The YEAR the EARTH STOOD STILL

2020 - THE YEAR THE EARTH STOOD STILL

As I take my single, allowable opportunity to exercise today by walking the 2.4 kilometres to the end of my village and back, I have time to reflect on what has passed, and consider what is yet to come; the butterfly effect of a stallholder contracting a new Covid-19 strain of novel coronavirus from a live animal in a ‘wet’ market in the city of Wu Han, China has stalled the global economy and has forced the “lock-down” of 98% of the worlds’ population.?

This unprecedented situation saw pandemic level transmission, panic buying, citywide curfews, travel bans, enforced social distancing, EU internal border reinstatement, mass exodus, mass repatriation, many deaths and global commerce brought to an absolute standstill. 7.8 billion people have unwittingly stumbled into a genuine Twilight Zone, a third world war against an enemy we cannot see, and the front-lines are our hospitals and care facilities; our heroes are our nurses, doctors, carers, medics, ambulance drivers, and hundreds of thousands of ordinary people who are selflessly volunteering to bring medicine and food to those that cannot fend for themselves.

My father passed away last Thursday, not of Covid but of late-stage Parkinson’s. I was fortunate to be by his side as he slipped away from his chains of confinement brought on by his debilitating illness; with a wry grin and a wink dad had threatened to escape from his care home on numerous occasions previously and now he finally has. My brothers and sisters were not so fortunate to be able to say goodbye to him as the care home only allowed one visitor at a time, who had self-isolated for 14 days, it just happened to be my turn to sit with him.

We are all experiencing an existential crisis, living out a real-life disaster movie nightmare, only there are no giant tripods stomping the Earth, evaporating people as they go, or massive robots unleashing havoc upon us to save the planet (Day the Earth stood still), yet the ending will be just the same, the human race will prevail but the world will be changed forever.

Last year, I wrote a piece about the state of unemployment in the UK, exposing the fact that the Office of National Statistics had rigged the employment figures in such a way as to make it seem like there was a record number of people working full-time, even though they also admitted that 4 million children were living in a state of poverty, and the use of food-banks was at an all-time high. At that time, there were closer to 7.5 million people out of work, or working less than 10 hours per week, or were on zero hours contracts, but the ONS counted the vast majority as being in full-time employment, thereby heavily skewing the numbers in the governments favour.

This is critically important to what I am going to say next, because there were 7.5 million workers with little to no income pre-pandemic and since the "lock-down" measure was instigated, 500,000 people per week have joined them with no sign of abatement. Our new, rather inexperienced, yet very confident Chancellor of the Exchequer, Mr. Rishi Sunak, has made great personal political capital out of telling the nation that he “will do whatever it take to save our economy," including giving low interest loans to businesses, and providing 80% (capped) salary guarantees, so employers retain their staff during this crisis. He is also giving mortgage payment holidays, and has said that landlords cannot evict tenants for not paying their rent for a period of three months.

What he has not done is secure the basic living expenses of those that he says "have fallen through the cracks," the 10 Million+ people from the transient gig economy; the one man bands with no balance sheet to speak of; the casual plasterers, plumbers, carpenters, labourers, painters, bar staff, waiting staff, Uber, and mini-cab drivers, messengers, take-away food deliverers, cooks, and counter staff, cleaners, market vendors, and field hands; the fledgling 'bootstrapped' pre-MVP start-ups, that are not registered for VAT so are not trading yet; those on zero hours contracts with no work to go to, and the recently laid-off that now join the ranks of the mass unemployed. So, not really just a few unfortunates falling through the "cracks" Chancellor, more like millions of people unwittingly pushed into crevasses with no means of escape.

So, he clearly has not done "whatever it takes to save the economy," not by a long chalk.

Since they were announced, the Chancellors mitigation countermeasures have been found wanting, and desperation has started to ensue. Even though the exchequer had received assurances from the CEOs of the UK banks that emergency liquidity provided by the government would quickly flow through to companies in need, thousands of business loans have since been rejected by them, and employers are laying workers off hand-over-fist. Equally, the 80% 'furlough' salary guarantee scheme (capped at ￡2,500) will not start to flow through to employers until late April/early May, so many are laying people off now, as they do not have the cash reserves to pay salaries until then. Also, if the employee has not been employed for at least two years prior to being furloughed, the employer may choose to terminate their employment at any time without financial recourse.

In 2019, I made a compelling argument that the reason so many of our long-established retailers were going out of business then, was because of a lack of disposable income due to the number of people actually out of work, or on zero hours contracts, not because e-commerce had taken over, as many industry analysts had so easily "observed," e-commerce still only represents 15.6% of global Retail volume.

For those who are unfamiliar with commerce 101, including the most observant of Retail industry analysts, the BBC, and any other so-called experts that called it wrong previously, any form of capitalism requires the same common denominator, which is disposable income. If the masses do not have it, there is zero probability of an economic recovery, because it is the very catalyst that will fire-up, engage, and drive the global economy. Without disposable income, the pistons within our economic engine will remain still, and our fragile commerce ecosystem will have stalled.

Below, see a line around a city block, of people queuing for work during the great depression of 1929, all wearing 'best bib and tucker,' with perfectly shined shoes; all carrying the same desperate hope for an interview for employment that will probably never happen. Today, if it was not for the anonymity that the Internet provides, you would see the same long, depressing queues, as many hundreds apply for the few available jobs; the only difference between then and now - in 1929 a cardboard sign would go up saying "vacancy filled," today, one is lucky to receive a cynically dismissive, always less than insightful email containing the most hated of words —"unfortunately."

Contrary to what the government would have you believe, it has actually been like this since 2009. It will be much, much worse post "lock-down."

Below, see a screen grab of a LinkedIn job advertised yesterday; note the application statistics for this specialised, executive Chief Commercial Officer role for a highly technical, niche enterprise software vendor. Are there really 522 applicants qualified to undertake this work? or are people now desperately scatter-gunning everything they see?

So, what does a lack of disposable income look like to our society in real terms? If one is unable to earn money to pay for things such as rent, food, and utilities, it follows that one certainly has no money to pay for: investments, pension contributions, mortgages, insurances, travel (planes, trains, rental cars, and hotels), eating out, petrol, automobiles, clothes, medicine, dental work, haircuts, loan payments, electronics, white goods, pay-tv, tv license (UK), mobile/fixed phone, broadband, council tax and any other general ‘stuff.’

MY POST PANDEMIC "LOCK-DOWN" PREDICTIONS: -

• My first prediction is a stark one. If the UK government does not substantially increase state benefits for the millions that do not qualify for the various fiscal stimuli, or introduce an immediate, temporary Universal Basic Income for everyone, there will be an exponential increase in the homeless population, starving families, and consequently, massive civil unrest, with food riots on the streets. It is 2020 not 1820, so with all due respect, a ￡3 food voucher per-day per-child, and adding ￡20 per-week to an already woefully deficient 'Universal Credit' state benefit allowance, really does not cut the mustard, and certainly will not cover the rent, food, and utilities for anyone unlucky enough to need support. This is the 5th largest economy in the world, I'm pretty sure we can do much, much better.

• Many large airlines are at serious risk of becoming insolvent, including Virgin Atlantic, Jet2 and EasyJet if the government is true to form, having previously failed to bail out Laker Airways, British Midland, BMI Baby, Flybe, Monarch, and Thomas Cook. It is equally probable that most, if not all rail franchises will revert to public ownership.
• Boeing/Embraer, Airbus, Bombardier, and every other commercial aircraft manufacturer will suffer major order cancellations, as airlines fight for their very existence, including the cancellation, and or return of every hybrid 737-MAX aircraft, delivered and undelivered, which will inevitably see its permanent demise and, as a result, the possible demise of Boeing itself, requiring the US government to step in and take a large equity stake in exchange for a massive bailout. Boeing is genuinely "too big to fail" as it represents 1% of the entire US GDP. Airline founder Sir Stelios Haji-Ioannou believes EastJet will run out of cash by late August, inclusive of the ￡600M loan from the?Treasury, and the Bank of England's emergency coronavirus fund.
• Global residential property values will nosedive once again, as millions of household mortgages go into default due to mass unemployment in every country affected by the pandemic, and mass foreclosures ensue. The UK will see many defaults but values although slightly reduced, will remain relatively stable as housing demand out-ways supply by some margin.
• If this depression persists for more than a year, there is a strong possibility that many utility companies will be re-nationalised and subsidised once the government finally realises that their grossly inflated pricing is unsustainable, because people are choosing between feeding their families, paying rent, or keeping their lights, and heating on. UK state benefits are some of the most frugal in the world, and British families with no income are often faced with "robbing Peter to pay Paul" every month, because there is no basic safety net, even for those that have paid upper rate taxes all of their lives.
• Our town/city high streets and shopping malls will become ghost towns; disposable income is everything to the retail industry, without it there is no retail industry.

• All oil companies will have ceased production by then as they have already filled their storage and tanker fleets to maximum capacity. As I write this, every super-tanker in the world is filled to the gunnels, sitting low in the water off of the coasts of their refinery terminals with nowhere to go. The commodity price per barrel will plunge to sub $10 and the price of petrol at the UK pump will return to sub 1990 prices.
• Global shipping will come to a standstill, as crews are unable to leave their ships at the end of their contracts due to port embargos caused by the spread of the virus. Thousands of merchant seamen and woman will be stuck aboard ships as shipping lanes are restricted and ports remain closed.
• In about 12 months’ time, Comcast will attempt to offload Sky TV as it will haemorrhage money once millions of subscribers realise that they can no longer afford their service packages. Some would say this might serve them right, having forced the entire Sky sports subscriber base —in their millions - to pause their own sports subscription, rather than just doing it themselves automatically as good customer service would normally dictate, especially as no ball had been kicked, no wheel had turned, and no club/bat/racket/glove had been swung in anger anywhere in the world since the start of the pandemic. They also made it as difficult as possible to do so, by forcing their customers to a hastily constructed web-service that did not work.?Equally, Virgin Media’s conglomerate parent Liberty Global may attempt to sell their F1 stake back to F1 O.G. and founder Bernie Ecclestone for cents on the Dollar, once they realise there is no money left for TV rights, or headline sponsorship, and circuits are no longer able to afford to pay for lucrative hosting rights. Disposable income pays for circuit entry, and broadcast pay-media, so if people aren’t buying any ‘stuff’ headline sponsorship dries-up, so no more €100M per year from Shell for Ferrari.
• 5G will become a fantasy, as mobile subscribers in their millions default on their contracts.
• No disposable income means very few new car sales. BMW will close down their MINI plant, and Jaguar Land Rover will likely go into administration after their parent TATA Group firstly separates Jaguar from Land Rover, to sell them as separate going concerns and fail. Aston Martin will go into administration (again), once their latest investment tranche is exhausted, but will no doubt find another buyer, they always do. Rolls Royce, McLaren and Bentley will survive, as the rich will remain rich, they always do too. Toyota and Nissan will permanently close their UK facilities, and Peugeot will close both Vauxhall plants. Tesla will become an e-purchase option only, before they lose all market traction entirely and go into Chapter 11, having massively overextended themselves globally. China's home purchasing power is ultimately dependent upon western disposable income, the absence of which means there will be limited demand for Chinese manufactured merchandise in the west; the resulting negative recoil effect on China will be catastrophic to the sales of locally produced Tesla and other imported premium brands.
• Any social media platform such as Facebook, which relies 100% upon advertising revenue to survive, will need to either "drop their drawers" to the floor, or pivot immediately and find an alternative, equally lucrative business model, or find themselves quickly out of business.
• Our hospitality industry will be on its knees, as people will have no money for Big Macs and milkshakes let alone haute cuisine. Many major hotel brands will offer 5-star accommodation for pennies on the Pound, as they compete for very limited trade, and many prominent restaurateurs and hoteliers will go into liquidation.
• Watch as many large French, German, Spanish, Italian, American, and Australian wineries throw their grapes away after picking them, as retail demand for wine slumps and their industry starts to dry up. A lack of disposable income does not just mean poor sales of supermarket boxed wine, it also means large corked vintners will suffer. Smaller, ultra special niche wineries such as Chateau Lafite-Rothschild, or Domaine de Chevalier will probably be okay as they tend to cater for the more salubrious of society.
• Major suppliers of fresh produce with short shelf lives, such as California based Driscoll's and Dutch Flowers Direct will suffer as restaurants, fruit, vegetable, florist/garden centre, and fish markets remain closed due to social distancing rules being maintained, even after the early loosening of restrictions to enable economic recovery. Our fishing and home garden centre industries may find it very difficult to recover without additional government subsidies.
• Without the common denominator that is disposable income, many tier 1 enterprise software vendors will shed thousands of jobs, as their ARR (annual recurring revenue) starts to decay when licenses are no longer renewed, because dependent customers start to enter Chapter 11, go into administration, or realise their own demise is nigh and seek cheaper alternatives, in attempt to mitigate their own losses.
• Also, expect mass redundancies from any software vendor that is not considered to be an intrinsic supplier by their customers. Any 'tactical' ISV SME will be seen as such and given notice.
• At the end of Q2 2020, expect massive profit warnings from the largest publicly traded technology companies as sales stagnate and demand falls off a cliff. Expect to see the 2019 gains made by Apple, Amazon, Alphabet, and others wiped out as the pandemic persists. No disposable income does not only effect brick and mortar Retail, it will also have a colossally detrimental impact upon e-commerce, because the lack of grass-roots liquidity will not distinguish between the two. If there is no quid in the hands of the many, there is no quid pro quo omnino.
• Expect all 39 of the payment FinTech startups to go bust, no disposable income means their services are no longer required.
• Expect many AdTech, BrandTech, DeepTech, e-mobility, MarTech, PropTech, RiskTech, Quantum, Space, AR, VR, ML, social data scrapers, and AI start-ups to fail, and see another $1 Trillion+ lost in venture capital.
• Expect many shared work-space, and serviced office companies such as WeWork, and IWG Plc (formally Regus) to suffer as their occupancy levels start to fall due to work from home on-mass take up, insolvency, and struggling start-ups seeking cheaper alternatives.
• Expect all Crypto currencies ‘value’ to evaporate just like the emperor’s new (invisible) clothes, because they never existed in the first place.

• Same goes for many names in the global service industry, as firms start to close their doors to the landing and expansion exploits of tier 1 management and strategy consultancies/SIs. Companies will look closer to home for other sources of advice, which do not charge ￡1,200 per day for a level 3, or ￡2,500++ per day for an Associate Partner.

• Accenture (formally Andersen Consulting) and Cognizant will go first followed by Cap Gemini, Atos, and Deloitte, although their audit branch will probably survive. Bain, McKinsey, and Boston will all remain, albeit in much smaller guises. PwC, KPMG, and EY will thrive with all of the impending business insolvency administrations, and industry analysts such as Gartner, Forrester, and Nielsen will be reduced to a shadow of their former selves.

• Foreign governments and institutional investors may soon decide that the USD is no longer as ‘safe’ a haven as they first thought it was, now the US administration has just added considerably more debt to their already insolvent, and over inflated (now) $25 Trillion debt mountain (US GDP was $21.44 Trillion pre-pandemic). There may come a reckoning and it's value may decline. If China starts to sell even the smallest volume, it could escalate into a Dollar exchange market tsunami. If it does, Investors will race to cash in their Treasury Bonds, and seek safer havens elsewhere, probably in Gold, or other commodities if they can. CNN is now reporting that due to heavy lay-offs, panic has started to ensue in the leading economy in the world. Massive drive-through food-banks are now in operation in many states with 5+ mile queues for necessities. Equally, US unemployment has recently rocketed to over 13.5% of the working population and is forecast to double again to an unprecedented level during the next few weeks, thereby dwarfing the initial great depression figure of 15%+, which took 18 months to accumulate, and over 10 years to dissipate, thanks mainly to the industrial and military mobilisation caused by the second world war. China, Saudi Arabia, and Japan's Sovereign Wealth Funds may eventually "cut bait" if they see no signs of recovery.

I am back from my daily trudge now so I will end here. If you are like me, and you have been wondering how this is all going to pan-out and get back to normal? Do not expect anything to go back to normal, it will not. There will be no much vaunted "bounce back," no predicted "U-curve," or "V-swing," and anyone that tells you otherwise is either seriously misinformed, making a S.W.A.G. or, is just plain delusional, because to achieve a positive upswing delta of any kind, will require stimulus at the grass-roots level.

Our government has either forgotten this basic but fundamental principle of capitalism or, has lost the plot entirely, having concentrated the vast majority of fiscal stimuli propping-up business whilst, at the same time ignoring the fact that it was the disposable income of the millions of people they have heedlessly left behind, who underpinned all of our businesses, large and small.

Our billionaire Chancellor, apparently does not understand that one goes hand in glove with the other, to be able to achieve the correct equilibrium to make a commercial ecosystem perpetual. I will repeat, if there is no quid in the hand of the masses there is no quid pro quo omnino, and now there are millions of people with no income looking up through "the cracks" wondering how they will survive the day, let alone pay for goods and services tomorrow.

Make no mistake, it is going to be a very tough, long road ahead for the whole world, so take some comfort in the fact that you are not alone in this endeavour. Finally, please allow me to leave you with words of inspiration from Rudyard Kipling to hopefully assuage any anxiety, and to help you stay the course in some small way: "If you can meet with triumph and disaster And treat those two impostors just the same, and so hold on when there is nothing in you except the will which says to them “Hold on,” If you can fill this unforgiving minute with sixty seconds’ worth of distance run —Yours is the Earth and everything that is in it, And —which is more —you’ll be a Man my Son!"

Good luck!??