LEAKS AND TAKEOVERS
Seasons of Feast; Seasons of Famine
I have a lot of notes from 2017, 2018 and early 2019, mostly on world domination: notes on delivery and accounting systems, doing the books, reminders on meetings and employment and hiring processes.
Of course, this was all before running into the teeth of the FDA, whose misbegotten alliance with the authorities at the port,along with an errant supplier chopped me down to size. It was bad for my self-conception.The result: destruction of capital and a tally of promissory notes longer than a shopping list. Good Times.
An unintended corollary of this crisis is that wholesale oil and fuel prices, which make up close to half of all airlines’ costs are low. Should airlines be interested? Are airlines interested? So bad they can taste it. Well, no one is travelling. But this isn’t what I want to talk of.
During this crisis, a common motif I have come to hear is that global growth has moderated and markets have finally gone down enough for young people and poor people to pile in(for us down here, Tullow, the biggest company, is jockeying to be the poster and the problem child. It’s going to find it hard to survive oil at $25(GHS 144). Ideally, mostly, certainly, usually, this assumption is warranted, except we are living in the weirdest of timelines. This crisis is not an equalizer; it has and will mostly keep producing fence-sitters:
In tough times, small companies look to preserve cash; they cut off capital investments in new plants and if they are banks, stop balance sheet growth by refusing to lend.The only companies making any sort of moves will be the much bigger companies who are sitting on tons of dry powder. At the most granular of levels, people are isomorphic to companies. Like companies, they have assets (degrees/diplomas, skills, qualifications, salaries) and liabilities (obligations to pay rent, feeding, utilities, clothes and so on).Taking this analog further, once they see off their liabilities, then they have equity [= disposable income] that can go back into assets[in the form of savings, investments, gaining more skills, etc. ]. They can even increase assets(savings) by reducing liabilities (expenses on clothing). This a perfect model for how all personal finance works and everyone half-consciously follows it. So, just as crises force small companies to sit out investments, they force young and poor people with fragile salaries to move most (if not all) disposable income,if any, into savings. Of course for those on the breadline,there is no disposable income. In the next few months, the only ones making any sort of investments will be:
1. Lowest rung: people with solid, good paying careers with assurances they will continue to draw regular salaries.
2. Next rung: People, very rich or just rich, who already have enough savings to tide them over in the crisis
3. Cash flow positive companies, who will buy cash-burning companies.A good tactic will be for Masa-Son(this guy!!) and Uber to push for a consolidation of ride-hailing companies in West Africa.
4. Top rung: Governments under the cover of bailouts will take sizable stakes in struggling banks, airlines, oil companies,etc. My prediction is that this will mostly happen in developed countries.Constituents will complain but politicians’ skins have already been thickened by years of abuse.
We have never had so much time but we have also never had so little to do.if you are bored,I will put together an inventory of books,podcasts and really good films you can dig into.Its likely you will find something you like.