As the world finds its footing amidst the Coronavirus, we find ourselves lacing fiscal projections with an almost cult like positivity. If there was ever proof of the danger that stock market speculation poses in lieu of pragmatic analysis then the past two week should be referenced by future generations as a cautionary tale.
A lot of my friends have been bouncing in and out of the stock mark after wielding short swaps with frequently disastrous consequences.
It seems to me as someone who has been hoarding liquidity since this crisis begun that regardless of financial indicators, trades are reverting to base knee jerk instincts, balancing the Jekyll and Hyde tight rope of hope and gloom with almost reckless abandon.
Observing the shit show unfolding (with regards to the economy) has become almost comedic. Placing wall street narrative on a pedestal and KYC & Suitability tests from Brokerage firms reinforcing this naive euphoria that the pretty candlesticks will guide us home safe and sound. If we step outside the charts and look at our communities, it becomes clear that this situation has created the monster of all domino effects and as a community we should be frank and stop with the fucking cheerleading.
When we talk about the labour force, we have a romanticised notion of office and contract blue collar workers who will happily march back to work when the lockdown is upended & the consequent boost in productivity will propel us to reclaim any lost economic grounds in a few short years.
Unfortunately, this assumes that companies did not use this opportunity to cut costs and thus ditch unproductive workers and that electoral positivity is somehow adopted in the boardroom.
It is not.
Many of the furloughed workers will find their contracts unable to be renewed under the prior terms and companies will be hoarding capital- not dumping cash into the magic markets.
Furthermore, these companies are bleeding money- regardless of government subsidies & stimulus packages. 47% of companies with commercial rent on the high street in the UK are not paying their rent.
Those commercial landlords are frequently over leveraged and the knock on effect will be devastating.
Compounding this issue is the fact that these skipped rents both commercial and residential are not absolved by grants. They are debt obligations and one way or another the chips will fall. This is the real crisis that will drag down the sector because our supply of money to offset these enormous losses and the prudent chilling effect this virus has had on the consumer base is going to compound to the extent that the bailouts in 2009 will be a fond memory of reasoned economic management.
Looking around my own community in Portugal, I see restaurants, hotels and the broader hospitality sector that won’t be able to recover en masse from this. Of course winners will emerge but the rapid drop in liquidity is hammering nails into an already fragile coffin. The service sector is incredibly important to so many people to the extent that losing that side job as a waiter can render entire families destitute- the reality is that many people depend on multiple sources of income that are not protected under labour laws and losing that 30% can mean the difference between paying rent or defaulting.
The elephant in the room is that all these events create a perfect storm that will eat away at any recovery as one domino falls after the other. Many families have 2 cars, both of which are leased- what happens when the family has to cut down?
We have housing, leasing and student loan bubbles coupled with an environment of fear, where the social stigma of bankruptcy has been eroded due to a widespread it’s all going to shit mentality, the social ideals of responsibility will only cover one’s family and other clannish interest.
What concerns me the most is the only tool left is for the government to crank the taps open and leave them running past the point of being able to stomach the sheer size of this debt obligation. This new enemy of ours has gripped our society with so much fear (albeit, warranted) that we have become almost blase about the financial levers being pulled to the point of snapping from whiplash.
The reason I am ranting about this is due to the bullish swings in the markets as of late, executives have been buying back their own stock at a discount and the markets rejoiced, with a broad, almost frantic belief that it’s all going to be ok. Oblivious that not everyone works for a fortune 500 company.
The world runs off small businesses. Resellers and contractors. We can rejoice that corporations are going to accept working from home in the future but in our elation we are forgetting about all the people whose job depends on the daily churn of workers in the city and the obvious ramifications of this shift in mindset.