What The Black Death And Spanish Flu Can Tell Us About What Comes Next

Tracy Alloway (0:10)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

Joe Weisenthal (0:15)

And I'm Joe Weisenthal.

Tracy Alloway (0:17)

So Joe, you know what I like to do during uncertain times? Times of trouble.

Joe Weisenthal (0:24)

Play with your dog, play with your puppy.

Tracy Alloway (0:27)

Yes, but that's a relatively new development. But for a long time, I really like reading history books.

Whenever the world seems a little bit crazy, I like going back in time and finding other moments where things seem just as crazy.

Joe Weisenthal (0:42)

See, I like stress eating when the world is really bad.

Tracy Alloway (0:47)

Yeah, stress eating is also enjoyable. But the reason I bring it up is because in the current situation, we've seen the coronavirus pandemic, there are a lot of historic parallels to this particular outbreak. So almost immediately when this whole thing started, people started reaching back to the Black Death of the Middle Ages. We also had people talking about parallels with the Spanish influenza pandemic of 1918

Lots of people looking at history to try to figure out what's going on right now and what the economy might actually look like once this outbreak has subsided.

Joe Weisenthal (1:29)

Yeah, that's exactly right. Especially the Spanish flu, the Spanish influenza of 1918

There's been numerous stories about that, I guess, because maybe of all the different pandemics we've had in the past, we probably have the most accurate recollection of what the medical experts were saying at the time. Of course, everyone's seen those charts of the second wave of the Spanish flu. But as you say, lots of attempts to look at history to figure out what they mean for the present.

Tracy Alloway (2:04)

Right.

And whenever we talk about financial history, there's one guest that we really like to have on, and we're going to have him on again. It's Jamie Catherwood, aka Finance History Guy from O'Shaughnessy Asset Management. He also runs a website called investoramnesia.com. We've had him on before. We're going to have him on again to walk us through what we can learn from previous outbreaks or pandemics and what they tell us about the current situation. So, Jamie, thanks so much for coming on.

Jamie Catherwood (2:36)

Thank you so much for having me back.

Tracy Alloway (2:38)

So, Jamie, maybe to begin with, you know, Joe mentioned that a lot of people have been focusing on the Spanish influenza pandemic of 1918 in particular. But is there one moment in history that you focused on in your readings and in your studying of this topic, one moment of history that is the most relevant to our current situation?

Jamie Catherwood (3:03)

So, I think that, like you guys talked about, there's a lot of people going back to both the Black Death and the Spanish flu. There's a lot of other kind of epidemics and pandemics in history that are also interesting, but they're all really different, including the Spanish flu. It's fairly different in terms of just the disease, but also kind of the time it occurred in versus today. So I think there are a lot of differences, more than similarities, but there are some interesting trends in both today and the Spanish flu that are similar. And one that I found really interesting was just there is a paper that talked about the Amazon effect that occurred in the Spanish flu, which sounds crazy, but we've all talked about how Sears was the original Amazon.

And there was evidence, I think it was in a Federal Reserve paper, that showed on a monthly basis during 1918 and the second wave that was in the fall, which is the worst of the three waves, that the sales and business activity for Sears Roebuck and Montgomery Ward, which had mail order catalogs, increased in the worst months of the Spanish flu when more places were shut and kind of lockdown was taking place.

And then as the economy started to reopen again, sales started to decline back to normal levels. But there's like this spike when people were at home more of ordering through these mail order catalogs, just like today everyone orders from Amazon while they're in a hunkered down at home.

Joe Weisenthal (4:31)

So if the Sears catalog was the Amazon of that, what was the peloton of that crisis?

Jamie Catherwood (4:39)

I can't even imagine. I feel like there's some ridiculous contraption that you see like some elastic bands workout machine or something.

Joe Weisenthal (4:46)

No, no.

Jamie Catherwood (4:46)

But there's a lot of anecdotes like that, which are just very reminiscent of today. There were things like retail foot traffic was down 33% in some areas. But what was interesting is that then after the reopening started to occur, that some retailers, not all obviously reported that the bounce back after the reopening made up for more than the sales from when their business had to be shut down. So that's kind of interesting.