https://twitter.com/percent48/status/1239811354694909952?s=20
1 Like
I can’t speak for the U.K., as I haven’t seen any numbers. However, US airlines used more cash than they earned to buy back shares in order to prop up their over inflated share prices. SP500 companies spent over 50% of their free cash flow on average on stock buybacks instead of investing for the long term or retaining cash to weather crisis environments. If that doesn’t classify as mismanagement, I am not sure what does.
So let’s call it what it is: bail-outs, or at least for a good chunk of the cases.
Where are the bailouts for the small companies? Nope, instead insurance companies are already claiming that Corona won’t fall within their T&Cs. The big are too big to fail, the small too small to succeed, and all the while the fat cats walk away with big bonuses, whilst governments prop up their companies.
It’s socialism for the 1%.
3 Likes
This is calamitous for sure, but the stock markets needed to come down a bit. For too long they’ve been rising on a hope and a prayer rather than strong fundamentals. This event is going to show us which companies have strong fundamentals (good cashflow, large savings, etc)
When it all bottoms out hopefully investors will rush to strong businesses with good fundamental rather than startups receiving crazy VC capital without showing any profits or longevity.
That being said though, it’s important not to be too heartless - there are good people trying to run good businesses and employ good people that will feel the pain of this like nothing else.
1 Like
We are on the same wave length here. A bit early on the buy - but it’s still at a very low point…
I understand and agree with your broad sentiment, and financial support should not necessarily mean a free lunch in specific cases, but;
- The current situation is unprecedented, 2. Aviation as but one example supports 100,000s of jobs directly (American employs 120k people alone) and many more hundreds thousands throughout the supply chain. 3. You must also consider the loss to institutional shareholders and the damage this will do to peoples’ pensions.
The impact of letting these businesses go to the wall at scale would be profoundly damaging to not just the economy but society at large.
Carilion is a recentish (UK) case in point in which business is not too big to fail, where there was genuine mismanagement and wonky accounting practises (with bank, accountant, consultant and HMG complicity) leading to the failure of the business. A lot of investors, including retail, lost out. And who else? Employees, sub-contractors and other associated trades who might be lucky to see just 10p in the £ owed to them.
Yet for every large company that is deemed too big to fail for exactly all the reasons you mentioned - which, by the way I agree with - people seem to be happy to put 1,000’s of small companies against the wall, yet if you add up the numbers around those, the ripple effect I would suspect is likely to be broadly the same.
-
At the start of 2019 there were 5.82 million small businesses (with 0 to 49 employees), 99.3% of the total business. SMEs account for 99.9% of the business population (5.9 million businesses).
-
SMEs account for three fifths of the employment and around half of turnover in the UK private sector.
I am not per se against bailing out big companies, but let’s call it for what it is, and let’s do it with severe restrictions associated to it, so the message sinks in as for every Carillion there are more Royal Bank of Scotland’s.
And for heavens sake, provide stimulus or relief to the SMEs, as for them it’s not just a business and a big pay check like it is for the fat cats of big businesses, it’s their life’s work, it’s their family, it’s their everything - and at the moment they’re left without any safety net.
Right, my tirade is over. 
By the way, I don’t run a small company, I work for one of the UK’s biggest companies.
3 Likes
It’s funny how this thread has evolved… The initial reaction was dismissive and buy the dip. And now of panic and black swan moment.
Would be interesting to see how this thread will end. Hopefully will be a logical end.
5 Likes
I think the mood is still somewhat the same - people keen to buy the dip, just nobody knows when the dip ends. Most don’t seem overly bothered about their paper losses, we’re long term investors, not traders.
3 Likes
I think this is the biggest issue for me; the cronyism and lack of any meaningful accountability.
I’d be super keen to have concrete numbers on how many of these SMEs are supported by the supply chains of corporates. I suspect it is substantial.
Thank you for the engaging topic of discussion!
Right, regular service now resumes: BUY THE DIP! BUY THE DIP! BUY THE…
4 Likes
Agree with you that many SMEs are reliant on large companies, but many won’t be. I don’t have any numbers though!
Likewise, good stimulating debate. Thanks!
Will resume our natural order as well…
** BUY THE DIP! ** ** BUY THE …** ** OH, F***!!! ANOTHER CLIFF EDGE! WTF?!? **
4 Likes
I took a photo of a black swan when taking a stroll in the park a few weeks ago. Didn’t know it may have been a sign.
Also, remember Michael Burry, MD?
“I have had a significant bearish market bet that is working out for now,” the money manager, who made a fortune betting against mortgage securities after correctly predicting the 2008 housing crisis, told Bloomberg. Burry added that it was a “good size” wager against indexes, but declined to offer more details.
The California-based investor — a key character in the Michael Lewis book “The Big Short” — warned that coronavirus has changed the calculus for investors.
…
“No one knows how long it will last, and so people have a valid reason to sell,” he told Bloomberg, adding that stockholders could no longer be certain that their investments would rise in value or that central banks could “apply the brakes” and prevent a sell-off.
…
“A global pandemic is absolutely a potential trigger for the unwinding of the passive investing bubble,” he told Bloomberg. “With COVID-19, the hysteria appears to me worse than the reality, but after the stampede, it won’t matter whether what started it justified it.”While his bearish positions flourish, Burry has turned his focus to spotting smaller public companies whose shares have been unfairly caught up in the recent market rout.
“Despite the viciousness of the sell-off, there has not been enough time for the buy-the-dip mentality to truly go away,” he told Bloomberg. “But the fear in the markets is being paralleled by growing fear of the virus, and the twofer is toxic to market sentiment.”
TUI just SMS-ed me that mid-term holiday got cancelled with full refund, following travel restrictions imposed by the foreign and commonwealth office.
Travel companies will be battered.
1 Like
A little piece of speculation: the only viable conclusion so far as to why Italy’s death rate is so high compared to Germany’s, could be that Italians love a good cigarette.
Should this be the case, that the virus is extra deadly to smokers, the cigarette companies could fall off the face of the earth.
Also, take a look at Italy’s rivers as the boats & pollution has stopped for a while… Apparently clear and full of fish. The jump that ESG investors need.
P.s. I overheard this conversation.
1 Like
They actually have the oldest population per capita in Europe.
5 Likes
Not sure if that is factually true, but it is a fact that Italy has a higher proportion of older people who are much more susceptible to Corona.
Edit: Jamie1088 was just ahead of me. 
3 Likes
NHS doctor warns ‘a colleague is looking after several patients under 40’
Stay safe.
Stay at home.
1 Like
Some things to consider that the mainstream media won’t report as their agenda is built around fearmongering for hits 
What I found interesting yesterday was when Boris Johnson said, and I’m paraphrasing, “look at Italy, we are 3 weeks behind”
This will give us a decent chance to “time” the market imo.
1 Like
No, it’s about the NHS’ ability to treat people.