It must affect me strongly on two planes, which I think of as vertical and horizontal.

The horizontal plane is the social/historical perspective. What a time or place was like – e.g., Italy in WWII or the South under Jim Crow. I need to feel that I’ve learned something that is both important and true.

The vertical plane is about the individual – about what it is like to be a human being. To be great, a film or novel has to get me to examine not just what I believe is true of people but what is true about myself.

Okay, that’s half-baked. And my butt is killing me from sitting on this narrow cement wall for almost an hour. I’ll go into the horizontal/vertical stuff some other time. Meanwhile, what do you think of this idea about good and great art? Does it make sense to you when you consider the movies you’ve seen and the books you’ve read?

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