Often ignored by the news media are the business owners, real estate operators and developers, and professionals who maintain massive obligations to their lenders, investors, and remaining ranks of payroll. These Americans have been writing the checks to cover America’s debts (or at least the debt interest) but do not have a proportional level of support versus others.
It’s one thing to get a loan that helps cover payroll. But it’s quite another to meet one’s commercial mortgage obligations when 50% of their commercial tenants default on their lease payments.
The American public has not yet come to grips with the long-term devastation taking place in businesses across the country in the last year and into the next. Those affected in the early onslaught of 2020 include:
Southwest Airlines – negative 33%
Wynn resorts – negative 51%
United Airlines – negative 57%
Marriott – negative 48%
Disney negative 31%
Six Flags entertainment – negative 66%
It’s not only the entertainment and travel industries that were crippled. Retail has witnessed a significant list of bankruptcies, across the board. A small sampling of retailers and business categories include:
Mid level retail – Lucky brand jeans & Forever 21
Low level retail – JC Penney
Nutrition – GNC
High end retail – John Varvatos & Ann Taylor
Gourmet foods – Dean and DeLuca
Middle end foods – California pizza kitchen
Consider the revolutionary changes in industries ranging from tech to automobiles. Apple’s value literally doubled within the first year of Covid. Tesla, while selling less than 5% of the vehicles in the US marketplace, catapulted in value, exceeding the combined market capitalization of Toyota, Honda, and Volkswagen.
What’s happening?!
As always, Wall Street bets on the future value of stocks. So we must as well. As tech startups and industry giants attract investment, their need for capital is reduced. In an era where hundreds of billions of dollars have been sitting on the sidelines, many of these companies have nowhere to go but up. Their weak sisters have been pushed out of the plane without a parachute.
For sure, certain industries (e.g. airlines, cruise companies, and others) will survive because of capital infusion by the government, be direct or indirect through reduced taxes, reductions of other burdens, etc. But most businesses are doing just “ok” at best. If you make your living running one of these companies, you will either adapt to the new economy or you face the risk of perishing.
