Effect of economic crisis on America’s small businesses [slides] • Hacker News Board

Re: Effect of economic crisis on America’s small businesses [slides]

#41

Post by tinyhouse » Sat, Mar 21, 2020, 2:32 AM UTC

lettergram wrote: post #2

One thing that really horrified me was how quickly people threw away the economy. Unfortunately, this virus is highly contagious (to the point that the vast majority of countries won’t contain it) and fairly lethal. We don’t actually know how lethal, but it appears 1%-3%, but without widespread testing we wouldn’t know. At the moment, we just reduced our GDP by 30%-50% in regions under quarantine. Think about that fo…

I wouldn't say it's lethal, at least not for everyone. The last report from Italy has stats on 2000 deaths. No deaths under age of 30 and only a few under 50, all with pre-existing health conditions. Women's median age close to 84. Men's 80. And vast majority of deaths are people with multiple pre-existing health conditions.

Re: Effect of economic crisis on America’s small businesses [slides]

#42

Post by lettergram » Sat, Mar 21, 2020, 2:33 AM UTC

maxerickson wrote: post #9

lettergram wrote: post #2

One thing that really horrified me was how quickly people threw away the economy. Unfortunately, this virus is highly contagious (to the point that the vast majority of countries won’t contain it) and fairly lethal. We don’t actually know how lethal, but it appears 1%-3%, but without widespread testing we wouldn’t know. At the moment, we just reduced our GDP by 30%-50% in regions under quarantine. Think about that fo…

Reasonable compliance with social distancing from 25% of the population has a huge impact on the slope of the curve. Of course better compliance from larger numbers of people has even more impact, but it's not a binary condition. That said, we probably aren't doing enough to prevent hospitals from being overwhelmed, or to even push that very far into the future.

Not enough, all the simulations show we’d need to basically reduce our number of interactions a day by 75% and double the number of ventilators by 100% to “stay under the curve” that’s if we didn’t have a huge number of celebrations and people in lines, etc.

Projections are 500k dead by June. Maybe with the precautions we can slow the millions dead by the end of the year. It remains to be seen.

Re: Effect of economic crisis on America’s small businesses [slides]

#43

Post by lotsofpulp » Sat, Mar 21, 2020, 2:33 AM UTC

JMTQp8lwXL wrote: post #4

Instead of hundreds of billions in loans to businesses, which have to be underwritten -- and as discussed on Slides 17/18, the SBA did an abysmal job administrating during Hurricane Sandy, helicopter money might be the better answer. Give everyone money, no criteria. If we do impose income limits, and since viable proposals do -- we ought to discuss it. Give them a check now anyways. We cannot be worried people will…

Why income limits? Would it not be easier and faster to just adjust marginal tax rates and simply give everyone money right now?

Re: Effect of economic crisis on America’s small businesses [slides]

#44

Post by codingslave » Sat, Mar 21, 2020, 2:33 AM UTC

jdminhbg wrote: post #37

codingslave wrote: post #7

The stock market is largely collapsing because: 1.) Hedge funds levered up their capital 5 - 15x to make more money, then got caught with their pants down. So they all panic sold at once, crashing the market. 2.) CEOs of large corporations used cash to buy back their stock, inflating the stock price, and depleting their cash reserves. So now those same companies are on the brink of collapse, causing the credit market…

> The stock market is largely collapsing because: I'm gonna go with: 0) A pandemic has caused the government to shut down a double-digit percentage of the economy.

People are completely underestimating how much leverage and pumping there was on those companies, and how thats effecting us now. Companies dropping 75% because they might lose 3 months of revenue is not an expected outcome.

Re: Effect of economic crisis on America’s small businesses [slides]

#45

Post by danieltillett » Sat, Mar 21, 2020, 2:33 AM UTC

glass_of_water wrote: post #13

This appears to be an appeal by Womply to direct a ton of stimulus money toward them, so that they can make loans to small businesses (instead of the Small Business Administration), and then they can take a cut of that.

This appears to be a very ungenerous reading of the slide deck. This is a time everyone needs to pitch in and do what needs to be done.

Re: Effect of economic crisis on America’s small businesses [slides]

#46

Post by sokoloff » Sat, Mar 21, 2020, 2:34 AM UTC

codingslave wrote: post #35

SpicyLemonZest wrote: post #29

Earlier quoted context omitted.

It's not really possible for the market to drop only a little bit in response to half the economy shutting down. Stock prices are an expectation of future cash flows, so they have to drop on news that a huge chunk of those future cash flows are cancelled.

Look at Boeing stock. Companies dropping 50% because they miss 3 months of revenue?

If that 3 months risks a bankruptcy, that might be right. Long-run valuation for shareholders doesn’t matter if the bond-holders end up with the company.

I suspect this is a 12-24 month economic event, maybe longer before it fully rolls through.

Re: Effect of economic crisis on America’s small businesses [slides]

#47

Post by SpicyLemonZest » Sat, Mar 21, 2020, 2:35 AM UTC

testfoobar wrote: post #38

The virus is terrible. But our solution could turn into an economic catastrophe. It simply isn't possible to shut down the economy and then pay people, businesses to sit idle for an undetermined amount of time. The solution is aggressive, continuous testing so that people can feel safe going back out. 1. Make hundreds and millions of the rapid tests available. 2. Deploy them to every business, every institution. 3. T…

I agree with the spirit, but theme parks specifically should probably stay cancelled until the virus is completely and universally suppressed. Temperature checks in smaller public accommodations, absolutely.

Re: Effect of economic crisis on America’s small businesses [slides]

#48

Post by AnthonyMouse » Sat, Mar 21, 2020, 2:35 AM UTC

dijit wrote: post #3

The slides by themselves do not speak a compelling narrative to me, so I think I’m missing something fundamental or not understanding. Small businesses (all, businesses) will suffer quite badly, but if your company cannot continue operating because its shut/slowed down for 2 weeks then it’s likely that your business was running on a knifes edge and /any/ shock would have killed it. Arguing that many people have done…

> but if your company cannot continue operating because its shut/slowed down for 2 weeks then it’s likely that your business was running on a knifes edge and /any/ shock would have killed it.

Nearly all businesses in reasonably competitive markets have thin margins. You buy a widget and sell it for 30% more, but then most of that 30% goes to rent and utilities and salaries etc. Your actual net profit margin is more like 2%.

The result is that most businesses do fail if they're hit with any kind of major shock. Which happens all the time. It's supposed to. Mistakes have consequences. A business failing here and there is reasonable and expected.

But it's a completely different kind of problem when it happens to everybody all at once.

Re: Effect of economic crisis on America’s small businesses [slides]

#49

Post by senordevnyc » Sat, Mar 21, 2020, 2:35 AM UTC

codingslave wrote: post #7

The stock market is largely collapsing because: 1.) Hedge funds levered up their capital 5 - 15x to make more money, then got caught with their pants down. So they all panic sold at once, crashing the market. 2.) CEOs of large corporations used cash to buy back their stock, inflating the stock price, and depleting their cash reserves. So now those same companies are on the brink of collapse, causing the credit market…

1) Hedge funds didn’t crash the market. There’s just no evidence for that. The market crashed because there’s enormous uncertainty and people would rather be liquid while they wait to see what happens vs losing a huge percentage of their wealth.

2) Businesses exist to make a profit for their shareholders. Yes, they should have some retained earnings as a rainy day fund, but some of these companies are losing 75-100% of their revenue (airlines, cruises) and it doesn’t make sense to try and self-insure for the most extreme tail risk ever. So they return profit to shareholders. And for various reasons, buybacks are often preferred to dividends.

Would you be this up in arms if they had never done a buyback but had been paying a regular dividend to return those profits?

Re: Effect of economic crisis on America’s small businesses [slides]

#50

Post by jdminhbg » Sat, Mar 21, 2020, 2:35 AM UTC

codingslave wrote: post #44

jdminhbg wrote: post #37

Earlier quoted context omitted.

> The stock market is largely collapsing because: I'm gonna go with: 0) A pandemic has caused the government to shut down a double-digit percentage of the economy.

People are completely underestimating how much leverage and pumping there was on those companies, and how thats effecting us now. Companies dropping 75% because they might lose 3 months of revenue is not an expected outcome.

It really doesn't matter. If 20% of the economy is zeroed out because it's not safe under current conditions, the stock market will crash. Nothing you could have done beforehand, and no hobby-horse you've ridden for no matter how long, can fix that.