fortune--2020-03-23--SoftBank announces $41 billion asset sale to face coronavirus rout—and silence critics

Masayoshi Son is making his biggest play yet to silence doubters. On Monday, the Japanese billionaire unveiled an unprecedented $41 billion plan to sell off assets and shore up SoftBank Group Corp.’s crumbling market value in the face of the coronavirus pandemic.
SoftBank aims to sell assets to raise as much as 4.5 trillion yen ($41 billion) over the coming year to buy back stock and slash debt — an amount equivalent to almost its entire market value last week. The scale of the endeavor surprised investors, sending the Japanese firm’s stock up 19%. Yet that’s a fraction of the capitalization the investment house has lost since its 2020 peak, underscoring persistent concerns that tumbling technology sector valuations will damage Son’s debt-laden company.
The Japanese conglomerate, which also operates the $100 billion Vision Fund, is considered especially vulnerable to economic shocks given its enormous debt load and ties to unprofitable startups across the world. After Monday’s rally, it’s still down more than 40% from this year’s peak in February.
The coronavirus-triggered rout has also spread to credit markets and sparked a surge in the cost of insuring debt against default — including that of SoftBank, whose credit-default swaps touched their highest level in about a decade.
Monday’s announcement appeared intended to underscore a point Son himself has made repeatedly: that SoftBank is worth far more than its current stock price thanks to holdings in industry leaders from e-commerce giant Alibaba Group Holding Ltd. to British chip designer Arm Holdings Plc and Japanese carrier arm SoftBank Corp. Its slice of Alibaba alone is worth more than $120 billion.
“Son is finally doing what his investors have been asking for years and unfortunately it took an unprecedented sequence of events for him to do so,” said Justin Tang, head of Asian research at United First Partners in Singapore. “His Vision Fund ambition will have to take a backseat for now, but he will be back.”
It’s unclear what SoftBank intends to sell, however. Alibaba represents its single biggest chunk of unrealized value, but Arm — which SoftBank bought for $32 billion in 2016 — is a worldwide leader in the chip architecture that underpins modern smartphones. SoftBank Corp., on the other hand, is a steady if unspectacular leader that generates cash to help fund Son’s global ambitions, and the group likes to use its stock as collateral for loans.
“Arm is a golden egg for SoftBank, and the business will attract U.S. firms like Intel once it starts a bidding process,” said Koji Hirai, the head of M&A at advisory firm Kachitas Corp. in Tokyo.
Part of the sale proceeds would go toward a new share buyback program of as much as 2 trillion yen that comes on top of previously announced repurchases. Alibaba’s stock was down more than 5% in the afternoon in Hong Kong. The Japanese firm’s domestic telecom arm, ended 3.4% lower. SoftBank spokeswoman Hiroe Kotera declined to comment on whether it would sell shares in the Chinese e-commerce giant.
“There is institutional memory at SoftBank of these kinds of shocks, first dating back to the dot-com bubble,” said Kirk Boodry, an analyst at Redex Holdings who writes for Smartkarma. “There is no doubt that there will be much more bad news coming from the Vision Fund, bankruptcies and falling valuations. This is one way SoftBank can get ahead of that.”
Son is trying to salvage his reputation as one of the world’s foremost tech investors, a name based largely on a prescient early bet on Alibaba, which grew to dominate e-commerce in the world’s No. 2 economy. But he’s struggled since to match that success, after sinking money into a string of struggling startups from Uber Technologies Inc. to WeWork and Oyo Hotels.
Even before the global outbreak, WeWork’s spectacular implosion served as a catalyst for Son to temper SoftBank’s and the Vision Fund’s aggressive global bets. He urged founders to rein in excesses and focus on the bottom line, wary of a repeat of WeWork’s uninhibited expansion.
Son has reason to worry. SoftBank’s exposure to cash-burning startups partly prompted S&P Global Ratings to cut its outlook on SoftBank to negative, citing also the broader market declines and the conglomerate’s initial plans for a buyback. The stock repurchase program announced Monday comes on top of a 500 billion yen plan announced just over a week ago, after activist shareholder Elliott Management Corp. called on the Japanese investment firm to boost returns.
SoftBank has said its financial policy is to have enough liquidity on hand to cover two years of bond repayments and focus on its loan-to-value ratio, a metric for balancing net interest-bearing debt against the value of investments. SoftBank has also said it’s curbing new investments to match the current environment and acknowledged that fundraising costs are likely to rise.
It keeps a running tally of what it calculates is the value of its shares, excluding its debt. Despite Monday’s rally, that figure remains more than three times its closing price of 3,187 yen.
While SoftBank’s newly unveiled asset sale and buyback plan would go some way toward assuaging concerns about its situation, the big question remains the spread of Covid-19 and its ultimate impact on both investment activity and the broader economy.
“SoftBank is now trying to sell its assets as the values for those are cheap,” said Mitsushige Akino, an executive officer at Ichiyoshi Asset Management Co. in Japan. “Investment companies are supposed to purchase assets when they are cheap and sell them when they are expensive. It looks like SoftBank is doing the opposite, when they have to invest more money.”
More must-read stories from Fortune:
—This famed economist doesn’t think we’re headed for another Great Recession
—These estimates of how much COVID-19 will hurt the economy are terrifying
—With the markets in turmoil, the ECB readies a bond-buying bazooka
—Here’s where Goldman Sachs predicts the stock market will bottom out—Listen to Leadership Next, a Fortune podcast examining the evolving role of CEO
—WATCH: What’s causing the looming recession
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fortune--2020-03-23--Exit Interview: What Helena Foulkes learned about retail and leadership as CEO of HBC

In the face of an N95 mask shortage for coronavirus healthcare workers , sewists got to work

Helena Foulkes took the job of Hudson’s Bay Co. CEO two years ago, fully intending to clean up one of retail’s toughest messes. On March 13, she stepped down, having achieved a number of wins at the 350-year-old Canadian company, but not yet having met her ultimate goal: turning the department store conglomerate around.
Soon after her departure—she left the company as it went private to fix its remaining issues outside the glare of the stock market’s klieg lights—Foulkes spoke with Fortune. In a candid and wide-ranging conversation, she discussed the challenges the retailer faced under her watch, how she tackled them, and what she sees for the future, both for HBC and for herself.
Foulkes, 55, had been the head of CVS Pharmacy’s $80-billion-a-year drugstore chain for four years before taking the reins at HBC in February 2018. (She spent 25 years in all at CVS Health.) When she stepped into the top job, HBC was a sprawling hodgepodge of department stores—Saks Fifth Avenue, Saks Off 5th, and Lord & Taylor in the U.S.; the company’s namesake chain in Canada; and struggling German retailer Kaufhof as well as a handful of Hudson’s Bay stores in Europe.
Despite its bid to become an international department store empire, the company was hemorrhaging: In the full fiscal year ended just before Foulkes became CEO, HBC’s comparable sales fell 1.7%, and the debt-laden company’s operating loss came to $646 million on total revenue of $14.4 billion. The one bright spot in the portfolio was luxury chain Saks Fifth Avenue, which had turned a corner a year before Foulkes arrived and returned to growth.
Some might have been scared off by those numbers, but Foulkes says she saw potential. “I came because I thought this was a great opportunity to have a real impact on a global business and lead a transformation,” she tells Fortune. She was also drawn to the world of fashion and HBC’s iconic brands.
Almost as soon as she walked in the door, Foulkes, well-regarded for her successful stint at CVS, set about unwinding the retail Frankenstein’s monster that HBC had become, thanks to many ill-advised acquisitions. She also looked to shake up HBC’s insular culture, under which the various chains shared little with one another, whether in terms of best practices, resources, or even philosophy.
“We made a lot of bold moves really fast,” she says. During her stint at the helm, HBC unloaded flash-sale site operator Gilt Groupe only two years after buying it, sold the Lord & Taylor chain to Le Tote, exited Europe, shelved plans to expand Saks in Canada beyond its first three stores there, and closed dozens of Saks Off 5th stores. In all, these deals helped HBC pay down about $1.5 billion in debt, giving it a lot more breathing room to invest in retail fundamentals, including continuing a $250 million renovation of Saks’s iconic Fifth Avenue flagship that has reignited that store’s sales.
“We really shored up the business so we could focus on the crown jewels,” says Foulkes, referring to Hudson’s Bay and Saks, the two chains she saw—and still sees—as best placed in the HBC portfolio to survive retail’s department store storm.
But Foulkes wanted to build too, not just reverse bad M&A. So in her first few weeks at HBC, she went on a listening tour of stores and departments in the organization. Foulkes says she used those sessions to ask managers as well as rank-and-file employees, both in stores and at headquarters, questions like, What are three things the company should keep doing—or change? And, What does success look like in three years?
“It unlocks a lot of information,” Foulkes explains. “And anytime you’re in a new position, it allows you to learn from the team. This early on taught me where the opportunity was.” That information also helped her assess people’s strengths and, as she puts it, “get the right people in the right seats.”
The listening tour also revealed to Foulkes that she needed to take on the culture at HBC. As a longtime director at Home Depot, she knows firsthand what a strong culture can do for a retailer, where workers feel empowered but also accountable for the results of their work.
She found that there wasn’t enough emphasis on accountability or urgency at the company. Instead of thinking about what customers wanted, too many people stuck to tried-and-true projects that didn’t really improve HBC’s offerings. What’s more, the digital team seemed uninterested in coordinating its efforts with the stores’ teams, putting it behind rivals in the e-commerce wars. She says she tried to instill a “Fail fast, fail cheap” ethos in the company to get employees to be more daring or, at least, less afraid to try things. The tendency to play it safe had hurt HBC—as well as competitors like Macy’s and J.C. Penney—over the years. “It emboldened people to get out there and take risks,” she says.
Reflecting on her strategy, Foulkes notes: “When you have a lot to fix, I think the challenge is, Where do you spend your time and energy, and making sure you focus on the things that are big enough.”
Foulkes, who has maintained a regular meeting with a professional executive coach for the past decade, says that one effective tool she brought into the company was the use of the Net Promoter Score, a commonly used metric at consumer-facing companies that gives executives and their underlings regular, detailed customer feedback and how they rate versus competitors.
The initial effect of her efforts was good. The Saks Fifth Avenue business would soon regain its old luster, and Hudson’s Bay started to turn itself around. Discount chain Saks Off 5th, which had long lagged Nordstrom Rack, finally returned to growth.
By improving the company’s finances and the brands’ performance, Foulkes ultimately helped pave the way for the take-private deal. From a retail perspective, she helped position Saks Fifth Avenue to hold its own against Nordstrom and Neiman Marcus (a least for a while; more recently Saks has stumbled again). Online sales growth picked up speed during her tenure, hitting 20.6% in her last full quarter there from 6.8% in her first. Still, in a show of just how tenuous retail can be, Saks and Hudson’s Bay tumbled in HBC’s last quarter as a public company.
What’s next for Foulkes? She’s clearly a retailer at heart and says she hopes her next gig will be in the field—or at least one that is consumer-focused. And no matter the industry, Foulkes prides herself on her ability to motivate the troops and figure who is best at what.
“I loved being a CEO, and I’d do it again,” she says. “I’ve always believed you should play to your strengths. And I love building teams.”
More must-read stories from Fortune:
—Accenture CEO Julie Sweet on her company’s rapid-fire transformation
—How to be effective when you’re presenting remotely
—15 powerful women share the personality trait that’s key to their success
—Google and Unilever use initiative to have better family-leave implementation
—Listen to Leadership Next, a Fortune podcast examining the evolving role of the CEO
—WATCH: The double burdens that hold women back
Keep up with the world’s most powerful women with The Broadsheet newsletter.


fortune--2020-03-24--How recession fears change spending habits

Where ’ s the bottom for stocks ?
By this important measure , they may have hit fair value

This is the web version of CEO Daily. To get it delivered to your inbox, sign up here.
Good morning.
American fears of recession are rising rapidly. When BCG surveyed a cross section of the public March 6-9, only 56% expected coronavirus would lead to a recession. When the survey went back into the field March 13-16, that had risen to 72%. And today? “You have to assume much higher,” says CEO Rich Lesser. U.S. sentiment seems to be running just a week or two behind European sentiment, where 91% of Italians now expect recession.
So how will their spending habits change? Not surprisingly, the BCG study found most people plan to spend substantially less on travel and restaurants. But it also found many expect to spend less on clothing, luxury and household appliances. Areas for more spending: organic food, vitamins and supplements, household care products, packaged food and beverage, and cigarettes.
Lesser believes the big issue for the coming weeks is this: If social distancing succeeds in tamping down the spread of the virus, then what? “We can’t live in this mode forever.” If a vaccine is more than a year away, how do we keep the virus at bay and get the economy going at the same time? “We are going to have to think about how to restart,” he says. “What are the tradeoffs between lives and livelihoods? What are businesses doing to be ready to restart?”
You can read Lesser’s thoughts on the subject on Fortune.com, here. It will soon be a topic every business has to wrestle with.
Markets continued their downward dive on Monday, driven in large part by a Goldman Sachs study showing earnings per share will fall 33% this year. Amazon, faced with a surge of orders, is deprioritizing certain shipments in order to ensure timely delivery of medical supplies and household staples. The company has said it is hiring 100,000 people to work in its distribution facilities and help meet the demand.
Separately, for a case study in how CEOs should communicate in the most dire circumstances, be sure to watch Marriott CEO Arne Sorenson’s message to his employees last week, when announcing the furlough of tens of thousands of employees. Candor, sincerity and empathy go a long way.
News below.
Alan Murray
@alansmurray
alan.murray@fortune.com
TOP NEWS
Markets up
After another depressed day, the Federal Reserve's pledge to back business lending and buy unlimited amounts of government debt seems to have boosted markets around the world. In Asia, the Hang Seng, ASX 200 and BSE Sensex were all up more than 4%, and the Nikkei bounced by over 7%. The Stoxx Europe 600 also rose more than 4% at opening, and U.S. futures look similar. Financial Times
Lockdowns spread
The U.K. has gone into lockdown for at least the next three weeks, with government sources telling The Sun that an extension into May or even June is possible. South Africa has taken similar measures, hoping to stop the outbreak in its early stages there. In both cases, heavy measures were imposed after people continued to congregate in public, flouting recommendations about fighting the spread of the disease. Sun
States isolate
Florida Governor Ron DeSantis is to sign an executive order imposing a two-week quarantine on anyone travelling in from New York or New Jersey. The move comes as many New Yorkers flee the coronavirus hotspot for the Sunshine State. DeSantis has been heavily criticized recently for not keeping people off the beaches. The Hill
Airline shutdown
Major airlines in the U.S. are preparing for a voluntary or involuntary shutdown of almost all passenger flights in the country. The airlines are already struggling with near-empty flights, and could also soon be facing staffing emergencies at air-traffic control facilities. Wall Street Journal
AROUND THE WATER COOLER
African trade
Trade talks ahead of the planned July 1 launch of the African Continental Free Trade Area (AfCFTA) have been put on hold. The launch of the accord, which the U.N. hopes will boost trade within Africa by more than half, is now likely to be delayed—though officials still aim to push it through this year. Politico
European crash
IHS Markit's latest stats for eurozone private-sector activity are in, and they're the worst they have ever been—the Purchasing Managers' Index measure is down from 51.6 to 31.4 (50 is the dividing line between expansion and contraction). Services are being hit even worse than manufacturing. In the U.K., the PMI is down from 53.0 to 37.1. Bloomberg
AB InBev
The brewing giant AB InBev is the latest corporate giant to scrap its 2020 outlook, due to the coronavirus crisis. At the end of February, it forecast a 2-5% drop in core profits for the full year. Now all bets are off—though the company is still pushing ahead with the sale of its Australian operations to Asahi Group Holdings. Reuters
Evaluating measures
Geoffrey Smith has an interesting Fortune piece looking at the various urgent measures being promised by governments, from bailouts to tax deadline waivers and the state paying people's wages. He writes: "The reflex to keep companies afloat—however natural—inevitably stores up trouble for a later day…However, those who dare to mention such risks at present don’t have a chance of success." Fortune
This edition of CEO Daily was edited by David Meyer.


fortune--2020-03-24--Global markets climb as investors pin hopes on lockdown measures and stimulus aid

This is the web version of the Bull Sheet, Fortune’s no-BS daily newsletter on the markets. Sign up to receive it in your inbox here.
Good morning, everyone. There’s green on the screens this morning as we’re looking at a risk-on Tuesday.
Let’s see where investors are putting their dough.
Markets update
We start in Asia. Led by Japan’s Nikkei, all major indexes are in positive territory. China is planning to lift its two-month coronavirus lockdown in Wuhan, where the contagion began, allowing residents to return to work and normal life in the coming weeks.
It’s a different story in Europe where COVID-19 infections are far from reaching a peak. But, there’s a ray of hope from Italy, the worst-hit country. The hospitals here are still overwhelmed, and factories and businesses are shut, but the death toll fell for a second straight day. That news, and the promise of EU-wide fiscal coordination, is sending the markets higher this morning. The benchmark Stoxx Europe 600 jumped more than 4% in the opening minutes of trade, with bourses in London, Frankfurt and Milan all climbing. That’s despite lockdown measures being tightened in towns, villages and capital cities across the continent.
The U.S., in contrast, looks like the biggest basket case. Partisan politics is delaying the passage of a fiscal relief package, and President Trump is now questioning the logic of strict lockdowns. The paralysis in Washington—will it be the $2.5 trillion plan favored by House Democrats or the Senate’s more modest $1.8 trillion bill?—sent the U.S. markets sharply lower on Monday. The Dow and S&P 500 have each lost more than one-third of their value since the February peak.
The U.S. futures though look set for a strong open, recovering all of yesterday’s losses, and then some. Market commentators say the Fed’s historic measures to scale up purchases of Treasurys and corporate debt appear to be brining liquidity back to the markets, which will hopefully remove some of the recent volatility from trading.
***
Elsewhere, the dollar is down, putting and end (for now) to an impressive 10-day rally. And Brent crude is up, pushing the oil benchmark above $30 a barrel.
***
Let’s turn to Corporate America. Goldman Sachs is out with a new forecast looking at the bottom-line impact on companies. Earnings growth will be a key metric to determine whether the economic recovery turns out to be the hoped-for “V-shaped” variety or it’s the more protracted “U,” or even dreaded “L.”
Here’s how they see it playing out:
***
The bottom line: it’s pretty bad
Goldman is writing off the first three quarters of 2020. If we’re lucky, most companies will see bottom-line growth again not before the final quarter of the year. A nice Christmas gift for weary shareholders.
I’m going to bring back yesterday’s chart for a moment to illustrate one more thing to watch. Earnings growth, we know, typically lags economic growth. The consumer has to get back on her feet again, and spend, re-invest, travel, dine out. When will that happen? Goldman economists figure we’ll see normal activity to return at some point in the second half. Here’s how they break it down.
But look at the last bar of both charts—the one on the far right. Goldman reckons the economy will contract by 3.8% this year and that EPS will fall by a much more precipitous 33%. This suggests the earnings recovery will take far longer than that of the overall economy. Bottom line: companies will see more of a protracted U-shaped turnaround.
Postscript
If you noticed yesterday the breeze pick up around 6 p.m. CET (1 p.m. New York time), that was us here in Italy—an entire country exhaling with relief. At that hour, health officials deliver their daily press briefing, live on TV, detailing the latest coronavirus data: new infections, numbers hospitalized, recoveries and deaths. Yesterday’s was a good briefing.
For the second consecutive day, we saw an improvement in each metric. It’s too early to call this a “trend” or a “peak,” but it’s what health experts told us they hoped to see at this point as we enter the third week of limited public interaction. We’d know the measures were working if, after a full two weeks of lockdown, the toll of sick and dying ticked downwards progressively. That’s two straight ticks. We’ll take it.
Yesterday here I mentioned the many heroes on the front lines. Today, I want to tip my hat to a number of Italians who’ve become famous for homeland security efforts: i sindaci, or the mayors. Throughout the lockdown period, Italians have been sharing on Twitter and WhatsApp their favorite videos and recordings of Italy’s curmudgeonly mayors and regional presidents scolding the populace to respect the lockdown rules of social distancing. You can hear them bark into the camera that they’ll sequester citizens’ shoes if they catch them taking strolls on the lungomare by the seaside, or that they’ll bust up planned graduation parties with flame-throwers.
The most entertaining ones seem to hail from down south: from Bari (the Pugliese city on the heel), Messina (in Sicily) and the Campania region (home to Naples). Their short video appeals have now gone viral. A bunch of video whizzes compiled the best and mashed them up into a single viewing, even putting English subtitles on them. HT to Angela Giuffrida at The Guardian.
“Ping-pong is not allowed!” the mayor of Bari barks at residents on the beach in one scene. “Go home… to your Playstations!”
In another scene, an incandescent mayor rages at the underground practice of inviting hairdressers into the home to do whatever outlaw hairdressers do. “You’ll have coronavirus in your hair, instead of hair spray!” he hollers, punctuating his message with C-bombs (translation F-bombs).
Watch how the Mayors in Italy rage at stubborn Italians. It’s about time our politicians do the same too pic.twitter.com/O6dxluj1gI — Typical Malaysian (@TypicalMsian) March 23, 2020
Dear reader, stay home. With your Playstations. Forget the ping-pong.
Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com
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Today's reads
Gold rally. The safe haven is back. The shiny yellow stuff is on a tear this morning, climbing well over $1,600 per troy ounce following yesterday's Fed moves. Goldman Sachs, for one, is telling investors it's time to get back into gold after investors ditched the precious metal last week in near-panic selling.
Alibaba sale. Yesterday, the Japanese conglomerate investor SoftBank announced a roughly $41 billion asset-sale plan to raise much needed funds to reduce debt and buy back shares. What's on the block? A $14 billion sale stake in Chinese e-commerce giant Alibaba, the jewel of its portfolio, Bloomberg TV reports.
$80 hand sanitizer? In recent days you may have come across some jaw-dropping prices scanning Amazon, eBay or the websites of Target and Walmart for things like masks and hand sanitizers. Attorneys general of various states are now demanding the retailers do whatever they can to stamp out the price-gouging of vital supplies needed to keep the coronavirus infection rate to manageable numbers. The retail arbitrage game is creating headaches. The number of lawsuits now tops 6,000.
Market candy
And then there was one...
After yesterday's sell-off, the number of tech firms sporting a trillion-dollar valuation has dwindled to one: Microsoft. Yesterday at this time, Apple was in the 13-figure club as well. But then its shares fell 2.1% on Monday to put its market cap at $982 billion. Amazon and Google parent, Alphabet, fell out of the club earlier in the year. As for Microsoft, it's hanging on by a thread with a market cap of $1.03 trillion, the Wall Street Journal calculates.


fortune--2020-03-24--Where’s the bottom for stocks? By this important measure, they may have hit fair value

Book tours are key to promoting new releases , but authors have been left stranded amid coronavirus pandemic

I’ve been wondering if it would actually happen. For the first time in more than seven years, the Shiller price/earnings ratio, or P/E, is flirting with its long-term average. This could be a signal that, at long last, the overall market—in its coronavirus-driven collapse––is now a good buy.
This event could prove a landmark, because Robert Shiller, the Nobel Prize winner and Yale professor, offers what’s arguably the best yardstick for measuring whether stocks are cheap, expensive, or sit somewhere in the reasonable range. Shiller calls his famed metric the CAPE, for cyclically adjusted price/earnings ratio. The CAPE’s beauty is that unlike the standard P/E, it doesn’t rely on the most recent annualized earnings numbers reported over the past four quarters. Using current profits as the denominator is highly misleading, because that formula inflates the P/E in an earnings recession, when stocks are actually bargains, and understates how rich they really are when profits hit unsustainable lofty levels.
Instead, Shiller calculates an average of inflation-adjusted earnings over the past 10 years. That provides a truer reading of value because it takes out the careening swings that distort P/Es based on current earnings.
Recently, corporate profits reached an unsustainable bubble, making stocks look like pricey but not excessively so, when in reality they were really, really expensive. As we’ll see, the CAPE didn’t make that mistake.
Over the past 50 years, the median multiple on the CAPE is 20.3. Based on Shiller’s adjusted earnings number of $107 per share, the S&P would reach 2172 at its normal long-term valuation ($107 in EPS multiplied by 20.3). On Monday, March 23, the S&P closed at 2237. At that point, the index sat within less than 3% of what might be termed a key benchmark for the CAPE. At midday, the difference was less than 1%. Remarkably, the S&P was 1.5% higher at the close on the day Trump was elected, Nov. 8, 2016, than what could be considered today’s fair value.
It’s instructive that two things occur when the CAPE soars over 25, which is almost 20% above the half-century median. First, it always falls back through that 20-plus mark at some point in the future, and second, that fall may take a long, long time. For example, the CAPE neared 25 in January of 1966, and stayed in the low-20s until mid-1969.
The CAPE then languished in the low-double and single digits until 1995, when it finally climbed back to 25. It stayed above that level until it collapsed during the financial crisis starting in 2008. It wasn’t until August 2014 that the CAPE hit 25 again, and it remained at rarefied heights in the high-20s and low-30s until early this year. At the end of February, it stood at 30.8, 52% above its historic reading of 20.3.
The coronavirus pandemic unleashed the deepest, quickest drop in the CAPE’s history, bringing it back to that 50-year benchmark on March 23. That the selloff led markets to what could be called a “normal” level, based on the CAPE, casts doubt on the view that shares are now radically underpriced. You never know how long it will take for an elevated CAPE to wend its way back to 20.3. But it always gets there. It may well be that this historic plunge simply got us back to a place where we should have been all along: fair value.
More must-read stories from Fortune:
—Why the extraordinary dollar surge spells more trouble for the global economy
—These estimates of how much COVID-19 will hurt the economy are terrifying
—The NYSE is closed because of the coronavirus. What that means for investors
—How thinking like a golfer can help you ride out market mayhem
—Listen to Leadership Next, a Fortune podcast examining the evolving role of CEOs
—WATCH: The U.S. tax deadline has moved from April 15 to July 15
Subscribe to Fortune’s Bull Sheet for no-nonsense finance news and analysis daily.


fortune--2020-03-24--‘Can’t even give it away:’ Gasoline drops below $1 a gallon as U.S. economy locks down

London, Kentucky, became the first U.S. city to see pump prices fall below $1 a gallon as coronavirus-related lockdowns halt transit across the country — and it won’t be the last.
Several others are poised to join the club in the coming days as the pandemic crushes fuel demand and sends the economy to the brink of a recession. While cheap fuel usually spurs gas-guzzling Americans to hit the highways, the latest downturn in prices portends dark times ahead.
David Carter and Cliff Williams fill their vehicles and gas cans with fuel at the Spur gas station in London, Kentucky on Friday, Mar 20, 2020. Carter and Williams were just a few of many who came to buy gas for .99 cents per gallon. USA TODAY NETWORK/Reuters
“You almost can’t even give it away,” said Paul Bingham, head transportation economist at IHS Markit Ltd. “The price elasticity has totally changed. It’s full-on demand destruction.”
Nationwide, pump prices are headed for depths not seen since the Great Recession. Retail gasoline is expected to average $1.99 a gallon in the next two days and fall as low as $1.49 by mid-April, the lowest level in 16 years, according to Patrick DeHaan, head of petroleum analysis at Gasbuddy.
The downturn comes as large swathes of the country are under containment orders in an effort to curb the virus that’s killed more than 15,000 people globally. U.S. unemployment could rise 30% this quarter while the GDP may drop by 50%. In that environment, low gasoline prices won’t induce consumption in the way it typically does, and may instead be yet another indicator of a struggling economy.
Oklahoma City may be the next to reach sub-$1 gasoline, with two stations already at $1.05 on Monday afternoon, DeHaan said. Illinois also could soon join the list, as Chicago wholesale gasoline sold at a record-low 20 cents Monday morning, Bloomberg data show.
Pump prices are chasing gasoline futures lower. Futures in New York plunged 63% in March alone as coronavirus containment measures grip major U.S. cities, bringing the nation to an economic standstill. On average, about 28 cents in taxes and fees are added to the price of gasoline paid at the pump, according to RJO Futures, with the retail price typically lagging futures by about a week.
Prices would fall even further if it weren’t for the food-delivery drivers and long-haul truckers who are in high demand now that more Americans are self-isolating.
The last time an individual gas station sold fuel for less than $1 was in 2016 in Iowa, according to GasBuddy. The national average last held that level in 1999, U.S. government data show.
While $1 gasoline isn’t typical, “we could see sustained low retail pricing into August,” said Andy Lipow, president of Lipow Oil Associates in Houston.
“We’re in uncharted territory,” Bingham said. “It’s not just commuting patterns like going to work, it’s other indicators that go hand in hand with the economy and gasoline consumption. That shock is going to exceed what we saw in the Great Recession.”
More must-read stories from Fortune:
—Coronavirus economic relief proposals are overlooking the 57 million self-employed
—The workers the U.S. government deems “essential” amid the coronavirus pandemic
—Italy’s only ventilator maker works round the clock (and at cost) in coronavirus fight
—Which stores are open—and closed—during the coronavirus pandemic in the U.S.?
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fortune--2020-03-24--House Speaker Pelosi unveils $2.5 trillion Democrat coronavirus stimulus plan as Senate bill stagnat

House Speaker Pelosi unveils $2.5 trillion Democrat coronavirus stimulus plan as Senate bill stagnates

House Speaker Nancy Pelosi unveiled a $2.5 trillion virus economic stimulus plan in a bid to shape negotiations on a Senate measure that stalled on Monday, triggering a sell-off in U.S. equities markets.
Pelosi’s 1,400-page bill would have broad implications for the financial sector. It would force lenders to grant a temporary reprieve from mortgage and car payments and credit card bills. It would order the Federal Reserve to provide loan servicers with liquidity to allow borrowers to stop paying their mortgages for up to 360 days. Public housing residents would get a temporary reprieve from paying rent, and student loan borrowers would have $10,000 of debt forgiven.
Negative consumer credit reporting would be halted. Foreclosures and evictions would be banned.
There are currently no plans for House members to return to Washington to vote on the bill, and the proposal appears to be a list of demands Democrats want to see included in the Senate bill. Treasury Secretary Steven Mnuchin and Senate Democratic leader Chuck Schumer spent much of Monday negotiating behind closed doors on the Senate proposal, initially introduced last week.
“Secretary Mnuchin just left my office,” Schumer said on the Senate floor shortly after House Democrats introduced their bill. “We are going to work on into the night.”
Democrats on Monday blocked Senate Majority Leader Mitch McConnell‘s second attempt at a procedural vote to advance his $1.8 trillion plan, saying its loan program for companies lacks transparency and oversight.
Investors and Americans are looking to policymakers to provide concrete action to respond to the health risks of the global health crisis and the economic fallout. Democrats say they still aren’t satisfied with changes to the Senate’s Republican-written bill. The House’s decision to introduce a counterproposal — even as a messaging bill — risks slowing the process further.
The House and Senate would have to pass the same version of the bill before sending it to President Donald Trump for his signature.
Individual Payments
The House bill would require corporations receiving any federal assistance to restrict executive pay, ban so-called golden parachute payments for departing executives, halt stock buybacks and dividend payments, pay a $15 minimum wage, and maintain their workforce and any labor union agreements.
Under the House bill, all individuals with a Social Security number, including retirees and the unemployed, would receive $1,500, compared with $1,200 for taxpayers in the Senate bill.
But households with 2020 income over $150,000 for a joint filer, $112,500 for a head of household filer, and $75,000 for a single filer will be required to pay back part or all of the assistance payment over three years. For these households, the payment is a zero-interest loan.
Both bills would boost unemployment checks by $600 per week and expand the pool of people who qualify.
The legislation would authorize the Federal Reserve to purchase state and local government bonds to bolster resources needed to fight the coronavirus outbreak. The House bill would also send $60 billion to schools and universities.
GOP Rebuffs
Republicans denounced House Democrats’ bill as a wish list, noting it includes provisions on federal elections, minimum wages, union regulations and climate change that Democrats have long advocated.
“Republicans had a deal until Nancy Pelosi rode into town from her extended vacation,” Trump said in a Twitter post late Monday night. “The Democrats want the Virus to win? They are asking for things that have nothing to do with our great workers or companies.”
Earlier, McConnell said on the Senate floor that “The bazaar is apparently open on the other side.”
But Schumer, speaking to reporters at the Capitol late Monday night, said “we expect to have an agreement tomorrow morning,” and that Mnuchin had called the president.
The bill would create a national requirement for states to allow early voting and voting by mail in cases of national emergency, and it would stop Trump from issuing any new financial regulations during the coronavirus emergency.
The House plan would direct airlines that receive assistance to offset their carbon emissions and reduce them by 50% by 2050. It would provide grants for the development of sustainable aviation fuels and allow the Department of Transportation to purchase inefficient airplanes if airlines commit to purchasing newer, more fuel efficient versions.
The Democrats’ proposal would allocate $37 billion in grants to airlines and $3 billion to airline contractors to keep workers on the job, while the GOP bill offers only loans. Airlines for America, a lobby group for the largest U.S. carriers, pushed for at least $29 billion in grants to save jobs.
Airlines would also be eligible for up to $21 billion in loans under the House plan. The Senate’s rescue would provide $50 billion in loans for passenger carriers plus another $8 billion for cargo haulers, but would not offer grants.
For small businesses, the Pelosi plan would unlock loans, grants and payroll tax suspensions to help keep workers employed.
While the Senate Republican bill gives the Energy Department $3 billion to buy crude for the U.S. emergency stockpile, the House Democrats include no such funding.
The House’s draft includes legislation passed by the House in July on a mostly party-line vote to shore up financially troubled union pension funds that serve more than 1 million workers and retirees. Senate Republicans have resisted the measure.
“People are sick, families are frightened, our economy has ground to a halt, and workers face unprecedented job loss,” House Republican leader Kevin McCarthy said in a statement. “Democrats are using this national crisis to hold relief hostage unless Congress mandates corporate board diversity requirements and major components of the Green New Deal which will kill American jobs.”
Senate Bill
The Senate version includes aid for middle class taxpayers, the unemployed and distressed companies and local governments, although the details are different from the House plan.
The Senate would give direct payments of $1,200 to most middle class individuals, with $500 per child. After negotiations with Senate Democrats, the most recent version boosts unemployment payments and makes them available for longer periods, although Democrats continue to push for more generous funding.
The Senate plan includes $500 billion to loan to struggling corporations and state and local governments. That has been a source of tension with Democrats, who are seeking more stringent rules for companies that get federal aid.
Stocks sank Monday as lawmakers fought over the third and largest bill to address the coronavirus crisis. The S&P 500 Index fell 2.9% as of 4 p.m. in New York and the Dow Jones Industrial Average lost 3%. The S&P is down almost 35% from its Feb. 19 record and the Dow Jones Industrial Average has lost almost all its gains since Trump was elected on Nov. 8, 2016.
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—Why the extraordinary dollar surge spells more trouble for the global economy
—The Supreme Court has shunned technology. Could coronavirus change that?
—10 questions about the 2020 election during the coronavirus pandemic, answered
—The workers the U.S. government deems “essential” amid the coronavirus pandemic
—Listen to Leadership Next, a Fortune podcast examining the evolving role of CEO
—WATCH: U.S. tax deadline moved from April 15 to July 15
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fortune--2020-03-24--What is a 401(k)? And why do you need one?

Not that you need more things to be stressed about right now, but does hearing the term “401(k)” leave you sweating? It can seem daunting, but a 401(k) is just an account designed to help you save money for retirement. Yes, it’s truly as simple as that.
Employees across generations need to be thinking about retirement funds more carefully—especially now that the economy is set to be radically transformed through the coronavirus pandemic. A 2018 survey by Personal Capital of over 2,000 Americans, 1,630 of which were pre-retirees, found that an average of 37% had no money saved for retirement. This included 32% of baby boomers, 34% of Gen Xers, and 39% of millennials, showing a minimal change as people moved closer to retirement.
While money constraints limit the amount and ability for some people to invest in their 401(k), a refresher on the importance of 401(k) plans is always handy to start planning for retirement—whether you’re just starting out in your career or are already decades in.
How does a 401(k) work?
Instead of having to remember to file random amounts of money away every now and then, you can choose how much to save and how often—and you don’t have to pay taxes on it. Sounds pretty good, right? Seems like you’re going to like 401(k)s after all.
“A 401(k) is an IRS-approved retirement savings account offered by employers to their employees,” says Taylor Jessee, director of financial planning at investment management firm Taylor Hoffman. Employees can deposit a portion of their paychecks into the 401(k), up to a total of $19,500 a year—although this limit goes up a little each year. Most often your employer will actually match your contribution. “It’s an incentive for employees to save, and to attract and retain talented workers,” says Jessee.
If, for example, an employer offers to match 3% of what you’re putting into your 401(k) and you contribute the same amount, you are really saving 6% of what you’re being paid. Often employers will match however much you put in, up to a certain amount.
As for taxes, 401(k) deposits are taken out before your income is taxed. Say you choose to put in $1,000 and your income is $50,000. Only $49,000 would be subject to tax. It’s important to note that any employer contributions cannot be used to reduce your taxable income; it’s only what you personally put in.
Your money will not be taxed as long as your money is inside the 401(k).
“Money inside the 401(k) can be invested in products such as mutual funds and ETFs, and any interest, dividends, or growth in the portfolio is not taxed,” says Jessee. “You only pay tax once you take withdrawals from the 401(k), which ideally is not for decades, when you eventually retire.”
You won’t get away with avoiding taxes on that money forever, but the reduction now, plus increased savings, is a win-win.
Why does a 401(k) matter?
While this all sounds well and good, you may be thinking of skipping the whole process since you could still save on your own. Why bother?
For starters, not having to remember to save can make a world of difference. “For most people, it is an easy way to save automatically for retirement, since savings come straight from your paycheck,” says Brianne Soscia, a certified financial planner with the Wealth Consulting Group.
A 401(k) also helps ensure you aren’t just relying on Social Security in retirement.
“These 401(k) plans serve a dual purpose: reduce your taxable income, and set you up for income in retirement,” says Katharine Earhart, a partner at Fairlight, an investment management and workforce retirement company.
This is especially important for the 19% of millennials and 29% of Gen X participants in Personal Capital’s survey who reported plans to live off Social Security alone in retirement.
According to Earhart, “Social Security is only meant to be a stopgap measure for most people should a crisis hit in retirement or should they be forced to take early retirement.” Soscia agrees: “The average Social Security payment will not be sufficient to cover many people’s expenses in retirement, so saving for yourself is crucial.”
While the 39% of millennials without retirement savings may not be able to forgo any money at the moment to save, a 401(k) provides employees with the ability to save, no matter how much they can afford.
“If you start saving early, your investment savings will compound over the course of your entire working career,” says Earhart.
If you’re at a later stage in your career and were previously unable to save as much as you would have liked for retirement, there’s good news. Earhart explains, “For people over 50, you can save an additional $6,500 in 2020, which is referred to as a catch-up contribution.”
This increase in funds can help tremendously in securing your finances for retirement, regardless of when you start worrying for it—but the sooner you do, the better.
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fortune--2020-03-24--Tesla CEO Elon Musk is donating 1,200 ventilators from China to L.A.’s coronavirus fight

Elon Musk, the chief executive officer of Tesla Inc. and an outspoken skeptic of the severity of the coronavirus outbreak, donated more than 1,000 ventilators to officials in Los Angeles to meet demand as the pandemic becomes more severe.
The billionaire said in a tweet he helped acquire 1,255 of the machines from China last week and arranged them to be air-shipped to Los Angeles. He thanked Tesla staff and customs officials in China and Los Angeles for assistance.
Yup, China had an oversupply, so we bought 1255 FDA-approved ResMed, Philips & Medtronic ventilators on Friday night & airshipped them to LA. If you want a free ventilator installed, please let us know! — Elon Musk (@elonmusk) March 24, 2020
“Elon Musk: how about this? I told you a few days ago he was likely to have 1,000 ventilators this week,” California Governor Gavin Newsom told reporters in a briefing Monday. “They arrived in Los Angeles and Elon Musk is already working with the hospital association and others to get those ventilators out in real time. It’s [a] heroic effort.”
Musk’s move comes after he tweeted dismissively about whether there will even be a ventilator shortage. The entrepreneur had also called the panic surrounding the outbreak “dumb” and said that kids are “essentially immune” despite evidence that it can be serious for some children. Musk spent days dueling with local officials over a county shelter-in-place order before Tesla finally idled production at its lone U.S. car-assembly plant.
Tesla now joins General Motors Co. in providing ventilators after one Tesla customer urged him to re-purpose Tesla’s factory to produce the machines.
Newsom said six California companies have offered their facilities to manufacture gowns and he’s in conversation with another 25 providers that want to start 3D printing masks for health-care workers.
Updated models predict the state is 50,000 hospital beds short to meet needs as the pandemic spreads, the governor said. For the health care workers who will staff those additional beds, Newsom said the state is looking to procure 1 billion gloves and more than 500 million masks.
“That’s not a typo,” Newsom said.
More coronavirus coverage from Fortune:
—Why the extraordinary dollar surge spells more trouble for the global economy
—Japan finally admits coronavirus might disrupt Tokyo 2020 Olympics
—Which stores are open—and closed—during the coronavirus pandemic in the U.S.?
—What medical experts say about Everlywell’s home coronavirus testing kits
—How to defer your mortgage payment due to coronavirus
—How Emmy season is proceeding, with caution, amid the coronavirus crisis
—Listen to Leadership Next, a Fortune podcast examining the evolving role of CEO
—WATCH: World leaders and health experts on how to stop the spread of COVID-19
Subscribe to Outbreak, a daily newsletter roundup of stories on the coronavirus pandemic and its impact on global business. It’s free to get it in your inbox.


fortune--2020-03-24--An at-home coronavirus test is now available to health care workers

A hello on this challenging Monday, readers.
Apologies on the late send this evening—it’s been a pretty packed day (I’ll let you know much more about that shortly). Here’s just one of the bits of news: The testing capacity for COVID-19 is finally, if still slowly, ramping up in the United States.
Today President Trump, Vice President Mike Pence, and a number of other federal officials held a press conference discussing the escalating effort to address the outbreak. There was a lot to parse over the course of the discussion—but Dr. Deborah Birx, the administration’s response coordinator for the White House’s coronavirus task force, emphasized a number of new tests which are now coming onto the scene.
As we’ve explored in depth, private firms and state governments have had to step up to fill the void left by a lack of early federal government testing. That includes a Roche diagnostic that barreled its way to FDA authorization as the first commercial COVID-19 test in the U.S.—and, as Birx referenced, multiple new options which have either been cleared or poised for market use.
That includes a “point-of-care” diagnostic from Cepheid, which received an emergency FDA authorization just two days ago. Such a treatment could theoretically be conducted within 45 minutes. But, on the flip side, there are just about 23,000 machines that can conduct the test around the world.
And then there’s the at-home testing business. The diagnostic getting the most buzz is Everlywell’s kit. The company said it started selling 30,000 kits today. They’re being offered to health care workers first, and, eventually, will be available to the broader public as well—though it may have to go through a few more regulatory steps to get to that point.
One of the big questions is whether or not your average consumer is equipped to conduct such a test on themselves. The more traditional COVID-19 test kits involve some pretty deep nasal and oral swabs—so how might one know if they’re handling it correctly?
It may not be the most pleasant experience. But the lack of available options enhances the need for expanded testing capacity.
Read on for the day’s news.
Sy Mukherjee
sayak.mukherjee@fortune.com
@the_sy_guy
DIGITAL HEALTH
How Garmin keeps up with its major rivals. In a fascinating tale of industrial transformation, my colleague Danielle Abril reports on how Garmin has fought to keep up with its biggest rivals, including tech titans such as Apple and Google. It's a story of turning GPS technology into something that can be used in smartphones, transitioning it from an automative-focused business to one known for its personalized fitness technology. (Fortune)
INDICATIONS
Gilead gets orphan drug designation for remdesivir as compassionate use request skyrocket. The Food and Drug Administration (FDA) has given Gilead's coronavirus treatment remdesivir orphan drug designation, which could speed its entry into the market. The treatment has already been deployed in multiple late-stage clinical trials and is in such high demand that Gilead, an HIV and hepatitis C medicine specialist, halted "compassionate use" programs that would let some people get the drug even though it's not technically approved by the FDA. (Reuters)
THE BIG PICTURE
Harvard and Thrive Global launch First Responders First initiative. First responders are, literally, at the front lines of the fight against coronavirus. To that end, Harvard's school of public health, Thrive Global, and the CAA Foundation are teaming up to provide material support to health care workers who may lack the supplies they require for their jobs. This is a fundraising initiative to collect donations that would then be funneled to care givers who don't have the proper equipment.
REQUIRED READING
Zillow halts home buying amid coronavirus, by Chris Morris
Term Sheet in the time of coronavirus, by Lucinda Shen
Will the Supreme Court finally allow cameras, by Jeff John Roberts
Sewists step up in the face of N95 mask shortage, by Emily Price
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fortune--2020-03-23--In the face of an N95 mask shortage for coronavirus healthcare workers, sewists got to work

This weekend U.S. seamstresses both professional and amateur sat down in front of their sewing machines with just one pattern on their mind: face masks for healthcare workers battling the COVID-19 outbreak. With hospitals, senior homes, and first responders putting out desperate calls for masks, sewists including Jessy Gillespie, a retiree in Bossier City, La., created groups to field urgent requests, pass them along to other seamstresses, and then distribute the masks where needed.
Handmade masks are far from ideal, but in areas where N95 masks and surgical masks are in short supply, handmade masks are being used to extend the life of medical-grade masks, which would typically be disposed of after seeing a single patient. In some cases, where there’s an even greater shortage, homemade masks are being used as a primary form of protection.
While a surgical mask can filter 90% of virus-sized particles, a mask made of, say, an anti-microbial pillowcase filters about 70%.
Gillespie founded her Facebook group “Sew You Care” on Friday. By Sunday the group had distributed more than 1,000 handmade masks around the country. Now, even with more than 1,600 members, the group is struggling to keep up with the need. Gillespie is a longtime organizer for relief efforts, though this is her first time calling on sewing enthusiasts.
“I recently retired from it this year, but I was the vice president of Cajun Navy Supply. We specialized in logistics getting humanitarian aid into disaster areas,” Gillespie told Fortune.
She said she originally promised her husband she wouldn’t get involved, but then she saw the need for masks and a way to help.
“I usually do hurricanes and stuff like that,” Gillespie said. “What’s really cool about this is that we can just mail them, so we can have people working all over, from grandmothers to stay-at-home moms to cosplayers. Everybody that has a little bit of extra fabric is jumping in on this and it’s awesome.”
Masks created for the “Sew You Care” group. Photo by Amanda Raquel Leyva.
She decided to create the group after talking to friends that are doctors and nurses that said they had limited, or in some cases, no personal protective equipment (also known as PPE).
“I started seeing articles being shared that are saying these nurses are wearing bandanas, they’re wearing handkerchief’s tied across their faces,” she said. “It became a very scary realization.”
So far, President Trump has said that he will not compel companies to make masks, although some, including Hanes, have said they plan to.
Gillespie’s group is using a pattern for masks provided by the CDC. She’s organizing requests and the distribution of the masks through Google forms. Requests for masks are vetted by a team member, and then those requests are matched with a seamstress in the area where those masks are needed so they can be distributed quickly.
“What caught me really off guard is how badly they’re actually needed,” Gillespie said. “We’re looking for more seamstresses. Currently, we’re trying to root them out of everywhere that we can find them.”
While Gillespie’s group of seamstresses is one of the largest, it’s definitely not the only one.
Running low on masks, Deaconess Hospital in Evansville, Ind. put out a request last Wednesday asking for the community to sew masks. Thanks to an overwhelming amount of support, by Friday it was able to meet its demand and launch a directory to connect other groups that need masks with people that can potentially donate them.
As of Monday, the list of hospitals, medical facilities, and first responders that need masks was 2000 places long.
That need may be due, at least in part, to a lack of available materials. For instance, Wazoodle Fabrics in Pennsylvania, which makes medical-grade fabric for masks, was originally ordered to close because it was deemed a “non-essential” business. The manufacturer was later allowed to reopen and is now sold out of many of its fabrics and, for now, had to stop accepting new ones.
In Washington, an upholstery business, Kass Tailored, has been making masks for local medical workers.
The lack of masks is a problem that’s getting worse around the country, but it’s also one that’s bringing people together as well.
“The coolest thing to me is that you’re seeing so many posts of grandmothers sitting down with their 12-year-old granddaughters and teaching them how to sew. This art form that we all love so much is making a huge comeback in a really crazy time,” Gillespie said. She compares the work to being a modern-day Rosie the Riveter, “except with sewing machines and flannel.”
More coronavirus coverage from Fortune:
—Why the extraordinary dollar surge spells more trouble for the global economy
—Japan finally admits coronavirus might disrupt Tokyo 2020 Olympics
—Which stores are open—and closed—during the coronavirus pandemic in the U.S.?
—What medical experts say about Everlywell’s home coronavirus testing kits
—How to defer your mortgage payment due to coronavirus
—How Emmy season is proceeding, with caution, amid the coronavirus crisis
—Listen to Leadership Next, a Fortune podcast examining the evolving role of CEO
—WATCH: World leaders and health experts on how to stop the spread of COVID-19
Subscribe to Outbreak, a daily newsletter roundup of stories on the coronavirus pandemic and its impact on global business. It’s free to get it in your inbox.


fortune--2020-03-24--Coronavirus healthcare workers need medical gloves but the world’s top producers have cut capacity

Delta is downgraded to the ‘ junk ’ pile—and may soon have lots of company

Malaysia’s medical glove factories, which make most of the world’s critical hand protection, are operating at half capacity just when they’re most needed, The Associated Press has learned.
Health care workers snap gloves on as the first line of protection against catching COVID-19 from patients, and they’re crucial to protecting patients as well. But medical-grade glove supplies are running low globally, even as more feverish, sweating, and coughing patients arrive in hospitals by the day.
Malaysia is by far the world’s largest medical glove supplier, producing as many as three out of four gloves on market. The industry has a history of mistreating migrant workers who toil over hand-sized molds as they’re dipped in melted latex or rubber. It’s hot and exhausting work.
The Malaysian government ordered factories to halt all manufacturing starting March 18. Then, one by one, those that make products deemed essential, including medical gloves, have been required to seek exemptions to reopen, but only with half of their workforce to reduce the risk of transmitting the new virus, according to industry reports and insider sources. The government says companies must meet domestic demand before exporting anything. The Malaysian Rubber Glove Manufacturers Association this week is asking for an exception.
“Any halt to the production and administrative segments of our industry would mean an absolute stoppage to glove manufacturing and it will be disastrous to the world,” said association president Denis Low in a statement released to Malaysian media. He said their members have received requests for millions of gloves from about 190 countries.
U.S. imports of medical gloves were already 10% lower last month than during the same period last year, according to trade data complied by Panjiva and ImportGenius. Experts say greater declines are expected in coming weeks. Other countries making gloves including Thailand, Vietnam, Indonesia, Turkey, and especially China are also seeing their manufacturing disrupted due to the virus.
U.S. Customs and Border Protection announced Tuesday it was lifting a block on imports from one leading Malaysian medical glove manufacturer, WRP Asia Pacific, where workers had allegedly been forced to pay recruitment fees as high as $5,000 in their home countries, including Bangladesh and Nepal.
The CBP said they lifted the September order after learning the company is no longer producing the medical gloves under forced labor conditions.
“We are very pleased that this effort successfully mitigated a significant supply chain risk and resulted in better working conditions and more compliant trade,” said CBP’s Executive Assistant Commissioner for the Office of Trade Brenda Smith.
The Southeast Asian medical glove manufacturing industry is notorious for labor abuses, including demanding recruitment fees that send impoverished workers into crushing debt.
“Most of the workers who are producing the gloves that are essential in the global COVID-19 endemic are still at high risk of forced labor, often in debt bondage,” said Andy Hall, a migrant workers rights specialist who has been focusing on conditions in Malaysian and Thai rubber glove factories since 2014.
In 2018, workers told several news organizations they were trapped in factories and grossly underpaid while working overtime. In response, importers, including Britain’s National Health Service, demanded change, and companies promised to end recruitment fees and provide good working conditions.
Since then, advocates like Hall say there have been improvements, including recent food handouts at some factories. But workers still suffer long, arduous shifts, and receive little pay to make medical gloves for the world. Most of the workers in the Malaysian factories are migrants, and live in crowded hostels at the factories where they work. Like everyone in Malaysia, they’re now locked down because of the virus.
“These workers, some of the invisible heroes of modern times in fighting the COVID-19 pandemic, deserve much more respect for the essential work they do,” said Hall.
Gloves are just one of many types of medical equipment now in short supply in the U.S.
The AP reported last week that imports of critical medical supplies including N95 masks have sharply declined in recent weeks due to factory closures in China, where manufacturers had been required to sell all or part of their supply internally rather than export to other countries.
Rachel Gumpert, director of communications and membership services for the Oregon Nurse‘s Association said hospitals in the state are “on the edge of crisis.”
“Across the board there’s not enough of anything,” she said. They’re mostly lacking adequate masks right now, she said, but “in two weeks we’ll be in a very bad place in terms of gloves.”
In the U.S., concerns about a shortage have prompted some stockpiling and rationing. And some locales were asking for public donations.
In response, the FDA is advising medical providers whose stocks are dwindling or already gone: don’t change gloves between patients who have the same infectious disease, or use food grade gloves.
Even with adequate supplies, the agency said that under present circumstances: “Reserve use of sterile gloves for procedures in which sterility is required.”
Last week an Italian doctor died after testing positive for novel coronavirus. In one of his last interviews, he told broadcaster Euronews he had had to treat patients without gloves.
“They have run out,” he said.
More coronavirus coverage from Fortune:
—All the moves the Fed is making to bolster the economy
—2020 Tokyo Olympics will be delayed by about one year due to coronavirus
—Which stores are open—and closed—during the coronavirus pandemic in the U.S.?
—As the U.K. goes into lockdown, London faces isolation—and clear skies
—17 companies that are hiring during the coronavirus crisis
—President of the Tenement Museum on what we can learn from previous pandemics
—Listen to Leadership Next, a Fortune podcast examining the evolving role of CEO
—WATCH: World leaders and health experts on how to stop the spread of COVID-19
Subscribe to Outbreak, a daily newsletter roundup of stories on the coronavirus pandemic and its impact on global business. It’s free to get it in your inbox.


fortune--2020-03-24--Delta is downgraded to the ‘junk’ pile—and may soon have lots of company

Yale ’ s most popular class is now available online for free

After weeks of pessimism about how the $10 trillion corporate debt sector would fare as the coronavirus outbreak has brought the U.S. economy to a near-halt, it appears the dominoes are beginning to fall.
On Tuesday, Delta Air Lines saw its credit rating downgraded to “junk” territory by S&P Global Ratings. Already at the lowest investment-grade rating of BBB-, S&P cut the airline down to a BB rating—demoting Delta into high-yield, speculative territory on concerns over declining bookings and revenues due to the coronavirus outbreak’s devastating impact on commercial air travel.
The move does not come as a great surprise, given that analysts have forecasted deteriorating credit profiles across the airline sector as the outbreak has escalated in the U.S. over the past month. Fitch Ratings expressed such concerns earlier this month in a note that pointed to “risks that [air travel] demand takes materially longer than previous shocks to recover,” and last week revised its outlook on Delta and four other airlines to negative from stable.
Amid all this, the airline industry—as well as airplane manufacturer Boeing—has been in the spotlight as potentially needing financial assistance from the federal government in order to survive. As Congress continues to hash out the details of an expected $2 trillion stimulus package, passenger airlines have been earmarked for up to $50 billion in federal aid, which could entail everything from government-backed loan guarantees to direct cash grants and tax relief. The prospect of taxpayer assistance has raised eyebrows, given the extent to which airlines have invested cash flow into buying back their own shares over the past decade.
But even with help from the government, falling credit profiles pose trouble for airlines as they look to tap private lines of credit in order to stay afloat. Having reportedly been in discussions with lenders including JPMorgan Chase for more than $2 billion in short-term financing, Delta secured a new $2.6 billion credit facility last week and also drew down $3 billion from existing credit facilities, according to research from both S&P Global and Morningstar. That spotlights the extent to which airlines have become reliant on borrowed funds as they continue to slash operations; in a March 20 memo to employees, Delta CEO Ed Bastian noted that the company is “burning roughly $50 million in cash” per day.
Yet the airlines are not alone in their current credit squeeze. S&P has already attributed more than 100 credit rating downgrades to the coronavirus, with industries like real estate and energy also falling victim. In the latter sector, the outbreak has coincided with a price war between OPEC and Russia that has battered crude oil prices; as a result, Fitch downgraded 17 North American energy companies last week, citing “significant credit risk” for those in exploration, production and oil field services.
The Federal Reserve appears to be aware of the pressures facing the corporate credit sector. As part of its unprecedented intervention in the financial markets, the central bank has launched credit facilities designed to pump liquidity into both the primary and secondary corporate bond markets.
But the Fed’s facilities only deal in the market for investment-grade debt—and with more than half of investment-grade bonds carrying the lowest possible rating of BBB, there are fears over what a wave of further downgrades into junk territory could mean for issuers and bondholders alike should economic conditions continue to worsen.
For one, being downgraded to junk status makes it much more difficult and expensive for companies to refinance the outstanding debt on their books. Meanwhile, many institutional investors want little to do with junk-rated bonds; some, such as pension funds, are prohibited from owning them. In turn, junk bonds comprise a significantly smaller share of the corporate bond market than investment-grade debt.
“There’s just not as many buyers out there [for high-yield debt],” according to Kathy Jones, chief fixed income strategist at Charles Schwab’s Schwab Center for Financial Research. In addition to forcing many investors to dump the newly junk-rated debt, an influx of downgrades would “overwhelm the high-yield space and make it difficult for yields to come down,” she notes.
While acknowledging that no company is prepared for the steep decline in revenues now facing airline operators, Jones adds that it has “been apparent for years that these companies were laying on more debt” to a worrying extent.
“Now, the tide has turned, and all of their financing costs are going to be higher,” she says. “That’s going to put more stress on them, their balance sheets, and their earnings.”
And should junk-rated companies be unable to raise the financing they need amid an economic recession, it could send many into default—with repercussions that would ripple across the financial markets.
So far, airlines like Delta appear to be on the front lines of this worrying dynamic. If the economy continues to deteriorate, expect other industries to follow the airlines’ trajectory.
More must-read stories from Fortune:
—Why the extraordinary dollar surge spells more trouble for the global economy
—These estimates of how much COVID-19 will hurt the economy are terrifying
—The NYSE is closed because of the coronavirus. What that means for investors
—How thinking like a golfer can help you ride out market mayhem—Listen to Leadership Next, a Fortune podcast examining the evolving role of CEO
—WATCH: U.S. tax deadline moved from April 15 to July 15
Subscribe to Fortune’s Bull Sheet for no-nonsense finance news and analysis daily.


fortune--2020-03-24--Yale’s most popular class is now available online for free

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The course materials begin with a beautiful promise.
Skills you will gain: gratitude, happiness, meditation, savoring.
Yale psychology professor Laurie Santos became a breakout education star after she began teaching her real-world class, Psychology and the Good Life, in the spring of 2018. It was her attempt to address what she observed to be alarming levels of student depression and anxiety on campus. To her happy surprise, it became the most popular course in Yale’s history.
The free online version, now available through Coursera, promises the same mashup of breakthrough psychological research and behavioral science—personalized via fascinating personality assessments that can help you measure your level of happiness and elements of your character.
“We actually have lots of insights into the kinds of things that make us happier, that make us laugh, that make our life more fulfilling,” Santos says in her introduction. But that’s not enough. “One of the things we’re going to learn is that knowing about what makes you happy isn’t enough to actually make you happy. You actually have to put those things into practice.” Americans, in particular, are deeply unhappy people, with recent college graduates among the unhappiest cohorts of all. “[American doctors] prescribe antidepressants at 400x the rate we did 20 years ago,” she says in the course.
While focusing on personal happiness sounds like a welcome distraction during a challenging time like a pandemic, the science behind it is also good fodder for any aspirational leader.
Smart science combined with prompts to encourage healthy behavior, known in the field as “nudges,” is increasingly being applied to public policy with promising results. And a behavioral focus is beneficial in the workplace, says Tomas Chamorro-Premuzic, the chief talent scientist at ]Manpower Group, and a professor at University College London and Columbia University. In this Bloomberg opinion piece, he encourages organizations to worry less about people’s hearts, minds, or hidden biases, and more on incentivizing the interactions they value. “Organizations should focus less on extinguishing their employees’ unconscious thoughts, and more on nurturing ethical, benevolent, and inclusive behaviors,” he writes.
Santos also has a popular podcast called The Happiness Lab, which has fresh or repurposed episodes that directly address well-being and anxiety during the coronavirus epidemic with evidence-based science.
But with uncertainty now camped on my doorstep, I’m heading back to school to “rewire” my habits for happiness. (There’s even an app to help you apply what you learn in the course in your daily life—check out ReWi on iOS or ReWi on Android.)
Enrollment on Coursera begins today! Meet me there? I’m sitting in the front row and saving a seat for you.
Ellen McGirt
@ellmcgirt
Ellen.McGirt@fortune.com
On Point
Coronavirus: Planning for the worst, hoping for the best Last week, my Broadsheet colleagues Kristen Bellstrom and Emma Hinchcliffe interviewed Margaret Arakawa, the CMO of Seattle-based tech startup Outreach. Arakawa and her family are as close to corona-ground zero as you can get: Her husband Brad Schmidt is a firefighter and paramedic in Everett, Wash., which saw the first coronavirus clusters, including the nursing home where some two-thirds of the residents contracted the disease. Life in a first responder family is tough. “We just had a talk as a family about what happens *when* my husband gets exposed and *when* he comes down with coronavirus,” she says. “We’ve come up with a plan. It’s not a great plan, but it’s a plan nonetheless.”
Fortune
Rest in power Manu Dibango The saxophone legend, best known for his 1972 hit Soul Makossa, has become the first global artist to die from the coronavirus. “It is with deep sadness that we announce you the loss of Manu Dibango, our Papy Groove,” a statement on his official Facebook page read. The 86-year-old Cameroon native died in a Paris hospital. Dibango’s signature hook was has been sampled by Rihanna and other artists. Dibango sued Michael Jackson in 2009, accusing him of stealing a sample for two tracks on his Thriller album. His eclectic fusion style delighted fans for decades. "As you are African they expect you always to play African. Forget that,” he told the BBC in 2017. “You're not a musician because you're African. You're a musician because you are musician. Coming from Africa, but first, musician."
BBC
Racist attacks on Asian people continue The stories are horrific: Chinese-Americans are being harassed, yelled at, blamed, hit, even spit at. While everyone’s lives have been put into the spin cycle, Chinese-Americans, with plenty of other Asian-Americans lumped in, are particularly on edge. The president’s use of the term “Chinese virus” is not helping. “If they keep using these terms, the kids are going to pick it up,” Tony Du, an epidemiologist in Howard County, Md., tells the New York Times. "They are going to call my 8-year-old son a Chinese virus. It’s serious.”
New York Times
On Background
The ethics of health care rationing in the age of coronavirus This is a technical piece from a group of physicians about fairness in the face of scarce resources—but it’s worth flagging for several reasons. On a practical level, it describes in helpful detail the scope of the pandemic and what has happened in hot spots around the world thus far. Then, it goes into the importance of using evidence to model and forecast, even in the face of unknowns. (I can imagine a world in which ethical decision-making in times of scarcity will be a valuable skill.) And finally the four fundamental values of ethical rationing: maximizing the benefits produced by scarce resources, treating people equally, promoting and rewarding instrumental value, and giving priority to the worst off. “Consensus exists that an individual person’s wealth should not determine who lives or dies,” they write.
New England Journal of Medicine
My mother’s biryani Ruchika Tulshyan is a diversity and inclusion expert and a raceAhead treasure—you'll love her guest essay on why you need to diversify your social network. In this poignant personal reflection, she shares how she once looked down upon her mother’s homemaking and cooking life, a lifestyle anathema to her teenaged feminist sensibility. “Women who worked at home were answerable to the oppressive patriarchy,” she writes. “Instead, I would attend fancy colleges and make wads of money so I could have others cook for me! An ambitious woman doesn’t enter the kitchen!” In her rebellion, she ate out so often, she developed an insulin-related illness. In learning to cook, she learned to nurture herself and embrace the food, one recipe in particular, which symbolized the lifestyle she once tried to avoid.
The Establishment on Medium
What actually works in remedial education When a student (or perhaps intern or new hire) needs to brush up on their basics before they’re ready for college, they are typically directed to a remedial course in reading, writing, or math. Currently, some 60% of community college first-years and 40% of public college first-years take these classes. But the results tend to be mixed. But co-requisite remedial training, support that happens concurrently with college-level courses, works far better, argues Alexandra W. Logue is a research professor at City University of New York Graduate Center. This post cites great data, perfect for folks who are contributing to corporate education initiatives. But Logue also identifies the main barrier to instituting better student effectiveness programs: faculty resistance.
Inside Higher Ed
Tamara El-Waylly produces raceAhead and manages the op-ed program.
Quote
"Most people trusted in the future, assuming that their preferred version of it would unfold. Blindly planning for it, envisioning things that weren't the case. This was the working of the will. This was what gave the world purpose and direction. Not what was there but what was not."
—Jhumpa Lahiri, author, The Lowland


fortune--2020-03-24--‘Making progress is good news’: Dow surges 10% to its best day since 1933

Subscribe to Outbreak, a daily newsletter roundup of stories on the coronavirus pandemic and its impact on global business. It’s free to get it in your inbox.
The Dow Jones Industrial Average surged 10% Tuesday as Congress and the White House neared a deal to inject nearly $2 trillion of aid into the coronavirus-ravaged economy.
The huge gains on Wall Street followed a worldwide rally as a wave of buying interrupted what has been a brutal month of nearly nonstop selling. Despite the gains, investors were far from saying markets have hit bottom. Rallies nearly as big as this have punctuated the last few weeks, and none lasted more than a day.
Investors have been frustrated waiting for the U.S. government to do what it can to help the economy, which is increasingly shutting down by the day. But both Democrats and Republicans said Tuesday they’re close on a massive economic rescue package, which will include payments to U.S. households and aid for small businesses and the travel industry, among other things.
A vote in the Senate could come later Tuesday or Wednesday, and if approved, it would follow the latest round of extraordinary aid launched by the Federal Reserve on Monday.
“I don’t think there’s any more confidence in the fundamental outlook, but the fact that we’re making progress is good news,” said Katie Nixon, chief investment officer at Northern Trust Wealth Management. “It’s sort of like, keep the patient alive in the emergency room so you can provide some treatment options.”
The buying circled the world. South Korean stocks surged 8.6%, Germany’s market jumped 11% and Treasury yields rose in a sign that investors are feeling less fearful.
The market has seen rebounds like this before, only for them to wash out immediately. Since stocks began selling off on Feb. 20, the S&P 500 has had six days where it’s risen, and all but one of them were big gains of more than 4%. After them, stocks fell an average of 5% the next day.
“One of the things to be careful about is thinking this will be the panacea or that this fiscal response will be sufficient,” said Eric Freedman, chief investment officer at U.S. Bank Wealth Management.
Ultimately, investors say they need to see the number of new infections peak before markets can find a floor. The increasing spread is forcing companies to park airplanes, shut hotels and close restaurants to dine-in customers. Altogether, estimates suggest at least 10% of the U.S. economy is shutting down, according to Rob Sharpe, head of investments and group chief investment officer at T. Rowe Price.
The Dow Jones Industrial Average rose 1,933 points, or 10.4%, to 20,525. The S&P 500 was up 8.8%, and the Nasdaq was up 7.6%.
Economists are topping each other’s dire forecasts for how much the economy will shrink this spring due to the closures of businesses, and a growing number say a recession seems inevitable.
To support the economy while health experts work to corral the virus, the Federal Reserve on Monday pledged to buy as many Treasurys and mortgage-backed securities as it takes to keep lending markets working smoothly..
Investors are waiting for Congress and the White House to also do what they can. They debated through the weekend and Monday on a plan to send cash to households and help support the hard-hit travel industry, among other things. After negotiations dragged through the night, a Senate vote could come later Tuesday or on Wednesday.
That helped travel-related stocks surge to the market’s biggest gains. Norwegian Cruise Lines, MGM Resorts and American Airlines Group were all up at least 30%. All, though, remain 60% or more below where they were last month.
Other areas of the market that were hardest hit in recent weeks were also helping to lead the market higher, including energy companies and banks.
Governments and central banks in other countries around the world are unveiling unprecedented levels of support for their economies in an attempt to limit the scale of the upcoming virus-related slump. Germany, a bastion of budgetary discipline, also approved a big fiscal boost.
The gains came even as the first reports arrived showing how badly the outbreak is hitting the global economy. In the United States, a preliminary reading on business activity in March showed the steepest contraction on record, going back to 2009. Reports were also gloomy for Europe.
“Everyone was prepared for a set of shockers, and that is precisely what we got, but they are not a surprise,” said Chris Beauchamp, chief market analyst at IG. “It is at times like this that the market’s propensity to look forward is demonstrated most effectively.”
More dour data is nearly assuredly on the way. On Thursday, economists expect a report to show the number of Americans applying for jobless claims easily set a record last week. Some say the number could be way beyond 1 million, amid a wave of layoffs, toping the prior record of 695,000 set in 1982.
Helping to lift sentiment in markets is news from China that it is preparing to lift the lockdown in Wuhan, the epicenter of the outbreak, and from Italy reporting a reduction in the number of new cases and coronavirus-related deaths.
“It’s still early days, of course — perhaps investors can start to envisage life beyond the coronavirus,” said Craig Erlam, senior market analyst at OANDA Europe. “That could make stocks look a little more attractive, although anyone jumping back in now will need to have nerves of steel.”
For most people, the coronavirus causes only mild or moderate symptoms, such as fever and cough. Those with mild illness recover in about two weeks. Severe illness including pneumonia can occur, especially in the elderly and people with existing health problems. Recovery could take six weeks in such cases.
More coronavirus coverage from Fortune:
—All the moves the Fed is making to bolster the economy
—2020 Tokyo Olympics will be delayed by about one year due to coronavirus
—Which stores are open—and closed—during the coronavirus pandemic in the U.S.?
—As the U.K. goes into lockdown, London faces isolation—and clear skies
—17 companies that are hiring during the coronavirus crisis
—President of the Tenement Museum on what we can learn from previous pandemics
—Listen to Leadership Next, a Fortune podcast examining the evolving role of CEO
—WATCH: World leaders and health experts on how to stop the spread of COVID-19
Subscribe to Outbreak, a daily newsletter roundup of stories on the coronavirus pandemic and its impact on global business. It’s free to get it in your inbox.


fortune--2020-03-24--Subway and other retailers want to stop paying rent to offset coronavirus closures

Major U.S. retail and restaurant chains, including Mattress Firm and Subway, are telling landlords they will withhold or slash rent in the coming months after closing stores to slow the coronavirus, according to people familiar with the situation.
In a brewing fight, chains are calling for rent reductions through lease amendments and other measures starting in April, said the people, who asked not to be named because the discussions are private.
These moves mark the next phase in virus fallout: What happens to billions in rent owed for businesses that have been closed? The stakes are high. Retail has a slew of big chains in turnaround mode. And if they do withhold payments, there would be a ripple effect. Landlords can’t afford to stop collecting rent for long, with many property owners sitting on loads of debt.
The situation is likely to get messier. The U.S. relief packages being considered don’t directly address rents. But the Federal Reserve’s actions may give banks the leeway to defer mortgage payments, allowing property owners to delay rent. It’s also unclear if retailers can declare a so-called “force majeure,” a contract clause that covers highly unusual events, and if landlords could then make the same case to insurers.
“The court system is just going to get flooded with a million of these disputes between tenants and landlords,” said Vince Tibone, an analyst at Green Street Advisors. “If the government doesn’t step in in any form or fashion, it could get ugly. They need to respond quickly.”
‘More drastic’
Mattress Firm, with about 2,400 stores, sent landlords a letter last week saying it would cut rent in exchange for longer leases and offering two options to do so. This week, it sent a more urgent note revoking its earlier offer.
“The decline in revenue and forced store closures across the nation are more drastic, compressed and immediate than we originally anticipated,” the company wrote in a letter reviewed by Bloomberg. “Our need is now more severe,” the firm said, invoking the virus as a force majeure event that “will prevent or prohibit us” from paying rent.
After being contacted by Bloomberg, Mattress Firm confirmed that it has requested a temporary suspension of rent.
“We appreciate our landlord partners, and the responses have been encouraging so far,” Randy Carlin, chief real estate officer for Mattress Firm, said in a statement. “We will continue to do everything we can to maintain business continuity and to ensure there are jobs available for our people to return to when this crisis ends.”
Subway Restaurants, which has more than 20,000 U.S. locations, sent out a letter to landlords last week saying that it might cut or postpone rental payments due to the virus, according a person with knowledge of the situation. The Real Deal, a real estate trade publication, reported on the communication earlier.
Some help
In a statement, Subway said it was looking at ways to help franchises mitigate the virus fallout.
Some landlords have recognized they need to help smaller tenants. Irvine Company Retail Properties, based in Irvine, California, is allowing rent to be deferred for 90 days and then paid back with no interest over a year starting in January, according to a document reviewed by Bloomberg. The firm confirmed the practice without further comment.
Bedrock, a Detroit developer, said it will waive rent and other fees for three months for its smaller retail and restaurant tenants.
Retail real estate investment trusts may need to provide leeway on rent, Bank of America said this week after downgrading several REITs. The bank sees store closings lasting through May and the possibility of some locations going away as more fragile retailers are forced into bankruptcy.
More coronavirus coverage from Fortune:
—All the moves the Fed is making to bolster the economy
—2020 Tokyo Olympics will be delayed by about one year due to coronavirus
—Which stores are open—and closed—during the coronavirus pandemic in the U.S.?
—As the U.K. goes into lockdown, London faces isolation—and clear skies
—17 companies that are hiring during the coronavirus crisis
—President of the Tenement Museum on what we can learn from previous pandemics
—Listen to Leadership Next, a Fortune podcast examining the evolving role of CEO
—WATCH: World leaders and health experts on how to stop the spread of COVID-19
Subscribe to Outbreak, a daily newsletter roundup of stories on the coronavirus pandemic and its impact on global business. It’s free to get it in your inbox.


fortune--2020-03-24--‘This is cataclysmic’: The coronavirus could obliterate 5 million to 6 million jobs in March alone

Subscribe to Outbreak, a daily newsletter roundup of stories on the coronavirus pandemic—and its impact on global business.
Layoffs are spiraling.
The jobs cuts from American businesses and industries, like airlines and cruise lines, could add 5 million to 6 million people to the unemployment line in March, according to an estimate provided by Moody’s Analytics to Fortune. That would be greater than any single month for job losses in American history, and it blows away the more than 800,000 jobs lost in March 2009—the largest month for job losses during the 2007 to 2009 Great Recession. This comes as a growing number of states have ordered nonessential businesses to shut their doors in an attempt to slow the spread of the coronavirus.
“This is cataclysmic. I can’t think of a darker word. It’s Armageddon if lawmakers don’t come up with support [for businesses and households] in the next couple days,” says Mark Zandi, chief economist of Moody’s Analytics. His projected 5 million to 6 million job losses won’t be visible in the U.S. Bureau of Labor Statistics’ March jobs report—given it collects numbers only through the week of March 12. He expects the BLS March report to show only around 50,000 lost jobs, while the April report is when we’d see the millions of lost jobs on paper.
Over the next few months Zandi foresees the unemployment rate jumping from February’s 3.5% to the double digits. A double-digit monthly jobless rate has only occurred once over the past 30 years.
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