[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).