E-letter: Coming out of hiding

0

There was an encouraging bit of news out of China last week. Disneyland Shanghai announced its reopening, and was rewarded with its opening-day ticket sales selling out in hours. Granted, the ticket sales were limited to 30 percent of normal, but if the markets were looking for fear or caution, they did not find it. 

Kerry Knudsen

There is also good news out of the U.S. this week, with Quicken Mortgage saying they have seen no softening in real estate prices so far.  

One thing that’s concerning is the evolving politicization of the pandemic, especially in the States. The White House Task Force said earlier this week that they can’t believe what the Centers for Disease Control says. That’s big. And there are enough reports of directed diagnoses  officials ordering doctors to label any pneumonia, flu or heart ailment as Covid – that it will be at least a year before we can gauge year-over-year mortality rates for H1N1 flu and other diseases to see if we can isolate the numbers for this one. 

During the U.S. Senate hearings yesterday, the Democrats were slamming the Trump administration for the U.S. having a much higher mortality rate than does South Korea, but nobody seemed to note any number of variables that may have had an effect, such as average age, population density, percentage of old people in facilities versus home and the ability of the government to do invasive contact tracing. It just seems too early to start laying blame and stating facts. 

One fact worth noting is that we are NOT in a recession. We cannot be, by definition. A recession is defined as two consecutive quarters of negative growth in the GDP. I will grant that it appears we are headed there, but we are not there, yet. This whole mess started in earnest only two months ago. 

 

One thing I think is interesting is that Canada’s fiscal response has been mostly split equally between two of three sectors, and we are not one of the two. Big businesses are being protected, and individuals are getting mortgage relief, wage subsidies in one form or another and are saving costs on eating out, transportation and clothing. They may not like it, but they are. One of the quips a friend sent last week is that his car is now getting nine days to the liter. 

Small businesses are getting a wage subsidy, which helps, and we are getting the chance to borrow $40,000 at no interest and a 25 percent forgiveness if it’s paid back by the end of 2022.  

I have to say, that seems fairly thin, compared to the other two sectors, especially since small businesses will be paying back the largess of the government for the foreseeable future, a loan is a loan and must be repaid and nobody can predict what revenues will look like over the 18-month payback period.  

A wise and thrifty entrepreneur can borrow the no-interest money, sit on it for a year, pay it back and pocket $10k, which is nice, I guess, but I don’t know your cash flow. Ten thousand dollars will just about cover the postage on one issue of the magazine; forget about printing and binding. 

This will be interesting. As we approach returning to work, we will see two groups of people: those that were able to work or not, commute by Zoom or not and collect a cheque, anyway, and those that were able to work or not and not collect a cheque. Small business owners may fall in that second category. One friend of mine owns a couple of gyms. According to her, just the taxes, maintenance and insurance on one facility is $6,000 per month, not including the lease, and her revenues went straight to zero. 

It strikes me as odd that the tables have been turned to the point that employees may be returning to the market with money in their pockets, while their former bosses are left wanting. 

Another friend and business owner made another interesting observation. He said, “A few people are going to get very rich over this.” 

 

So should we get despondent and quit? Not at all. As noted, the housing markets look good. The virus appears to be defeatable in other countries, so it is, here, as well. So, things will return to normal, even if it’s an adjusted normal. 

What should we do? The same thing as entrepreneurs always do. Look for opportunities in change, fix what can be fixed, save what can be saved and start over when nothing else works. 

Simple, eh? The thing is, social-distancing jokes aside, we are all still in this together and tomorrow is a new day. It’s spring and it’s time for Canada to come out of a cold, hard winter. 

Oh, what the heck! One social-distancing observation: after all this is over, the population will need a lot more floor space. That means more cabinets, more tables, more desks … you get the picture. 

________________________

I would like to thank the British Columbia Floorcovering Association for inviting me to speak via Zoom to their recent meeting. They recorded the talk, which covered some of the same points, and you can see it here, if you like.