As the coronavirus pandemic spread across America and the world, Ryan asked David for his thoughts on its long-term impact on society and our economy – and what investors should be doing now.
Ryan Williams: We’re still in the middle of the coronavirus outbreak here in the U.S., but some are already comparing the economic impact to the 2008 financial crisis. What similarities do you see and what’s different?
David Rubenstein: The similarities are that it’s a big economic shock to our system. With the crisis of 2007, ‘08, and ’09, we went into what’s called the “Great Recession” and we had considerable economic decline and a dislocation of the financial system that went on for a while. Today we see something like the Great Recession, driven not by intrinsic problems with our economy, but rather by a health care crisis. On top of that, we have an energy crisis as well, where you’ve got energy prices at historically low levels than they’ve been in the last 20 years or so. Those things together make this a very serious problem and we don’t really know exactly how to fix these problems because we’re pouring enormous amounts of money into the financial problems, but we don’t know whether we’ve put enough into it from the Fed and the Congress. We don’t really know when the health care crisis will end. And we don’t know when the energy crisis is going to end.
Ryan Williams: What are a couple of things the government should be doing and is there anything tangible that would give confidence to the markets?
David Rubenstein: The most important thing that the government can do and is doing is to deal with the health care problem, and I think that Dr. Fauci, among others, has done a very good job of trying to lay out what the challenge is. Until the health care crisis is behind us, I don’t think the economy can function again the way it should. Once we think we’ve broken the back of the healthcare problem, not having completely solved it, but broken its back, we can begin to look ahead. I think this is probably going to take four to six months before we’re back to some kind of economic life similar to what we have known before. It could be that we go back to work before that, but I don’t think the economy is likely to be back in some kind of really meaningful growth pattern for another four to six months at least.
Ryan Williams: A major trend we’re seeing already is a huge move from equities to cash, but with the Fed’s action to go to near-zero interest rates there is very little yield to be found in most investments. Where should investors put their cash right now?
David Rubenstein: Well first, cash is king, so even if you get no return on it, having a fair amount of cash is very comforting and I think provides a certain amount of security. If you have enough cash for your basic needs and your security, don’t panic. Having your money managed by people who have managed through crises is a good thing. Sticking with relatively safe things is a very good thing. Today there are many and in some cases better tools for individual investors, including easier access to alternative assets. Real estate could be an interesting area to look for value. So, I would not try to time the bottom of the market or try to be a stock market genius right now. We don’t know exactly where the economy is going, so I would keep a fair amount of cash just to give yourself security and peace of mind. And if you’re looking for some return, the equity markets probably will come back, and there are other places to look right now. If you have people managing your money, you should consider having people who are not trying to do heroic things.
Ryan Williams: We’re building our philanthropic initiative, Cadre Cares. What advice do you have for companies and individuals who are looking for ways to support their communities in moments of need like this?
David Rubenstein: I think it’s very important for people to try to address the communities in which they live because they are more likely to feel affected by what those communities are doing. So, talk to others in the same situation, talk to people you work with, people that you deal with in a philanthropic manner. Try to work through concentric circles of people you deal with and try to see where the money you have and the energy you have and the ideas you have can be best used. These are the kinds of things that people will remember many years from now. So, trying to work to help people now is going to be very important to getting our economy back together again.
Ryan Williams: You’re talking to senior government and corporate leaders all day every day. What advice are you giving or getting that more people should hear?
David Rubenstein: What I am saying is that one: we shouldn’t panic, we have to put health first, health of people over everything else. When we know we’ve dealt with the health problem then we can begin to address the economic problems and I think we shouldn’t think we’re going to get out of this problem over night and there’s one easy solution that’s going to solve our economic problems, just as there’s no one solution that’s going to solve our health care problems. This is something that comes along once a lifetime. We’ve never had anything quite like this before, even the great influenza of 1918, while it had greater impact in terms of death, than COVID-19 appears to at this time, the economic impact does not yet appear to have been as significant then as it has been now. It’s a different situation, but the great influenza of 1918 was modest in terms of an economic impact compared to what I think the economic impact is here.
Ryan Williams: Tell us about how you’re hunkering down right now? What’s a typical day like for you?
David Rubenstein: I’m in my house and I’m doing several Zoom calls a day, on meeting for various non-profit boards. I am interviewing people for various organizations: The Economic Club of Washington, The Library of Congress, my Bloomberg television show. I’m doing a lot of reading trying to keep up with what’s going on and trying to figure out how to use all the technology that I really don’t know how to use as well as I should. So, I am learning how to make sure all these equipment pieces are actually working and then frantically calling people who know more than I do when I can’t figure out how to get them to work.
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