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Wednesday Morning Thread: If you’re extra squeamish about ugly financial realities, sit this thread out. As always, the goal isn’t to scare you. The goal is to help you understand what’s going on at a very deep level. 1/
Every time I think about the economy being shutdown, I think of restaurants. And while they are certainly struggling, this morning I want to talk about how much deeper this problem really is, and why our minds always return to restaurants. 2/
Think of your favorite strip mall, or traditional mall for that matter. It’s closed. Not just the food courts and the anchor restaurants, but the vacuum shop, the alterations lady, the kiosk selling Successories posters, and every other store. 3/
The car dealerships, who often have a car in the mall like some sort of showroom, aren’t selling many cars at all, and thus they’ve stopped advertising. 4/
So then the advertisers, such as radio stations, tv stations, and newspapers, see a large drop in revenue. So they layoff/furlough sales people, staff, and journalists. 5/
The dance studio in the strip mall is closed, as is the group fitness franchise. People aren’t driving to these classes, or anywhere else for that matter, so car repair shops have no work. 6/
The travel agent business isn’t booking any trips, and so the flight attendants and the TSA agents don’t have as much work either. 7/
We think of restaurants because dining-out is the manifestation of our discretionary spending. All the shops & professions I mentioned above go out to eat, in a way, to celebrate their financial freedom. There currently is no discretionary spending, because there's no income. 8/
For every profession I named, let your mind travel up and down the supply chain of those businesses. For instance, when you remove youth dance and gymnastics studios from the economy for 2-3 months, you zap millions and millions of dollars from the economy. 9/
Millions that pay for alterations, car repair, fitness classes, and Successories posters. Our economy was a fantastic flywheel which had seemingly perpetual motion, but that complex fly wheel came to a messy halt. 10/
I have no doubt we’ll defeat the virus, & I have even less doubt the stock market will recover. I believe our economic flywheel will rotate again, but I think it’s not only gonna take significant time, but I don’t think some people will be welcomed back into the process. 11/
In order to build strong and healthy businesses, business owners will focus on getting lean and efficient. This is why you keep seeing long-term unemployment rate projections hovering around 10%. 12/
The sadness I experience in any given day not only revolves around those people who lost their lives and loved ones due to COVID-19, but also those who will be left out — Just like the people who were left out of the recovery in 2009. 13/
I’m not suggesting you will be the one left-out, but I do know that raises, bonuses, and additional income opportunities are going to suffer for a while too. And while I certainly want you to get ready to help the flywheel rotate once again, I also implore you to get lean. 14/
Make an emergency fund a priority in the rebuild, and don’t let lenders set your spending limit. Defend your need for stability. We're not returning to normal anytime soon.
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15/15
