Riding Out the Storm: Debt and Survival in the Covid Era - 2021-03-19

Charlie Munger's wisdom rings especially true in times of crisis: steer clear of companies drowning in debt. Why? Because when the storm hits, those are the first to sink. Cash is king, and a robust war chest ensures survival. A year into the Covid-19 pandemic, the storm rages on, with rising case numbers and continued uncertainty. Thankfully, our own ship has weathered it well. Our jobs remain secure, and our debt load is minimal – we could, in theory, pay off our house if we chose. But for many, the situation is dire. Years of financial mismanagement and excessive leverage have left them vulnerable and desperate. This principle extends beyond businesses to personal finances and even investment strategies. Investing with money you don't need provides a crucial buffer during market downturns, allowing you to ride out the volatility. The pandemic has brought these realities into sharp focus. I witnessed a stark example: a spacious 3.5-story landed house with 5 bedrooms, sold for a mere S$1.4 million. Job losses and mounting debt forced the owners to liquidate their prized asset. Even more baffling was the case of a property agent who lost his income during the pandemic. Despite struggling to pay his daughter's school fees, they kept their house's air conditioning running 24/7! This disconnect between financial reality and lifestyle choices highlights the devastating impact of prioritizing luxury over prudence. Luxury, coupled with excessive debt and meager savings, is a recipe for disaster. This isn't just theory; it's a harsh reality I've seen unfold. I urge you to avoid this perilous path. Build a solid financial foundation through diligent saving and wise investing. This way, you'll be prepared to weather any future storms, without facing the agonizing choices that others are forced to make. Looking back, it's striking how many major upheavals I've witnessed in my relatively short time. Think about it: The Asian Financial Crisis (1997): That was a real wake-up call, showing how quickly economies can unravel.

The Nipah Virus Outbreak (1998-1999): Which led to Singapore banning pig imports from Malaysia and except relax to import from Sarawak in 2024, this outbreak was a scary reminder of how quickly infectious diseases can impact our lives and economies.

The dot-com bubble burst (2002): It was a real-world collision that shattered IT careers. I witnessed firsthand the sudden, drastic drop in fresh graduate salaries, and within a year, I too, found myself without a job.

SARS (2002-2004): A chilling preview of how a respiratory virus can disrupt global travel and commerce. I saw customs officials install thermal cameras for temperature screening for the first time! The Subprime Mortgage Crisis (2007-2008): The domino effect of risky mortgages collapsing, triggering the global financial crisis, was a stark lesson in interconnectedness. Sadly, your grandmother lost some of her savings due to a structured deposit at the bank. The Eurozone Crisis (2009-2012): This one highlighted the fragile balance of shared currencies and sovereign debt. COVID-19 (2020-2022): This pandemic redefined 'global disruption,' impacting everything from healthcare to supply chains. Our whole family fell sick, and I witnessed many people lose their lives. For the first time, we were mandated to work from home, and non-essential businesses were ordered to close. It's clear to me that these kinds of events aren't anomalies. They're part of the fabric of our world. So, I fully expect to see more crises in the future. The exact timing? That's the million-dollar question. But the certainty of their arrival. That's what I'm banking on. Now, in my experience, I've seen enough to know that complacency is a dangerous game. My kids, if you choose to ignore the lessons of the past and fail to prepare, you're essentially inviting trouble to your doorstep.