The day after tomorrow

[vinod1]

Spek,

 

There are three effects here, and we seem to be talking about different ones.

 

1. Health effects of the virus on the population

2. Economic effects of the virus directly by sickness, death or precautions; indirectly by government quarantine etc.

3. Market reactions

 

I was talking about 2. If I can find which business will survive, I can try to buy those cheap. Of course they might get much cheaper for a few months or even years, because I don’t have much hope about timing the market(3). As a whole I agree that the market is still not crazy cheap. Lots of companies are still at high PE.

 

1918 is not the best comparison as you pointed out, but it’s the only somewhat similar case. If we accept that we can’t figure out a worst case scenario for (2), then shouldn’t we be buying just companies which could survive anything, like Japanese cash hoarders. That was my original question, how does one invest in a market like this?

 

Yes, this thread should be about the longer term economic effects of the epidemic. We have already enough discussions about the near term outlook in term of epidemiology in the Coronavirus thread.

 

Cigarbutt coined the term New deal 2.0 and I really like it. First of all it is consistent with the tremendous interventions from the government around the world that we are seeing and second it describes a fundamental paradigm shift that I believe we will have as a consequence of all this.

 

When this epidemic first got started, I regarded it as similar to the 9/11 recession because I thought it will be mostly related to travel and airline. This is clearly not the case any more, the consequences are not confined and most likely will affect every sector. So, the GFC Is a better comparisons at this point. I have no idea how, but I think we will see more government involvement and regulation and less free market. I could be wrong of course, but I see that as the likely course we are taking.

 

Good points!

 

Although we had regulations and it kind of hindered bank profitability a little, it did not really change the competitive dynamics long term. Banks had severe restrictions and it reduced profitability but it reduced risk too, deserving a slightly higher multiples. So it might be on the whole a wash.

 

Did the New Deal really change or hinder company profitability in any way? I am not arguing, just asking. What do you see as likely impact on travel, recreation or health care?

 

Vinod

[John Hjorth]

[picture omitted for avoiding dense quoting, John]

 

I kind of wonder a bit of people are going to consider if they want to live in urban vs suburban environments in the future. Above is how my “ backyard” looks this morning. Looks pretty good to me, considering we have basically pandemonium going on outside. And I still live close enough to civilization to have a decently paid job (so far).

 

That really looks wonderful, Spekulatius,

 

I hope you grant yourself at least some time every day to enjoy moments like that caught on the photo. Here in Denmark, it's now real spring, and I spend time in the garden every day, when weather permits. It's good for mental health in these times.

[Cigarbutt]

Spek,

There are three effects here, and we seem to be talking about different ones.

1. Health effects of the virus on the population

2. Economic effects of the virus directly by sickness, death or precautions; indirectly by government quarantine etc.

3. Market reactions

I was talking about 2. If I can find which business will survive, I can try to buy those cheap. Of course they might get much cheaper for a few months or even years, because I don’t have much hope about timing the market(3). As a whole I agree that the market is still not crazy cheap. Lots of companies are still at high PE.

1918 is not the best comparison as you pointed out, but it’s the only somewhat similar case. If we accept that we can’t figure out a worst case scenario for (2), then shouldn’t we be buying just companies which could survive anything, like Japanese cash hoarders. That was my original question, how does one invest in a market like this?

Yes, this thread should be about the longer term economic effects of the epidemic. We have already enough discussions about the near term outlook in term of epidemiology in the Coronavirus thread.

...New deal 2.0 and I really like it. First of all it is consistent with the tremendous interventions from the government around the world that we are seeing and second it describes a fundamental paradigm shift that I believe we will have as a consequence of all this.

When this epidemic first got started, I regarded it as similar to the 9/11 recession because I thought it will be mostly related to travel and airline. This is clearly not the case any more, the consequences are not confined and most likely will affect every sector. So, the GFC Is a better comparisons at this point. I have no idea how, but I think we will see more government involvement and regulation and less free market. I could be wrong of course, but I see that as the likely course we are taking.

Good points!

Although we had regulations and it kind of hindered bank profitability a little, it did not really change the competitive dynamics long term. Banks had severe restrictions and it reduced profitability but it reduced risk too, deserving a slightly higher multiples. So it might be on the whole a wash.

Did the New Deal really change or hinder company profitability in any way? I am not arguing, just asking. What do you see as likely impact on travel, recreation or health care?

Vinod

I'm now enjoying my coffee with a beautiful view. Can I give it a shot?

It's possible that this was an accident waiting to happen and people may overestimate the short term impact as well as underestimate the mid to long term consequences. Many things can be true at once.

https://www.collaborativefund.com/blog/true-at-once/

 

As for the trigger (virus), scores (APACHE, SOFA) {as coincident indicators} have been used to 'predict' the outcome in ICU CV patients and people tend to forget, especially in the acute phase, that it's the leading indicators that led to the respirator. It's funny though because it's been shown (MIT etc) that, despite major clinical advances and sophistication as well as the introduction of AI adjuncts, it often comes down to gut instincts. The following is by one of the authors of This Time is Different and the thought process is coming from a certain angle but she depicts an interesting perspective of the trigger and suggests that we ain't seen nothing yet in terms of Fed and other whatever-it-takes contamination:

https://www.project-syndicate.org/commentary/covid19-crisis-has-no-economic-precedent-by-carmen-reinhart-2020-03

 

FWIW, I have a deep interest in history and will give the following opinion about the New Deal's impact on profitability. The New Deal was a series of mostly improvised, inconsistent and failed experiments that distracted the populace for the time it took to correct the excesses of the past. It's a period of time during which businesses were thought to be worth more dead than alive and when Mr. Benjamin Grossbaum Graham made court appearances to argue that stocks were undervalued. And the economy really took off only with WWII. And then we had thirty glorious years.

 

It just feels like hydroxychloroquine won't do the trick this time.

Just like a few years back, I've started to listen to a song that starts with the unspoken sound for whom the bell tolls and I intend to get through this and end up back in black.

[John Hjorth]

...It just feels like hydroxychloroquine won't do the trick this time.

Just like a few years back, I've started to listen to a song that starts with the unspoken sound for whom the bell tolls and I intend to get through this and end up back in black.

 

I hear you, Cigarbutt,

 

Two days now with up market prices on stocks, for absolutely no reason. Helicopter money handed out in enormous amounts many places around the world. Here, around DKK 286 B [Denmarks 2019 GDP is around DKK 2,319 B]. I've never in my life seen anything like this. Respirator treatment [oxygen] to several kinds of businesses, most of them straight out dead by now, if not treated. Business owners on public welfare [subsidies to salaries & wages, if you don't layoff employeés, subsidies to cover fixed costs for certain sectors & industries, if you have lost your turnover [!]] My inner picture of how my country is structured has collapsed like a house of cards. This is not QE X, - it's QE^X.

[vinod1]

Spek,

There are three effects here, and we seem to be talking about different ones.

1. Health effects of the virus on the population

2. Economic effects of the virus directly by sickness, death or precautions; indirectly by government quarantine etc.

3. Market reactions

I was talking about 2. If I can find which business will survive, I can try to buy those cheap. Of course they might get much cheaper for a few months or even years, because I don’t have much hope about timing the market(3). As a whole I agree that the market is still not crazy cheap. Lots of companies are still at high PE.

1918 is not the best comparison as you pointed out, but it’s the only somewhat similar case. If we accept that we can’t figure out a worst case scenario for (2), then shouldn’t we be buying just companies which could survive anything, like Japanese cash hoarders. That was my original question, how does one invest in a market like this?

Yes, this thread should be about the longer term economic effects of the epidemic. We have already enough discussions about the near term outlook in term of epidemiology in the Coronavirus thread.

...New deal 2.0 and I really like it. First of all it is consistent with the tremendous interventions from the government around the world that we are seeing and second it describes a fundamental paradigm shift that I believe we will have as a consequence of all this.

When this epidemic first got started, I regarded it as similar to the 9/11 recession because I thought it will be mostly related to travel and airline. This is clearly not the case any more, the consequences are not confined and most likely will affect every sector. So, the GFC Is a better comparisons at this point. I have no idea how, but I think we will see more government involvement and regulation and less free market. I could be wrong of course, but I see that as the likely course we are taking.

Good points!

Although we had regulations and it kind of hindered bank profitability a little, it did not really change the competitive dynamics long term. Banks had severe restrictions and it reduced profitability but it reduced risk too, deserving a slightly higher multiples. So it might be on the whole a wash.

Did the New Deal really change or hinder company profitability in any way? I am not arguing, just asking. What do you see as likely impact on travel, recreation or health care?

Vinod

I'm now enjoying my coffee with a beautiful view. Can I give it a shot?

It's possible that this was an accident waiting to happen and people may overestimate the short term impact as well as underestimate the mid to long term consequences. Many things can be true at once.

https://www.collaborativefund.com/blog/true-at-once/

 

As for the trigger (virus), scores (APACHE, SOFA) {as coincident indicators} have been used to 'predict' the outcome in ICU CV patients and people tend to forget, especially in the acute phase, that it's the leading indicators that led to the respirator. It's funny though because it's been shown (MIT etc) that, despite major clinical advances and sophistication as well as the introduction of AI adjuncts, it often comes down to gut instincts. The following is by one of the authors of This Time is Different and the thought process is coming from a certain angle but she depicts an interesting perspective of the trigger and suggests that we ain't seen nothing yet in terms of Fed and other whatever-it-takes contamination:

https://www.project-syndicate.org/commentary/covid19-crisis-has-no-economic-precedent-by-carmen-reinhart-2020-03

 

FWIW, I have a deep interest in history and will give the following opinion about the New Deal's impact on profitability. The New Deal was a series of mostly improvised, inconsistent and failed experiments that distracted the populace for the time it took to correct the excesses of the past. It's a period of time during which businesses were thought to be worth more dead than alive and when Mr. Benjamin Grossbaum Graham made court appearances to argue that stocks were undervalued. And the economy really took off only with WWII. And then we had thirty glorious years.

 

It just feels like hydroxychloroquine won't do the trick this time.

Just like a few years back, I've started to listen to a song that starts with the unspoken sound for whom the bell tolls and I intend to get through this and end up back in black.

 

Thank you!

[Spekulatius]

 

I'm now enjoying my coffee with a beautiful view. Can I give it a shot?

It's possible that this was an accident waiting to happen and people may overestimate the short term impact as well as underestimate the mid to long term consequences. Many things can be true at once.

https://www.collaborativefund.com/blog/true-at-once/

 

As for the trigger (virus), scores (APACHE, SOFA) {as coincident indicators} have been used to 'predict' the outcome in ICU CV patients and people tend to forget, especially in the acute phase, that it's the leading indicators that led to the respirator. It's funny though because it's been shown (MIT etc) that, despite major clinical advances and sophistication as well as the introduction of AI adjuncts, it often comes down to gut instincts. The following is by one of the authors of This Time is Different and the thought process is coming from a certain angle but she depicts an interesting perspective of the trigger and suggests that we ain't seen nothing yet in terms of Fed and other whatever-it-takes contamination:

https://www.project-syndicate.org/commentary/covid19-crisis-has-no-economic-precedent-by-carmen-reinhart-2020-03

 

FWIW, I have a deep interest in history and will give the following opinion about the New Deal's impact on profitability. The New Deal was a series of mostly improvised, inconsistent and failed experiments that distracted the populace for the time it took to correct the excesses of the past. It's a period of time during which businesses were thought to be worth more dead than alive and when Mr. Benjamin Grossbaum Graham made court appearances to argue that stocks were undervalued. And the economy really took off only with WWII. And then we had thirty glorious years.

 

It just feels like hydroxychloroquine won't do the trick this time.

Just like a few years back, I've started to listen to a song that starts with the unspoken sound for whom the bell tolls and I intend to get through this and end up back in black.

 

I have a hunch that Value investing in the truest Graham sense may make a comeback. The only place where you can do this now is Japan’s, where you find companies trading for cash and often less than that. Perhaps there will be more markets where this is possible.

 

I know little about the new deal, probably should read up on this. One thing I know is that it lead to more regulation, laid the foundation for social security, but also lead to much higher taxes. It seems to me that over the long run, the higher taxes are a near certainty.

 

The experimental approach is interesting. Try things out on a limited scale, to see if they work, if they do go ahead, if not abandon. Seems to make sense to me, except whoever runs the administration looks stupid most of the time. But it seems to be better to cut losses than to keep doubling up, which tends to be what most governments have been doing the last few decades.

 

 

[Castanza]

 

I'm now enjoying my coffee with a beautiful view. Can I give it a shot?

It's possible that this was an accident waiting to happen and people may overestimate the short term impact as well as underestimate the mid to long term consequences. Many things can be true at once.

https://www.collaborativefund.com/blog/true-at-once/

 

As for the trigger (virus), scores (APACHE, SOFA) {as coincident indicators} have been used to 'predict' the outcome in ICU CV patients and people tend to forget, especially in the acute phase, that it's the leading indicators that led to the respirator. It's funny though because it's been shown (MIT etc) that, despite major clinical advances and sophistication as well as the introduction of AI adjuncts, it often comes down to gut instincts. The following is by one of the authors of This Time is Different and the thought process is coming from a certain angle but she depicts an interesting perspective of the trigger and suggests that we ain't seen nothing yet in terms of Fed and other whatever-it-takes contamination:

https://www.project-syndicate.org/commentary/covid19-crisis-has-no-economic-precedent-by-carmen-reinhart-2020-03

 

FWIW, I have a deep interest in history and will give the following opinion about the New Deal's impact on profitability. The New Deal was a series of mostly improvised, inconsistent and failed experiments that distracted the populace for the time it took to correct the excesses of the past. It's a period of time during which businesses were thought to be worth more dead than alive and when Mr. Benjamin Grossbaum Graham made court appearances to argue that stocks were undervalued. And the economy really took off only with WWII. And then we had thirty glorious years.

 

It just feels like hydroxychloroquine won't do the trick this time.

Just like a few years back, I've started to listen to a song that starts with the unspoken sound for whom the bell tolls and I intend to get through this and end up back in black.

 

I have a hunch that Value investing in the truest Graham sense may make a comeback. The only place where you can do this now is Japan’s, where you find companies trading for cash and often less than that. Perhaps there will be more markets where this is possible.

 

I know little about the new deal, probably should read up on this. One thing I know is that it lead to more regulation, laid the foundation for social security, but also lead to much higher taxes. It seems to me that over the long run, the higher taxes are a near certainty.

 

The experimental approach is interesting. Try things out on a limited scale, to see if they work, if they do go ahead, if not abandon. Seems to make sense to me, except whoever runs the administration looks stupid most of the time. But it seems to be better to cut losses than to keep doubling up, which tends to be what most governments have been doing the last few decades.

 

Probably the best President we never had.

 

“Much of the social history of the Western world, over the past three decades, has been a history of replacing what worked with what sounded good.“

Thomas Sowell

 

“The welfare state is not really about the welfare of the masses. It is about the egos of the elites.”

Thomas Sowell

 

“The welfare state has always been judged by its good intentions, rather than its bad results.”

Thomas Sowell

 

[james22]

Longer-run economic consequences of pandemics

 

How do major pandemics affect economic activity in the medium to longer term? Is it consistent with what economic theory prescribes?

 

Since these are rare events, historical evidence over many centuries is required. We study rates of return on assets using a dataset stretching back to the 14th century, focusing on 12 major pandemics where more than 100,000 people died. In addition, we include major armed conflicts resulting in a similarly large death toll.

 

Significant macroeconomic after-effects of the pandemics persist for about 40 years, with real rates of return substantially depressed. In contrast, we find that wars have no such effect, indeed the opposite. This is consistent with the destruction of capital that happens in wars, but not in pandemics.

 

Using more sparse data, we find real wages somewhat elevated following pandemics. The findings are consistent with pandemics inducing labor scarcity and/or a shift to greater precautionary savings.

 

http://ssingh.ucdavis.edu/uploads/1/2/3/2/123250431/pandemics_jst_mar2020_.pdf

[LC]

I have problems with that study and its conclusion.

 

Data sources for interest rates in the 1300s aside, they have 12 data points for a pandemic over a 700 year history. We have difficulty modelling losses with 20+ data points over a 100 year period.

 

Additionally, coronavirus deaths are at 25,000 - it wouldn't even classify as a pandemic per this author's threshold.

 

Finally, they claim that real interest rates are artificially depressed for 35-40 years post-pandemic? Well, take the HK or Asian flu, occuring in the late 50s/60s. Were rates artificially depressed in the 1980s as a result? I would argue no they were not.

 

Perhaps there is some effect of pandemics on short term rates; but to make claims about 30+ years in the future is pretty outlandish to me.

[james22]

Yeah, lots to quibble with.

 

Shouldn't expect labor scarcity since the demographic at risk is largely out of the workforce.

 

And a shift to greater precautionary savings? Many more examples of the market having a short memory.

[Spekulatius]

Yeah, lots to quibble with.

 

Shouldn't expect labor scarcity since the demographic at risk is largely out of the workforce.

 

And a shift to greater precautionary savings? Many more examples of the market having a short memory.

 

Some mostly unrelated thought what might happen:

 

1) There will be an onslaught of lawsuits. Covid-19 infection at work - lawsuit. Restaurant (preferably a deep pocketed chain) has a Covid-19 infected worker who may infect people - lawsuit. US sues China?

 

2) Cheesecake Factory told landlords they that don’t pay rent in April. It’s not that they can’t pay, they just decided not too. Evict us, if you don’t like it. unlikely that they will remain the only one. Just not paying your bill might become a national sport? Calvinball time?

 

3) Bankruptcy courts may get clogged up for a long time from the volume of cases. What happens if you declare bankruptcy and can’t get  court date? I’ have no idea.

 

4) UK’s credit rating just got downgraded from AA to AA-. What about hard hit countries like Italy or Spain? This is probably causing another debt crisis in Europe and elsewhere.

Is the US safe?

 

5) Even with the aid packet, I don’t think the airlines will last a long time - they will run out of cash in a couple of month, due to operating leverage. how can they restart national flights with hotspots all over the place. NY and NJ quarantined? other hotspots will flare up? International flights are even worse.

 

6) Even if you open up restaurants and small service business open up, will customer come back? What is safe, how can we tell? This is our first recession that is led by the service industry, which employs way more people than manufacturing or any other sector

 

7) President talk a out quarantining NY and NJ, what are the consequence of this. Are other states going to be closing borders too? I don’t think this was ever done before - US becoming more like the EU?

[Castanza]

Yeah, lots to quibble with.

 

Shouldn't expect labor scarcity since the demographic at risk is largely out of the workforce.

 

And a shift to greater precautionary savings? Many more examples of the market having a short memory.

 

Some mostly unrelated thought what might happen:

 

1) There will be an onslaught of lawsuits. Covid-19 infection at work - lawsuit. Restaurant (preferably a deep pocketed chain) has a Covid-19 infected worker who may infect people - lawsuit. US sues China?

 

2) Cheesecake Factory told landlords they that don’t pay rent in April. It’s not that they can’t pay, they just decided not too. Evict us, if you don’t like it. unlikely that they will remain the only one. Just not paying your bill might become a national sport? Calvinball time?

 

3) Bankruptcy courts may get clogged up for a long time from the volume of cases. What happens if you declare bankruptcy and can’t get  court date? I’ have no idea.

 

4) UK’s credit rating just got downgraded from AA to AA-. What about hard hit countries like Italy or Spain? This is probably causing another debt crisis in Europe and elsewhere.

Is the US safe?

 

5) Even with the aid packet, I don’t think the airlines will last a long time - they will run out of cash in a couple of month, due to operating leverage. how can they restart national flights with hotspots all over the place. NY and NJ quarantined? other hotspots will flare up? International flights are even worse.

 

6) Even if you open up restaurants and small service business open up, will customer come back? What is safe, how can we tell? This is our first recession that is led by the service industry, which employs way more people than manufacturing or any other sector

 

7) President talk a out quarantining NY and NJ, what are the consequence of this. Are other states going to be closing borders too? I don’t think this was ever done before - US becoming more like the EU?

 

Less than an hour after the stimulus bill was signed UAL said they won’t be able to pay workers past September....Simply amazing. This type of talk is coming from anyone and everyone big and small business. Just last night there was a lady who called in to the Joe Biden townhall and said she and her husband owned 3 bars and a spa in NYC. They needed cash to stay afloat. The kicker is she threw out the sympathy card that she was pregnant and quickly followed up with “we don’t believe in loans, we believe in grants.” Most other callers said the same thing.

 

Point being, this could be interesting moving forward in terms of which group will be receiving more money and in which form.

[Viking]

Yeah, lots to quibble with.

 

Shouldn't expect labor scarcity since the demographic at risk is largely out of the workforce.

 

And a shift to greater precautionary savings? Many more examples of the market having a short memory.

 

Some mostly unrelated thought what might happen:

 

1) There will be an onslaught of lawsuits. Covid-19 infection at work - lawsuit. Restaurant (preferably a deep pocketed chain) has a Covid-19 infected worker who may infect people - lawsuit. US sues China?

 

2) Cheesecake Factory told landlords they that don’t pay rent in April. It’s not that they can’t pay, they just decided not too. Evict us, if you don’t like it. unlikely that they will remain the only one. Just not paying your bill might become a national sport? Calvinball time?

 

3) Bankruptcy courts may get clogged up for a long time from the volume of cases. What happens if you declare bankruptcy and can’t get  court date? I’ have no idea.

 

4) UK’s credit rating just got downgraded from AA to AA-. What about hard hit countries like Italy or Spain? This is probably causing another debt crisis in Europe and elsewhere.

Is the US safe?

 

5) Even with the aid packet, I don’t think the airlines will last a long time - they will run out of cash in a couple of month, due to operating leverage. how can they restart national flights with hotspots all over the place. NY and NJ quarantined? other hotspots will flare up? International flights are even worse.

 

6) Even if you open up restaurants and small service business open up, will customer come back? What is safe, how can we tell? This is our first recession that is led by the service industry, which employs way more people than manufacturing or any other sector

 

7) President talk a out quarantining NY and NJ, what are the consequence of this. Are other states going to be closing borders too? I don’t think this was ever done before - US becoming more like the EU?

 

Less than an hour after the stimulus bill was signed UAL said they won’t be able to pay workers past September....Simply amazing. This type of talk is coming from anyone and everyone big and small business. Just last night there was a lady who called in to the Joe Biden townhall and said she and her husband owned 3 bars and a spa in NYC. They needed cash to stay afloat. The kicker is she threw out the sympathy card that she was pregnant and quickly followed up with “we don’t believe in loans, we believe in grants.” Most other callers said the same thing.

 

Point being, this could be interesting moving forward in terms of which group will be receiving more money and in which form.

 

I start to get a few flickers of optimism and then i read this :-) We really are in uncharted waters. The next couple of months could make for some great reality TV.

[Spekulatius]

Yeah, it seems that defaults become a sport or go viral so to speak. I am not sure what rabbit holes this leads us to, but it is certainly not bullish for banks.

 

The above are just things that I started to notice. Maybe it’s something, maybe it’s nothing. Most will play out over the long run. Near term, the Potus talk about quarantining NY makes it almost inevitable to do it, unless he walks this back immediately. That would be interesting.

[SharperDingaan]

" 6) Even if you open up restaurants and small service business open up, will customer come back? What is safe, how can we tell? This is our first recession that is led by the service industry, which employs way more people than manufacturing or any other sector"

 

It's not just the customers, it's also finding the additional service staff, and the re-start losses that those businesses will incur.

Everyone re-starting at once means pay up, or go without. Business is great for 2-weeks, and dies back 50% after the party.

Then ... another Covid-19 contraction shows up.

 

SD

 

[Castanza]

" 6) Even if you open up restaurants and small service business open up, will customer come back? What is safe, how can we tell? This is our first recession that is led by the service industry, which employs way more people than manufacturing or any other sector"

 

It's not just the customers, it's also finding the additional service staff, and the re-start losses that those businesses will incur.

Everyone re-starting at once means pay up, or go without. Business is great for 2-weeks, and dies back 50% after the party.

Then ... another Covid-19 contraction shows up.

 

SD

 

Could be supplier issues on the backend as well. Just because a restaurant is ready to open doesn’t mean their special flour supplier will be up and running. Breweries could have issues with hops and other perishable supplies or possibly oversupply of beer and no bottle to put it in. Just a guess, but there will probably be 2nd and 3rd order supply chain issues at least for some amount of time.

[Spekulatius]

Pretty good recording from Focused compound about economic expectations and impairments. In short, he beleived a 30% haircut for banks is justified for example. This one can also listened to as a podcast.

[Kaegi2011]

" 6) Even if you open up restaurants and small service business open up, will customer come back? What is safe, how can we tell? This is our first recession that is led by the service industry, which employs way more people than manufacturing or any other sector"

 

It's not just the customers, it's also finding the additional service staff, and the re-start losses that those businesses will incur.

Everyone re-starting at once means pay up, or go without. Business is great for 2-weeks, and dies back 50% after the party.

Then ... another Covid-19 contraction shows up.

 

SD

 

I think this is exactly right.  Outside of a very assured restart in terms of the virus having no more impact, small business owners will be reluctant to restart / hire and go back to 100% prior to crisis.  I know most of people I know would not risk it if they think the risk is diminished but not gone as a consumer.  Also, while the past 2-3 weeks most restaurants were open for delivery / take out, a lot of them are starting to shut down due to risk to their workers / themselves. 

[Gamecock-YT]

" 6) Even if you open up restaurants and small service business open up, will customer come back? What is safe, how can we tell? This is our first recession that is led by the service industry, which employs way more people than manufacturing or any other sector"

 

It's not just the customers, it's also finding the additional service staff, and the re-start losses that those businesses will incur.

Everyone re-starting at once means pay up, or go without. Business is great for 2-weeks, and dies back 50% after the party.

Then ... another Covid-19 contraction shows up.

 

SD

 

I think this is exactly right.  Outside of a very assured restart in terms of the virus having no more impact, small business owners will be reluctant to restart / hire and go back to 100% prior to crisis.  I know most of people I know would not risk it if they think the risk is diminished but not gone as a consumer.  Also, while the past 2-3 weeks most restaurants were open for delivery / take out, a lot of them are starting to shut down due to risk to their workers / themselves.

 

Not to mention, they'll probably be regulated to 25 or 50% normal capacity to start. China has had issues getting people to come back to restaurants.

 

https://www.eater.com/2020/3/24/21191278/china-beijing-coronavirus-future-of-restaurants

[james22]

US sues China?

 

A bipartisan effort is underway outside of Congress to hold China accountable for what could be trillions of dollars worth of damage caused by their mishandling of the global coronavirus pandemic.

 

The Berman Law Group, a Miami-based law firm advised by the younger brother of former Vice President Joe Biden, filed a class-action lawsuit against the government of China on March 13.

 

On Monday, Berman partnered with a lobbying and public affairs firm that has deep connections to President Donald Trump in a move to forge a unified response against China’s government.

 

“We believe that this is not a Democratic issue or a Republican issue. This is an American issue,” Berman senior litigation strategist Jeremy Alters told the Daily Caller News Foundation.

 

https://dailycaller.com/2020/03/24/china-coronavirus-class-action-lawsuit/

[SharperDingaan]

" 6) Even if you open up restaurants and small service business open up, will customer come back? What is safe, how can we tell? This is our first recession that is led by the service industry, which employs way more people than manufacturing or any other sector"

 

It's not just the customers, it's also finding the additional service staff, and the re-start losses that those businesses will incur.

Everyone re-starting at once means pay up, or go without. Business is great for 2-weeks, and dies back 50% after the party.

Then ... another Covid-19 contraction shows up.

 

SD

 

Could be supplier issues on the backend as well. Just because a restaurant is ready to open doesn’t mean their special flour supplier will be up and running. Breweries could have issues with hops and other perishable supplies or possibly oversupply of beer and no bottle to put it in. Just a guess, but there will probably be 2nd and 3rd order supply chain issues at least for some amount of time.

 

For the most part, brewers have been gassing (nitrogen), bagging, or converting their hops into iso-hops to preserve freshness. Bottle inventories were preserved by kegging remaining inventory versus bottling. The main issues on 're-start' will be lead-time and access to enough trucking to move the product - both heavily labour dependent.

 

A lot of small brewers are now making hand sanitizer (60% alcohol), operating at around 25-40% staff, and rotating staff through the hand packing and boxing lines. Net of subsidies, hourly pay remains at around 100%, but everyone shares fewer hours - including the salaried. Considered a 'good' solution in the current times.

 

Packaging suppliers/manufacturers are considered an essential service, and the creatives have been at work. At some breweries, every 1,000 th bottle of hand sanitizer comes in a commemorative 'limited edition' container. Every 100,000 th in a different pack again. Future collectors items!

 

SD

 

 

[Spekulatius]

Mc Kinsey presentation , comprehensive, economic viewpoint:

https://www.mckinsey.com/~/media/mckinsey/business%20functions/risk/our%20insights/covid%2019%20implications%20for%20business/covid%2019%20march%2025/covid-19-facts-and-insights-march-25-v3.ashx

[kab60]

We've been in lockdown in Denmark since the 13th of March. Results have been much better than expected. Will gradually open up after Easter. It'll take time before things are back to normal, obviously - I think it'll be a long time before large events are allowed. But there's a lot of pent up demand from people who wants to go out. While some of the hardest hit industries might be in for some terrible quarters - and one has to pick those that actually make it through - I could see things come roaring back. For most people this is entirely unprecedented and I think a lot of people realize how important socializing is to their wellbeing. Sure, it might be with masks, it might be smaller groups, but just a return to something that resembles normalcy should allow a lot of business to muddle through.

[chrispy]

kab60 - I agree.

 

Folks are scared today but also going stir crazy and missing family/friends. This is not a permanent fear such as after 9/11 and will subside very quickly followed by social gatherings

[Spekulatius]

kab60 - I agree.

 

Folks are scared today but also going stir crazy and missing family/friends. This is not a permanent fear such as after 9/11 and will subside very quickly followed by social gatherings

 

I don’t know about you, but I never had concerns after 9/11 to go out with friends. It might be different if you lived in NYC, but elsewhere; knowing how terrorism works, it’s not a compounding thing. You are quite safe after a terrorist attack, because they take a long time to plan out.

Epidemics are different - they are compounding and follow exponential growth laws at least early on. In addition, they affect the whole county, the entire air travel and not just a few locations. I don’t intend to downplay 9/11, and I remember this vividly, but to me, it seemed  like a piece of cake compared to this, unless one was in those doomed airplanes or twin towers of course.

 

 

The big question is now have we reached the peak and how long is this shoulder going to last until we can assume it is safe to open bits and pieces here and  there. I guess everything is progress but I don’t see normalcy for any month or to be specific early spring. by that time, we could have a nasty recession and a GDP that could still be down 5-10% from where we were at the 2/1/2020 run rate.