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Investment Implications of Covid-19


vinod1
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I have put together a short note and tried to identify the various factors that we need to monitor to understand risks. None of this is original, it has all been discussed in various places. I just tried to put together in one place all that I think are going to be important when analyzing a business. This is old news to most of the members of this site but you never know if someone might find it useful.

 

I am most interested if others can chime in on all the other risks that I am sure missed to capture.

 

I help out a few of my friends with their portfolios and all have the same questions, should I sell or should I buy? Rather than talking and explaining to each individually, I am sending them this along with general message of sticking to plan.

 

Thanks

 

Vinod

Investment_Implications_of_Covid-19.pdf

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One uncertainty that was brought up by someone in another thread is the risk of technical defaults.  A company like ViacomCBS may default simply by exceeding debt covenant debt/EBIDTA ratio briefly.  That would be a very unfortunate outcome of all of this.

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Unemployment estimates:

 

https://www.bloomberg.com/opinion/articles/2020-03-18/coronavirus-recession-is-already-causing-staggering-job-losses

 

A spike in initial claims for unemployment insurance is among the earliest signs that a recession is underway. The most recent official number is from the first week of March, and it shows 221,000 claims, roughly on par with the average of the last several months.

 

State unemployment offices, however, are reporting huge increases in the volume of more recent claims. Hawaii reported 1,500 claims on Monday, five times the previous Monday. From Friday to Tuesday, Connecticut saw 30,000 claims, about 10 times the average for a whole week. Pennsylvania received a staggering 50,000 claims on Monday alone, compared to 12,000 claims for the first week of March.

 

Again, using back-of-the-envelope math, that implies a rise in the unemployment rate to about 27% — even higher than the 20% Treasury Secretary Steven Mnuchin has warned as possible. It would exceed the highest unemployment on record, 24.9%, set during the Great Depression. To repeat: These are rough estimates based on early data.

 

 

 

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