A few thoughts/observations on #coronavirus + the gov't & market responses:
1) This is all very real & will impact everyone. Schools closed, biz shut down, people cooped up at home, small biz struggling. This isn't overreaction - it's the only meaningful way to stop the spread.
1) This is all very real & will impact everyone. Schools closed, biz shut down, people cooped up at home, small biz struggling. This isn't overreaction - it's the only meaningful way to stop the spread.
2) The delayed federal response & the ease with which many leading public officials dismissed the seriousness of this as recently as early March are both inexcusable. Those responsible for the late start or who trafficked in mockery should be held accountable. It cost lives.
3) The severity & persistence of the market reaction is both concerning & perplexing to me. This is *not* a structural crisis like 2008, where the intrinsic value of certain assets was completely illusory & heavily levered on balance sheets throughout the country. Big buy opp.
4) This is, at its worst, a 6-to-9-month hiatus in cash flow for certain industries. If you assume activity goes back to normal soon afterwards, the value of companies then should be relatively equivalent to their value before. So, the key becomes liquidity & flexible debt terms.
5) This is why concerns over an extended recession and a wave of corporate bankruptcies are confusing. Maybe six months of no revenue is too much of a shock to expect some companies to absorb - but, at that point, it's just a question of liquidity.
6) The ability to bridge downturns should vary by company size. Larger corps have the luxury of the best debt terms on the planet. There's very little excuse for these large corps to not be prepared with significant cash reserves & debt facilities. Why so many stock repurchases?!
7) Smaller businesses & solo contractors, however, don't work on 1 - 3 year budgeting timeframes. They make ends meet on a monthly basis & often operate under the terms of a small business loan that they were lucky to get in the first place. These are tough times for them.
8) There's also the worker side of this equation. Hourly wage workers will get hammered throughout this ordeal. Salaried employees are also at risk of termination as poorly prepared companies cope with the realities of tight budgets. Unempl. benefits & other support makes sense.
9) One final observation. This whole thing will hopefully remind Americans of two key realities that we've allowed ourselves to forget in recent years. Truth & objective facts shouldn't be political and we can't just retreat from the world because we are all connected.
Stay optimistic. We'll get through this. Do your part. Wash your hands. Stay away from large crowds. We can beat this thing. We need to show the world that it doesn't take a totalitarian police state to shut down a pandemic. Free people can also get the job done. Let's do it.
