SRED and the Economy

One of the benefits of the current flu epidemic for SRED claimants is the government’s policy of getting money into the hands of business. No site visits are being done. Other means of assessing claims, and presumably assessing them speedily, from home no less, are probably being contemplated and explored. It is not a time to shy away from filing a SRED claim.

Get your hands on cash. A valid SRED claim is one way to do that. Cash is king now. It is powder to be kept dry for opportunities that will shape up for asset acquisition after the market has bottomed, probably sometime this decade. I was long expecting the bubble to burst, but I didn’t know what the pin would be. Now we know. Stock markets around the world are pricing the new reality, and probably have a lot further to fall. Don’t chase prices….let them come to you.

Real estate will probably take a tumble. Just going by memory here, but my recollection is that the 1840 stock market collapse was preceded by the 1836 Chicago real estate collapse. The 1926 Florida real estate bust was followed by the 1929 stock market crash. The 1984 real estate downturn was succeeded by the 1987 flight from stocks. But sometimes stocks are hit first, such as the 2008 drop being followed by the 2012 real estate bottom. My guess is that the market bottom will happen early in a presidential term, so maybe around 2025. If Trump is re-elected (not seeming as likely as it did before the current crisis), maybe the bottom will happen in the next couple of years. If Biden, he will want to delay it until his second term. But that presupposes that the President can do anything about it.

He may not have the suasion and the Fed may not have the resources to bail out the banks in the unfolding crash, even though they have undertaken to underwrite assets from banks without limit. In the late 90s, Wall Street bailed out the S&L industry. Ten years later, the Fed bailed out Wall Street. Now 10 years later, who will bail out the Fed?

Don’t let all of this obscure your focus. Get your SRED claim filed!

Thoughts About the Corona Virus Epidemic

I went for a walk yesterday in a local in-city wilderness preserve. It’s a trail that meanders around a lake, but has moderate ups and downs. It has some rough surfaces that made it surprising to see strollers with moms and dads and kids out for a walk. It looked like a national holiday. I noticed that the dads generally did not appear glad to be there. One of the advantages of the corona virus induced shutdown is the increased family togetherness. I think people feel the stress and uncertainty of the future. The fear of the unknown is a bigger problem now than the virus itself. That may change though.

In some nations, Italy being an example, physicians are having to make the tough choices associated with limited equipment such as ventilators. If a 20 year old with severe breathing problems needs the ventilator being used by a 75 year old, the switch is being made, perhaps not in every such instance, but it happens. It must be an agonizing decision and action for a physician when one is likely to die without the ventilator. Aside from such pain, our health care workers are facing increased risk of contracting the corona virus, and many have.  They deserve our gratitude and respect.

The choice described above brings up the question of which life is worth more --- the life of a baby, or the life of an old person who has contributed a great deal to society and continues to enrich other people’s lives. The question is too vague. Worth more to whom? Each person’s life is worth more to himself and his family. So let’s say the “whom” is humanity at large. It’s a hard decision…….if you are a thinking person. We don’t know what the baby will do, but we do know that the track record of the oldster suggests more good to come. It’s not a choice I would want to make.  

The Morality of Hoarding

A phenomenon that has been noticed in connection with the current goods shortages connected with the virus scare is resale of hoarded items. People have gone to Costco, for example, and bought all hand sanitizer and then resold on Amazon at huge mark-ups.

While such actions are viewed with disgust and greeted with calls for interdiction, I disagree. The free market is too important to the welfare of society to impede it because of such concerns. To have a free market, you need property rights, voluntary transactions, a price system, and a profit system. It helps to have division of labor too. Preservation of such rights and functions aid overall prosperity.

The guy that hoards and later releases goods into the market has performed a valuable function. In a free market, prices signal demand. The higher the price, the more acute the need that the price reflects. The guy that hoards by buying a product at a relatively low price and later sells at a seemingly outrageous price has in effect saved goods from consumption until the time they are most needed. He has performed a valuable service, and the profit he makes is his reward and incentive for doing so.