Wayne's corona virus predictions...

[Wayne 962]

I noodled this out the other day on my phone and then just expanded it. This seems like common sense to me. Here you go:

From March 9th:

Tesla - China factory problems will push Tesla towards cash crunch and BK, late 2020 / early 2021. Look to see them be acquired in a rescue by a much larger company. Maybe Volkswagen, but I would put money on some Chinese company. Elon is a great visionary, and an inspiration to many people, but his track record as a nuts-and-bolts CEO is spotty at best. Steve Jobs had Ives and Cook to back him up – Elon’s best talent seems to have left over the past few years. Model ‘S’ sales were down 40% towards the end of last year – that shows weakness in this segment.

Nursing homes. Huge problem. Health care workers will bring the Corona virus in, and will spread it amongst the older people there. There’s no good solution to this, as these people need younger people to help them out – maybe keep staff at the homes living there indefinitely to avoid outside contamination? I think that this will be the saddest part (it already is in Seattle) of the whole corona affair.

Bad news for Airlines, cruise ship lines, sports arenas and movie theaters. I don’t think movie theaters will recover from this – they’ve been under attack from home theater for over a decade now. Streaming services will thrive, but look to see movie theater chains die off. The death of the mall too will accelerate. This area of real estate was already on life support. I mean, who wants to go to a mall today? We’ll see more of the retail apocalypse, I mean this is the absolute worst-case scenario for traditional retail. They were already predicting record retail bankruptcies for this year (J Crew, Pier 1, etc.), this will only make it worse.

Restaurants – boy, that’s a tough one. They will eventually recover because people need to eat, but only the strongest brands will survive. I don’t know what those are right now. Restaurants here in LA are already mostly empty. They will need to hunker down and will need to preserve cash to pay rent until this passes.

Delivery services – yes yes yes. Think Dominoes and Papa Johns. No brainer there. Ordering in pizza will increase big time. Maybe also grubhub and others, but I still think Dominoes and the like are much easier, plus they are already set up for their delivery network.

Amazon - yes. No brainer. Amazon is the clear winner from a virus outbreak. I ordered scotch tape the other day because I didn’t want to go to the store. Amazon delivered it on a Sunday. I still don’t get how they can afford to do that. On the same note, all E-commerce stuff will thrive even more than it has previously. It will really accelerate the move from stores to online big time.

NYC will be hard hit. I can’t imagine being in New York and riding the subway with corona virus around. When I worked there, we were back-to-front in the subway cars every single day. Los Angeles - less so. We live in our cars (cocoons) and that keeps us isolated. I think that of the biggest cities around, LA will be the slowest to spread the virus. We’re in a warmish climate, so people are outside more, and we drive everywhere. Different than other cities (public transit is a big problem for other cities with this virus spread). Indeed, outbreak in cities other than NYC will be slower and contained due to lack of human interaction. People have been warned now and will be more cautious and will be more aware, slowing transmission.

Disney parks - no go. Universal too. Man, who wants to ride a roller coaster that has been ridden by 1,300 different people in just the last hour? No thanks. I know six people who have cancelled theme park vacations that were set to happen over spring break. I think the ski mountains too will suffer, although I’m not sure I would equate them the same as the theme parks. I’m somewhat insulated from stuff on the lift, although my next door neighbor – her brother-in-law has corona, and so does seven other people in his party that just came back from skiing in Italy (one is in the hospital on a ventilator, and they are also taking experimental Ebola anti-virus drugs!).

No need to stock pile water, this is not an earthquake. I don’t get the whole bottled water thing, I don’t think the water supply will be affected. This shows me that people are not really thinking. Also toilet paper? I mean, in a virus outbreak, I’m not going to be terribly concerned about how I wipe my ass – it’s really low on my priority list. Then again, I might change my mind if I “need a spare square.”

Grocery delivery services - take advantage of this! These guys have been trying to succeed at this for two decades now (think WebVan from 2000). Man, I still think this done right will be a success. Maybe now that people don’t want to head to the grocery store, the delivery services can actually charge what their service is worth (instead of giving it away for free). Amazon Fresh will do well (my wife signed up yesterday!), and also Wal-mart with their huge store footprints. If they screw this up, it’s an unforced error.

China supply lines - problems in March/April. This is the big one that will affect the economy. The average car has about 30,000 parts, many of them made in obscure areas of China. If just one of those parts is missing, the car is incomplete and can’t be finished. The US car makers have ample supply of parts to build the cars, but this will last only a few months. China’s been shut down since January – the supply chain shocks have not been fully felt yet. We’ll probably see tons of semi-complete cars just parked in lots in Detroit waiting for parts. I have friends who are scrambling right now to get material (Velcro) from China to complete their products. It’s happening right now.

Owner occupied real estate - tap or sell for equity. So, here’s a golden opportunity. Assuming that the economy tanks (headed there right now), all of these small businesses will be suffering and in trouble. If they owners happen to own their own real estate, then they will tap their equity for funds by borrowing against the building. But, banks aren’t stupid – when there’s uncertainty in the markets (any markets), the banks pull back on lending and tend to get more conservative. So, if a business is doing poorly and wants to borrow against their building, they might have a difficult time with the loan covenants. Look for opportunities here in the space to purchase real estate from struggling owners – they will want to sell and do a lease back (we did two of these types of deals in 2019). This corona recession will be temporary – the real estate will always have value, and with constant uncertainty, the ones with cash and few cajones will be able to pick up some nice properties (with built-in tenants, although they might be shaky).

[Wayne 962]

[part 2]

This will get worse before it gets better. Maybe the summer heat will deter contagion. Our doctor friends are hoping for this. I’m also hoping that we’re cleaner (aren’t Americans obsessed with hand sanitizer?). We also have the advantage of knowing what is coming (by watching China, Italy, South Korea). We might be dumb enough to ignore the lessons learned there, but at least there’s some guidance from things that worked and did not work. The lockdown in China may have worked for now. That and additional care / knowledge of what is going on.

Medical facilities will become overwhelmed crowding out other ailments. Our doctor friends all agree on this. Don’t break your leg anytime soon – you’ll be in the ER with 100 other coronavirus patients. Get your teeth cleaned asap, as you won’t want to get that close to *anyone* in a few weeks.

Schools? Some might close. This virus appears to be weird in that kids don’t seem to be affected by it. But they are probably big-time carriers of it. My kid constantly spits on me when he talks – I think I’m doomed if he gets it, I’ll have to wear my welding mask around the house!

Stock market will continue to decline big time. In 2000, the market dropped 78%. In 2009, the market dropped 50%. Right now, it’s dropped about 20% from what many considered to be a peaky bubble. At first glance, this corona virus outbreak is going to be much worse than anything we’ve seen before. After 9/11, airline revenue dropped 7% and numerous airlines took a big hit. For this outbreak, they are predicting revenue drops of 23% right now. I think the CEO of United mentioned that if that size of a drop happens, then United will have to declare BK by the end of the year. No ****, that’s serious.

Election – In this situation, the Trump administration can’t win and will be criticized if successful or not. If they succeed in keeping the virus at bay, the Dems will say they spent too much. If the virus spreads everywhere, it will be Trump’s fault. The CDC has fumbled the ball once already, but it appears they might have control of it now. Who knows, too soon to tell. On the other hand, if the **** hits the fan, we may see a rallying effect like GWB saw after 9/11 but I’m not sure. One thing you can bet on – the media will spin and use every opportunity to bash the Trump administration.

Vacations- like 2009, look for people to go on “staycations” with immediate family. Big drop in airline travel. RV rental and sales will be big. Cruise line traffic will be down 50% (it probably already is – even Pence is saying “don’t go on a cruise right now.” That’s really bad for business.). There will be a lot of people in the national parks this summer.

Work from home will accelerate and perhaps offices will never recover. We work - done for. I never liked the concept of “sharing germs with other people in a co-working space”. Now, this just won’t happen. Shared offices? Not likely. The office market has been on a decline for a long time now, look to see this accelerate it. Home video apps and tools will do well of course. More people will work from home and like it, and will not want to return to the office.

Health clubs – will be quiet, although some people are just addicted to working out. Bicycle sales might increase as people head outdoors more. Here in LA you can do that, but you can’t bike in the winter in NY. Still, I can’t think of a more germy place than a health club. I actually get a little nauseous just thinking about it.

Churches - big problem. This is how it spread in South Korea, probably Iran, and New Rochelle. Religious people don’t want to give up their services. Even the Iran imams disobeyed the ayatollah and kept licking the statues. This one is going to be tough to give up. Meeting in church on Sunday may be difficult for people to give up.

Hand sanitizer and masks will continue to be in demand. No brainer there.

This will be a Big hit to economy and will cause a recession if it hasn’t already. No way this can’t happen at this point. It’s not like I would be predicting anything, it’s already here, right now. All one needs to do is look inside a restaurant or the airport. This one will go down in the history books right next to the dot-com crash, 9/11, the financial crisis of 2009, and the big market crash of 1987. If one wants to see what would happen, we could look to the flu pandemic of 1918 and the economic consequences of that (see this study here: https://www.stlouisfed.org/~/media/files/pdfs/community-development/research-reports/pandemic_flu_report.pdf)

The report mentions some things (from 1918):

How Influenza Affects Business.” The Arkansas Gazette, Oct. 19, 1918, page 4.

- Merchants in Little Rock say their business has declined 40 percent. Others estimate the decrease at 70 percent.
- The retail grocery business has been reduced by one-third.
- One department store, which has a business of $15,000 daily ($200,265 in 2006 dollars), is not doing more than half that.
- Bed rest is emphasized in the treatment of influenza. As a result, there has been an increase in demand for beds, mattresses and springs.
- Little Rock businesses are losing $10,000 a day on average ($133,500 in 2006 dollars). This is actual loss, not a decrease in business that may be covered by an increase in sales when the quarantine order is over. Certain items cannot be sold later.
- The only business in Little Rock in which there has been an increase in activity is the drug store


Conclusion? I don’t think it will be as bad as the most dire predictions (10 million dead), but the major damage will be economic.

-Wayne

[Crowbob]

Wow.

You should start a company!

[cabmandone]

I read that whole thing and all I could think of was

[cabmandone]

I think it will be interesting to look back in two or three months on all the prognostications to and see exactly who was right and wrong.

The good/bad news for the car industry is that new sales have been declining steadily so the break in the supply chain won't hurt that much IMO.

Nursing homes and assisted living facilities will adjust how they care for the most vulnerable. Some friends who work at these facilities have said changes are already being made very quickly.

Yep... the online retailers are gonna make a killing on this one.

I don't get the fear by otherwise healthy people to go to a store. I'm considered a germophobe by my wife (RN) and I haven't changed my shopping habits. I just do the same things I would normally do when I leave a place where a lot of people are. I have hand sanitizer in the car and I use it. I don't touch my face at all and it's painful for me when my eyes itch from allergies sometimes but I just won't do it.

My guess... and yep it's only a guess but by mid summer the market is back up to 28K

One more thing: The reason they anticipate the virus diminishing in the summer is because people get outside more often from what I've read. Being outside rather than in confined spaces is supposed to reduce the spread. I don't get it but that's what I've been reading about it.

[Tobra]

It is totally overblown. The flu kills a lot more, but people are not freaking out about that. I guess because there is a sporadically effective vaccine so people can feel like they are doing something about it. The Kung Flu is just a crisis to be promoted and taken advantage of, or that is certainly how it appears.

[cabmandone]

Originally Posted by Tobra

It is totally overblown. The flu kills a lot more, but people are not freaking out about that. I guess because there is a sporadically effective vaccine so people can feel like they are doing something about it. The Kung Flu is just a crisis to be promoted and taken advantage of, or that is certainly how it appears.

Sporadically effective is the key. It's really a hit or miss thing and even if they hit, you can still get the flu strain you've been vaccinated for. My daughter got influenza b even though she was vaccinated. Vaccines are a good preventative but the best preventative is making sure you have good hygiene practices.

[manbridge 74]

The Mediavirus of 2020 will not turn out to be the deadly crisis many are hoping for.

[sammyg2]

Originally Posted by Tobra

It is totally overblown. The flu kills a lot more, but people are not freaking out about that. I guess because there is a sporadically effective vaccine so people can feel like they are doing something about it. The Kung Flu is just a crisis to be promoted and taken advantage of, or that is certainly how it appears.

Agreed, over-hyped and too often used for personal or political gain.
But it is turning out to be a self-fulfilling prophesy.

Many people are wanting for doom (PARF), so they will contribute to it. Lemmings who irrationally panic are just as much to blame. Even if many do not do it consciously, they are still contributors.

it's easier to be victim than a victor.

[mgatepi]

I have been doing business in China for about 20 years now, have developed many friends in 2 different regions. My friends in Suzhou which is west of Shanghai and nearest to Wuhan in my travels, are all fine. I just Wee Chatted (texted) with a couple of them and life is returning to normal. As one said, rush hour is back. They are still required to wear masks at work, but everyone is working.
So is this hyped? You be the judge. From my point of view, an ounce of caution is worth a pound of cure. But this is not a society changing event.

[island911]

Originally Posted by Crowbob

Wow.

You should start a company!

I know. And maybe a book or two. (a lot of good stuff Wayne)


On topic; places of congregation are now seen as places of contagion. Subways and theme parks, schools and large corp campuses.

Up here in the PNW Microsoft has become a ghost town. The Univ Of Washington has moved classes online. Traffic congestion... where did it go?

With people's massive panic to be safe I expect this virus will have a tough time. Hooray for anti-social behavior.

Good thing our supply chains are still strong.

[Sooner or later]

Wayne, obviously a Tesla hater, should prepare to be dog piled...

[sammyg2]

Before I forget: welcome back Wayne, good to hear from you. Hope everything is going well with you and yours.

[Sooner or later]

Originally Posted by sammyg2

Before I forget: welcome back Wayne, good to hear from you. Hope everything is going well with you and yours.

This

[cabmandone]

Sorry! This one came to mind too.

[masraum]

Great post, Wayne, but mostly just happy to see you posting.

[Jim deCordova]

For those of you who wish to see actual facts I have posted a good website. As shown it appears to be of the highest risk to seniors.
Scroll thru the whole website, there is lots of good info here.

https://www.worldometers.info/coronavirus/country/us/

[Sooner or later]

Originally Posted by Jim deCordova

For those of you who wish to see actual facts I have posted a good website. As shown it appears to be of the highest risk to seniors.
Scroll thru the whole website, there is lots of good info here.

https://www.worldometers.info/coronavirus/country/us/

I like that site, Easy navigation and lots of info. I have checked a lot of data they show and it seems to be reliable.

[sammyg2]

Database connection failed: Too many connections (1040)

[john70t]

Very comprehensive writeup. Agree that businesses in the public areas (cruise ships, Dinsneyland, restaurants) will take the first wave of economic failures and will have to modify their practices to make customers feel safer-ish.

It might be a few months, but people will eventually start going back out once this initial hype has calmed down and more information is known about it and how it spreads. Is it contact or air born? The gov isn't giving an answer so far.

I was in a restaurant and on the highway yesterday and both were unusually empty. Actually a good thing for the semi drivers. Bad for car manufacturers and repair shops. Saudi Arabia decided to nix Russia to keep pumping on volume 11 so gas was inexpensive. Travel was very easy.

More public measures will probably be put in place. My understanding is that it spreads fast, but affects those already more compromised same as the flu, and has a 2% mortality rate. Most people carry around mersa and staph on their skin but have a reasonable immunity to topical exposure. Some may want to take extra precautions as usual but there is probably no avoiding the inert carriers and goods necessary for normal lifestyles. That delivery box or the goods inside could have the same potential as the public door handle depending.