A Different Way To Earn Current Yield

Last time I wrote that I expect interest rates to remain low for years to come in part because that will help with the national debt. I also wrote that people who save and people who look for a current return on their investment portfolio will be hurt by low interest rates. If these savers want to look for alternatives to traditional fixed income investments that offer Total Return – current income plus the potential for capital growth – then savers may want to consider my Covered Call strategy.

Covered Calls

Covered calls are considered to be a conservative way to create current income from a long portfolio. Covered call selling or “writing” involves several steps:

  • The investor is long the stock or stock index in question.
  • The investor chooses call options that equate to the number of shares (or fewer) that they own in the underlying stock or index.
  • The strike prices of call options are typically at or higher than the price that the stock is currently trading at.
  • The exercise dates of the options are anywhere from a week to several months out. I like a short time frame, but others may like longer. 1 to 4 weeks is typical.
  • The investor sells or “writes” the call options and collects the premium for selling the call options.
  • At exercise date, if the underlying stock or index is trading below the strike price of the option, then the option expires worthless and the investor keeps the premium.
  • If the underlying stock or index is trading above the strike price at exercise date, then the call option owner will “call” the stock away from the investor at the strike price of the option. The investor still keeps the option premium they collected when they sold the call option.


The upside of this type of transaction, known as covered call writing, is that the call option gets to keep the option premium no matter what happens next to the stock price. The downside is that the investor may be foregoing some of the “upside” of the stock. For example, if the strike price of the option is $40 and the stock is trading at $43 at exercise date, then the investor will have to “put” the stock to the call owner at $40 and will lose the $3 of upside. However, they have already collected the call option premium to soften the blow. Another downside is that the investor must maintain their long position as long as they are currently short the option – otherwise the investor would be “naked”, which is not a good thing.

Index Funds

My strategy involves writing call options on index funds that I already own. I like to write call options every week that expire a week hence, because I feel like I have a better idea of what may happen a week out than what may happen a month out. I choose strike prices that are higher than the current price of the index fund because it allows me to participate in at least some upside in the index fund. If the price of the index fund trades up above the strike price of the option and my fund gets called away from me: Oh, well, at least I didn’t sell at a loss, and I kept my option premium.


Over the past 18 months, I have been able to generate a current yield in the high 6%-range, by my own calculation. I have had my long positions called away from me a few times but mostly not, so I have been able to participate in most of +the gains (and losses!) of the index funds that I own, which are mainly the S&P 500 and Nasdaq 100 indexes. Even during the horrible loss periods earlier this year – March in particular – at least I kept my option premiums. As always, past results are not indicative of future performance, but I believe this is a sustainable strategy that can be tweaked on a weekly basis based on changes in the market.

Cash Dividend

Although I don’t currently, one could look at the weekly sale of options and the resulting premium as a weekly cash “payday” or “dividend”. I currently leave the cash in my account but I could withdraw it if I want and keep the long index fund position in my account. There is not currently a way to automatically reinvest the “dividend” into more of the index fund, but one could manually do so, which would be easy and cheap in this era of reduced or zero commissions.


Think about your current portfolio, and think about what it would be like to earn an additional current yield on that portfolio. Granted, a systematic call option writing strategy necessitates discipline and minimizes the investor’s ability to sell quickly if and when they want to. However, if you are a long-term investor and the additional current yield is appealing, you may want to contact me to determine how you might avail yourself to this strategy.

Low Rates!

This article from the Wall Street Journal caught my eye. It says that the US Government may decide to address the increased level of debt that it has incurred as a result of the various stimulus programs meant to address the Covid-19 economic shutdown through use of a policy called “financial repression”. It sounds bad, and it can be bad for banks and for people who want more income from their savings, but it isn’t as bad as it sounds for most people.

Financial Repression

A financial repression policy has several elements and requires coordination among the fiscal (Congress) and monetary (Federal Reserve) sectors of our government, which isn’t easy to pull off. Here is a list of the elements of financial repression that all need to be implemented at the same time for it to be effective:

  • The Fed keeps interest rates very low;
  • US Banks would be required to hold low-rate US government debt as a percentage of their assets on their balance sheets;
  • A cap is placed on the rates that banks can offer to depositors;
  • Banks would have higher restrictions on their ability to invest in international markets or securities;
  • Higher bank reserve requirements; and
  • Fiscal restraint, meaning Congress shouldn’t spend more money that it already doesn’t have. This may be the most difficult part of this to pull off.

By “repressing” the financial/banking sector and thereby preventing it from sucking profits out of the US economy, a financial repression policy aims to stoke private sector profits and therefore stoke tax revenues that will pay down the US Government’s debt.

Savers Suffer

It all sounds like a good policy. Who isn’t for more corporate profits and more tax revenues (except for socialists and anarchists)? Unfortunately, the sector that gets hurt is Savers such as the elderly on a fixed income who rely on safe investments such as bank CD’s for their income. If US Treasury rates remain low, then savings rates will also remain low. On a macro level, in a financial repression scenario, Savers forfeit a portion of the income from their savings to the Government so that the Government can pay down its debt.

The Upshot: Rates To Remain Low

What you should take from this blog post is that you should expect interest rates to remain low for the next several years. Federal Reserve Chairman Jerome Powell said as much in his press conference last week wherein he said, “We are not even thinking about thinking about raising rates”. This is bullish for corporate profits and therefore stocks, perhaps with the exception of the banking sector. The purpose of financial repression is to grow the economy, grow taxes derived from the economy, and thereby grow our way out of our increased debt levels.

Buy Stocks

This means you should buy stocks as a long-term investment. I recommend index funds for the bulk of your stock investments. Yes, there are a lot of uncertainties surrounding our current economic situation related to Covid-19 among other issues. However, if you are thinking about 5 to 10 years down the road, if the US Government pursues a financial repression policy, or at least elements of it, then the long-term payoff of buying stocks now and owning them for that long could be good and should outperform the alternative of investing in Government bonds or bank savings vehicles such as CD’s.


The WSJ article that financial repression worked in the US, Great Britain, and other countries after WWII, and that it is much more doable and palatable than other debt-paydown strategies such as a sharp rise in tax rates. Look for such policies to be implemented once again in the US once we are deemed to be through the worst of the Covid-19 crisis, which hasn’t happened yet. Policies to stoke growth are one thing, but keeping government big spenders in the legislative and executive branches in check will be the larger trick. Therefore, I expect the monetary side of the equation to be implemented while the fiscal restraint side not to be implemented. The result will be something like a return to pre-Covid levels of new government debt of $500 Billion to $1 Trillion annually, after which Congress and the President will declare victory while US debt levels will continue to mount, albeit at a lower rate than during the middle of the Covid crisis. I guess that’s sort of a victory, but it should all prove good for the stock market, in my opinion.

Savers: Are you seeing a dismal future for investments that generate income and are looking for an alternative? Please stay tuned to this space.

Vegas, Baby!

Some Las Vegas casinos are opening up with precautions in place and social distancing in play. Shows are scheduled to reopen slowly in July and more so in August. Do you think visitors are ready to return to Las Vegas in a big way? Are you ready to return, or are you still concerned about Covid-19? Does gambling and merrymaking while wearing a mask turn you on? I have always been a Las Vegas skeptic and am more so now.

Stocks Hammered

Stocks of Las Vegas companies got hammered but have recovered nicely. Las Vegas Sands (LVS) lost about 50% of its market cap during 1Q 2020 but has since recovered such that it is about 28% off its pre-Covid high. MGM Resorts (MGM) was hit worse, losing about 75% of its market cap at the bottom and currently sitting about 38% below its high. Most companies have suspended payment of their dividends at least temporarily in order to conserve cash. Does the 30% +/- discount offer enough incentive to want to buy in to this sector? Or do you think we are still more than within 30% striking distance of optimal operations for these companies?


In addition to the illness issue, unemployment is another headwind that Las Vegas is facing. Nevada’s unemployment is in the 25% range, the highest in the country. This does not bode well for locals who want to gamble. With the national unemployment rate in the low to mid-teens, and with many still “employed” by the grace of the Paycheck Protection Program, my concern is that there will not be the disposable income out there to go to Las Vegas to gamble and go to shows.


I might think differently if Las Vegas stocks were still 50% to 75% discounted from their previous highs, but I think this is a sector to avoid. Nothing is forever, and as Las Vegas recovered from the hammering it got after the Financial Crisis 12 years ago, so will it probably eventually recover from today’s issues. I guess if you are a gambler, then go ahead and place a bet on Vegas, but please don’t go all in. Only invest the “disposable income” portion of your portfolio. Even if you are proven correct and Vegas does return in short order, I don’t think the payout for you as an investor is commensurate with the risk that you take by investing in Las Vegas stocks at their present levels.

June Gloom?

Here in Southern California we have a weather phenomenon called June Gloom. Often during June the temperature differential between the land and the ocean causes a foggy “marine layer” to encase at least the coastal areas of SoCal for much of the day. The marine layer may burn off as the day goes on or it may not, depending on how close you are to the beach. The result is mild but foggy weather that is more humid than normal for the area. Some people don’t like it – it’s harder to work on the tan during June – but I really like it because it is comfortable.

“June Gloom” At the Beach

Stocks Anything But Gloomy

Contrast typical June weather in SoCal with the performance of the stock market thus far this month. Stock performance has been a bright spot in a news cycle preoccupied with Covid-19 and racial protests. The S&P 500 is up about 5.5% so far with 3 weeks to go. The Nasdaq 100 index is up only about 2.5% this month but is now above the pre-Covid highs. Investors are optimistic that the worst is over and that we are now in the economic recovery phase. Last Friday’s report that the US economy gained 2.5 million jobs in May and that the unemployment rate dropped to 13.3% buoyed investor hopes. Is it time to go all in on the stock market? Are you already late to the game?

Not So Fast

The indicators that I watch all show that we are in an uptrend phase in stocks. That doesn’t mean you should go all in. It does mean that you can go back to your normal allocation of stocks within your portfolio. For instance, if you normally like to be at 60% stocks and 40% bonds, for example, go ahead and do that now. Moreover, just because there has been some good news recently doesn’t mean that all of the bad news is over. As states reopen their economies, there could be a spike in Covid-19 cases, or at least Covid-19 will remain with us. People will still get sick and die, and there will be reactions to this within the economy. We are heading into the Summer season now but what will happen when the weather turns colder later in the year? Research into vaccines and treatments look promising but a vaccine is no sure thing.


I advocate a disciplined approach. Just as I advocated that you don’t panic on the way down, I advocate that you don’t panic as we emerge from the worst times. Think and act like a long-term investor.


Just because the stock market has been strong so far this month doesn’t mean you should go all-in. The road to recovery ahead still looks bumpy to me. All of this means that you should stick to your plan and be disciplined about re-entering the stock market. I realize I am likely preaching to the choir but the message of discipline is important and bears repeating.

Don’t Double Or Triple Your Fun

I was drawn to this article in the June 1, 2020 Wall Street Journal about investors who got hammered by investing in leveraged Exchange-Traded Notes, or ETNs. ETNs differ from Exchange-Traded Funds (ETFs) in that ETNs are structured as a debt instrument whereas ETFs are structured as equity and actually own equity interest in the companies that comprise the index. However, there are both ETNs and ETFs that offer the 2 times and 3 times the return objective. In the WSJ article, people lost money by investing in leveraged ETNs, wherein some bank bought the basic ETN, then borrowed money to buy more of it, and then re-offered the initial part plus the borrowed part in a packaged that promised 2 times or 3 times the return of the original instrument. So, if the ETN’s price goes up 1%, then the 2 times ETN goes up 2% and the 3 times ETN goes up 3%. What could go wrong? Lots. When the stock markets tanked through the course of March, 2 and 3-times translated to big losses for the investors profiled in this article.


Are you already confused? Me, too. Leveraged ETNs and ETFs are confusing in their structure. They also tend not to do what they promise over a long period of time. That’s why I don’t recommend them. There are better alternatives if you want to leverage your return if you suspect that the market is going to jump, especially in the short term. More on that later.


If you have ever screened for ETFs (etfscreen.com is a great resource), you have probably seen these types of “2X” or “3X” ETFs . Banks such as ProShares and VelocityShares offer products such as the SSO, which is the 2X S&P 500, or the UGLD, which is the 3X on the price of Gold. Even more complicated are the Reverse 2X and 3X products, wherein the product moves in reverse relative to the underlying index. Most of the well-known indexes – the VIX, the Nasdaq 100, Russell 2000, All of the Dow Jones Indexes – have 2X and 3X derivative products that one can invest in. My advice: Don’t.

Returns Don’t Work Out

In my experience, just because a security offers the promise of a 2X return doesn’t mean you will get a 2X return. Let’s take one example: The SPY vs. the SSO. The SPY is the ETF for the S&P 500 Index, and the SSO is the ETF for 2X the S&P 500 Index. Here is a chart for the SPY, which shows the index to be currently trading about 7% below its pre-Covid high:

Now, here is the chart of SSO. If SPY is down 7%, then you might expect SSO to be down 2X or 14%, correct? Well, no. The SSO is down about 23% from its pre-Covid high. Not the 2X return, but something more, which in this case is worse for the investor:

Why don’t returns match what is promised? Because of the cost of the leverage and because of additional financial engineering through the use of options and the deteriorating value thereof due to the passage of time. It’s complicated, and that’s why I think you should stay away from these.


If you think a particular index is due for a jump one way or another, it is better to just buy call or put options on that index. They are much more straightforward, and your downside is that you lose the amount of the premium you paid to purchase the option. They won’t tank your entire portfolio or net worth, which is what happened with these poor souls in the WSJ article.


When you are offered 2X or 3X the return on a particular index or security, beware! They don’t work out as promised, and while your upside may be magnified, so might be your downside. It’s much better to be safe and invest in the standard 1X ETFs and buy your own options if you must. A more significant piece of advice is don’t do any of this without professional help. Contact me or your own financial advisor if you want such assistance.

Don’t Let This Crisis Go To Waste

You’re stuck at home, perhaps even happily so. Entertainment options are limited – TV and takeout, and maybe increased at-home alcohol consumption. Can’t go out to eat – although that is becoming more available as time goes on. Gas is cheap but there’s no where to drive to including to the office. Shopping for new clothes is off the table with many shopping centers closed and, besides, who needs new work or school clothes when your day is spent in front of a computer in your own home?

Look At Your Spending

What can you do for fun? For one thing, it’s an excellent opportunity to review your current spending and project what your future spending might look like after the shutdown and compare that with what and how you used to spend before the shutdown. I will wager that a lot of us can see that we don’t really need some of the things we spent money on before and can cut down or cut out some needless spending going forward. Here are some things you can look at:

  • Restaurants: We all miss having someone cook for us and serving our dinner and not having to clean up afterward. Yet, do you like ordering food to take out or have delivered to your door? There are at least a couple of benefits to ordering take out, both related to alcohol: a) You can go to the grocery or liquor store for your drink of choice and it will be a lot less expensive (per serving, at least) than ordering drinks at the same restaurant; and b) Drink up! No need to worry about drinking and driving since you are already home.
  • Movies: I wouldn’t want to be long on in-person movie theaters at the moment. Many states have yet to ok them to open up again, and so they are losing money there. Some movie studios are bypassing the in-person theater release and heading straight to streaming. Do you miss going to the theater? Or is watching a movie in your living room good enough for you? Netflix and the like are not without cost but they are still less than a night at the movies, especially if an entire family is involved.
  • Your Car: How does this new Stay At Home situation change how you view your car? Do you really need a high-end expensive car? If you are a couple, married or otherwise, do you each really need a car or can you get by just fine with just one car? Gasoline may be on the cheap side now, but don’t plan on it staying that way for the long term. Some project that the shutdowns by some oil producers will remain permanent which will lead to much higher oil prices once the economy heats up again.
  • Your Home: Are you happy in your current home? Or do you live in a hovel because you work so much and now that you aren’t at the office you want a nicer place to live? Do you want to upgrade your current home? Paint and carpet are not that expensive but other upgrades may be, especially if they involve blowing out walls. Perhaps you can look at spending less on other things associated with your “work at the office” life and spend more instead on your home. Or maybe this amounts just to buying a new office chair and a new couch.
  • Personal Appearance: Do you enjoy cutting or coloring your own hair and doing a self-mani-pedi? I didn’t think so. Probably no budget cuts there. However, how does nice, expensive clothing fit into the equation in the future? If you are going to be out in public less, probably you don’t need to up your wardrobe budget. On the other hand, maybe you do need to up your game with respect to your at-home appearance.
  • Saving For Retirement: How does all of this change how you are viewing your retirement and when you want to retire? Does this make you want to retire sooner – assuming you haven’t already been forced into “retirement”? Or are you the groundhog who sees his shadow and gets scared and scurries back into his hole? This shutdown should cause you more specifically to focus on the timing of your retirement and to make or change your plans accordingly.


Make the best of a bad situation. Don’t let this crisis go to waste. However you want to phrase it, my point is that you should use this shutdown and change in your lifestyle, whether forced or voluntary, temporary or permanent, to think about how you spend your money and whether you can make changes now that will make your future easier to afford.

By the way: I have written this column with the assumption that you have choices that you can make and that you don’t need to struggle every day to put food on the table for your family. If you have been laid off after having lived paycheck to paycheck, you likely have a different perspective about all of this. We all hope that the economy does recover and that we all can get back on our feet again.

Is “Stay At Home” Like Retirement?

Well, is it? I think it depends on your circumstances and your mindset. I know, it’s an equivocal answer, but let me explain.

Laid Off

If you are at home because you were laid off and you need to get back to work to support yourself and your family, then our current situation is likely not like early retirement. If you need to work to support yourself, you likely are younger and and not even thinking about retirement, early or otherwise. You are likely not happy about being home now and are working hard to get rehired or at least get back into the workforce. It is likely a stressful time for you.

Happily Laid Off

Perhaps you are happy that you were laid off, or at least not upset about it. You live within your means and you may have needed a mental break. Is this current time away from your job meeting your expectations? Here are some thoughts on how to answer that question:

  • Are you productive outside of work? Do you have a need to accomplish things that was previously satisfied by your job? And, if so, are you currently satisfied with how much you are able to accomplish now that you are not working?
  • Social Interaction: Do you miss the social aspects of your job? More or less than you thought you might? Do you have a family or close social relationships outside of your job that satisfy your social needs without the work part? Some people postpone their retirements not because of the money part but more due to the social aspects of their jobs. Don’t consider yourself “weird” if you don’t miss the money but do miss the people you used to work with.
  • Travel: Did you previously envision that your retirement would involve a lot of travel? And now that you are at home and likely unable to travel, are you disappointed? Do you think that you would be happier if you could travel more? Or do you miss travel less than you thought you would? Being stuck at home can be fun for some but can grow boring for others. Some like a daily routine while others need constant new stimulation. If this Travel issue is a big one for you, then don’t equate your current situation with what it would be like to be retired. And, if you do really miss the travel, then take a second look at your finances to see if you really have enough money saved to indulge your travel urges.

Still Working At Home

If you are still working from your home office, then this experience is not like retirement, but perhaps you can envision retirement from in front of your Zoom camera. You can see what goes on in your home and in your neighborhood while you would otherwise be at the office at work. Do you like what you see? Do you like where you live? If not now, perhaps with some modifications? If any of that is true, then how does that change your retirement plans? Many in the media are projecting that the “work at home” experience will remain with us even after the All Clear is sounded. Building landlords are concerned that their tenants will want to downsize their space or eliminate their real estate needs altogether. Are you enjoying “work at home” as much as the traditional office? Going forward, would you consider a job situation that would entail you working at home? At least your commute would be a lot easier, right? High tech companies seem to be at the forefront of allowing employees to work at home at least some of the time, and we will see how the remainder of traditional companies move to allow their employees also to work from home at least some of the time.

Part Time

I’m guessing that a lot of people would enjoy working from home especially if they could do it on a part-time basis. This may be the best of all worlds: social interaction and a sense of accomplishment through working but without the hassle of the commute; salary and perhaps even benefits such as health insurance; more time for yourself and your family with fewer work hours and no commute; perhaps less need to spend on wardrobe and other things that aren’t as necessary if one is working remotely. The demographics of an aging workforce means that there will likely be a growing component to whom a part time situation will have a lot of appeal. We will see over time to what extent companies adapt to part time employees, if at all. Prior to this shutdown, unemployment in the US was in the mid 3%-range, which indicates that there was a shortage of workers in some areas. With unemployment spiking due to (hopefully) temporary layoffs, the job market has become more of an employer’s market than employee’s market, which doesn’t bode as well for people who now want to work part-time. Nevertheless, as the hoped-for recovery moves forward, look for part-time opportunities to open up because more and more of our aging workforce will want it.


If nothing else, this economic shutdown is providing all workers whose work lives are affected by it with the opportunity at least to consider more closely what they want their retirement to look like. Given this experience, when you have the chance to do so, you should consider what your retirement budget looked like prior to the shutdown, and how you might change it now that we are in the midst of the shutdown and you have perhaps a better idea of the specifics of what you want your retirement to be like. Do you need help in thinking any or all of this through? Please contact me, and as a CFP® Professional, I can help you develop a retirement plan that meets your needs.

Dividend Cuts

Royal Dutch Shell (RDS-A and RDS-B) and Disney (DIS) are among the most prominent companies to have announced dividend cuts or suspensions due to the Covid-19 economic shutdown. Cash is king during crises such as this and dividend cuts are an effort by companies to conserve cash. Look for more dividend cuts, but think the cuts won’t be as severe as others might think because maintaining dividends is a crucial part of some companies’ missions.

Vulnerable Sectors

I believe some sectors will be more vulnerable to dividend cuts than will others. Among the more vulnerable sectors are the following:

  • Energy Sector: RDS is the biggest example, but Schlumberger (SLB) is another company to have cut its dividend by 75%. With the price of oil having tanked (no pun intended), energy sector revenues are down and energy companies are struggling with their cash flow. Yet, since RDS announced its dividend cut in late April, the other “majors” such as ExxonMobil and Chevron have not followed suit and have maintained their dividends. The price of oil has recovered somewhat from its sub-$20 days and so we will see if companies will continue to maintain their dividends. Perhaps RDS will raise its dividend if the oil price continues to stabilize. Even the “midstream” pipeline companies and such, which have traditionally been stable dividend plays for investors, are potentially at risk if economic activity and therefore energy consumption remains at risk for a longer period of time.
  • Entertainment Sector: With entertainment venues shut down, revenues are really suffering, and dividends from this sector are extremely vulnerable. DIS has plenty of cash and could have paid its dividend but there was so much uncertainty at the time that they chose instead not to pay their 1st half dividend. With their parks worldwide starting to reopen with the new normal of human interaction, but with people starving to have something fun to do, look for Disney to pay its 2nd half dividend later this year. Theater owner AMC Entertainment slashed its dividend by 85% in the 1st quarter 2020 – look for its possible elimination in the 2nd quarter as its venues are closed.
  • REITs: I am looking particularly at office and potentially mortgage REITs. Will workers flock back to traditional offices once the Covid scare is mitigated? Or will companies follow the lead of some its Silicon Valley brethren (such as Twitter) and allow workers to continue to work from home even post-Covid? I don’t see the demand for office space growing in the near future. With mortgage REITs, rates are so low that top-line revenues will likely be diminished, which could put stress on the dividend going forward. Annaly Capital Management (NLY), a company I have followed for years, has maintained its dividend while its stock price has fallen by about 40%, pre-Covid to now.

More Stable Sectors

On the good news side, traditional dividend plays such as the telecoms (AT&T and Verizon) have taken hits in their stock price (T more so than VZ) but have maintained their dividends. I would expect their dividend rates to be maintained. Also, the mega-caps that pay dividends, particularly AAPL and MSFT, will likely continue to do so.


As the picture brightens somewhat and the economy continues to open up, the dividend story, which looked really bad a month ago, may turn out to be not as bad as feared. Dividend cuts are not treated lightly and investors tend to punish companies that cut dividends. We are right in the middle of the 2nd quarter and financial results will be bad when they are announced in a couple of months or so. More dividend cuts could be announced, but if companies are looking at a brighter future when the time comes for the decision about dividends, perhaps companies will bite the bullet and maintain their current dividends and hope that the brighter future pans out. What to do if you are a dividend investor? Diversify! Don’t have all of your eggs in one basket, either in one company or one sector that might be more vulnerable than another. Alternatively, look at potential sources other than dividends to generate current income within your portfolio. I run a strategy that does so – send me a note to find out more!

Reopening Schools

If and when it happens, and hopefully it will as it does normally in August and September, the reopening of elementary and secondary schools will provide a big emotional boost to our nation. It will also allow more people to go back to work, which in turn will provide a boost to our economy and help to pull it out of the current nosedive. However, there are many issues that need to be overcome. Let’s see if we as a country can make it happen.

Is this what elementary school will look like in the US?


Covid-19 is the main obstacle to schools and their ability to operate again. Schools are not conducive to social distancing – elementary schools especially. On the other hand, kids don’t seem to be as susceptible to Covid-19. Nevertheless, schools need to make adjustments.

This “Guidance for Social Distancing for Youth and Student Programs” by the Minnesota Department of Health provides a good list of things schools will need to consider and do. I would be other states’ Health or Education departments will put together similar guidance statements. Staggering school opening times, cafeteria availability, and how and when to allow especially kids in lower grades to go to the bathroom and drink from the water fountain are issues that need to be thought through and dealt with.

More Needs but Less Money

Here’s the problem: All of the ideas such as staggering starting times or going to morning and afternoon shifts require more money to be spent on the schools at exactly the time states’ tax revenues are plunging due to the economic shutdown. A school district can’t hire additional instructors if there isn’t money to pay them. Also: if money somehow does appear and schools are able to hire more teachers, will the schools be able to let those teachers go when life returns to normal perhaps 1-2 years from now? The various school systems and teachers’ unions are not set up to be flexible during times of crisis such as this. School funding in many states was a struggle even before this. I can’t imagine how bad it is now.


For what it’s worth, here is what I think will happen with the opening of school during August and September of this year:

  • Schools will open on time, which will be a big morale boost;
  • Students will have to wear face masks, which they will hate;
  • Teachers will be asked to increase their workload and time they spend with the students, which they will begrudgingly comply with;
  • Sports and other extracurricular activities will be severely curtailed, especially in areas where money is very short;
  • The ability for teachers to teach and students to learn will be negatively impacted, but it still will be better than doing remote learning;
  • Little kids will probably be scared and/or have issues understanding why things are the way they are;
  • Parents will have to maintain flexibility in their own work schedules to accommodate for their kids’ not being at school all day or every day;
  • Which in turn means that employers will need to continue to allow for workers to work from home;
  • Which means that work productivity will not be at a level that it could be without all of this.

Look for schools to provide a boost, but the magnitude of the boost will be dulled by the continuing issues related to and caused by Covid-19.

The Future of Restaurants

Restaurants are among the hardest hit segments of the economy worldwide. Layoffs have been extensive. Some restaurants are making do plugging along with takeout fare, but with the more lucrative bar segment effectively shuttered, profit margins are sinking. In some areas, restaurants were suffering prior to the COVID outbreak due to higher costs including higher wages. The saying “Never invest in anything that eats or needs repainting” is true for a reason: the restaurant business is brutal and it is difficult to make money. More so now.

The Good Old Days

The Future

The future of the restaurant business is open to rampant speculation. Just Google “The future of restaurants Covid” and read some interesting articles. This article from Food and Wine Magazine has some interesting ideas. Here is my take on what we might see in the near future, which is whenever restaurants are allowed to open up again to in-seat dining:

  • Fewer Restaurants: Sadly, many restaurants will not reopen. Some projections: 50% of restaurants in San Francisco will close (Golden Gate Restaurant Association). 110,000 restaurants will close nationally (Business Insider). It’s going to be really bad.
  • Fewer Seats/Lower Capacity: At least for the time being in the restaurants that make it through, seating capacity will be limited due to social distancing guidelines.
  • Higher Prices: If the supply of restaurant seats is cut drastically through closures and reduced capacity while demand or potential demand either remains the same or reduces by a smaller amount, then prices will have to rise, and I think they will by a lot. I’m guessing we will have to pay 30% to 50% more for a nice meal at a quality restaurant. Maybe not so much at fast food places, but those too will have to increase prices, especially if the rumored meat shortage comes to fruition.
  • Takeout Business Will Continue: Just because restaurants are allowed to open up again doesn’t mean that customers will flock back. A lot of people are genuinely afraid to venture out even if the government says it is ok to do so. Also, many people may find that they like ordering in and dining at home as much or more than they do at restaurants. Anecdotally, I believe the takeout/home delivery model was a big hit among younger people even before Covid. The DoorDashes and GrubHubs of the world are here to stay.
  • Tax Deductibility: The 2017 Tax Cuts and Jobs Act reduced the tax deductibility of dinners out (while reducing the corporate tax rate). President Trump wants to restore full deduction of dinners out. Being a flat tax advocate, I am not in favor of using the tax code to influence taxpayer behavior, including in this case. However, I expect that something will get passed in this regard. Don’t look for it to be a big help.
  • A More “Rare” Experience: I’m not saying here that people will be eating more Rare meat. I am saying that going to restaurants and eating in there will become a less frequent experience in people’s lives. The restaurants that survive will be crowded and will cost a lot more. People won’t be able to afford as much of it. That said, perhaps going to restaurant will become a more valued, savored experience, which is consistent with the way it was 50 to 100 years ago.
  • Effect on Travel: Did you ever think that you won’t be able to travel somewhere because there are no restaurants available at your destination? Combined with the threat of getting sick, the dearth of dining opportunities will further diminish the experience of travel. Hope you like where you live now!


None of this is either good or bad, except if you own or work in a restaurant that has or will close. Then it is bad. But basically it will be another situation that citizens worldwide will have to adapt to. Restaurants will close, but soon entrepreneurs with short memories and big dreams will start new ones. Forests that burn start to regenerate soon thereafter. I don’t know how soon the restaurant industry will start to regenerate but it will, albeit in a different way. As for investing, I wouldn’t touch a restaurant stock or private restaurant investment with a ten foot pole. Don’t look for deep values here because there will be further bad news. Leave the investing to the professionals. Meanwhile, while you are still at home, support your local restaurants now by ordering takeout. It might help to keep your favorite restaurants in business through this godawful period.