Originally posted by @Joshua Myers:
Originally posted by @Matt Higgins:
Just read an article from the MIT technology review and read up on what we already know. Life is not going back to normal tomorrow, next month, or maybe ever.
https://www.technologyreview.c...
until we get a long term fix for carona our economy will be as bad as its ever been. MIT predicts that this will not be the countries only bout with social distancing. Some will go back to work, and when cases rise they will clamp down again. It sounds like eventually rules will have to be enforced at the city, county, or state level. We will have to restrict travel and sacrifice some of our social liberties to live with the virus. How many business or apartment operators can withstand a 12-18 month disruption? How many people who work in US retail will be laid off by the end of this month? It amazes me that the stock market is only down 7000 points. After disastrous earnings reports for the next 3 quarters the only thing CEOs will be able to tell share holders is that we are cutting expenses and laying people off. Even if the government puts a moratorium on foreclosures who will still have a job when the moratorium comes off? The foreclosures will come in waives.
I have heard people say A and B class apartments is where it’s at because their jobs are safe and they can work from home. BS, I know a bunch of mid level executives and some are already being let go. Eventually they will trade down to C class. I am sure some of my C class tenants will be laid off soon, but at least they should be able to make most or some of their $700 rent on tax returns, unemployment, and stimulus. Even if they don’t, I would rather miss out on a $700 payment than an $2000 payment. I would rather pay my C class property tax bill than the A class bill.
Sorry if this is too doom and gloom, but I got the carona blues :(
It sounds like the government is going to bail out as many people as possible, but just like in 08, the people who had their loans modified usually ended up losing them anyway. I’m sure the fixed cost of running an apartment in NYC is high, you have a moratorium on evictions, a governor threatening civil war in a state telling citizens not to pay rent, and talking for 2 hours a day on national tv about how to make pasta. None of this can be good for the investor who was already losing residents to low tax states.
I wonder how the refi & roll, brrrr, and vrbo strategies will look 18 months from now? My least favorite BP line of all time, “I can’t wait for the next crash so I can scoop up all the good deals”. I’m sure that line is usually given by the highest leveraged of all of us or the person that will always be too scared to jump in.
Crazy times, someone talk me off the cliff :) how hard will multi family be hit when the dust settles?
You're getting blowback from this, but I think it's a fair question. Looking back at 9/11 and the GFC I think it's fair to say that things were materially different for 5-7 years and that we are still living with some repercussions of those events today.
For things to get back to normal:
- everyone in the world (not just the US) will need to see their earning capacity completely restored
- consumer balance sheets will need built up again
-all of the lost productivity in the manufacturing sector will need to be restored
-consumers sentiment will need to return to all time highs
-governments (federal, state and local) will need to come to terms with trillions of new debt and massive budget short falls. this will be a big issue for states and localities that are already flirting with default (see Illinois)
-pension funds will need replenished
-corporations will need to deal with serious damage to balance sheets and return to net spending on R&D and capital outlays (the energy sector might be the biggest issue here). corporate debt was already at or near all time highs for several sectors prior to the crisis
- Both national and local economies will need to see a return of animal spirits to the pre-crisis highs from both local business owner and in the tech industry. Several startups are already laying off employees
There are more issues that I'm worried about. What happens short term to these co-working spaces like We Work? The duration mismatch is ridiculous. What is going to happen to loss making startups and their high income employees living in trendy urban centers? How effective will the FEDs lending facilities be at arresting the liquidity crisis? Is there a point where no amount of centralized action can stop a cascading liquidity crisis, and, if so, where is that? If the FED and federal government couldn't restart the economy within 12-18 months after the GFC, have they learned how to do that in the past 10 years
I don't know what happens with all of this, no one does, but any prediction of life as normal by Q3 of Q4 assumes that the majority of these problems will melt away in early summer.
Just a couple of those points i'd like to address... (through my rose colored glasses)
1) Loss making startups? If they're operating at a loss and it's in their forecast a setback like this shouldn't matter and that depends on the type of startup. Most tech startups are geared towards some sort of remote idea anyways. A Crisis like this will also be the foundation of a 100 start ups in a year or two anyways. Co working spaces ... can easily be work from home spaces. Sure the company itself has issues but the people using them can and should be able to work from home.
2) I don't think we need to see a COMPLETE restoration in earnings capacities right away but i feel like we will see a big jump towards that as people are allowed to return to work.
3) Pensions be returned is true maybe. We're down about 26-28% off of the highs but that means we're only 5% below a bear market indicator. One or two good days can get us right back up there the way the market has moved over the last 3 weeks and if your pension isn't able to sustain a short term bear market you probably shouldn't be investing.
4) SOME Corporations will need to deal with a damaged balance sheet (hospitality). AND SOME are doing better than ever(retail/grocer). that's just a normal cycle.
5) Most towns in america don't rely on the tech industry so we generally don't care how they feel about anything. I live in a college town for example and as soon as the schools are back the restaurants will return and the brewery industry and the sentiment around town is people can't wait for it. That "animal spirit" hasn't left. Consumer sentiment isnt down because there isn't an underlying economic "bubble" that would cause people to worry (in my part of town at least).
6)all of the lost productivity is going to lead to an increase in demand all the while the workers are employed switching to items to be used in this covid-19 issue (ventillators, masks, etc)
7)consumer balance sheets historically aren't "built-up" to begin with so that's not a hill to high to climb. Americans are terrible at saving as a whole and yes a month or two of this is going to hurt but as soon as they start making money again they'll usually start spending it.
