“The greatest danger in times of turbulence is not the turbulence—it is to act with yesterday’s logic.” —Peter Drucker

As someone who has been involved with businesses for over twenty years, I admire the entrepreneurial spirit of those who risk their hard-earned capital. Not only their money, they risk their valuable time to try and create the best life they can for themselves and their families. Large businesses don’t get big without first starting and going through the growing process. Most business endeavors don’t make it past three years, which shows you the free market is brutally efficient. If your plan is ill conceived, poorly financed, or operationally deficient, over the long term it is very difficult to survive. Still, people all over the world find a way to make their businesses prosper, and it is a testament to their spirit, creativity, will, and ability to adapt to changing circumstances. Let’s consider the current joy across our great land, that being the quarantine across ninety-five percent of the population.

As the month of April ends, each state makes its own determination about how to best proceed to manage the process of allowing citizens out of their houses and economic activity to resume. Naturally, there are guidelines from the Federal government about criteria to consider before opening. They involve downward trending numbers of infected citizens from the virus, a shrinking number of fatalities, available hospital rooms and equipment, testing capacity, and continued adherence to common-sense measures like social distancing.

Naturally, how each state approaches the question depends on a variety of factors, and you guessed it, one of those factors is political affiliation. The current trend seems to be pretty clear in this regard. Republican leaning states want to take the restrictions off pretty quickly, see Georgia, Texas, and Mississippi as examples. Those states will be opening very soon, or have already opened up in a restricted way. On the other side, Democratically controlled areas like New York, New Jersey, California, Michigan, and our state here in Nevada have adopted more restrictive policy.

The economic implications of the virus for private companies has been dramatic, as over 22 million unemployed workers have filed for benefits in the last four weeks. The famous quote that is most apt applies: A recession is when your neighbor gets laid off, a depression is when you get the ax. The vast numbers mounting up and the non-existent economic activity have all kinds of reverberations at various levels of government, especially state and local.

Many states are constitutionally obligated to balance their budgets, others not so much. With far fewer revenues coming in, city and state debt obligations, employment for public sector employees, and pension obligations are increasingly under pressure. It means job losses, potential debt defaults, and renegotiating pension payments. You know times are tough when governments cannot pay their own people. Along those lines, Senate Majority Leader Mitch McConnell suggested states which haven’t been financially responsible the last decade ought to declare bankruptcy. McConnell brought ire from state governors, but he does have a point. Not that the Federal government is financially prudent either. In fact, you could make the argument that government at every level finds a way to mess up everything they touch. Wait, plenty of people already have. Let’s take a look what took place here in my home state of Nevada as an example.

On Monday of last week, Governor Sisolak held a press conference to give us his plan for how Nevada would open up our economy. Mr. Sisolak is a Democrat who has deep roots with the teachers and culinary unions. He also is a willing recipient of contributions from our hotel and casinos. With over 300,000 people unemployed in our state, there is serious economic pain taking place. Moreover, with bonds financing all kinds of projects from convention centers to football stadiums, a reduction in taxes from hotel rooms and gaming could put those obligations in question. Mr. Sisolak has already indicated government workers are being furloughed. The next question becomes the funding of unemployment benefits. So, you would think Mr. Sisolak would be eager to open up our state, right? Wrong. The message the public got was, after a half-hour of bureaucratic babble, we will tell you when we tell you. 

Our leading proponent of opening the state is the Mayor of Las Vegas, the esteemed Carolyn Goodman. She is the wife of ex mayor, Oscar Goodman, a famous lawyer for all kinds of enterprises. Mrs. Goodman proceeded to go on CNN and get interviewed by Anderson Cooper. How did it go? Not so good. When your flag bearer for expanded economic activity comes across as potentially intoxicated or under the influence of one of the coronavirus medications, the public isn’t inclined to back your argument. So there you have it, government representation at it’s finest in the great State of Nevada. You can see why I much prefer the entrepreneurial spirit of businesses, can’t you?

In the market this week, it was full of news about earnings, oil, and other interesting items. Amazon reportedly used data about orders from vendors on its marketplace to turn around and create products that compete with those vendors. Bezos, a brilliant business person who has built a juggernaut that is better positioned than maybe any other, has a pattern of questionable ethical activity. Leverage potential city awards for tax advantage? Check. Working conditions for employees in where houses potentially hazardous (coronavirus)? Check. Using size of publishing operations against smaller operators? Check. Journalistic consistency, accuracy and credibility of Washington Post? Check.

Yet, Bezos is fawned over by the business press for Alexa, Amazon Prime, and same-day shipping. Turning to energy, on Monday the May futures contract for WTI expired with a negative 37.63 dollar price, interesting in that a negative price had never previously occurred. Oil remains under pressure because of demand destruction, but prices on futures recovered over the rest of the week.

I wonder about the notion that our leading technology firms are considered above reproach on a moral basis. If you look at the problems of Amazon, Google, Facebook, and Microsoft (think data, privacy, anti trust breaches, etc), why should the oil industry be demonized while technology leaders get a free pass? Next week, the largest integrated oil firms will report horrible earnings, and the outlook will be poor as well. Their comments on dividend sustainability (cuts) are probably the feature headline. The week will be full of reports from leading companies in consumer related areas, so that will be a focus, too. In the meantime, stay safe and I hope you are thinking about the future, as Mr. Drucker so eloquently advised.