Much of global commerce has ground to a halt
March 21, 2020
Summary – FedEx, Apple and other major companies postponing their earnings, stock markets going down all around the globe in just two months. The article talks about the mayhem the pandemic is causing, on such a large scale. Each and every sector is being affected. Some companies will go down some will go up. $23 trillion in global market has been lost since mid-February. With almost all citizen activities coming to a halt a lot of businesses will be facing trouble. Airlines, sports industry, transportation and manufacturing will be some of the worst hit sectors. Most companies are shutting their factories to save money and, people are being laid off on a large scale in a lot of places. There are two main factors to be taken into consideration liquidity and business model to make a guess which companies will be able to survive. Companies with more liquidity in hand will be able to survive better as they will have more cash in hand to deal with as for others, they will try to tap into their credit lines with banks. As per the article if firms in five big sectors (health care, energy, transport, leisure and mining) drew down 70% of their credit lines, and the rest tapped 30% of theirs, America’s biggest banks would be on the hook for $700bn. Companies with a business model of brick and mortar will not fare well or such which rely on direct purchase such as movies or events. Government across the globe are trying to help by releasing funds. Others will survive and some few will thrive, companies such as streaming services saw a boom in their viewers, other like zoom, cisco WebEx which provide remote work possible are seeing a boom too. Those that thrive now will have a strong footing in the future ahead.
Opinion – A few weeks ago I wrote an economist article on how business in China is going to be affected and what impact it will have on the rest of the world. Today, it’s like the whole world has followed China behind. Panic is everywhere, the situation is only going to get worse from here cases all over the world are expected to rise. Small business are going to be affected worse, some are going to profit not for a long time though such as toilet paper companies or like Purell. Government is also trying to help its best, but it won’t be enough to save everyone. On top of all of this the sudden crash in the oil price brought the market down even more, many oil companies will not be able to keep with such low prices and will likely go down. But when the cloud will clear there will be some companies that will see through and will have a dominant global position, such as the article explains in the case of airline industry. Other boost will go to whoever will find a cure for the virus. Nothing is certain, as per the article and with which I also agree, liquidity is important companies like Apple and Berkshire Hathaway which are sitting on a hoard of cash and have a stable business model will thrive dominate in the coming times.