COVID-19 notes
Coronavirus
Growth in Western Countries: March 27 Update
Our World In
Data: Confirmed Cases
The Tip of the
Iceberg: Virologist David Ho Speaks About COVID-19.
Walk us through the spread of the virus in the United
States. What does the country look like right now?
Let me just give you a picture of what I see here in New York. About two weeks ago, we had our initial case, and now in New York City newly diagnosed confirmed cases are tripling every two days. In our New York Presbyterian Hospital, approximately 25 percent of the swab samples that are submitted for testing are positive. In the suburban communities outside of New York, approximately 10 percent of the swabs submitted are positive. So, the virus is everywhere. And in New York, we know that we are in the exponential growth phase of the epidemic.
Looking back at what has transpired throughout the world, we saw the first wave hit China; the second wave hit South Korea, Italy, and Iran; and then, trailed by only about a week or so, France, Germany, Spain, and the U.S. We all know that China went through a period of great devastation. It has over 80,000 cases. Italy is rapidly catching up, with over 31,000 cases. We suspect that in the U.S. this will rapidly sweep from the coastal regions and it will hit middle America. It is already there, but we will see exponential growth very, very soon. Then of course we are all worried about what would happen when this epidemic strikes places like Africa and India where the health care system is less developed.
…
How long before the U.S. sees test availability
similar to what South Korea has implemented?
The PCR testing, which is the one that's approved, is now ramping up very, very rapidly in state and local labs as well as in academic medical centers and in the commercial sector. Their production will grow tremendously. Roche has a machine that will run 1,000 samples at a time. If you go to a commercial lab, they take a swab, they package it, they quite often send it to another facility somewhere else. The turnaround time is typically 72 hours. In that period, it's very, very hard to manage patients and their contacts. It's a nightmare for the healthcare worker.
We need point-of-care tests. Those kinds of tests are available for HIV and for many other diseases; you use a finger stick, drop the blood on a small device, and have a readout in 15 minutes. These tests measure antibody response to the virus and are extremely useful. Yet we don't have a single test licensed in the U.S. In China, in South Korea, and in Europe, those tests are used. The manufacturer for this rapid test is producing a million a day. It's there. But in the name of protecting the public, the FDA has moved very, very slowly. That delay, in my view, has caused more harm than good.
Devi Sridhar: Without Mass Testing, the Coronavirus Pandemic Will Keep Spreading.
long read: The New Yorker: How Does the Coronavirus Behave Inside a Patient?
The U.S. may end up with the worst COVID-19 outbreak in the
industrialized world. This is how it’s going to play out.
Nassim Nicholas Taleb and Yaneer Bar-Yam: The UK's
coronavirus policy may sound scientific. It isn't.
When, along with applied systems scientist Dr Joe Norman, we first reacted to coronavirus on 25 January with the publication of an academic note urging caution, the virus had reportedly infected fewer than 2,000 people worldwide and fewer than 60 people were dead. That number need not have been so high. At the time of writing, the numbers are 351,000 and 15,000 respectively. Our research did not use any complicated model with a vast number of variables, no more than someone watching an avalanche heading in their direction calls for complicated statistical models to see if they need to get out of the way.
We called for a simple exercise of the precautionary
principle in a domain where it mattered: interconnected complex systems have
some attributes that allow some things to cascade out of control, delivering
extreme outcomes. Enact robust measures that would have been,
at the time, of small cost: constrain mobility. Immediately. Later, we invoked
a rapid investment in preparedness: tests, hospital capacity, means to treat
patients. Just in case, you know. Things can happen. The error in the UK is on
two levels. Modelling and policymaking.
COVID Pandemic
Exposes the Ugly Secrets Hidden in America’s Healthcare System.
Abbott Labs Unveils COVID-19 "Gamechanger": Portable Test Can Detect Virus In Under 5 Minutes
Sweden bucks global trend with experimental virus strategy.
China Lifts Lockdown On Hubei Province Despite COVID-19 Resurgence.
Africa’s Race Against COVID-19.
The new Cold War with China has cost lives against coronavirus.
COVID-19 Could
Threaten Already Vulnerable Great Apes.
Regular Related (Political)
Fare
Bianco: Fed's Cure Risks Being Worse Than The Disease
Taleb: Corporate Socialism: The Government is Bailing Out Investors & Managers Not You.
Marshall Auerback: The Coronavirus Stimulus Bill Is a $2 Trillion Slush Fund for Washington Cronies.
Matt Stoller: Stop the $6 Trillion Coronavirus Corporate Coup!
David Dayen: It's not a bailout, it's corporate robbery.
Democrats Are
Handing Donald Trump The Keys To The Country.
The Senate coronavirus bill is shocking. The emergency coronavirus
legislation that the Senate agreed to on Tuesday can only be described as an
outrage. It is not an economic rescue package, but a sentence of unprecedented
economic inequality and corporate control over our politics that will resonate
for a generation. It represents a transfer of wealth and power to the super
rich from the rest of us, with the support of both political parties ― a
damning statement about the condition of American democracy.
…
The legislation provides nothing of substance to address the coronavirus pandemic itself. It mobilizes no new resources, organizes no production, improves no medical supply delivery and trains no new nurses.
A just and
sustainable economic response to coronavirus, explained.
In the short term, recovery; in the long term, resilience and renewal.
The US government has never had a better opportunity to truly reshape our economy.
Economic
Consequences of The Pandemic.
… most of the bailing out, in this crisis as in 2008, will be done thru
the Federal Reserve, whose operations dwarf those of Congress and the Treasury
department.
Assuming this crisis goes on for months, in waves, which is what the
science seems to say, the end result is simple, a lot of small businesses will
go out of business. A lot of people will lose their homes, and a lot of small
landlords (not large ones) will lose their property.
Companies which are bailed out, and companies and individuals with strong
cash positions going in, like private equity, will then do what they did after
2008: they’ll buy up distressed assets for dimes on the dollar and wind up
owning more of the economy than they going in. Industries will consolidate, as
smaller firms go under, and the remaining companies will be even
too-bigger-to-fail.
Must it be this way? No. Will it be this way? Assuming the policies continue
as they are, yup. But there’s a lot of road to go, and when people start dying
in droves the calculus may change if the politics change. In particular if
people truly can’t afford to eat or pay rent, in large numbers, things may get
nasty. …
Nathan Tankus: A Quarter of the 2 Trillion Dollar "Stimulus" Bill is Devoted to a Useless Accounting Gimmick.
Economic Policy Institute: The CARES Act’s aid to state and local governments isn’t enough to shield vital public services from the coronavirus shock: Lessons from the Great Recession tell us why.
Coronavirus has
not suspended politics – it has revealed the nature of power
..
This crisis has revealed some other hard truths. National governments really
matter, and it really matters which one you happen to find yourself under.
Though the pandemic is a global phenomenon, and is being experienced similarly
in many different places, the impact of the disease is greatly shaped by
decisions taken by individual governments. Different views about when to act
and how far to go still mean that no two nations are having the same
experience. At the end of it all we may get to see who was right and what was
wrong. But for now, we are at the mercy of our national leaders. That is
something else Hobbes warned about: there is no avoiding the element of
arbitrariness at the heart of all politics. It is the arbitrariness of
individual political judgment.
Under
a lockdown, democracies reveal what they have in common with other political
regimes: here too politics is ultimately about power and order. But we are also
getting to see some of the fundamental differences. It is not that democracies
are nicer, kinder, gentler places. They may try to be, but in the end that
doesn’t last. Democracies do, though, find it harder to make the really tough
choices. Pre-emption – the ability to tackle a problem before it becomes acute
– has never been a democratic strength. We wait until we have no choice and
then we adapt. That means democracies are always going to start off behind the
curve of a disease like this one, though some are better at playing catch-up
than others.
Willem H. Buiter: The Helicopters
Are Coming
Geopolitical Fare, aka Must Read of the Week:
The
Geopolitics Of American Fear. Peter
Zeihan.
Other Related Fare:
Oil price may
fall to $10 a barrel as world runs out of storage space.
Canada may be days away from running out of storage for its domestic oil
production, according to analysts at energy consultancy Rystad Energy, and the
rest of the world may follow suit in a few months.
US Airline
Traffic Currently Just 10% Of Normal.
Global GDP
Growth Estimates Are Plummeting.
The chart above
shows the United States GDP growth over the last 90 years including a variety
of forecasts for Q2 2020. Most of them predict the worst economic quarter in
American history. Even worse than during the Great Depression (1930s). Data
1930-1946 shows annual growth
In
addition to monetary and fiscal easing announced by the growing number of
countries, G20 leaders - who held a video conference call - pledged to do
“whatever it takes” to reduce the economic and social damage from the pandemic.
This is reassuring, but there is one critical element missing that prevents us
from adopting even the most cautiously optimistic view and declaring that the
worst is over for the markets: coronavirus peak.
How COVID-19 May
Move Markets.
In the COVID-19 – SPX model above, the steep red line is a forecast of new cases if social distancing were not in place. The green line shows how social distancing will flatten the curve of new cases. The blue curve shows how growth in the pandemic may unfold doubling every 4 – 7 days. The lower chart shows how social distancing correlates to movements in the SPX. As the number of cases peak, there is a related trough in the SPX. Looking at present levels, we are likely to see more selling as the number of cases increases to a possible low of 2000 in the May-June time frame.
Epidemiologists currently forecast the COVID -19 pandemic will unfold in two waves, with the current breakout and remission during the summer followed by a possible second breakout in the fall and winter of this year. Researchers think the closest analog to the COVID -19 pandemic is the Spanish Flu in 1918, which came roaring back the following winter resulting in a second wave of even greater infections and death.
The first blue dot shows where the SPX is today early in the pandemic. The SPX index may continue to fall as the economic damage increases and GDP declines in the first and second quarters. Two consecutive declines will officially put the economy in a recession. The SPX may fall to 2030 in this first wave, which represents a Fibonacci retracement of 50 % from the 2008 low to the 2020 peak. From there, markets may rebound back up to 2350, a Fibonacci retracement of 61% as the virus breakout fades, relief rally emerges, and economic activity picks up. However, as this occurs, higher interest rates from massive stimulus spending may weigh on financial markets, as seen in the spike of bond yields, the decline in gold.
Consumers who are already financially stretched are being furloughed or laid off, which will trigger loan defaults. Finally, corporations are now at the highest level of debt since 2008 and are experiencing a steep decline in sales, causing a cash squeeze leading to layoffs. The most important consideration is that the virus is exposing the heavy reliance on debt on major institutions and consumers in our economic system. The slide into a recession is evident in announced layoffs by significant corporations. Hotels have announced thousands of layoffs. Other hospitality companies will follow. Harley-Davidson, GM, Ford, Nissan, and Tesla have all suspended manufacturing for several weeks in the U.S. Thousands of workers are on furlough until manufacturing resumes. There is a growing risk consumer demand may not return to pre coronavirus levels forcing permanent layoffs.
While manufacturing is 30% of GDP, services contribute 70% of GDP. Many services can be offered online or via web conferencing. The present social distancing experiment will provide significant insights into how well the economy can perform when many knowledge workers are working from home. If working from home is successful, we expect to see more companies permanently move employees to their homes to reduce office space and cut expenses. This has grave implications for the commercial real estate industry and investors of those properties.
The diverse U.S. economy is likely to recover quicker than the world economy. However, an earnings recovery may stall due to the fact most S&P 100 companies derive 55% of their sales from overseas and 60% of their profits from international markets. Looking at a possible second virus wave in the fall, it is likely that economic damage will grow worse due to increasing unemployment, declining corporate spending, falling consumer spending, and a resumption of social distancing. The second wave fits a decline model seen in 2000 from the Y2K software bug scare. That crisis was an external event, causing a demand shock, though little supply shock. The bottom for the NDX did not happen until 18 months after the market peak. The virus seems to be compressing the market drop period as there have been three trading halts of 7% in the markets in just eight days of trading. SPX support is near 1810 – 1867 in 2016, just above the Fibonacci 38% level of 1708.
In our post of February 14th about the coronavirus triggering a downturn,
we saw the strong possibility of the economy sliding into a recession. In the post we noted that Allianz Chief
Economic Advisor, Mohammed El-Arian observed that we are likely headed into a U
or L shaped recession:
“…analysts and modelers should respect the degree of uncertainty in play,
including the inconvenient realization that the possibility of a U or, worse,
an L for 2020 is still too high for comfort.” Hope is not a strategy. Of
course, we hope the virus is contained, lives saved, and the economy can
weather the stress on corporations and consumers. However, as long term investors, we need to
look at the reality of what may happen based on research and plan our strategic
investments accordingly. Plan for the worst, and hope for the best.
Regular Fare
Nada; what’s normal these days?
(not just) for the ESG crowd:
Traffic and
Pollution Plummet as U.S. Cities Shut Down for Coronavirus.
Great Barrier
Reef suffers third mass coral bleaching event in five years.
A history of
FLICC: the 5 techniques of science denial.
Tackle climate
crisis and poverty with zeal of Covid-19 fight, scientists urge
Other fare:
This shows the location data of phones that were on a Florida beach
during Spring Break. It then shows where those phones traveled.
First thing you should note is the importance of social distancing. The
second is how much data your phone gives off. (see short video at the link)
Fun Fare:
The
New York Times reports that sewer officials around the country are pleading
with residents not to flush baby wipes, tissue paper, and paper towels, even if
the products purport to be "flushable". These toilet
paper-alternatives don't break up like toilet paper does, and thus they've
contributed to unprecedented blockages around the country.
Quotes of the Week:
John Kenneth
Galbraith: “The study of money, above all other fields
in economics, is one in which complexity is used to disguise truth or to evade
truth, not to reveal it. The process by which money is created is so simple
that the mind is repelled.”
Much more here, including:
Martin Wolf: “The essence of the contemporary monetary system is creation
of money, out of nothing, by private banks’ often foolish lending.”
Lord Adair Turner: “Banks do not, as too many textbooks still suggest,
take deposits of existing money from savers and lend it out to borrowers: they
create credit and money ex nihilo – extending a loan to the borrower and
simultaneously crediting the borrower’s money account.”
Tweets of the Week:
“One day we will go out to a cafe and then
sit in a cinema and what would have once felt totally mundane afternoon will
now be the most wonderful experience.”
“If I die during this pandemic, I
want my body catapulted onto the White House lawn.”
Pic of the Week:
When you work from home and your manager wants a word with you.
