Hey Snackers,
Excellent news out of New Zealand: the Prime Minister just confirmed that the Easter Bunny and the Tooth Fairy are, in fact, considered "essential workers."
US markets rallied again as positive comments from Dr. Anthony Fauci raised national optimism. Stocks also popped after Bernie Sanders dropped out of the 2020 presidential race. The Dow closed above 23K for the first time in almost a month.
BTW — this is our last newsletter of this week since markets are closed tomorrow for Good Friday.
How many letters in an economic recovery?... Apparently, four. We know the economy has tanked since February — the COVID-19 pandemic spelled an abrupt end for the longest economic expansion in US history. Now economists are sifting through alphabet soup to determine what shape a recovery from this looming recession will take. The four main contenders:
Which one will it be?... It depends on how long the economy is shut down for. And that largely depends on how quickly we can get the virus under control. Each day the economy is closed means more unemployment and more business losses — so recovery time increases daily.
The Multiplier Effect is a powerful thing... Your spending (or lack thereof) = someone else's income (or lack thereof):
The risky table is at the back... Airbnb and Slack just sealed 2 nearly identical deals, with two very different deal terms. Slack's office messaging, email-crushing biz model is thriving in the corona-conomy. Airbnb's travel-centric pad rental biz? Not so much. Despite these differences, they both decided it was time to borrow some cash.
What's your risk premium?... Not a Hinge-appropriate question. Slack is borrowing cash because it's growing (to thrive) — Airbnb is borrowing because it's sinking (to survive). That makes it way more risky. Investors can smell desperation:
The virus premium is unavoidable... for Airbnb, WeWork, and any travel/rental company unable to operate right now. Most are affected by this risk premium, because we're living in risky times. And companies that are faring well in the corona-conomy — like Slack, Zoom, and Netflix — can't pat themselves on the back either. They're just lucky that their businesses weren't as affected as others by unforeseeable circumstances.
Disclosure: Authors of this Snacks own shares of Slack and Square. The debt securities mentioned were for illustrative purposes, and not a recommendation'.
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