209: 4 Doctors, a Virus, and a Battered Economy: Part 2

Buck: I’d like to shift gears a little bit and now that we’ve kind of gotten to the point we’re talking about the curve you know where we are with that while we wait for the flattening of the curve obviously we’re trying to get these treatments we’re trying to you know put some bandages on this thing but ultimately what we are really waiting for is the development you know of a of a vaccine of some kind I’m wondering if one of you could explain the process of what goes into creating the vaccine and why does it take as long as it does especially given the fact that you know it’s not like we’re in 1919 and we’re dealing with the Spanish flu right we’ve got a lot of these tools that John talked about, we’ve got artificial intelligence to determine probably the more difficult the parts of the virus that are probably at best to target with with an antibody those kinds of things. Why does it take you know this so you know 12 to 18 months as everybody’s been saying and I just hope they’re not saying 12 to 18 months to up to 18 months from now but why it why does it take that long and do you really think it’s gonna take that long or is that just to make sure that nobody’s getting too excited.

Ian: Well I can’t speak to the actual specifics of it but I can give some context which has helped me. So I’ve kind of looked back at various pandemics and various sort of initiatives. The fastest vaccine that we’ve developed as far as I know is four years start to finish that happened in the 50s right and now we certainly have better tools as you mentioned to accelerate that but there there are certain just fundamental limitations that need to be acknowledged for a vaccine before a vaccine is introduced to the public, deployed on a large scale potentially you know hundreds of millions if not billions of people would be eligible for this and you certainly want to have everything as best as you can prior to that deployment. And you know again I can’t speak to the specifics but I will also comment that you know there’s a reason why certain viruses don’t have vaccines right. We tried for a long time to get an HIV vaccine and it’s just proven confounding. We’ve had corona viruses as John mentioned like four of them have been common colds they’ve been circulating for years and years we still don’t have a vaccine against that two of those corona viruses the SARS and MERS have been you know proven lethal and we’ve developed initiatives to get that rolling but we still don’t have a coronavirus vaccine so within that context to me you know 12 to 18 months sounds fairly ambitious you know and even if you could accomplish the science behind getting it to a an eligible level there are other challenges beyond that which include you know production challenges like right now as I understand it our vaccine production capabilities within our own factories are you know fairly muted if you take it and try to scale it to a population of 300 million I mean we’re like the production capacity is whatever call it five to ten million doses per year for certain vaccines and you’re gonna ask our country with appropriate you know advance notice but we’re gonna ask them to sort of figure out a way to scale that impressively. So I would just sort of add those yeah sort of a framework to get to this discussion.

Buck: And then that’s a good point and actually makes it even sort of more scary I mean maybe

Paresh you can comment on this but that’s a good point I mean who’s to say that we will that we can get a coronavirus a Covid-19 type vaccination or not I mean like like Ian said you know coronaviruses are usually associated with the common cold and we haven’t figured out a vaccination for the common cold is there a chance a good chance that we may not develop a vaccine at all in the next year or two or three?

Paresh: Yeah I think a couple things I think Ian summarized it pretty nicely but if you really look at the the vaccine tracking data I think there’s about four vaccines and but they’re currently looking at for Covid-19 most of that is in the phase one or the safety timeframe to see if these would be safe to use in humans they’re able to kind of push that forward little bit faster than normal as they normally take years to get through that first phase one part because of some of the data they had for both SARS and MERS that initially started the work and as it died down I think some of the pharmaceutical companies and governments sort of lost interest you know I just it takes time both because of the fact that these viruses mutate and also for some of the facts that it just takes time to get through these safety testing protocols to actually see if you can actually get something that is safe to use let alone whether it works so I think I agree with the in that 18 to 24 months as ambitious on top of that once you actually develop the vaccine in order to get it out to a population of businesses then itself takes another six to 12 months sometimes just to produce vaccine.

Buck: John I’m curious lighten your take on this and maybe you know for people who are listening if you have any more insight into the you know first of all you know if we couldn’t if we couldn’t do it for HIV is there a possibility that we still we won’t be able to do it for this and you know if that’s not if the case then why and then maybe kind of tell us what you know from you know obviously I think you’ve been following the literature on this and give us some sense of where we are with vaccines.

John: You know i well I agree with pretty much everything that’s been said so far. You know typically the first stage is to look for epitopes which are places in the virus that and anybody could potentially bind usually in the caps that are in this case in the spike protein this thing is very spiky it has a kind of a receptor sites. So that’s usually a couple here’s a man I think as Ian mentioned there’s a phase one two and three studies and there has never been a vaccine developed to a coronavirus. Now that’s not to say it’s not possible. I think that twelve months to have a vaccine up and ready to administer it’s highly unlikely I think that some of the work as I said early in the program there’s an 80% homology or similarity of the of the nucleotides from SARS to Covid-2 so some of the some of the SARS vaccine work has definitely informed and helped the vaccine makers but I do not think that there is a hundred percent probability we will have a vaccine at all. I think it’s probable but not not definite and the time frame is likely more at a minimum with a crash program and everyone’s doing these crash programs probably still looking at more like 18 months than 12 months.

Buck: Yeah well do you think John what do you think though I mean like you know I go back to the the comment that we don’t have vaccination for the common cold that they maybe we never really needed one so we never really tried, you know and then the HIV I mean because it’s a retrovirus was is it just something that’s probably inherently more challenging and that’s why we never got a vaccine for that?

John: Yeah no those are all good points and you know there are also companies working on just developing antibodies given sort of as a drug yeah and maybe not using the indirect route of having your own body producing antibodies. so I think I think there’s a good probability we’ll end up with a vaccine I really do. Time Frame wise not going to be soon.

Buck: Yeah okay so while we’re waiting for this we’ve got you know obviously we’ve got the country we’re dealing with you know we’re dealing with some issues we have we’re sitting at home we’re trying to flatten the curve. Here’s a question that you know it’s controversial particularly in I think our medical space but my understanding is when we flatten the curve we aren’t actually decreasing the number of cases overall that we expect we’re just stretching it out and so obviously the point of the quarantine is so that we don’t overrun the hospital system and you know like right now you know we have shortages of thing you know protection for medical workers but at some point when we start coming down in that curve how quickly do you think we can and should you know get back to work, start opening things up at least for for those businesses that you know that people people kind of need to do? I mean do you do you have any feeling on that I mean there is a little bit of a balancing act here right I mean obviously we can’t stay out over and if we know ultimately that overall probably the same number of people are going to get infected then how does that you know how does that shape your outlook on what we should do? Ian?

Ian: I would say that you know first of all an arbitrary return to the old economy that’s nonsense okay so great that’s not rational and it practically doesn’t exist. So there’s you know the path to you know the new normal if you will I think is a discussion there’s two extremes right you have you know take your chance the Swedish approach hey we’re gonna go out there and and just let everybody get herd immunity and see what happens that also is demonstrably probably not a good idea for our country and then there’s the more draconian approach right where are you just like it’s the hammer where you just put everything draconian measures China like everybody their house where the virus is going nowhere and somewhere in the middle there’s a dialogue and there’s a process to allowing our economy to be functional, allowing people to resume more normal existence and to me that revolves around data really, I mean it revolves around appropriate testing contact tracing epidemiology there’s a really really good article sort of lay article about the hammer and the dance and so you know keeping doing this social isolation and really clamping down to get the transmission down so that we can begin to release and do this dance where we’re gonna be under surveillance we’re gonna kind of figure out a way practically to find people who are at risk and or there’s an exposure and isolate them so that we can kind of continue to keep the number of cases at a reasonable level whatever that is but it leads to a level where we’re not gonna get overrun in our medical facilities. You know there’s there is really a challenge for people to kind of come together and discuss how practically we can we can do this you know but the other thing I would comment though is that you know we really do need to realize that we’re dealing with a novel virus, nobody knows how they’re individually gonna respond and so when with Cavalier intent say I’m just gonna go out there just be cautious about that. We don’t know the long-term effects you know and as it’s been mentioned already in this conversation that mutations are possible. So we know like things can change it can get more severe, it might get less severe, we don’t know. But the fact is we just need to continue to do what we know works well in some sort of moderation to buy ourselves time to allow you know the other efforts that we’ve discussed to take root. John?

John: Well I think there’s a couple things. One is we have to start loosening otherwise our economy is going to just self-destruct. But it does have to be done in a logical sequence I think. You don’t want to, as has been mentioned your capacity to be exceeded like happened in New York then you have a mess, your hospitals are overwhelmed. On the other hand there is a second reason too to kind of slow things down a bit and that’s to really for the medical community to get their therapeutics act in order. There’s also a little bit of data when you look at population data of Sweden which has been very interesting because of course they’ve relaxed the least or they’ve blocked down the least basically. They do have a mortality per hundred thousand that’s greater than the other Nordic states, they’re about 19 compared to Norway and Denmark at 7 and 4 but they’re still way less than the UK for instance at 27 and Italy in Spain at 41 and 46. So you know I think that story about how much of assistance this whole locking down process gives you is not entirely clear, obviously it bends the curve to some degree. The other thing is that Costa Rica data maybe if we hit on a regimen that really works early we knocked down the number of people going into hospitals and intensive care and that completely alters the makeup of this thing. You know a case fatality rate under 1% if they maintain that that’s kind of the way forward potentially with early hydroxychloroquine, maybe azithromycin. So I think there are some positives here. I’m a little bit skeptical about test trace following and isolation of at-risk populations, there’s just such a large group of people that are asymptomatic in relationship to the people that are clearly diagnosed and the early ability to transmit virus before you’re symptomatic that it’s going to be hard in those areas. I think we have to try it certainly the at-risk populations, the older diabetics and maybe elderly people in general are going to need to be quarantined longer.

Buck: Paresh what do you think it’s gonna look like when we come out of hibernation?

Paresh: Oh I think it’s gonna be sort of the new normal which is going to be quite different than what we saw January or February both socially and clearly from a business and investment standpoint. Socially speaking I think you know none of us imagined a month from now Friday night heading out to a Chili’s with a group of friends and hanging out as a group I think. You’re gonna see a big change in the way that we do with a lot of our social interactions and you know just some of the fear that naturally comes with this as an individual especially with a virus that you’re not sure who’s had it, who doesn’t have it and what is really my risk of getting into a severe situation. But like everything we’re right in the midst of this and as we continue person move forward with both the testing and some of the things that we talked about likely a combination of everything John and Ian and yourself have mentioned. I think over time we’ll get better grasp on how this is going to shake out it’s definitely going to be different.

Buck: Let’s talk money now because obviously that’s what we usually talk about. Let’s start with you Ian, what kinds of things are you invested in right now and how of those investments been affected by the economy?

Ian: So primarily I have a lot of my portfolio invested in various niches of of real estate so multifamily, self-storage, mobile homes, BRBO’s, single-family homes, the majority of it is in a relatively illiquid state that is in my opinion reasonably recessive resistant just by its very nature and that is proven out historically but again part of this whole process is that I’m forcing myself to challenge my previous assumptions because the new normal requires that but you know beyond that I also right now frankly I’m sitting on a lot of cash and I have part of that was being built up over time but I use that as sort of an insurance against life, not life insurance but insurance against life because you just don’t know and this whole process not that I predicted this in any way but I have enough experience and have enough humility to know that it can happen something can happen and it just gives me the peace of mind to sleep well at night to have that sort of allocation probably a little more weighted that way right now just for the way the economy has and because of that I’m in a position of anticipation that opportunities are going to present themselves as all this shakes out but certainly not in the near term.

Buck: So John what if anything is you know you maybe talk about what you’re invested but what have you learned during this period of time in terms of your investing and money management strategies and which would you do anything or will you do something differently as a result of this time in history?

John: You know I think I mean this is fed into my somewhat paranoid nature to begin with and I think that some diversification, you know I hate that word diversification but I mean in this situation I’m glad that I sort of hung on to my small percentage of precious metals that performed extremely well. I think that you can’t get too focused on just one asset class. Like Ian I’m mostly invested in real estate but I’m more liquid too in cash right now and this just goes to show you know he’s probably got something going with that whole Black Swan

Buck: Right absolutely. How about you Paresh, lessons from this that you’re gonna carry forward?

Paresh: Yeah you know stuff from the beginning definitely alternative assets I mean real estate students as diversification of tax mitigation and and also a few hard money lending type of situations both a fund and some smaller deals. You know I’m also sitting on a lot of cash waiting for some opportunity that that looks like it’s going to arise as as we cross through q4 and definitely into 2021 and I’m spending my time just working relationships trying to use that mantra to be sure when the opportunity arises how can I deploy that cash to get the most successful outcome.

Buck: So I’ll just throw in my two cents in this and first of all I think that here’s a few things that I’ve kind of learned: one is that I think you know having some kind of source of liquidity is really important, right as real estate investors and I am totally guilty of this most of the time we don’t usually have any you know liquidity sitting around like we usually have a you know whatever we get and then we maybe have a couple months of you know liquidity just in case but then you know then we just make sure that we deploy it right away. In the given situation that I got kind of lucky because you know I had money and the Wealth Formula Banking and in addition to that I was actually I was actually hoarding cash as well actually because I was planning to buy a house here and in Santa Barbara and that’s you need a lot of cash for that so I got lucky in that regard, otherwise I mean I’d hate to be worrying about you know paying bills and stuff like that right now. So that’s one thing. I do think like again situations like this I mean are good evidence for you know permanent life insurance like Wealth Formula Banking because then you know those balls are still growing I mean they’re still growing there’s still cash and liquid. The other thing is I think that I’m trying to look at this situation that we’re in a weird weird way I mean I remember like as a as a medical student I remember I don’t remember what this person somebody knew they were dying, they were totally conscious and they were totally aware of it and they were kind of like you know a little bit you know like what what’s going on they were kind of freaking you could see the fear on their face right and I kind of feel like that’s where we are in the economy right now it’s a really peculiar situation and I think those of us who are probably paying more attention, I’ve used this analogy before but we just got hit we just got rocked with an eight Richter scale earthquake and we’re sitting and not even noticing this massive tsunami that’s coming. The massive tsunami is because we’re gonna have it just don’t know how we’re not going to have 20% unemployment come you know Q4 come Q1 and when some of the safety nets are taken off. It’s incomprehensible to me what that looks like right now. So based on that like what I’m feeling a little bit lucky because I feel like the things that I’m mostly invested in are related to things that people absolutely have to have they have to live somewhere specifically their people and working-class they have to live somewhere so I feel pretty comfortable with that so for me you know sticking to those basics is really was you know they just realized that and also the idea to make sure that there is some sort of liquidity whether that’s straight up cash whether that is you know a cash value and life insurance policies etc. How about you, who hasn’t given their take? Was it Ian?

Ian: I was gonna say like so part of this process it you motivated me to kind of get a historical perspective on things. I’ve done you know I grab some biographies that I’ve been sitting on my shelf and I’ve been reading them and yeah one of the clip like I kind of like Churchill he’s an interesting character and certainly has lived a amazing life and had his share of adversity but he had a quote says this is not the end this is not even the beginning of the end rather this is the end of the beginning. I mean this is basically sort of like moving into a new realm for this sort of generation that you know is uncharted for the most part and challenging old assumptions is critical. Asking yourself quality questions you know really really exploring the blind spots that you might have is you know a prudent exercise.

Buck: Well listen guys thanks for all your time today and it’s been really a really good talk and I appreciate all of your inputs not only from the medical side but also on the investing because you know all three of you are you know active members of the Investor Club and you’re you know you’re doing things at a very high level so it’s nice to get your perspectives on things as well. Any last kind of words that you’d like to say to the Wealth Formula Community before we get off?

Paresh: I’ll start. I’ll just say that you know don’t panic I know that when we all get into these type of situations it’s very tricky when it comes to assets and and trying to get more cash flow and I would say you know if somebody once told me everybody’s a genius when the market is going up it’s really being the contrary and when things are down to figure things out. You know mentally framing this in a way that this is going to be an opportunity for the wealth formula group is the right way to think about it. You should the skills we’ve gotten from buck and many others skills that you spend time learning in order to effectively use this time frame to come out better than when you started um the only thing I would tell people is you know keep open ongoing communication with all of the operators and other people that you work with be sure you’re the first person that are thinking about when things turn ordeal lands on their desk and just keep stay educated.

Ian: Nice. Very thoughtful response on that, Paresh, thank you. One thing I would also advocate is zoom out right, when this is going on sort of get yourself to a point of being able to detach from the emotions that are involved and so you know where you think globally but act locally so like you’re aware of what’s going on but your sphere of influence is actually what you can control and what you can what you can impact and you know so I also sort of take the approach that I try to control what I can control and everything else is external to my sphere of influence I let that go because it tends to be a stressor it’s reality and I and I deal with it in that frame but I tried to influence where I can and let go of those other things. The other thing that I would also say is that you know it sounds weird and I don’t want this to come off the wrong way but I would try to also frame this time and this experience as an opportunity, I mean many people have been gifted time they’ve been gifted the opportunity to sort of you know pursue hobbies that they might not have because they’re you know not doing all the crazy things chasing kids going to do the office all of that thing you know they have the opportunity to take that time and read things, learn things, start a business, time to be closer to their nuclear family, you know time to sleep, you know time to you know focus on your diet, all kinds of things that you can choose to take control of in this time of uncertainty and basically it’s sort of you know it’s like forced load management and it’s an experience that really is unique. I mean I can’t think of another time where you might have this. If you’re lucky enough to sort of be in that and I realized that I’m speaking from one perspective and there are other people that don’t have that luxury but if you can frame it in a way that you can find the opportunity that this presents and capture it.

Buck: John?

John: You want to always have a plan B maintain enough flexibility to pivot to an alternate reality and to try and work on what to leave is called anti fragility, anti fragile you know that you can roll with the punches and still go on.

Buck: Good advice guys. Thanks again for being on the podcast this week and I hope you stay healthy and try to have some fun during the quarantine. We’ll be right back