My wife, Amy, and I seem to be running out of good shows on Netflix as we tick closer to a full year since the WHO declared COVID-19 a pandemic. I shudder to think how many weeks of those 52 have been spent in front of the box …
A few nights ago we found ourselves dredging the depths of the hundreds of TV channels on Sky and settled for a rerun of Ramsey’s Kitchen Nightmares. As Gordon Ramsey threw a few more expletives towards a couple of hapless restaurateurs, my mind wandered back to those hedonistic days of being able to go out to eat. In that moment I would have leapt at the chance to venture into one of these Kitchen Nightmares for a spot of grub, for the simple pleasure of eating a meal I haven’t had to prepare myself!
I’m sure I’m not alone in this, of course. We all can’t wait for Boris to give us the green light to head back to the welcoming embrace our favourite haunt for a drink and our favourite dish. We see it all around us, comments about this pent-up demand that’s going to make everyone rush out and spend all that money saved by being cloistered in our homes. Whether it’s restaurants, holidays, concerts or the theatre, there is this notion that the country is awash with cash and will finally have something to do with it.
The rub here, though, is that while we all can’t wait to be free, some of us may not be in the position to spend up large. In short, thinking everyone has cash piling up that they’re itching to shop seems very much like ivory tower thinking to us.
The expectation of excited masses clamouring to throw their cash at businesses like Fry in Futurama needs to be tempered by the fact that for many the pandemic and lockdowns have been a hellish ordeal. Many have lost their jobs, or have struggled to get by on reduced hours; others are at significant risk of losing their livelihood in the near future. It seems to us that, in reality, we are more likely to see a two-tier reopening recovery. Those who have been able to work from home and benefit from savings will have the means to spend, but for those who have not had it so good the struggle will continue. This second group won’t be rushing out to their nearest eatery as soon as they can. And as much as they may want to try, the first group can still only eat one dinner a night – they can’t eat for two!
This two-tier reopening would likely temper those exuberant expectations of spending and GDP recovery. This slightly more balanced expectation for GDP growth is why we’re continuing to focus on durable companies that produce high cash flows, rather than being tempted to rush headlong into very beaten-up consumer businesses.
We’ll be keeping the Kitchen Nightmares on the screen and not in the portfolios.
