It’s difficult. Because it’s both a trap for those excoriating him, yet also something that even if it is, he can’t be allowed to slide on
Trump’s gonna Trump. We know us saying that is gonna make people mad. And you know what? You’re right. We’re mad too. We even wrote a piece a couple of days ago calling attention to the fact that: “Trump Is Now Calling COVID-19 ‘The Chinese Virus’”.
Yet comments about the President’s continued smear right now accounts for more than half of all the Trump/Coronavirus traffic in our Twitter and Facebook feeds. And that has the effect of shielding Trump from other extremely valid criticisms and examples of mismanagement that he should be compelled to address, and might be compelled to actually do something about. And as consumers of online news, it’s shielding us from those other issues as well.
In that sense, whether he intended it this way or not, Trump’s decision to call COVID-19 the “Chinese virus” is brilliant. Trump supporters no doubt love it or don’t care. And everybody else has become very distracted by it, some to the point of obsession. And rightly so. (Also we’re not Asian-American so we can’t speak to impact it’s having specifically on our everyday lives.)
But it’s also messing with everyone’s focus. Which benefits only Trump, and probably does not benefit the American people. And allows him to distance himself from many of the other things he’s doing and saying that turn out to be negligent or dismissive or misinformation or lies.
And we already know he’s not going to stop saying it.
Focusing so much on the fact that he’s being racist again, is allowing him to cover up multiple instances of gross mismanagement and incompetence in his Coronavirus response. Maybe it is extraordinarily important to continue to express maximum indignation in order to never signal it’s even a little acceptable no matter what.
At the same time, that then allows Trump to make a lot of other ridiculous proclamations that he should be called out on, but instead just whoosh by…
Here’s a small example: Gas prices are crashing right now, a combo of a price war between Saudi Arabia and Russia, and a plunge in global demand due to the economic effects of the virus. Trump continually paints this as great news he’s bringing consumers, while continuing to insist he has some personal control of oil prices. “I was always for the person driving the car and filling up the tank of gas…I would raise hell with OPEC”, he boasted during his most recent Coronavirus briefing.
But no, Mr. President, that doesn’t make lower gas prices now “bigger than…any tax decrease we could give”. And lower gas prices aren’t like “big tax cuts” for consumers.
Because lower gas prices mean nothing if:
- You don’t have a job to commute to.
- You are being told not to leave your home unless absolutely necessary.
- You aren’t driving your children to school, play dates, or activities.
- You can’t make your car payments.
- You don’t have the cash to fill up your tank.
Also, plunging oil prices do huge harm to producers inside the U.S. Which Trump is keenly aware of. One of Trump’s most touted “crowning achievements” (even though it happened when President Obama was in office), is “making” the U.S. the biggest energy producer in the world.
A bigger example? The Federal Reserve’s Herculean efforts to prevent money market funds from “breaking the buck”. Which we explained in yesterday’s column. Yes, this doesn’t easily get people fired up, nor easy to understand why it’s so important. Yet if it happens, it’ll be the biggest blow to financial markets and the economy yet. And we will have truly entered uncharted, novel territory. So that too should be getting a lot more focus. Yet no one brought it up in the President’s media briefing.
Case In Point: Olive Garden
How deep is the economic hole the U.S. has suddenly fallen into? No one knows.
And that’s the problem. We keep saying this complete lack of visibility about the future of the economy, is like going over a waterfall without having any idea of how distant a drop it is into the icy waters below.
And we had a very good example of that when Olive Garden released its earnings today. Or rather Darden Restaurants, which also owns LongHorn Steakhouse and some others. Olive Garden accounts for about 1/2 of Darden’s revenue.
Let’s point out that we are not singling out Olive Garden because we think it’s an unusual case, or they’re doing anything egregious, or anything particularly differently compared to other companies. In fact, Olive Garden’s parent company seems to be one of the “good guys”: they’ve already promised paid sick leave and emergency pay in reaction to COVID-19. And the CEO isn’t taking his own salary for now.
We’re bringing this up because their parent company’s earnings came out today, and they made a pretty good amount of money recently. (Those endless breadsticks paid off!) And in fact, their stock surged today to close more than 8% higher.
Earnings announcements usually also involve a little guesswork, because companies are supposed to give guidance about their future. But Olive Garden’s parent company did something interesting: they gave no guidance — took no guesses. In fact, withdrew previous guidance and replaced it with nothing. Which is in a way the most responsible thing to do right now. But is highly unusual and scary.
Olive Garden’s parent company:
- Withdrew its projection for how it’ll do for the rest of the year. Didn’t revise. Withdrew. Meaning it’s projecting nothing. Management has figured out what each percentage point decline in sales will mean to its bottom line, but is making no prediction of how deep it expects those declines to be. NO VISIBILITY.
- Maxed out its external line of credit. Management indicated it did that preemptively out of “an abundance of caution”, meaning it felt it was wise to grab on to as much cash as it could. Which from this and other things all told adds up to about $1-billion dollars. But indicating it hasn’t had to spend that yet. Still, NO VISIBILITY.
- Suspended its cash dividend to shareholders. Because it may need that cash. The responsible thing to do, but another sign of NO VISIBILITY.
And according to CNBC, Olive Garden does carry business interruption insurance, but its policy maxes out at $10-million. (And that’s assuming the company that’s insuring it has sufficient liquidity.) This isn’t an example of no visibility, rather an underestimation of what a worst case scenario would look like. Especially since the company netted a quarter of a billion dollars in the last 3 months. But can’t really hold management at fault for that.
The only bit of visibility in this report: a contention by the company’s Chief Financial Officer that “a full close is unlikely”. Meaning with 60% of locations currently under to-go only restrictions by local governments, either they’ll be supported enough by that to keep operating at reduced levels (they say 6–10 employees are needed to keep locations with closed dining rooms running), or they believe Coronavirus cases will become concentrated and isolated enough that they may be able to keep open or reopen some restaurants for sit-down dining in areas that may seem to be safe. But they didn’t give a projected timetable for that either.