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We’re About To Get Schooled

The origin of the phrase “hope is not a strategy” is disputed, but I generally hear it in a business context. I get the feeling that educators are going to become acquainted with it pretty soon.

By this time in August, schools in much of the country are scheduled to be filled with teachers and students. Many universities will start a week or so later. Some will teach remotely, but most are still slated to be in-person or some hybrid thereof. As the dad of kids in both high school and college and the husband of a school employee, I’ve been privy to the plans — if you can call them that — of the superintendents and provosts.

There was a peculiar kind of cognitive dissonance on display early in the Covid-19 pandemic by educators. Of all people, they’ve failed to learn. Back then I contacted the local superintendent and the college provost as cases were spreading about when they planned to send kids and teachers home. The answers were “it’s still rare here” when there was almost no way to get tested and when epidemiologists were warning that it was spreading exponentially. 

That fear of looking dumb or alarmist repeated across thousands of districts and campuses probably cost thousands of lives. It’s somewhat excusable because it was hard back in February or early March to imagine what the world would look like just weeks later. 

But what about now? Decision-makers all certainly know the meaning of “exponential” if they didn’t before. The U.S. has had 145,000 confirmed Covid cases in just the past two days and almost certainly many more unreported ones as people face long waits to get tested in the Sun Belt. What is more, a higher share of those cases is from a young, working-age cohort. Some schools in Florida, which reported over 15,000 cases on Sunday, open in as little as 20 days. I’ve been following private forecasts by Qijun Hong, a postdoc at Brown University, who has been producing remarkably accurate infection models for several weeks. Here’s his latest for Florida.

This is for confirmed cases. Of those tested, very few are children, but this week we learned that an incredible 31% of children tested randomly in Florida were positive. Even if the number of new cases in Florida in August is just half as high as Mr. Hong is projecting, is that low enough to reopen schools? The answer is almost certainly “no,” and here’s why.

In the first month of school alone, about 1 in 60 Floridian adults would be diagnosed with Covid-19. A school with 500 kids will easily have 40 teachers, aides, principals, coaches, secretaries and janitors plus a handful more substitute teachers — all part of that potential pool. And then there are easily 1,000 more adults who live with or regularly see those children who also could be diagnosed. And don’t forget the spouses of those teachers, janitors, principals, and substitutes  — one of them could be diagnosed. Even if we assume that kids can’t spread the illness, the chances that at least one of those 1,100 adults doesn’t face quarantine or receive a diagnosis is tiny.

And if an asymptomatic teacher’s test is positive? With tests taking five or more days to come back, that employee will have had time to infect plenty of other adults and children. Will they all have to quarantine? And if they don’t, who wants to be the substitute teacher for the one who is positive? How many substitute teachers earn enough to take that risk and how many can the school system afford to pay? How sure are they that children can’t pass it on and at what age does it become more likely that they will? Try asking this question and getting a straight answer.

If the substitute starts feeling ill, will the system pay for his or her Covid tests or treatment even though they aren’t on the insurance plan? That substitute may have visited multiple schools, so which school is on the hook and will the teachers or students he or she met at each school then have to quarantine?

What if the first person diagnosed works in a middle school or high school? Well then he or she isn’t in contact with 25 kids daily but more like 125. In the case of a cafeteria worker it would be hundreds. What then? 

The schools tell us they are taking steps, including lots of extra cleaning and social distancing, but how effective will they be? Having half as many kids in a room at a time will help, and so will mandatory masks, but kids aren’t especially careful or sensible. Even 100% compliance with mask-wearing and hand washing only would reduce, not eliminate, contagion. We know that an infected person spending an hour at a party or bar can infect several people. Even if schools are half day, the period of exposure will be longer.

The odds of any given school not being touched by Covid-19 are a bit better in most other states, but not great. One-in-100 or even one-in-500 adults infected in a month still makes an infection at a given school quite likely. With perhaps a third of teachers in higher-risk categories because of age or medical history, it is unfortunately only a matter of time before some of them are on ventilators.

The situation could be even worse for colleges hosting young adults who are most certainly capable of passing on the illness and who generally lack a healthy appreciation of their own mortality. What happens when a student in a dorm of 150 tests positive? He or she will have been contagious for a while. Remember when a single sick person who left the Diamond Princess sparked a lockdown of everyone else in their cabins? Weeks later 691 people on board had it. That was with passengers confined to their rooms and being brought their meals. Will colleges deliver meals to the student? Whose job will that be? And what about shared toilet and shower facilities? How many positive tests in a building before everyone is sent home? Is a dorm being set aside only for those who test positive or will they just be sent home to infect their parents and siblings? And what about international students who can’t go home? Will airlines or Amtrak transport infected students anyway?

I understand why colleges are so eager to have students return in person: money. Empty dorms and students deferring will put even more financial strain on them. I also understand why primary and secondary schools are doing it: pressure from politicians and from parents worried about their children falling behind or about who will watch them while they work. Unfortunately, the plans to keep everyone healthy are vague and ad hoc and we still know too little about this disease.

Instead of hazy, expensive, and unworkable plans, how about doing some serious planning for a better remote learning experience in the fall while the world waits for a vaccine? Online learning in the spring was subpar, but it doesn’t have to be.

Columns · investing

Bear Markets

With apologies to Stanley Kubrick, I titled my latest Heard essay “How I Learned to Stop Worrying and Love the Bear Market.

It sounds a bit flippant at a time when so many people are seeing their nest eggs melt down on paper, but the message is important. Retail investors lag the market significantly because of timing errors and the biggest mistakes are made at junctures like these. If the 20% bounce from the coronavirus-fueled low turns out to be a dead cat bounce then it will stoke further pessimism and cause people to either sell or to have less of their wealth in risky assets such as stocks once the eventual turn comes.

I’d love to tell you when that turn will be, but I can’t and neither can anyone else. The important thing to remember, though, is that if you were comfortable having, say, 70% of your nest egg in stocks when the Dow was knocking on the door of 30,000 then you should feel the same way at 20,000 or (gulp) 15,000. The richest gains of the next bull market (no, I don’t think this recent bounce was the start of one) probably will come early on. They always have before.

For example, if you put $100,000 into a plain vanilla U.S. index fund at the very start of the last bull market in March 2009 and had sold at last month’s peak then you’d have $630,000 including dividends. If you had decided to wait three months to make sure it wasn’t another false alarm then you’d have just $450,000.

Bad times are surprisingly good. If you could go back in a time machine and buy stocks at the bottom of every bear market of the past 90 years but had to sell as soon as a recession had officially ended then your annualized return would be a whopping 64%. You would never have lagged the market’s long-run return.

And what if you really can’t sleep at night? Well that’s okay – Covid-19 is enough to worry about! But then you should do one of two things. One would be to dial back the risk you take permanently – no cheating the next time everyone around you is getting rich on pot stocks or whatever the next fad will be. You’ll be that much older and closer to retirement then anyway. The other would be to entrust your money to someone else like a reputable fee-only adviser or a robo-advisor like Betterment or Wealthfront and just check it as infrequently as possible.

Why should you (sort of) like bear markets? Because they’re the time when your attitude can make you a superior investor. Everyone is a genius in a bull market, but tough times are when your mettle matters – no finance degree or superior IQ required. When those glossy brochures from a brokerage firm tell you that the long run return of stocks is 9.6% or whatever, those returns include bear markets that have seen portfolios cut in half or worse.

That’s my usual spiel, which you can read about at length in my book as well, but it’s when I finish giving it and emphasize that nobody on Wall Street knows anything that someone inevitably asks what I think about the market anyway.

I used to get paid a lot to tell people which stocks to buy. Now I get paid a more modest sum to write and edit articles about the same thing. It doesn’t mean you should listen to me about what or when to buy. But, for whatever you may think it’s worth, I’m pretty pessimistic at the moment. If I hold to form then I’ll still be pessimistic when the turning point is reached and we all should be buying stock funds like crazy.