This is my attempt at setting up a framework for what the world will look like post covid-19 other than simply saying there will be recession. This is from the perspective of a credit investor and parent. Expect this to be update on a on going basis.
Key Sections
A. Finance
B. Sectors
C. Politics
D. Personal
Updated: 1 April 2020
A. Finance
Accounting, Taxes and Cash
- We will be done with the weather related excuses for missed results! (at least for a year)
- Instead will be looking at pre-cv and post-cv numbers
- Taxes will go up
- Will be interesting to see if Luxembourg and Ireland and other tax havens will sponsors those
- Cash, paper cash will be dirty – expect faster move to a cashless society. This will help with those taxes
- Peak dirty cash: paper cash will be at a discount to online cash and I don’t mean bitcoin here
- Btw, bitcoin the safe haven just got a D-
- Hedge funds will need to underline the market neutral part in their names if that applies as opposed to pure leverage
Bailouts and Banks
- Its about keeping unemployment low
- Its about avoiding social unrest
- People will not accept a 2nd time for governments to bailout wall street and shareholders without having them to pay
- Capitalism does not work if tax payers keep having to bailout the system
- Stagflation? No idea, but it does worry me
Distressed
- HY docs have no teeth so it will be a while before they step in as a buyer – big drops ahead
- Expect layering instead: secured debt in the teens with a spare key to the business in case of failure
- Initially expect a lot of waivers approved as too many not prepared to convert debt into actual ownership
- Direct Lenders potentially a more interesting space as docs have teeth and teams likely will be overloaded with work
- CLOs – that will be fun…
- Energy and energy services space looks nasty and its not like you are going convert those drill ships into cruise ships…
ESG
- Will grow further simply on having dodged the oil slide to 20!
- We will see a Medical twist very soon
- Oil at 20 will be a challenge for many alternatives to beat
- The real change will be if we get tax transparency. The cruise ships under tax free jurisdictions asking for a tax payer bailout are a prime example of a challenge here
B. Sectors
Healthcare
- US may actually finally realise they need a real healthcare system. One for @elonmusk to lead the revolution there
- Lack of social support makes people more generous in the us but healthcare needs to be a public good, just like law and police
- Worst case scenarios will be back with significantly higher storage requirements of supplies
- Visits to doctors and hospitals will drop as people see the risk of entering a potentially toxic environment
- Research funding will be up
- Demand for medical talent will sky rocket
- @billgates has been doing a lot on a global level, perhaps more to come
Military
- If they are smart in the US, they will volunteer to take over the future planning of preparedness and stability of healthcare
- Otherwise budgets will probably be cut except for cyber and obviously bio areas – funds need to come from somewhere
Real Estate & Retail
- Luxury retail will suffer unless online
- Appeal of malls will further deteriorate
- Venues without a temperature scanner will be something from the past at any prime indoor event
- Cinema’s will see a similar faith – just imagine someone coughing during a show
- Live theatre and operas shows likely to suffer even more in short term, the rich will find other ways to be entertained
- Families will value houses over apartment
- Summer houses will go up in value as a safer holidaying alternative to all inclusive with a breakfast buffet
- However that apartment from AirBnb in Southern Europe, well that one is on offer
- Wework not cool. WeStore instead.
- More work from home and less prime office needed
- Discretionary and Staples will mean a lot
- All those own brand products are not that bad or different after all. No need for the fancy brands, then again an affordable luxury versus going out!
Supply Chain
- Rubber glove production is unlikely to migrate away from Malaysia but just in time supply chains will change instead.
- Just in time will need to be scrapped in certain critical sectors. Storage, inventories and warehousing will need to go up. Nice one-off hit to all those working capitals numbers
- National security in terms of certain supplies will be back on the agenda
- Will make it difficult for countries to “get back to normal” without co-ordinating it with key trading partners. First country back will have limited upside other than less frustrated parents 😉
Tourism and Entertainment
- Operating costs for all facilities will go up and visitors will be down
- Expect bifurcation with some going for high risk volumes and others for high end safety and distancing
- Buffets will only be a thing of the low cost players
- Vacuum of new tv episodes will need to be filled with live streaming
Tech
- Feel sorry for those Value investors staying away from tech…
- Unfortunate also for those Value investors is that many of VC deals are not listed equities in benchmarks
- Softbank – lets just call it Alibaba holdco and spare us all the schadenfreude press coverage to come
C. Politics
Politics
- Some new heroes will be made, though most western leaders deserve a telling off for their ignorance of what was going in China in January
- Same applies to many corporate “leaders” and socially responsible branded national blue chips. (Funny enough some banks had mask supplies!)
- WHO – I am just hoping that the Swiss HQ is the only thing they have in common with FIFA
- EU? What EU? Germany took some patients from Italy and France but otherwise I did not witness any Unity. Why did no one send any doctors to Italy? Or did I miss something?
- Never waste a crisis – thank you Orban for that one
- An yes Big Brother is watching, suddenly all that data your mobile throws off will be used by governments!
Emerging markets
- The oil haves and have nots will turn tables for a bit
- …More to follow
D. Personal
WFH (Working from Home)
- More of that given any signs of an illness for white collars
- Paid leave for blue collar workers
- Demand for that extra room or cupboard
Families
- Expect a wave of divorces, especially for those that didnt plan for having conversations and joint parenting with their spouses
- Thereafter expect to see a drop and even a few marriage courses based a two week quarantine
- As for singles – online dating surely continues to grow
- Parents actually get insight in what their kids are doing in class
- Expect huge problems upon return to class rooms between those that advanced and those that fell behind for valid reasons but also bad parenting