‘We’ve Got To Figure Out How To Live With This Thing’

Dan Patrick, the lieutenant governor of Texas, said Monday that “lots of grandparents” in the Lone Star state would be willing to risk death from coronavirus if it meant preserving the vitality of the U.S. economy for the benefit of their grandchildren. Patrick, 69, told Tucker Carlson on Fox News that America should “get back to work, get back to living, and be smart about it.” Patrick said that if he were asked to risk death in exchange for “keeping the America that all America loves” for his children and grandchildren, “I’m all in.” 

He’s not the only one. Despite empty streets, stores devoid of toilet paper, and lockdowns of all but essential business in cities like Houston — Texas political and business leaders have begun to question the long-term value of halting the $1.6 trillion economy of a state that has so far recorded a relatively modest 410 confirmed cases of Covid-19 with 9 deaths.

Bud Brigham is an Austin, Texas-based oil and gas tycoon whose companies in the past decade have sold oilfields in North Dakota and Texas for more than $7 billion. One of his current oil ventures, publicly traded Brigham Minerals, has lost half its market value in recent weeks. With industry leaders anticipating a 70% drop in U.S. drilling over the coming months, it might have further to fall. “I’ve not seen this kind of contagion where the reaction is so extreme,” says Brigham, whose hometown of Austin has 86 coronavirus cases. “And I do wonder, are we overreacting? Is the cure worse than the ailment?” Though most of his office-based employees are now working from home, Brigham intends to keep his operations going as long as he can; in an interview last Friday he said the west Texas mines operated by his Atlas Sand where still going “full throttle,” even though demand for sand (used in oil well fracking) is set to dry up.

“Fear is a sudden and powerful motivator,” says Brigham. “But there’s a big difference between the government issuing guidelines, versus orders to shut everything down” or face the retribution of the state. A staunch defender of personal liberties and unfettered capitalism, Brigham is a big fan of the works of the late libertarian writer Ayn Rand, and he financed a three-part movie version of her novel Atlas Shrugged, which depicts a dystopic version of the United States where the gears of industry have been ground to a halt by socialist politicians determined to seize capital from entrepreneurs and redistribute it in the name of fairness. Here in the real world, Brigham fears the unintended consequences of politicians and unelected bureaucrats getting too comfortable ordering citizens into lockdown and throwing trillions of dollars at problems. 

Brigham believes it’s not worth eroding Americans’ civil liberties even in the fight against a scourge like Covid-19. Educated citizens, he believes, can make their own best decisions about their health and their businesses, and those that recklessly or knowingly spread the contagion can be prosecuted without tromping on civil rights to travel, assemble, and engage in commerce. “The beauty of free markets is individuals acting in their own rational self interest.” 

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Houston is in Harris County, which so far has 54 confirmed coronavirus cases (and an alarmingly high hospitalization rate) in a population of 4.65 million. This morning county officials ordered the shutdown all non-essential businesses. Thankfully the city’s all-important oil refineries can continue operations, as can its renewable energy providers, like publicly traded Sunnova, which has 75,000 customers nationwide.

John Berger, Sunnova’s CEO, says most of his headquarters employees are working from home, while those at the office are more spread out than usual. And he’s still there: “As the captain you’re the last one off the ship.” 

Berger doesn’t question the seriousness of the pandemic and the need to flatten the curve of infection, but he is worried that many people underestimate how hard it will be, after “slamming on the brakes” in the world’s biggest economy, to get everything moving again. “We’ve got to figure out how to live with this thing,” he says, because the coronavirus is not going to disappear soon enough to prevent millions of businesses from going under. Living with it means doing business in new ways. “Door knocking used to be how our partners sell solar systems; now that’s not the best approach,” so they will move to more phone calls and online marketing.

America “needs a middle ground” between total shutdown and free-for-all. “We can’t just stop working. That’s not realistic,” he says. In time entrepreneurs and business leaders will demand to go back to work. “People will take it into their own hands.” According to a letter to Congress last week from the Solar Energy Industries Association, new residential installations have dried up — terrible news for the 250,000 people working in the industry (including 400 direct workers at Sunnova and 10,000 more employed by their installation partners). 

Why even try to sell rooftop solar systems at a time when many homeowners are preoccupied with figuring out how to pay the mortgage and more traditional fossil fuels are cheaper than they’ve been in decades? Because by shifting to a long-term solar lease, “customers will see savings immediately.” (Sunnova shares are up 10% today, after having lost nearly half their value in the past month.)

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Houston billionaire Tilman Fertitta is struggling to keep his empire afloat. He owns the NBA Houston Rockets, as well as Landry’s Restaurants, which operates some 600 eateries, several Golden Nugget casinos and even aquariums. He appeared on CNBC back on March 6, saying that his restaurant business then was down about 10% — about $1 million a day on average $12 million daily sales, and warned that for most restaurants a 20% drop in sales could wipe them out. He warned viewers then that people have “got to go about their lives” because the alternative is breakdown. Two weeks later, Fertitta was forced by coronavirus lockdowns to shutter nearly all his locations and furlough most of his workers. He reversed course on cutting benefits for staff at his tony Post Oak Hotel after taking flack. No NBA basketball is being played either. 

A spokeswoman for Fertitta declined to confirm the extent of the Landry’s shutdown or how Fertitta expects to keep current on some $4 billion in debt carried by the chain. To try to at least keep some of his cooks busy, Fertitta has expanded Landry’s partnership with online delivery service Waitr, which has seen its share price quadruple since last week, to a market cap of $100 million. It’s a start. 

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Some critics of enforced lockdown have been proven overly blasé about the risks. Richard Epstein of the Hoover Institute a week ago forecast total U.S. deaths to the virus at likely no more than 500. That number was surpassed Monday.

“All of this keeps me awake at night. I’ve never been this worried for the country,” says John Goff, a Fort Worth-based investor in real estate, oil, and distressed debt, who has appeared on the Forbes list of Global Billionaires. Among his assets is the Canyon Ranch chain of luxury wellness resorts in Arizona, Massachusetts, and Northern California. He also owns the Ritz-Carlton in Dallas and controls Crescent Real Estate. Fort Worth is in Tarrant County, which has 71 confirmed cases so far and 1 death. 

Although Goff says he’s well capitalized, other real estate investors aren’t. “It will be a very tough six to 12 months,” says Goff. Though some real estate lenders may be willing to “look the other way” on a month or two of late mortgage payments — because it is not in their best interest to foreclose on properties for which there’s no buyers — there’s a limit to how long the system can be down. “No one is planning on a year. They aren’t capitalized for that.” Goff is concerned about the moral hazard risk of big government bailouts that plunge the nation into impossible debt while getting in the way of lasting solutions: “Does it crowd out the real capitalists?” 

For now, his Canyon Ranch properties are working through the lockdown by finishing maintenance projects and redoing rooms. He’s itching to get customers back into Canyon Ranch’s holistic programs focused on physical and mental health. “Wellness is only going to become more important.” 

In much of sparsely populated Texas, where citizens already practice social distancing as a matter of habit, businesses need to be given the latitude to, responsibly, go about their business, says Ed Hirs, an energy economist who lectures at the University of Houston and is a fellow at consultancy BDO. He too accepts the seriousness of the pandemic, but agrees with Berger that the nation cannot endure an extended shutdown. “We’re not going to let coronavirus run our country into depression,” he says, but that’s what would happen. “If people stop spending money it causes everything to go away.” Though federal stimulus is welcome, this is a crisis that can’t be solved by thowing free money at it. “They are pushing on a string. You can’t stimulate demand when people are locked in the house.” 

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