Carey’s 30 Second Snapshot –

The U.S. Senate passed an unprecedented peacetime $2T Stimulus Package last night which some are saying equals 9 to 10% of the GDP (remember, Gross Domestic Product or the measure of value/income created in our economy) and the House is expected to unanimously approve the bill today. (Or they’ll have to come into to work as antiquated voting laws require them to be present on the House floor to vote if any one House member votes no.) This is the 3^rd bill and the most significant intended to send a life line to everyone from low income workers to small businesses and large corporations; as well as much needed funds to hospitals and local and state governments who are on the front line of the crisis. Yesterday was the best day in 87 years for the Dow up 2,112 points and today the largest stimulus ever is announced! So why is trading up, down and all around?  Simple, this is “not normal” and we don’t know for how long! It’s that duration thing, again!

Monday we talked about the economist’s predictions of lost income over the weekend. In particular, the President of the Federal Reserve Board of St. Louis was quoted as projecting $ 2.5T (yes, Trillion) in lost GDP because of Covid-19 for the 1^st & 2^nd quarter of this year. And don’t forget the same financial leader is suggesting a BOOMING economy in the 4^th quarter. The U.S. Government is making up $2T of that loss in stimulus. So what’s the problem?  This event is a health crisis which has suppressed demand for entire sectors of the economy and disrupted supply.  And until demand – consumers and businesses buying goods & services – resumes in normal patterns and supply of normal services resumes we will continue to see wild swings as investors and traders guess which companies will weather the storm and which will not. The Fed and now the U.S. Government are doing all they can to support individuals and businesses.  So our best course of action ~ keep a cool head and focus on staying healthy! #BeTheCalm

IN THE WEEDS –

Let’s look at Demand –

Demand is simply consumers and businesses buying goods and services.  So what is your house buying or demanding right now? (Please no TP memes! It’s my daughters new fav to track. We get a complete run down at family dinner whether we want it or not!) But seriously, we’re buying the necessities and maybe some home gym items, some books from Amazon and binge watching Netfix or Hulu IF we still have jobs and savings.  What are you not buying? You didn’t go on Spring Break with your family so you cancelled your airplane tickets, hotel rooms, and haven’t been to a restaurant in 2 weeks, nor the mall for the new spring look. (All though there are some amazing retail sales on-line.) And now that you’re telecommuting, you’re NOT using gas, the dry cleaners, nor the restaurant for lunch. You can’t have your nails nor your hair done and you are not grabbing a drink with friends after work on Thursday. You most definitely are not Ubering to a restaurant on Friday night for dinner with friends. Even if you are trying to support a local restaurant by buying dinner from their curb-side, the bill is substantially less than if you sat down to dinner and had a couple cocktails a few weeks ago!  So which companies are impacted and what products are impacted?

Investors are trying to sift through and understand how demand is reshaping the winners and losers  –

• A Great Example: Beer manufacturers & distributors are perfect – The bars aren’t buying kegs since many are closed by state orders.  However, supermarket and convenience store sales are up for bottles & cans of beer.  Do the sales even out? Is the increased cost of production covered in the store prices for bottles & cans?  Is the profit the same?

• Also, there are many distilleries that are redirecting production away from alcohol and “retooling” their processes so they can make hand sanitizers to ensure hospitals, businesses, and homes are properly protected.  Who’s doing that? How fast can they get to market? And what do those numbers look like?  

• Now, get all that data 1) about your company’s demand changes, 2) data that shows you’ve got solid suppliers who will get you raw ingredients without stopping shipments because they are sick, and 2) data that shows you have a healthy distribution channel to get your increased bottles & cans of beer and your new hand sanitizers to the stores to be sold. Package all that data up neat & pretty in a presentation with a bow on it so the executives of your company can talk to the market analysts, institutional investors and the media!  Then go sell, sell, sell the merits of your company so you can have a good day trading!

Supply – The Other Side of the Equation

Normal supply chains have been disrupted when it comes to imports. Because China and Korea were shut down before the rest of us, many of the necessary components in medicines and technology couldn’t get to us. Now that they are returning to normal, those supply chains are re-opening. India, one of our large trading partners who supplies raw ingredients and manufactured good for us, is now in lock down. U.S. companies reliant on India for their products will have to use up what they have in stock and wait until India re-opens for business before restocking. Do they have enough inventory or in stock for few months?  Many drug companies are re-visiting supply chain dependencies on single countries and the mix of international vs domestic production plants. This is prudent and good risk management. Putting all your eggs in one basket is never a good idea!

I am particularly grateful for the U.S. Farmer & Rancher!  The good news is that the U.S. is a net producer of food for the world. That means keeping them healthy and protecting those who deliver our food supplies to the stores is super important. We’re already hearing news reports of some countries shutting down exports.  We might not be able to get all the varieties of foods we like to enjoy from other countries. Fortunately, the U.S. farmer has our back! The government is very focused on ensuring necessities continue to flow to our stores!

But again, we’re talking about covering our basics needs. Some of the service industries can’t supply their service because of the health crisis with government orders to shut down sports & entertainment events, eat-in-restaurants, travel bans, etc.  These companies can’t supply anything for sale. This is why the stimulus is so big for small and big businesses. They need life lines to stay solvent (out of bankruptcy) while we wait for the health crisis to pass.

What we know about the Stimulus Package –

1. $130B for Hospitals fighting the Virus
2. $150B for State & Local Governments fighting the Virus
3. $250B for Extra Unemployment Insurance on top of State Insurance
4. $250B for direct cash payment to those making less that $99K individually or/ $150K jointly
5. $350B for Small Business Loans
6. $500B for Large Corporations

Many of the details are still to come …

As always, what can we do?

Stay healthy, be prudent about how you choose to spend your money right now, and take the long view on the market. Please help those in need within your community, get outdoors to relieve some of the stress, and be your amazing selves!

We will lead our families, our communities, and our teams calmly through this event!  #BeTheCalm #Leadership!!!

If you have any questions or topics of interest, please send them in!

Stay Healthy!

Susie