by Fred Fuld III
Your email account has probably been pelted with COVID-19 letters from every company you have ever done business with, or for that matter, every company you have ever interacted with. They all say the same thing, “extraordinary times,” “crazy times,” “historic challenges,” “our commitment to you,” etc. Plus they all tell you to wash your hands. I think we all get the picture.
However, for the next several months and possibly the next couple years, there will be a new normal. I am concerned about some short term and medium term risks associated with the coronavirus, not just economic risks but societal risks. Here they are:
No Immunity
With everyone sheltering in place, and not interacting with anyone else, individuals won’t be exposing themselves to viruses and bacteria that they usually would under normal circumstances. This would prevent them from building up immunity to infectious agents, making them more susceptible to illness during the flu season this fall.
Baby Boom
In nine months, there will be a baby boom caused by the quarantining at home. This means that hospitals will be flooded with pregnant women during the December and January time frame, right during the peak of the influenza period. Will there be enough hospital beds? I realize that there can be more births at home and birthing centers but there will always be a need for hospitals to handle the C-section and difficult births.
Relapse
Will there be a relapse for those who caught the coronavirus? According to a recent article in Newsweek dated April 13, South Korea is seeing a rise in ‘Reactivated’ Coronavirus patients.
Restaurants
How willing will people be to go out to eat at restaurants again? How long will social distancing in restaurants last even after the quarantine is over? Will restaurants reduce their number of tables by 50% and sit people at every other booth, thereby reducing their capacity and revenues?
Bankruptcies
Once one major company declares bankruptcy, such as a retailer or a cruise line, will it create a snowball effect? Will these corporations go bankrupt AFTER they receive the bailout money?
Inflation
The U.S. national debt is now over $24 trillion. The Federal Reserve Board has flooded the economy with trillions of dollars recently. Will the U.S. eventually have runaway inflation like Zimbabwe?
Nosebleed P/E Ratios
Price to earnings ratios are trading at extremely high levels, and infinite levels in some cases. The stock market can still go higher, but with many stocks trading at such inflated prices, not even taking into consideration the reduction in earnings during March and April, the market is due for a downturn.
Beneficiaries
Of course, there will be a few companies and their employees that will benefit from this pandemic. The corporations that provide online shopping, online entertainment, and online meeting and video conferencing will be the big beneficiaries.
Stay healthy everyone.