Data Can Drive Safe Reopening, and Here's Who Will Benefit Most

Several states started the process of reopening the economy last week, including Texas, which along with California has one of the largest economies in the U.S., even though its energy industry has been hit so hard. The decision reopen seems highly controversial, even confrontational. But I believe that the science and the data we have accumulated over the past several months about the virus support attempting to reopen economies - in a way that's surgical. I think any reopening must be focused on voluntary participation. Consumers and customers are not forced to participate, and workers should not be forced to participate. Any work that can be performed from home, should remain performed at home for those who can, want, or need to. Where physical presence is required, this is a lot more difficult, as employees may feel nervous about not going back to work if they can't, shouldn't or don't want to because of health concerns. That is tricky and I believe the limited reopening lets most employers give employees that choice without putting their jobs in jeopardy. One reason to open is the economic downturn and government spending are snowballing and threatening to run out of control. The trillions that are being spent is not enough. We cannot justify reopening on the cost alone, but we will also have health and welfare impacts from the economic downturn that is becoming more apparent the longer the shutdowns and lockdowns go on. While many argue against reopening, there are many arguments for reopening. From what I can tell, Texas, as an example, is prepared to attempt a slow, safe reopening. Here is a link to the Texas Covid-19 dashboard. Virtually every state has one now and some are better than others - I found the Texas one particularly useful. A state with 29 million people has had 30,522 confirmed cases and 847 deaths in linked to COVID or 0.003% of the population. Every death should be avoided and is cause for concern. Each state, however, has had very unique experiences around the virus. Demographics, physical location and climate demonstrate the rationale against using a one-size-fits-all approach. Texas also provides some additional useful information on hospitalizations and other specifics about the disease's toll on the state. Currently 1,725 people are hospitalized for Covid-19 and there are 19,940 available beds, 2,134 available ICU beds and 6,552 available ventilators. They are clearly tracking the right things (and this is just what is readily available publicly), which gives me some confidence in the state's ability to manage reopenings. Individuals at high risk and hot spots are better understood and have been identified over the past two months of the war on the virus. Sadly, long-term care facilities seem to be at least half of all Covid-19 deaths in many states, including New Jersey, Virginia, Connecticut and Massachusetts. Healthy people, under the age of 50, seem to be less affected most of the time. There are cases of people under that age getting sick and dying, but it is not at the rate older people are getting sick and dying. Elderly, especially with severe existing conditions, are most at risk. Many of us, including myself, fit into that poorly defined category. The data of how hard hit the long-term care facilities have been is depressing, but it does start letting us develop plans that allow the reopening to occur without severe health consequences. Keep Expectations Low, and Hopes High Expectations for a reopening seem reasonable. Take away the noise of bears screaming that everyone thinks that there will be a V-shaped recovery and I think that expectations are reasonable and if anything, too low. I expect that the first week or two will be difficult. Lots of negative headlines will need to be overcome. Specifically, as testing increases, we will see confirmed cases rising, and that will have little to do with the reopenings, but will be a headline that the states attempting to get back to business will need to overcome. I do believe the data points to a way forward, where the economy can begin to recover without forcing anyone to put themselves at risk. There are many reasons to be optimistic that we can avoid a wave of deaths, as testing has improved, so has availability of medical equipment, and the use of masks, social distancing, and better virus hygiene should all mitigate the spread. Add Energy and Financials, Take Profits on Tech If I am right, and the reopening is successful, energy and financials should do well. Some other beaten up sectors could get rebound more fiercely, but the downside risk there is worse than the downside for energy and financials from a failed attempt. Tech, which led the way, may give some ground as investors rotate to companies that will benefit if the effort is successful. Mulling Over a Crazy Idea on Malls At first this sounds crazy, and it may be crazy, but I think the new normal will become work from satellite offices. From the corporate executives I talk to, work from home seems like a three month to six month stop-gap measure. But returning to densely crowded city locations also seems unappealing. Firms are already looking for office space outside of major metropolitan centers, and, because of social distancing, they will actually have increased square footage, just spread around more locations. I'm also betting we get back to cubicles rather than open floor plans. While I think retailing as we know it, which was already under pressure, has changed permanently, we could see malls become the new office space. Big space. Lots of parking. Room to add stores to service the workers. I admitted the idea sounds crazy, but it is growing on me. The reopening has me liking energy and financials. I also expect that the story in D.C. is going to shift to supply chain repatriation and infrastructure spending, so winners and losers will develop specific to that, though energy is an obvious choice on that front too.

Data Can Drive Safe Reopening, and Here's Who Will Benefit Most

Let's use Texas as an example of how getting back to work could look, and here's my 'crazy' idea for all those empty malls.

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