London’s famous Ritz Hotel is shuttered during the Coronavirus outbreak

The Markets
On Friday, the Dow Jones Industrial Average finished down 622 points, or 2.6%, at 23,723. The broader S&P 500 index also fell, by 2.8% to 2,830. The latter was impacted by a nearly 8% decline in Amazon’s stock price, which said that it will spend all of its second-quarter profits on its Coronavirus response.

Until a few months ago, famed investor Warren Buffett’s Berkshire Hathaway conglomerate was one of the largest investors in all of the four major US airlines: Delta, Southwest, United and American. Over the weekend, at Berkshire’s (first ever virtual) shareholders meeting, Buffett announced that he had sold all of his airline investments, worth a combined $4 billion. Buffett believes “… the world has changed for airlines” and that he’s unsure whether “…three, four years from now people will fly as many passenger miles as they did last year. You’ve got too many planes.”

This morning, futures are pointing to a lower opening for all of the major indices.

The Public Health
With the expiration of the federal social distancing guidelines at the end of April, states have largely been left to their own devices when it comes to reopening their economies. Over thirty states have started gradually reducing restrictions imposed only a few weeks ago, despite not fully satisfying the criteria outlined by the White House in its Opening Up America Again plan.

The US Centers for Disease Control and Prevention has drafted a 17-page document that details interim guidance on how businesses, schools, churches, mass transit and other organizations should handle safely reopening to the public amid the coronavirus pandemic.

On Sunday, President Trump was interviewed by Fox News. He focused on trying to reassure Americans that it’s safe for states to begin reopening, and offered support to protesters who are frustrated with continuing lockdowns in many states. And in an echo of his now-infamous Charlottesville comments, he tweeted that protesters in Michigan – some of whom were armed with semi-automatic rifles – “…are very good people, but they are angry. They want their lives back again, safely!” He was also forced to acknowledge that the death toll for the virus in America may soon exceed 100,000.

Ohio Governor Mike DeWine, who was widely praised by public health officials and by politicians of both parties for his handling of his state’s response to the pandemic, abruptly reversed a decision to make mask-wearing mandatory because people “were not going to accept the government telling them what to do.”

On a positive note, Dr. Anthony Fauci, a key member of the White House Coronavirus Task Force, said at the end of last week there’s a chance that hundreds of millions of doses of a potential COVID-19 vaccine could be available by early next year. Fauci noted that in order to accelerate production, the companies making the medicine would need to do so at “risk”, meaning that they would need to ramp up manufacturing before being certain that the vaccine would be effective.

What Will the Future Look Like?
We’re all wondering when we’ll be able to resume our normal way of life, even as we acknowledge to ourselves that the new “normal” will look much different than the old one did a few months ago.

The British weekly news magazine The Economist refers to it as the “90% economy”. The implication is that if you look at countries that have largely controlled the spread of the virus (such as China and South Korea), it appears that national output will be capped at 90% of its potential because of persistent social distancing measures.

According to The Economist, there are three distinguishing features to the “90% economy”:

Fragile: The threat of the coronavirus rebound (leading to more lockdowns) will make it nearly impossible for many types of business to plan months ahead. Without long-term planning, it’s unlikely that they will commit to longer-term capital spending.

Less innovative: With social distancing dramatically, reducing in-person socializing, there will be fewer opportunities for spontaneous brainstorming sessions that can lead to revolutionary, world-changing ideas.

More unfair: As Jerome Powell, chairman of the US Federal Reserve, noted last week, this economic crisis has disproportionately hurt lower-income workers. Researchers at the University of Oxford in England found that Americans who earn less than $20,000 per year were twice as likely to lose their job during the pandemic as those who make more than $80,000.

A Teenager’s Business Model
On Saturday, our teenage daughter decided that she would like to sew reusable cotton facemasks for our family, to replace the disposable ones she made a few weeks ago. For anyone who’s interested, she’s modified this Kaiser Permanente pattern, so that a filter can be inserted.

After a trip to the fabric store, we discovered that she’d bought enough material to make nearly 100 masks. So, she’s decided to make a few for our family and donate the rest.

By Sunday, she’d figured out that there’s a booming market for non-clinical masks (see: Etsy), and we spent a good part of the day figuring out whether a “sell one, donate one” business model was viable. Stay tuned…

Keep the faith, be safe and stay healthy.

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