Episode 39: Corona Friend or Foe

LILLY: Welcome back. We hope you had a great Fourth of July. My name is Lilly, and I’m a friend of Mak and G’s.

MAK: She was our special guest last episode.

GRANT: Yeah. We’re so glad to have her back with us. And, she brought Cindy too. Awesome.

CINDY: Thanks Grant. I’m your friendly neighborhood Ventriloquial Figure.

MAK: We’re glad you’re here Cindy. Why don’t we jump in???

MAK/GRANT/LILLY: Time to finish our season with the effects of Corona on businesses!! 

DAD: Welcome back Lilly and Cindy, great to have you with us.

GRANT: I can’t believe that she actually wanted to come back.

MAK: Thank goodness you didn’t use the “D” word again.

CINDY: I forgive Grant. He’s been nice to me since we figured things out.

DAD: So Lilly, can you give us a little information on this ventriloquism thing?

LILLY: Originally ventriloquism was a religious practice. It comes from Latin which means “to speak from the stomach”.

MAK: Grant speaks from his stomach loudly when he eats beans. It’s a BAD religious experience!!

GRANT: Haha. Funny.

CINDY: It’s alright Grant. It’s the musical fruit!! The Greeks thought the noises in the stomach were the voices of those who were dead and lived there.

GRANT: I guess depending on the food you ate, would depend on how many dead people would live there. Funny.

CINDY: How true.  They believed the ventriloquist could speak to the dead and wait for it… tell the future too.

MAK: Ok, that is a little freaky. Can YOU tell the future Lilly?

LILLY: Well, I did say school would be closed for several months due to Corona.

GRANT: WWWWOOOOO. That’s spooky.

MAK: So, when did things change from dead people in your stomach to entertainment?

LILLY: Well, it was when “fun fares” traveled around Europe. It was around 1754 that a guy named Sir John Parnell spoke with his hands, and 3 years later an Austrian Baron used a small doll.

GRANT: Can you imagine the first guy probably did sock puppets. That made me laugh. But, the current form of ventriloquism is over 260 years old. Wow.

CINDY: Most Ventriloquists “threw” their voices, and didn’t talk through their “doll” in the beginning.

LILLY: Then, Fred Russell came along. He is the “father of ventriloquism”. In 1886 he used a “cheeky boy dummy” named “Coster Joe” who sat in his lap and talked at the Palace Theater in London.

CINDY: Lilly!!!!

LILLY: Sorry, that’s what you were called back then… We’re much more politically correct now.

MAK: Did I hear that the “dummy Sailor Jim” was one of the highest paid entertainers back then on the “music hall circuit”?

LILLY: Yes, he was. There were actually radio shows and a TV show in India that made comedic ventriloquism a big hit.

DAD: Do you know any famous puppets?

LILLY: One of my good friends has a famous puppet called “Julio the CockRoach”. He’s pretty funny.

GRANT: Where do you put your hand on a cockroach puppet?

LILLY: Still in the back, but it goes through the wings.

MAK: Gross. And he can do a show on stage?

LILLY: Why do you ask?

MAK: Well, don’t cockroaches scatter when the lights go on?

GRANT: Good one Mak.

DAD: Very interesting cockroach talk. So Lilly, do you get a good workout when practicing to do a show?

LILLY: It can get tiring working on your voice and holding Cindy. I think she might have put on some weight since the lockdown. You know, comfort food.

CINDY: Hey, I haven’t been getting much exercise. And, do you think it’s easy for me with your sweaty hand in my back for an hour? It’s no walk in the park “sister”.

MAK: Wow, Cindy definitely isn’t afraid to share her opinion. Maybe she should take a few more walks in the park…

GRANT: Now that you mention it, maybe we should talk about exercise during quarantine. Dad, didn’t you say the fitness industry helped some, and hurt others.

DAD: It did. For many people, they couldn’t go to the gym like before.

MAK: I know you worked at 24 hour Fitness in California when you were younger. How are they doing?

DAD: Well, with Corona, they got hit hard and closed 100 locations. They went into a special type of bankruptcy called chapter 11.

LILLY: What is a chapter 11 bankruptcy?

DAD: It’s the 11th chapter of the legal book on bankruptcy. It describes what you can legally do when you need help. It gives a company time.

MAK: Time to do what?

DAD: First, it protects the company from the people owed money. So, it gives the company time to make changes and restructure things to be stronger financially so they can pay their bills later on.

GRANT: So 24 hour Fitness didn’t close all their gyms and are making changes to be more financially stable?

DAD: Yep, they still have 300 gyms. If they had to pay their bills now, with no money coming in, then they would simply close all of them. But, now they have time to raise money like the cruise lines. Kids?

MAK/GRANT: Sell Stock or Borrow Money.

DAD: You got it. And, it’s better for the company, employees, and a lot of times it’s better for the people they owe money to.

LILLY: Wow, sounds like Mak & G know some stuff.

MAK: Lilly, when a company needs money to get started, keep it running or to expand, they need capital. It’s a fancy name for money.

GRANT: So, it sounds like 24 hour Fitness got hit hard. And, I think we know where people had to work out.

CINDY: At HOME!! It was so great to see Lilly every day. She did a lot of jumping jacks while out of school! When she gets to 25, she starts to make a funny face.

DAD: I think we probably all make a funny face at some point when we exercise. Hey Cindy, do you like riding bikes? I think Lilly does.

CINDY: Mr. Jones, my legs aren’t long enough to reach the pedals. Are YOU some kind of dummy?

LILLY: Cindy!!! He was only asking a question. I love riding bikes. Why do you ask?

DAD: Because a different fitness business had a different experience. Have you ever seen a Peloton commercial? It’s REALLY nice.

MAK: Isn’t that a stationary bike with a computer and screen. You can compete against other people and you have a coach? It doesn’t go anywhere. So, it’s only for exercise.

GRANT: Wow, you know a lot about Peloton, or at least the commercial.

LILLY: Well, the lady in the commercial beat the guy when they were competing. VERY COOL.

DAD: Here’s the question. Do you think Peloton did better or worse during Corona?

GRANT: I bet they did MUCH better. They haven’t been around long, have they?

MAK: I read they started in September of 2019. The initial public offering was around $25. They sold stock when they started. CAPITAL!!

DAD: Nice job Mak. Well, about 10 days prior to the Corona drop, it was $20 and was climbing up to $25. Here’s where it gets weird. It only DROPPED to $23 when everything else got hit.

LILLY: What’s the price now?

MAK: It’s around $60 per share.

LILLY: So, when it dropped a little bit, did people get scared by the uncertainty of Corona?

GRANT: That’s what it looks like to me. You know stocks don’t like uncertainty.

MAK: But, once investors figured out that Corona would probably help the company, it rose pretty quick.

LILLY: That makes a lot of sense. So do people exercise to be healthy and possibly lose weight?

DAD: Great question. For some, when they’re stressed, it helps to get rid of the extra energy. For others, they feel better after exercise and still others use it to keep their weight down.

MAK: Dad, with quarantine, I felt like we weren’t as active as before. No team sports, running around in the car, swimming, etc.

DAD: You’re right, most people aren’t as active. Plus, many people felt a little scared or stressed by Corona. Do you know what happens then?

GRANT: We lay around more and play a lot of video games!

DAD: Yes, that is true, but there is also something called “stress eating”.

MAK: You’re talking a lot about stress. I guess with Corona, losing jobs, uncertainty, it makes sense.

LILLY: Does “stress eating” mean people ate more because they were stressed. And, if they exercised less, that would mean they’d gained weight?

MAK: Dad, I think she nailed it. Is this where you eat comfort food?

CINDY: Eating chocolate makes me feel super comfortable, but a little gassy??

MAK: Nice to know. I LOVE chocolate!! (whispering) without the gas. It’s my #1 choice, and my #1 comfort food!!!

DAD: You nailed it, some people are gaining more weight than normal. In late March, when Corona was in the headlines, what do you think happened to the sale of candy?

GRANT: If people were stress eating and looking for “comfort food”, I think it would have gone up a lot.

DAD: You’re right. sales went up by 2 ½ times. If you ate a chocolate bar once a week before Corona, now you’re eating 1 bar like normal, but you’re adding another 2 ½ bars MORE.

LILLY: Sounds like that may have helped candy companies.

GRANT: Agree. Dad, didn’t you also mention people might be drinking more alcohol too?

DAD: They sure are. Estimates have come out that we’re drinking 50% more. That’s a lot. That’s not great news, as alcohol isn’t really good for you.

MAK: So you need to stop drinking your red wine?

DAD: WELLLLL, there was a Harvard study a couple years ago that said it was good to have a little wine. But, we’ll have to save that for another discussion.

GRANT: I think the key is “little” dad.

DAD: Thanks G. Lilly, got any ideas of other products we used more of during Corona?

LILLY: At our house, we bought a lot more cleaning supplies, hand sanitizer and stuff like that. My mom likes to kill germs.

CINDY: You didn’t see it, but she’d wipe me down 4 times a week. I feel like I’m wearing Lysol perfume.

LILLY: Cindy!! She was just protecting you. Be good. Mr. Jones, I have to believe companies making cleaning supplies went up in price.

GRANT: Didn’t we find out that Clorox makes some of those things? We have a ton of those Clorox wipes around the house.

DAD: They really benefit because they make a lot of cleaning supplies. Shortly before the drop it was $190, dropped to $165 and has risen to almost $230.

LILLY: Sounds like they clearly are doing better. What other items were being bought like crazy?

MAK: Toilet paper was sold out for weeks. I was beginning to worry what would happen, we might have had to do what grandpa used to do.

GRANT: Are we talking about using the Sears catalog as toilet paper?

GRANT/MAK/LILLY: EEEEWWWW!!

DAD: Probably not what we wanted to talk about, but on the farm, they used an outhouse, and the catalog. He said he still remembers the day he got a bathroom indoors. It was up there with my birth.

MAK: That must have hurt your privates!

DAD: He told me it did, but he said you got used to it.

GRANT: I don’t think I could have ever done that!

DAD: It is hard to think about. But, you know even though companies sold out of toilet paper, there is only so much pooping we can all do.

MAK: Come on dad. You’re just being gross.

DAD: My point is, if you stocked up, you’ll just buy less later on this year. No reason to have 100 rolls in your closet. So, it doesn’t change the expectations of a company long-term

LILLY: So, a stock price wouldn’t go up if it only made toilet paper because you’re just changing the timing of when you bought it. But, if people consistently use more Clorox wipes, their stock would go up.

DAD: Excellent Lilly. You really got it. Let me ask you about one more. Did you guys use Amazon at all during the shutdown?

GRANT/MAK/LILLY: Absolutely. Yes, All the Time, Sure.

DAD: Lilly, do you think you can tell us what happened to Amazon?

CINDY: I think it dropped some when Corona hit, and afterwards, it probably took off. A lot of people didn’t want to go to the store if they didn’t have to.

DAD: Ok, Cindy, you are right, but I was asking Lilly.

LILLY: I got this. Before the drop, Amazon was $2,000. That’s a lot. Then it went down to $1,800 and now it’s over $3,000.

MAK: Way to go Lilly. I knew you could do it.

GRANT: And it’s easy to see that Amazon would benefit from delivering groceries and all kinds of products. Many stores had to shut down to be safe, so Amazon took off.

DAD: So much so, they were trying to hire 75,000 people.

CINDY: That’s a lot!!

DAD: You got that right. Well, before we say goodbye, we’d like to Thank you Lilly and Cindy.

MAK/GRANT: THANK YOU!!! YOU ROCK!!

LILLY: Thanks for having us on the show. It was a lot of fun!

CINDY: And, hard work, my brain hurts.

LILLY: I’m sure we’ll be ok.

GRANT: Lilly, since you’re already here, how about we play a few video games before you leave?

MAK: I want to play too!!

DAD: You guys have fun, and we’ll see everyone else on our next podcast of:

GRANT/MAK/LILLY: Money with Mak & G, BYE…

Ben’s 2 Cents

Major events clearly can affect your investments, but it doesn’t always hit all the companies in the same industry in the same way. We’ve seen how the entire cruise industry was decimated, but in fitness it’s a different story.

In addition, sometimes companies are only affected in the short-term. Even though about 70% of the world doesn’t use toilet paper, a person goes through, on average 100 rolls a year, and there are over 83 million rolls produced each day. But, a buying frenzy when Corona hits doesn’t mean that the volume of usage will continue. It’s not an increase in expectations which pushes a stock higher.

For those two reasons alone, we have to know a bit more about the company, and how the situation will affect it. We’ve spoken about winners and those who were hurt. We also saw how many companies saw a drop in their stock price when the initial uncertainty hit.

Baron Rothchild in the 18th Century famously said “the time to buy is when there’s blood in the streets”. He should know, he made a fortune after the panic following the Battle of Waterloo. It means when things look really bad, and you see a great company on sale, it might be worth picking it up. It’s my form of Black Friday shopping.

I hope we look back on the pandemic as a small blip in our investing horizon. There’s a new normal coming, and quite honestly nobody’s sure what it will be. Be safe, stay healthy, and make sure to Like, Subscribe and Comment. And, we’ll see you next season for more Money with Mak & G. Finance for you and your family.