COVID-19 aftermath: What things will change forever?

[adambr2]

What will change forever? People will finally start taking advice learned in their personal finance classes and have 3-6 months of living expenses on hand.

 

 

Just kidding, no way that happens.

 

Can someone explain to me why average citizens living paycheck to paycheck are realistically expected to save 3-6 months of living expenses, but companies are bleeding after one month of reduced profits?

 

Why can't they apply the same principles of saving 3-6 months of expenses in the event of a global economic catastrophe?

[nodakfan17]

What will change forever? People will finally start taking advice learned in their personal finance classes and have 3-6 months of living expenses on hand.

 

 

Just kidding, no way that happens.

Wallus: I’ve been meaning to ask, are your tenants doing OK?

 

If the government can wave a magic wand and declare a rent holiday, does that make people less willing to invest in rental properties?

[MrTPlush]

What will change forever? People will finally start taking advice learned in their personal finance classes and have 3-6 months of living expenses on hand.

 

 

Just kidding, no way that happens.

 

Can someone explain to me why average citizens living paycheck to paycheck are realistically expected to save 3-6 months of living expenses, but companies are bleeding after one month of reduced profits?

 

Why can't they apply the same principles of saving 3-6 months of expenses in the event of a global economic catastrophe?

 

Not sure it really is any different. The problem is they are the backbone of the entire economy...them going under has an enormous domino effect. For instance if you lost your job you would cut expenses, would you not? You would do that whether you had a rainy day fund or not. Well, a great way for the airlines to cut expenses is furloughing everyone without pay. This goes for pretty much any company that can't do business. Government is essentially giving them an incentive to keep paying their workers even if they can't actually come to work.

[homer]

If they are that crucial to the economy maybe don't allow them to buy back stock in good years so they have a reserve available if there's a sudden downturn in travel.

[Samurai Bucky]

What will change forever? People will finally start taking advice learned in their personal finance classes and have 3-6 months of living expenses on hand.

 

 

Just kidding, no way that happens.

 

Can someone explain to me why average citizens living paycheck to paycheck are realistically expected to save 3-6 months of living expenses, but companies are bleeding after one month of reduced profits?

 

Why can't they apply the same principles of saving 3-6 months of expenses in the event of a global economic catastrophe?

 

Not sure it really is any different. The problem is they are the backbone of the entire economy...them going under has an enormous domino effect. For instance if you lost your job you would cut expenses, would you not? You would do that whether you had a rainy day fund or not. Well, a great way for the airlines to cut expenses is furloughing everyone without pay. This goes for pretty much any company that can't do business. Government is essentially giving them an incentive to keep paying their workers even if they can't actually come to work.

I agree that so many people and companies don't anticipate pandemics or catastrophes. I'm not sure we can use a broad brush to paint over every company. My software development company, for example, tries to keep at least 3 months in the bank. However, when clients pull their work to have people in India do the programming instead, we can't keep up. We have less than a handful of people working for the company, so we can't lay anybody else off without folding up shop.

 

Retail (grocers specifically), for example, works on razor thin margins. When I worked for a grocery chain in Wisconsin, I often heard about little things that could make or break the store. Upsetting the apple cart (pun intended) has unforeseen consequences.

 

Other decisions need to be made -- if I have $100,000, do I put it in a savings account where it earns .0000000000000001% interest, or do I try to invest it in new technology, products, etc.? If I don't invest in those items, I can't keep up with my competitors.

 

Personally, we have probably 5 months liquid ready to go in checking or low interest accounts. It helps having a Financial Advisor as a wife... for sure!!!!

[FVBrewerFan]

We're forgetting about government too, they carry the largest debt of all. Federal govt, and many states. Our society is built on having debt at every level, it is encouraged.

[MrTPlush]

If they are that crucial to the economy maybe don't allow them to buy back stock in good years so they have a reserve available if there's a sudden downturn in travel.

 

Sure, sounds good in theory...but you assume they keep it in a reserve if they couldn't buy back stock. Reality is they wouldn't. Reserve or not you still would have to give aid to them. Even a company rolling around in cash isn't going to keep expenses they don't have to during a shutdown like this. They are going to cut costs and furlough workers unless you give them attractive aid to basically force them to keep paying the employees.

 

Our society is built on debt because it is good for the economy. Money being saved and stashed away doesn't do much for the economy. The world changed greatly when there was the ability for people to lend their money to others easily (indirectly through banking generally). That is on a macro scale though.

[Baldkin]

I believe hard work can overcome most obstacles in the long run, but absent an immediate turnaround, the Class of 2020’s career earnings will be lower than recent graduating classes.

 

07/08/09 is really feeling it.

[jerichoholicninja]

It also doesn't make much sense for businesses to keep money in the bank and earn little interest and pay taxes on that money when they could spend (invest) it on employees or new facilities, equipment, etc. and deduct it.

[homer]

It also doesn't make much sense for businesses to keep money in the bank and earn little interest and pay taxes on that money when they could spend (invest) it on employees or new facilities, equipment, etc. and deduct it.

 

Cool. But don't expect a bailout. Capitalism has risks.

[homer]

Catastrophe insurance might be a thing that changes forever. Of course, when the government just gives you a bunch of money I guess you don't need it.

[jerichoholicninja]

It also doesn't make much sense for businesses to keep money in the bank and earn little interest and pay taxes on that money when they could spend (invest) it on employees or new facilities, equipment, etc. and deduct it.

 

Cool. But don't expect a bailout. Capitalism has risks.

 

I agree. The government shouldn't be giving money to businesses for any reason. Even the small business bailouts which was really just about making businesses handle unemployment claims for the government.

[FVBrewerFan]

First, pandemic insurance is not realistic. Lloyds of London was really the only one offering it before, it was ungodly expensive. Moving forward, I doubt they will even offer it, and if they do it will be too expensive for any company to buy.

 

As far as bailouts go, I really don't agree with the concept either. But important to note, a lot of the big corporations are being given a loan, not a bail-out- big difference. For example, without loans from the government all airlines would go under relatively quickly. Now we could let that happen, but when there's a reasonable way to avoid that you do it.

[sveumrules]

What will change forever? People will finally start taking advice learned in their personal finance classes and have 3-6 months of living expenses on hand.

 

 

Just kidding, no way that happens.

 

Can someone explain to me why average citizens living paycheck to paycheck are realistically expected to save 3-6 months of living expenses, but companies are bleeding after one month of reduced profits?

 

Why can't they apply the same principles of saving 3-6 months of expenses in the event of a global economic catastrophe?

 

Privatization of profits + socialization of losses = Capitalism, apparently.

[FVBrewerFan]

Privatization of profits + socialization of losses = Capitalism, apparently.

 

Cute bumper sticker, but wildly inaccurate. Large companies are getting loans which they have to pay back. Individuals are getting paid for being out of work, a huge percentage are getting paid more to be out of work than when they were working. People and small business are getting far more assistance than corporate America.

[wallus]

What will change forever? People will finally start taking advice learned in their personal finance classes and have 3-6 months of living expenses on hand.

 

 

Just kidding, no way that happens.

Wallus: I’ve been meaning to ask, are your tenants doing OK?

 

If the government can wave a magic wand and declare a rent holiday, does that make people less willing to invest in rental properties?

 

So far I have not heard of any health or job problems which is great. I have been wanting to pick up another property or two for months now. The price has not been attractive enough (I have a criteria) to buy. The rent holiday would not stop me from any purchase. At least in my area, new listings have been overpriced comparative to where I feel they will be in a few months.

[LouisEly]

Hopefully places get rid of hand dryers, those ones you stick your hands in particular.

Those are touchless - how are they an issue?

 

With paper towel rolls, they always get jammed up or the sensors don't work and you have to manually turn the knob to get them to dispense the next towel.

 

They blow an immense amount of germs from the floor, into the air. Fecal matter being the one that is most concerning.

The whole world is covered in a thin layer of feces. Ever been to a beach and play/walk in the sand, swam in a lake or ocean, sat on grass?

 

Do you brush your teeth in the bathroom? Leave your toothbrush out? That's also where you take a dump. What do you think happens when you flush?

 

One of the things I hope doesn't happen is environmental conservation efforts getting thrown out the window over irrational fears.

[DHonks]

What will change forever? People will finally start taking advice learned in their personal finance classes and have 3-6 months of living expenses on hand.

 

 

Just kidding, no way that happens.

 

Perhaps a few will think twice before rushing out to stand in line in front of the Apple Store to fork over $2,000 for the newest iPhone that will be obsolete in 6 months when they release the next one.

 

I can't wait for the 5.4" rumored phone this fall! and one note, Apple's phones aren't obsolete in 6 months, because they follow a 12-month release window. But point taken

[DHonks]

What will change forever? People will finally start taking advice learned in their personal finance classes and have 3-6 months of living expenses on hand.

 

 

Just kidding, no way that happens.

 

Can someone explain to me why average citizens living paycheck to paycheck are realistically expected to save 3-6 months of living expenses, but companies are bleeding after one month of reduced profits?

 

Why can't they apply the same principles of saving 3-6 months of expenses in the event of a global economic catastrophe?

 

I get this, but it also wasn't foreseen 4 months ago. Companies could have a better financial reserve, but it's up to them to choose how to use their capital. Individuals need to start at a young age saving $5 at a time. Most people should make a 3-6 month reserve a goal in their early 20s like paying off student loans and saving for retirement. It doesn't happen, but it would be a nice goal.

[igor67]

As much as I agree with the reserve, people suddenly saving that much would have a big drag on the economy. Japan eventually ran into this after the 80's, and their cultural bias towards saving has held their economy back ever since (big simplification). It is of course very amusing for all of us who lived through the 80's and can remember when Japan was 'going to take over everything'.

[sveumrules]

Privatization of profits + socialization of losses = Capitalism, apparently.

 

Cute bumper sticker, but wildly inaccurate. Large companies are getting loans which they have to pay back. Individuals are getting paid for being out of work, a huge percentage are getting paid more to be out of work than when they were working. People and small business are getting far more assistance than corporate America.

 

Large companies are getting loans because they've overly privatized past profits. If they hadn't they wouldn't require the "loans" (how much of the 2008 bailout money was repaid?) to socialize their losses.

 

If people & small businesses are getting far more assistance than Corporate America then people & small businesses should emerge from this whole thing with some of their providence reclaimed from Corporate America, er no? I'll stay tuned for the results.

[OldSchoolSnapper]

Halting cash flow from millions or billions per month to 0 overnight is going to wreak havoc regardless of what reserves a company has. Companies of that size plan for slow economies but they don't plan for going from gangbusters to near 0 in one night, which is what happened to places like Kohl's. The sales they thought they could depend on are already earmarked for spending. Fortune 500 companies can't grow or operate with a billion dollars in a checking account.

 

Also, I know the large corporations are evil is a big thing now but those companies employ millions of people at good wages. It's not good for them to fail.

[FVBrewerFan]

Privatization of profits + socialization of losses = Capitalism, apparently.

 

Cute bumper sticker, but wildly inaccurate. Large companies are getting loans which they have to pay back. Individuals are getting paid for being out of work, a huge percentage are getting paid more to be out of work than when they were working. People and small business are getting far more assistance than corporate America.

 

Large companies are getting loans because they've overly privatized past profits. If they hadn't they wouldn't require the "loans" (how much of the 2008 bailout money was repaid?) to socialize their losses.

 

If people & small businesses are getting far more assistance than Corporate America then people & small businesses should emerge from this whole thing with some of their providence reclaimed from Corporate America, er no? I'll stay tuned for the results.

 

2008 bailouts were all paid back, at least the auto makers. So their losses weren't "socialized." They were loans, and they were paid back. This time around, the same thing will happen. It's not like loans are being given to Amazon and WalMart. They're being given to industries like airlines and soon healthcare providers.

 

These industries don't need loans because they've "overly privatized profits." Sorry, but that's just factually wrong. Take airlines for example. Thin margins to begin with, then see your business go down 80% for a couple months, and it will probably be down 50% for many more months. That's not greedy evil corporate greed, govt loans are necessary to survive.

 

That said, I'm sure I would agree with you on the need for loans for some industries/companies. As with everything else surrounding this pandemic, there are no easy answers. But I think you would agree having airlines is pretty important.

[OldSchoolSnapper]

^The margins in a lot of industries is something that the public really doesn't have an awareness of for the most part. On a $100 transaction my company profits like $8.

[igor67]

Given the magnitude of the issue I don't have issues with all sectors getting some type of support, as massive bankruptcies don't really help anyone. Investors do need to actually be willing to accept risk as part of that equation, but we are seeing this now with the meat packing that WI looks like it will be in a little better shape than other locations because they have a higher number of smaller shops that can actually process some of the meat that is in danger of going to waste. Having policy that balances some of the benefits of large corporations with the risks would be cool. AT&T and their history is a cool look on a positive role a regulated monopoly can have. Short version before being broken up they gave away more technology and the markets to go with it then Bill gates could ever hope to in multiple lifetimes. Because they invented the computer chip, and launched the first telecom satellite and just gave them away. The Idea Factory by Jon Gertner details it very well.