Viking

I was thinking about this today. Tried to think of a positive situation. - High School graduates this year and the next few years may entertain the idea of not pursuing college right away or at all. - Could help sure up the lag in filling blue collar jobs. - Potentially change the financial mindset of an entire generation. - The plethora of BA. BS holders looking for employment may benefit if there is some lag in upcoming college graduates. Basically give them some more time to filter through the system (if the economy up ticks) I have three kids. Bottom line, one year on-line should be fine. If this stretches into fall 2021 and 2022 then i am not sure. Kid 1.) entering third year university: mix of school and coop job in fall. Transitioning to online learning not a big deal. Kid 2.) entering first year university (computing science): was told by university councillors to only take 4 courses (versus usual 5) due to all classes being online. Doing some prep this summer. Kid 3.) entering grade 12: currently taking French online (during summer) to get one course finished before fall. Sept classes will be mix of in class and on-line. The big difference is both kid 1 and 2 will be living at home (versus living away from home). The key will be keeping things fresh in the house, especially when exams hit :-) We have also had each kid figure out what they need for technology and work stations to get the most out of online learning. Computers, lap tops, iPads (pencils), desks, chairs etc. We actually did not need to spend much but the exercise was time well spent. And Money well spent. Kids need to feel like they are in control. Now families with younger kids or toddlers... yikes! Older kids? Not ideal but manageable. PS: the best part of Covid is each of our three kids are learning how to cook. They each do at least one meal a week. The only rule is their is no rule. They give me their ingredient list and i buy it no questions asked. Beef tenderloin. Tiger shrimp. Prime rib. Gnocci (make from scratch with 60 minute zoom call with grandma). Chicken parmesan. Shrimp linguini. Eggs benedict. etc. They are all having fun coming up the next favourite menu item. Great education can also happen outside of school.

The grocery thread talks about money, seafood, steaks, and erections. 4 things most of us enjoy. It shouldn't be weird it's popular. rb, thanks for making me laugh out loud. My kids think I am a little touched and i think I like that ... :-)

The Japanese thought US citizens were lazy and bombed Pearl Harbour to break their spirit. We all know how the US responded. I think you are way underestimating what the US population is capable of when they rally to a cause. The virus has presented the US with its greatest challenge since Pearl Harbour. To defeat the virus leadership was by far the most important factor (just like in WW II). Trump’s performance has been terrible. The US response has been one of the worst of any developed country. Imagine if Trump was President pre Pearl Harbour. He would have been lauding Hitler and Imperial Japan... concentration camps? Go ahead and build them! Want to over run Hong Kong... who cares. He loves dictators :-)

Smart move. They ate their vegetables, now they move onto dessert. USA? Stuck in futile "isolate seniors/vulnerables" until/if a vaccine ever emerges. Oh, and economy takes on water over longer term now even without any more lockdowns. "Isolate seniors strategy" a.k.a. prepare for long term hits to tourism, entertainment, no spending by those who have money to spend (seniors/retirees), less spending even by young folks who also really don't want covid themselves, restaurant/hotel volume hits, etc etc. Oh, and good luck completely sealing off seniors from the rest of the population. Maybe we can pull some seniors out of retirement to run the nursing homes... The EU will not be alone in doing this. Canada keeps extending severe border restrictions with US and it is hard to see why they would be lifted with the spike in US cases. The rest of the world will likely continue shutting out the US. I am sure this fits with Trump’s re-election strategy... all part of the well thought out plan :-) ‘stable genius’ that he is.

You look at all the economic devastation caused by the virus. Of all the things individual people can do to get the economy back to normal, wearing a mask when out is the most simple and most effective. Given our need to get the economy back to normal as quickly as possible wearing masks when out should be a requirement. But governments in US and Canada would look stupid (given previous communication on wearing masks) so this will likely not happen. So most people will continue to not wear masks when out; and many of these same people will bitch and complain about the need for the government to end restrictions and get the economy back to normal. Crazy times :-) Taleb has 6 reasons why masks help. Here is one of them: Third Error: Mistaking Absence of Evidence for Evidence of Absence “There is no evidence that masks work”, I kept hearing repeated to me by the usual idiots calling themselves “evidence based” scientists. The point is that there is no evidence that locking the door tonight will prevent me from being burglarized. But everything that may block transmission could help. Unlike school, real life is not about certainties. When in doubt, use what protection you can. Some invoked the flawed rationalization that masks induce false confidence: in fact there is a strong argument that masks makes one more alert to the risks and more conservative in behavior.

Do you see inflation as a result of current Fed actions? Or future Fed/Treasury actions? I would watch one of the many Lacy Hunt (Hoisington) videos on YouTube. He sees mild deflation in our near future. When debt bubbles go bad the result is deflation. He also says the Treasury, not the Fed, is the key (if we are to see inflation in the future). Fed actions (under current mandate) will not result in inflation. Globally, we have too many workers. And too many plants (capacity). Too much retail space. This suggests deflation is in our future. The rapid move to technology is just getting started and is hitting every industry - and this is highly deflationary (need fewer people, offices). So my guess is mild deflation is more likely in the coming years than inflation. Perhaps 1 or 2 percent. This will not be good for debt holders as the real total value of total debt will grow. So if you have a $400,000 mortgage and deflation is 1% then at the end of a year the real value of your mortgage is now $404,000. Deflation and debt bubbles would be terrible for the economy. This is likely why the Fed is so afraid of deflation getting established, even if it is mild.

Here are a couple of notes from what i am hearing here in Vancouver: 1.) condo’s are weakest part of market today 2.) demand has picked up as lock downs end; families are trying to get settled before school starts - my guess is there are lots of families who live in a condo, apartment, townhouse who are getting sick of having no space. They have to be dying to own a detached house with more square footage and a yard. 3.) supply has not picked up in detached housing segment - who is wanting to sell a single family house right now? You have space, a yard... the virus is likely coming back in the fall so and decision to move will likely be delayed a year. - My guess is detached single family houses are going to remain in tight supply as long as covid is around as an issue. 4.) with demand picking up more that new supply coming on the market prices have held up well 5.) condo prices are down about 5% and detached houses are only down a couple of percent 6.) if you want to sell better to do it right away as opposed to waiting a year; prices are expected to be lower in another year (across all segments); CMHC is calling for price decline from 9 to 18% over next year in Canada. 7.) immigration is a key driver of economic growth in Canada. We bring in about 350,000 immigrants each year which adds about 1% to population growth. This in turn drives GDP growth and demand for housing. My guess is few immigrants are coming in as long as covid remains a problem. 8.) few international students will be coming this fall. Canada had 720,000 international students in 2018 (2% boost to our population). This will be a big hit to GDP and demand for rental units. 9.) watch the alternative lenders for stress in the fall; if there are problems with lenders this is where it will likely pop up first. 10.) rental prices are down about 6-8% - lots of young adults have move back home to ride out covid - big universities in Vancouver have announced Sept classes will be online so demand from students will be minimal - as mentioned above, minimal immigration and far fewer international students will materially shrink demand for rental units - and makes sense AirBNB units will be moving to long term rental market (increasing supply) until tourism picks up My guess is it will be after October that we will start to understand the real estate market here in Vancouver. By then we will understand what wave 2 of the virus looks like and also understand its economic impact. ————————- For those of you who are interested in a local perspective (Vancouver) you might want to follow Steve Saretsky. He does a weekly update and posts it to YouTube. Real estate broker. Very informative. Likes to talk macro.

Holy shit! Everyone in the US needs to read and reflect deeply on what Mattis wrote. Mattis is a Republican, a professional soldier, a patriot and has intimate knowledge of who Donald Trump really is as a person and how he thinks and acts as President. This message is not from a partisan Democrat hack. Mattis’ is very clear in his assessment of the situation and the President. Donald Trump is clearly not fit for office (and it is not even close). How anyone with a working brain can continue to support this man completely boggles my mind. No, the alternative is NOT worse. That is a false choice. Read the underlined section below if you still do not understand why he must be defeated at the polls in November. “...Donald Trump is the first president in my lifetime who does not try to unite the American people—does not even pretend to try. Instead he tries to divide us. We are witnessing the consequences of three years of this deliberate effort. We are witnessing the consequences of three years without mature leadership. We can unite without him, drawing on the strengths inherent in our civil society. This will not be easy, as the past few days have shown, but we owe it to our fellow citizens; to past generations that bled to defend our promise; and to our children.“

With all due respect, i think the Blackberry purchase was a disaster. After Fairfax’s first purchase they had 6 months to learn how challenged the business was amd how poorly managed it was; it was pretty obvious (all you had to do was listen to the quarterly calls to understand the management team was not up to the challenge.). PS: i actually bought RIM shares back when Fairfax initiated their position. It took me 3 conference calls to figure out the RIM management team was in way over their head (the company was no longer a start up and the industry was morphing fast with strong competitors). I took a small hit when i sold my position. But investing in RIM became one of my best investment decisions ever because it taught me about the cell phone industry. 18 months later Apple got wickedly cheap (the narrative then was Samsung was going to take over the world) and i was able to take my learnings from my time in Blackberry and buy a truckload of Apple over a 4 month period (the stock just kept going lower), which ended up being by largest gain ever :-) Learn...

I agree, private ownership would be better for Blackberry as it executes on its transformation. And Fairfax certainly should understand the company right now. Just wondering where Fairfax will get the $ from? They will need a big chunk of money. Another partnership with OMERS? And interesting that they feel this would be the best use of shareholders capital - versus buying Fairfax shares at a steep discount or growing insurance subs in hard market or buying something else. Perhaps something is driving the decision to make the purchase now.

Pre covid, restaurants in Canada were facing the perfect storm: 1.) rising minimum wage (here in BC it was going up almost $1 per hour for each year for many years) 2.) rising property taxes, as high as 6% in some municipalities 3.) increase in usage of delivery apps (Ubereats etc) resulting in less dine-in; Ubereats take results in very poor margins on these sales Restaurant stocks, especially large table count/dine in, were in a bear market pre-covid. None of the three trends listed above have gone away. And then you add covid and you have a business model that is now completely broken (especially the dine in). Establishments with take out windows are best positioned but that is not the majority of Recipe’s establishments (i.e. Keg) And recessions typically hit food away from home segment harder than food at home. The restaurant business is extraordinarily difficult even in good times to make money. Fairfax clearly did not understand this basic fact when they started on their journey into restaurant ownership. And they kept adding completely new concepts which added more complexity and resulted in few synergies (each concept has to make it on its own). We discovered over time there was no wizard behind the screen (although the various wizards did get very rich). The bigger Recipe got the greater the chance it would fail. Individual brands lacked leadership and got stale; ‘synergies’ (great word) never materialized. Having said all the above, there is a good chance that we could see in the next 6 months a devastating number of bankruptcies in this industry. There are lots of mom and pop operators who may not make it. The companies who can make it to the other side might be in good shape. Or perhaps we see a continuation of the long term trend: the industry muddles along and continues to destroy investor capital. Fairfax might be tempted to double down with Recipe. There will likely be lots of opportunities to pick up other restaurant chains for a song. Or expand existing concepts (as better locations come on the market). But do you give Recipe more $ when they have not demonstrated the pre-covid model even worked? Would there not be lots of ‘synergies’? They might need to go in the opposite direction. Start to sell off some of their concepts to other operators who are more focussed, passionate, motivated, nimble and better able to execute in covid world.

There is so much we do not understand about the virus. Chinese and Trump approaches to managing the pandemic are almost exact opposites so with each month that passes we will also get more information as to how effective each approach is from both health and economic perspectives. We all better hope we do not get a second serious wave before a vaccine is ready... China’s New Outbreak Shows Signs the Virus Could Be Changing - https://www.bloomberg.com/news/articles/2020-05-20/china-sees-signs-new-cluster-carries-virus-longer-than-in-wuhan Chinese doctors are seeing the coronavirus manifest differently among patients in its new cluster of cases in the northeast region compared to the original outbreak in Wuhan, suggesting that the pathogen may be changing in unknown ways and complicating efforts to stamp it out. Patients found in the northern provinces of Jilin and Heilongjiang appear to carry the virus for a longer period of time and take longer to test negative, Qiu Haibo, one of China’s top critical care doctors, told state television on Tuesday. Patients in the northeast also appear to be taking longer than the one to two weeks observed in Wuhan to develop symptoms after infection, and this delayed onset is making it harder for authorities to catch cases before they spread, said Qiu, who is now in the northern region treating patients. “The longer period during which infected patients show no symptoms has created clusters of family infections,” said Qiu, who was earlier sent to Wuhan to help in the original outbreak. Some 46 cases have been reported over the past two weeks spread across three cities -- Shulan, Jilin city and Shengyang -- in two provinces, a resurgence of infection that sparked renewed lockdown measures over a region of 100 million people. Scientists still do not fully understand if the virus is changing in significant ways and the differences Chinese doctors are seeing could be due to the fact that they’re able to observe patients more thoroughly and from an earlier stage than in Wuhan. When the outbreak first exploded in the central Chinese city, the local health-care system was so overwhelmed that only the most serious cases were being treated. The northeast cluster is also far smaller than Hubei’s outbreak, which ultimately sickened over 68,000 people. ...The northeast provinces have ordered a return of lockdown measures, halting train services, closing schools and sealing off residential compounds, dismaying residents who had thought the worst was over. “People should not assume the peak has passed or let down their guard,” Wu Anhua, a senior infectious disease doctor, said on state television on Tuesday. “It’s totally possible that the epidemic will last for a long time.”

My guess is the path of the virus and the economy will be key. If the virus news gets better (vaccine) then the economy can start to heal and everyone (including the Fed) continue to muddle along (like we have for the past 10 years). If the virus news gets worse and the economy remains in depression levels of activity then we will be in uncharted waters. We know the Fed will continue to do ‘whatever it takes‘. We also have a President who also will do ‘whatever it takes‘ to get reelected in 5.5 months (via the Treasury). If more and more unconventional levers are used then the risks of unintended consequences increase. Because the virus is impacting all countries my view is nothing will change in the near term (the next year) in terms of the US and its place in the larger order (reserve currency etc). My big picture concern is if we see hyperinflation down the road (that wipes out peoples savings :-)

And what is Japan doing with schools? Full lock down since early March. Doesn’t look to me like they are ‘just wearing masks...’ Japanese government prods schools to partially reopen by grade as pandemic eases (May 2 article) https://www.japantimes.co.jp/news/2020/05/02/national/japan-schools-partial-reopening-coronavirus/#.XsVSzi8iehA The education ministry has presented the option of schools reopening for some grades only amid the ongoing coronavirus pandemic, with priority given to classes for first- and sixth-graders at elementary schools as well as third-year students at junior high schools. The proposal was made to local education boards on Friday. Most school across the country have been closed since early March amid the outbreak.

I also thought it was very interesting what Cuomo said. Why is the administration only ordering proper masks to be produced for front-line workers? Trump is visiting one such plant this Friday, and Trump had to be told that he must wear a mask (and this no doubt is because Pence showed up at Mayo without one, and claimed he didn't know about their mask requirement). What people who talk about places without lockdown fail to understand is that that boat had sailed for the US. If you had strict hygiene and masks and people who understood things very early on, did good contact tracing, R0 will stay low enough that you can contain things. But if you don't and it just runs wild and exponentially double and double and double for a while, you are past the point where you can compare yourself to Japan or South Korea or Taiwan or New Zealand or whatever. You don't get to just decide you want these countries' results without having done what they did. I think people mis-understand what Japan has done to deal with the virus. They issued state of emergency that shut down large swaths of their economy. People stayed at home (they were asked to do things not required... different culture?). When you look at the economic numbers you can see the impact the virus had on individual countries. Japan's economy falls into recession in Q1 - https://www.marketwatch.com/story/japans-economy-falls-into-recession-in-q1-2020-05-17 TOKYO -- Japan's economy fell into a recession by one common definition in the first quarter of 2020, with worse expected in the current quarter. The world's third-largest economy after the U.S. and China shrank an annualized 3.4% in the January-March period, following a 7.3% contraction in the previous quarter when the national sales tax rose to 10% from 8%. Two straight quarters of contraction is one definition of a recession. ...The coronavirus pandemic pushed down spending by households and companies and kept tourists away. Private consumption fell 0.7% on quarter as people refrained from leisure and dining out to avoid infection. Capital expenditures by companies dropped 0.5%. Economists expect that the economy shrank at an annualized pace of 20% or more in the current quarter. Prime Minister Shinzo Abe declared a national state of emergency in April, which led many stores and restaurants to close. Most foreign visitors are barred from entering the country` and domestic travel has mostly stopped. Last week Mr. Abe lifted the state of emergency in 39 of 47 prefectures. It still applies in Tokyo and Osaka but is expected to end nationwide in the next week or two. "Sharp declines in private consumption, housing investment and capital spending are inevitable after April due to the state of emergency and the subsequent request for closing businesses," said Taro Saito, an economist at NLI Research Institute.

Good luck with the new job. Thanks for taking the time to share your ideas. Please continue to share what you can moving forward :-)

Calculated Risk blog has started tracking six indicators to help track the recovery: 1.) daily total traveller 2.) diners 3.) domestic box office 4.) hotel occupancy 5.) gasoline consumption 6.) mobility trends: driving, walking, transit MONDAY, MAY 18, 2020 Six High Frequency Indicators for the Eventual Recovery - https://www.calculatedriskblog.com/2020/05/six-high-frequency-indicators-for.html

cwericb, I personally consider your post - generally & on overall basis - in line with what Vinod has posted in [as far as I remember] this topic not so long ago. The real question - at least to me - is : Who has the burden on their shoulders of the responsibility to actually act on the situation, if the incumbent POTUS - for reasons of mental illness is not fit & proper? -What does i.e. the US Constitution [or other legislation] say? [Personally, I don't know.] John, my view is the Senate Republicans are the key enablers of Trump. The problem is they are too afraid. So what the US essentially has right now resembles a version of an absolute monarchy. Trump is in the process of re-making the Presidency in his image. Loyalty is the only requirement. The interesting thing is the man is only getting started...

Read whole thing... That was a hellava article. Thanks. Yes. It is an incredibly balanced piece and that is what makes it so frightening. It captures in great detail what has happened in the Trump administration. Given we are only at the start of the second inning of this pandemic (according to Scott Gottleib) the US is so screwed moving forward. What is really fascinating to me is it really does not matter what Trump does... he can screw over who ever he wants... his base just does not care what evil he does. Or how incompetent his actions are. Or what the ramifications are. ‘The alternative is worse.’ Amazing. And such complete bullshit. I think that must have been what Germans were saying in Germany back in 1938. And then Hitler proceeded to destroy their country. ————————- Article’s conclusion: “Trump is caught in a box which keeps getting smaller,” says George Conway, a Republican lawyer who is married to Kellyanne Conway, Trump’s senior counsellor. “In my view he is a sociopath and a malignant narcissist. When a person suffering from these disorders feels the world closing in on them, their tendencies get worse. They lash out and fantasise and lose any ability to think rationally.” Conway is known for taunting Trump on Twitter (to great effect, it should be added: Trump often retaliates). Yet without exception, everyone I interviewed, including the most ardent Trump loyalists, made a similar point to Conway. Trump is deaf to advice, said one. He is his own worst enemy, said another. He only listens to family, said a third. He is mentally imbalanced, said a fourth. America, in other words, should brace itself for a turbulent six months ahead – with no assurance of a safe landing.

Another factor boosting S&P 500 earnings per share data the past 10 years is the huge amount of debt taken on by corporations to buy back shares. Some call it effective use of balance sheet and others call it financial engineering. BRK did not ‘lever up’. Did the opposite in fact by building cash to $135 billion. This should matter when looking at earnings moving forward. Especially as we start the ‘most severe recession since the Great Depression’.

If i had to pick highest probability of armed conflict it would be an oil country like Libya or even Iran. The longer oil stays low, combined with a possible resurgence of the virus In the fall, the greater the odds of armed conflict. Also, if down in the polls in Sept an easy way to mobilize base is to be involved in armed conflict. Americans will rally around the flag/President. Low cost and high reward. Given the way politics is done today in the US this is also highly rational and easily justifiable. Win at all costs. Morals? Ethics? Right? Does not matter. ‘The alternative is so much worse’. Anything can be easily justified :-)

Covid is quickly becoming THE political issue in the US. Scott Gotleib has said we are only in the second inning of this game. Hard to see how the continued politicization of this is going to help the US moving forward. The battle against the virus is moving to a new even more difficult stage. G.O.P. Defiance of Pennsylvania’s Lockdown Has 2020 Implications - https://www.nytimes.com/2020/05/14/us/politics/pennsylvania-tom-wolf-coronavirus.html?action=click&module=Spotlight&pgtype=Homepage Republicans, sensing a gut-level anger in exurban and rural areas after nearly two months of restrictions, see an issue with the potential to drive turnout by voters in a state where Mr. Trump, as elsewhere in the industrial and Midwest region, needs a surge of support to repeat his narrow victory of 2016. In Wisconsin, also a swing state, the State Supreme Court sided with Republicans on Wednesday and threw out the stay-at-home order of Gov. Tony Evers, a Democrat. In Texas, armed men have shown up to support businesses defying government orders to stay closed, an extreme sign of the politicizing of social distancing rules. At the same time, polls show that Mr. Wolf, like other governors moving cautiously and heeding scientific benchmarks to reopen, is enjoying record support, including among many Republicans.

Every commercial property lessee is going to ask for rent reduction /participation in cost due to COVID-@9 impairments. Have some office space where you can’t fit all the people in the elevator at the same time, or can’t occupy your office space with the same density - well you are going to ask for a rent reduction. Same for pretty much any B&M store which are getting whacked by online retailing anyways. That’s going to have quite a bit of impact for the real estate asset and CMBS loan valuations. Ouch! The virus is causing value destruction all the way down the chain: - retail establishment or restaurant is impaired - lower employment - commercial real estate is impaired (depends on scale) - suppliers to retail / restaurant are impaired; bad debts? - advertising budget cut etc - everyone earns less so they pay less in taxes Its like a recession that is hitting the globe at pretty much the exact same time. No wonder most people have no idea where this crazy train is taking the global economy :-)

Get ready for alot more actions like this. Commercial landlords are in a very tough spot... Starbucks asks landlords for a year’s worth of rent concessions - https://www.washingtonpost.com/nation/2020/05/13/coronavirus-update-us/#link-IRDOQGL7NBFNFOTF2E5VL4U3XE In a letter to corporate landlords, Starbucks said it “will require” rent breaks for at least a year in the wake of its stores’ closures from the coronavirus pandemic. The Seattle-based coffee giant is asking for adjustments to lease terms and base rent for 12 months effective June 1, the company’s chief operating officer, Roz Brewer, wrote in a form letter, which was obtained by the Greater Baton Rouge Business Report and several news outlets. “Starbucks will require concessions to support modified operations and structure, so we can withstand this uncertainty together,” Brewer wrote. The letter is dated May 5, a day after Starbucks announced that 85 percent of its 8,000 company-owned U.S. stores would reopen by the end of that week. The company temporarily shuttered half of its stores in late March. “None of us know the full extent of the challenges ahead, but it’s clear the value of commercial real estate has changed,” Brewer wrote. “We understand what we ask of you may not be easy, and our commitment is to be fair in our discussions.” “We look toward the future with realistic optimism and expect, as you have in the past, your support in the enduring success of the Starbucks brand,” she added. Given the scale of the company, the ask will have ripple effects, especially as landlords negotiate with other tenants and may have bankers to pay.

I voted just fine like it always was. Back in late Feb and during March there was lots of Coronavirus posting. April / May it has shifted (thank god) back to investing and regular stuff. Not that Coronavirus is not important... When i got annoyed at some posters on the coronavirus thread (i am sure it just happens to me :-) i just ignore them. I. Take a self imposed time out. I actually like the fact that there is so much disagreement on important topics. Normally it means there is some learning to be had. Look at the Fairfax threads... i agree with both sides (depending on the day). Coronavirus is just the primer... the real story will be happening in November. Put your seatbelt (or hockey helmet) on if you think the Coronavirus thread was a wild ride :-)