Saturday, April 18, 2020

The Plight of the Cruise Lines and my Plan to Save Them.

Some people might be wondering why the Cruise Line Industry did not receive any government aid in the COVID-19 Relief package.  That is because they are not American companies.  While they do employ Americans, all the major ocean-going cruise lines like Norwegian, Carnival, Royal Caribbean, Princess, etc., are foreign companies.  They are registered in places like Panama, Liberia, and Bermuda.  Their ships (except for one Norwegian ship) are not American flagged ships.  In other words, they are not registered in the United States.

Why is it like this you might be asking?  Because by domiciling their corporations in countries like Panama, Liberia, and Bermuda, the cruise lines avoid paying U.S. corporate taxes.  It is a profit-driven decision.  Likewise, the ships are registered overseas because were they registered in the United States, they would have to be crewed by Americans.  Americans demand or require higher pay than the foreigners who do crew the ships, which would cut into the cruise lines profit margins.  So again, it is a profit-driven decision.  These foreign-owned companies with foreign-flagged ships do benefit the passengers who sail with the cruise lines.  Since the cruise lines tax burden and labor costs are lower, they can offer cruise packages at a much lower price to the customer and remain profitable.  As long as the cruise lines continue to be foreign companies with foreign-registered ships with international crews, the United States Congress will not be willing to give the cruise lines financial aid. 

As the COVID-19 emergency drags on, the situation for the cruise lines could become quite desperate.  I have no idea how long the cruise lines can continue to sit idle paying crews and making payments on shiny new ships before they go bankrupt.  How long they can sit idle depends on how much cash they have on hand or what commercial loans they can secure from the big banks.  So, what will happen?

Eventually, the stress on the cruise lines will begin to show up in their stock prices.  As their stock prices approach zero, they will become relatively cheap to purchase.  A billionaire like Warren Buffet could come in and buy out the line and inject the necessary cash.  That's option 1.  Option 2 is the cruise lines go bankrupt, and the banks take possession of the ships and sell them to the highest bidders.

My proposal, which I will call Option 3, is that the cruise lines "Americanize."  That they become American companies with American flagged ships, the cruise lines would then be subject to United States taxes.  The cruise lines would then have to hire American crews.  After the cruise lines redomicile and reflag, then I imagine Congress would be willing to help.  Such a deal could probably be struck with Congress, where aid would flow pending the redomiciling and reflagging of the cruise line(s).

Since I doubt the CDC will recommend anyone go on a cruise ship anytime soon.  In addition to the CDC issue, the ports that the cruise ships wish to call on much be willing to receive the ships and their thousands of passengers.  Therefore, I believe it will be a while before the cruise ships go anywhere.  How this plays out only time will tell; however, it will be exciting to watch.

Friday, April 17, 2020

America in Late 2020 and Beyond.

There will be three types of fallout from the fight against COVID-19 in addition to the loss of life brought about by the disease.  First and foremost, will be the economic fallout.  The second will be the mental health fallout.  And third will be the fallout against the Communist Chinese Government.

The economic fallout will render the United States in depression more profound than that of the Great Depression, which lasted from October 29, 1929, until the beginning of World War II in 1939.  It will destroy businesses, communities, careers, and the families that depended on those things for income and social fabric.  It will bankrupt not only businesses and families but also towns, cities, and states.  We will be lucky if it doesn't bankrupt the United States as well.  It will rack up Government Debt that our children's, children's, children will still barely have begun to pay off. 

There will be two main groups of mental health fallout.  The first group of mental health fallout is the resultant alcohol abuse, drug abuse, spouse abuse, depression, and suicide from loss of employment and financial ruin.  The cost in lives over the subsequent years will be a higher cost than that of the lives lost to COVID-19.   The second group of mental health fallout will be the post-traumatic stress felt by healthcare professionals and first responders in areas that are walloped by COVID-19.  Something akin to the problems experienced by Veterans after returning from war will affect health professionals after their battles with COVID-19.  Twenty-two Veterans commit suicide each day.  I could see a similar fate befalling healthcare professionals if we fail to adequately address the impact of fighting the virus on those people who did the fighting.

The third type of fallout will be the international fallout against the Chinese Communist Party for not only their improper handling of the virus in the laboratory before the pandemic started but also their failure to warn the nations of the world after the virus escaped.  Millions will have died directly, and millions more will die from the fallout, not to mention the economic damage on the US and world economy.  I can see the day in the not too distant future where people look upon anything made in China with disdain.  I see a world where people post videos of themselves destroying stuff made in China.  Where public opinion forces industries to hurriedly break ties with China over public anger that American or European companies dare enrich themselves and the Chinese Communist Party by doing business in China.  The great exodus from China is coming.  Where the international community will look upon dependence on China for any material, subcomponent, item, or medicine even remotely tied to national security as an anathema, that last part is a good thing.

So, to sum up.  The world will enter a new depression that is more considerable than the Great Depression of the 1930s.  More death and destruction as a result of the economic fallout than from the disease itself.  Lastly, China becomes an international pariah.