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This is exactly why we have bankruptcy! These businesses are failing and need to renegotiate their liabilities. This is expected and healthy if you want any ret

This is exactly why we have bankruptcy! These businesses are failing and need to renegotiate their liabilities. This is expected and healthy if you want any retailers to have any hope of survival going forwards.

borkt 6y ago
It’s going to have severe consequences somewhere down the line as I don’t believe anything nearing the magnitude and density of the coming bankruptcies has ever occurred. That being said I agree it’s meant to be this way, and I will always prioritize RESPONSIBLE business trying to restructure and preserve jobs over landholders who basically do very little work while extractIng as much rent out of their tennants as they possibly can without them leaving.
- AnimalMuppet 6y ago
  Ever? 1929, maybe? Crash of 1879? Or am I being uncharitable, and you mean recently?
  - PaulDavisThe1st 6y ago
    There was a lot more regional and even local independence in the economy when these happened. Vastly more people still worked in agriculture, and economies produced far more of what they needed within much more limited areas. 1929 was bad, but the economy then had more of a "node" structure. Today, it is more of a "web", and tugging hard anywhere stands a good chance of pulling the whole thing apart.
morganvachon 6y ago
> This is exactly why we have bankruptcy! You're not wrong, and under normal circumstances this would be a blip on the radar. However, the hundreds if not thousands of locations each of these companies plan to shutter will have an unprecedented effect on the commercial real estate market. Within months we will have thousands of property owners suddenly unable to pay their mortgages because they no longer have tenants, meaning they will have to default on their loans. This will greatly affect banks and other lenders in the months and years following. It's a domino effect that will be felt for many, many years after we've wiped out SARS-CoV-2.
- dragontamer 6y ago
  Which is also the point of financing and securities. I invest money into the market. Sometimes the market does poorly and goes down. My job as an investor is to accept risk when others do not. It is my money that disappears in these circumstances. The general idea is for the riskier among us to lose money. The investing class reaps benefits when the economy is good, but they lose money when the economy suffers. ---------- When downturns happen, investors become frightened. Which is fine: it means more opportunities for me to buy back into the market. But accepting this year's losses is part of the plan.
- dencodev 6y ago
  Won't somebody please think of the landlords and banks
  - morganvachon 6y ago
    I think you missed my point, that eventually the pain will trickle down to the rest of us at the bottom. I should have continued the domino metaphor to this conclusion to avoid misunderstanding, I'm sorry. And to be fair, I and likely many other "regular Joes" benefited initially from the 2008/9 downturn; I was able to buy my first home, humble as it is, at less than half its usual market value. I'm still enjoying that benefit today, with a monthly house payment less than most people's car payment even on a used vehicle. I think this time around it will be much different; this is approaching a true depression, not just a downturn. We are at 30 million jobs lost due to the pandemic, on top of the existing unemployment not related to it. We are on a dark road.
    - valuearb 6y ago
      There is a lot less pain tricking down if the lenders and real estate owners take the brunt of it.
      - munk-a 6y ago
        I think you vastly underestimate how over-leveraged everyone is. The real estate owners are no more resilient than a sheet of paper when it comes to the guillotine that could be coming for the economy. And, while I'm sure a lot of people aren't feeling any particular love for real-estate folks in general due to the current administration - letting them get liquidated and then trying to build up a replacement is harder and more damaging than just propping them up. But I, personally, am seriously done with this slap-on-this-wrist for endangering the economy during clear weather BS. Engaging in unsafe business practices can cause massive loss of life - whether you're Wells Fargo inflating fake accounts and leveraging them as assets, the wolf of wall street or just committing some plain old accounting fraud we need to come down hard as a society and stop glorifying it as if these clowns are sticking it to the man.
alkonaut 6y ago
The problem with external shocks is that during the "readjustment", people still have to eat. The people who worked in the shops, the people who own the buildings etc. In the end, just keeping companies afloat through rare shocks might be the cheapest option. Market economies create efficiency, not resiliency.
TheOtherHobbes 6y ago
There's a difference between strategic failure caused by poor management and interruption of a viable business by an external event - force majeure. You can buy insurance policies to protect your business against the latter. (Although with Covid a lot of insurers are refusing to pay out, and some are being taken to court.) Where there's no insurance it's reasonable for government to act as an informal insurer of last resort, because it's hugely more expensive and damaging to allow businesses that are otherwise viable to go to the wall. You don't just lose a viable business, but you create losses that ripple through the entire system causing upstream insolvencies. So you lose the productivity of all the businesses affected and the spending power of their employees. It takes a good long time to rebuild both. The problem is in the grey area where it's hard to tell if businesses are genuinely viable and just need temporary reinforcement, or whether they're already zombies and need to be killed off. Patronage and politics makes this even more complicated. But the principle is still sound: in a national disaster insolvency is not a clear signal of failure, and allowing all business to crash regardless will do much more harm than good.
- PaulDavisThe1st 6y ago
  One could make an argument based on what we've seen during COVID19 so far that very large sections of the US economy are not genuinely viable. They've been fabricated out of the whole cloth that we call debt, they have almost zero resilience in the face of negative economic factors, and they participate in widening income and wealth inequality by not actually being the locus of viable family-supporting jobs. Nobody has wanted to acknowledge that so much of the US economy is a house of cards. COVID19 isn't forcing people to do so, but is making it much clearer.

borkt 6y ago

It’s going to have severe consequences somewhere down the line as I don’t believe anything nearing the magnitude and density of the coming bankruptcies has ever occurred. That being said I agree it’s meant to be this way, and I will always prioritize RESPONSIBLE business trying to restructure and preserve jobs over landholders who basically do very little work while extractIng as much rent out of their tennants as they possibly can without them leaving.

AnimalMuppet 6y ago
Ever? 1929, maybe? Crash of 1879? Or am I being uncharitable, and you mean recently?
- PaulDavisThe1st 6y ago
  There was a lot more regional and even local independence in the economy when these happened. Vastly more people still worked in agriculture, and economies produced far more of what they needed within much more limited areas. 1929 was bad, but the economy then had more of a "node" structure. Today, it is more of a "web", and tugging hard anywhere stands a good chance of pulling the whole thing apart.

morganvachon 6y ago

> This is exactly why we have bankruptcy! You're not wrong, and under normal circumstances this would be a blip on the radar. However, the hundreds if not thousands of locations each of these companies plan to shutter will have an unprecedented effect on the commercial real estate market. Within months we will have thousands of property owners suddenly unable to pay their mortgages because they no longer have tenants, meaning they will have to default on their loans. This will greatly affect banks and other lenders in the months and years following. It's a domino effect that will be felt for many, many years after we've wiped out SARS-CoV-2.

dragontamer 6y ago
Which is also the point of financing and securities. I invest money into the market. Sometimes the market does poorly and goes down. My job as an investor is to accept risk when others do not. It is my money that disappears in these circumstances. The general idea is for the riskier among us to lose money. The investing class reaps benefits when the economy is good, but they lose money when the economy suffers. ---------- When downturns happen, investors become frightened. Which is fine: it means more opportunities for me to buy back into the market. But accepting this year's losses is part of the plan.
dencodev 6y ago
Won't somebody please think of the landlords and banks
- morganvachon 6y ago
  I think you missed my point, that eventually the pain will trickle down to the rest of us at the bottom. I should have continued the domino metaphor to this conclusion to avoid misunderstanding, I'm sorry. And to be fair, I and likely many other "regular Joes" benefited initially from the 2008/9 downturn; I was able to buy my first home, humble as it is, at less than half its usual market value. I'm still enjoying that benefit today, with a monthly house payment less than most people's car payment even on a used vehicle. I think this time around it will be much different; this is approaching a true depression, not just a downturn. We are at 30 million jobs lost due to the pandemic, on top of the existing unemployment not related to it. We are on a dark road.
  - valuearb 6y ago
    There is a lot less pain tricking down if the lenders and real estate owners take the brunt of it.
    - munk-a 6y ago
      I think you vastly underestimate how over-leveraged everyone is. The real estate owners are no more resilient than a sheet of paper when it comes to the guillotine that could be coming for the economy. And, while I'm sure a lot of people aren't feeling any particular love for real-estate folks in general due to the current administration - letting them get liquidated and then trying to build up a replacement is harder and more damaging than just propping them up. But I, personally, am seriously done with this slap-on-this-wrist for endangering the economy during clear weather BS. Engaging in unsafe business practices can cause massive loss of life - whether you're Wells Fargo inflating fake accounts and leveraging them as assets, the wolf of wall street or just committing some plain old accounting fraud we need to come down hard as a society and stop glorifying it as if these clowns are sticking it to the man.

alkonaut 6y ago

The problem with external shocks is that during the "readjustment", people still have to eat. The people who worked in the shops, the people who own the buildings etc. In the end, just keeping companies afloat through rare shocks might be the cheapest option. Market economies create efficiency, not resiliency.

TheOtherHobbes 6y ago

There's a difference between strategic failure caused by poor management and interruption of a viable business by an external event - force majeure. You can buy insurance policies to protect your business against the latter. (Although with Covid a lot of insurers are refusing to pay out, and some are being taken to court.) Where there's no insurance it's reasonable for government to act as an informal insurer of last resort, because it's hugely more expensive and damaging to allow businesses that are otherwise viable to go to the wall. You don't just lose a viable business, but you create losses that ripple through the entire system causing upstream insolvencies. So you lose the productivity of all the businesses affected and the spending power of their employees. It takes a good long time to rebuild both. The problem is in the grey area where it's hard to tell if businesses are genuinely viable and just need temporary reinforcement, or whether they're already zombies and need to be killed off. Patronage and politics makes this even more complicated. But the principle is still sound: in a national disaster insolvency is not a clear signal of failure, and allowing all business to crash regardless will do much more harm than good.

PaulDavisThe1st 6y ago
One could make an argument based on what we've seen during COVID19 so far that very large sections of the US economy are not genuinely viable. They've been fabricated out of the whole cloth that we call debt, they have almost zero resilience in the face of negative economic factors, and they participate in widening income and wealth inequality by not actually being the locus of viable family-supporting jobs. Nobody has wanted to acknowledge that so much of the US economy is a house of cards. COVID19 isn't forcing people to do so, but is making it much clearer.