n-cov notes:
SCMP: Coronavirus: the
new disease Covid-19 explained. Lots of graphics; updated
daily
MIT Tech Review: The best, and
the worst, of the coronavirus dashboards.
World Health Organization: COVID-19 Situation Report. March 4, 2020. March 8, 2020.
On the origin
and continuing evolution of SARS-CoV-2.
The Official
Coronavirus Numbers Are Wrong, and Everyone Knows It.
Because the U.S. data on coronavirus infections are so
deeply flawed, the quantification of the outbreak obscures more than it
illuminates.
We know, irrefutably, one thing about the coronavirus in the United
States: The number of cases reported in every chart and table is far too low. The
data are untrustworthy because the processes we used to get them were flawed.
The Centers for Disease Control and Prevention’s testing procedures missed the
bulk of the cases. They focused exclusively on travelers, rather than testing
more broadly, because that seemed like the best way to catch cases entering the
country.
Dealing With a
Once-In-A-Century Pathogen.
Such measures are unlikely to be introduced in democratic societies.
Writing in 2015, Gates noted that future epidemics would be harder to stop in
liberal societies: “Because democratic countries try to avoid abridging
individuals’ rights to travel and free assembly, they might be
too slow to restrict activities that help spread disease.” …
It’s worth remembering that in an existential crisis, decisions need to
be made on the basis of incomplete evidence. Measures implemented too early are
deemed “alarmist,” if implemented too late, “negligent.”
“The HUGE error
now in [the] USA is being made by state and local health departments—they fear
panic, so they are afraid to cancel public events and close schools. They are
still waiting for symptomatic cases to act when we know there is huge
asymptomatic spread. This is folly, and the expansion in places like Seattle
will likely be uncontrollable. We must take more decisive action at state and
local levels to immediately close schools and large gatherings and use social
distancing, in order to flatten the curve. The reason that is so urgent is
there is no way for our system to handle the critical and acute care burden
unless we flatten the curve.”
· Do nothing and tell people
all is well. ….
· Allow business as usual
while telling people to prepare ….
· Institute China-style
lockdowns. ….
The other key thing to note, however, is that whichever of the three options a government takes, the outcome is major
damage to the economy.
Do nothing, and the economy is hit by the virus; act incrementally
and a virus outbreak is likely to be larger – and the public to panic anyway,
hitting the economy; lockdown the economy and be *guaranteed* a deep downturn.
Slow burn not V-shape?
One other thing needs to be made clear, but which not many are
expressing: at this stage, and regardless of the strategy pursued, there is a
real risk that the virus will spread globally. In which case, the best that
even quarantine measures can realistically hope to achieve is to spread out the
impact of the virus so that not everyone gets sick at once, so reducing the
strain on healthcare systems as well as economies. Yet this also means that
this cannot be a quickly-resolved “V-shape” issue, but rather a slower burn
with longer-lasting economic effects. The British government is now
transparently assuming that this will be at least as 12-week cycle, hopefully
beginning to be under control properly by June.
It is hard to square such thoughts with Bank of England Governor Carney’s
recent message that in the UK Covid-19 will cause economic “disruption and not
destruction”. For one, we have to stress that hysteresis is as important as
hysteria: the longer the crisis lingers, either because of government actions
or regardless of them, the deeper the economic damage that will be done on many
fronts: how will many millions of the self-employed and small businesses
owners, mortgage holders and credit-card borrowers survive for three months
with little or no income. The impact of this crisis, even if managed well, may
last well beyond what cynics would usually assume when dismissing panic-filled
newspaper headlines.
FT.com: Why the US is so
vulnerable to coronavirus outbreak
High numbers of uninsured people mean it could spread more quickly than
in other countries
Economic Policy Institute: Lack of paid
sick days and large numbers of uninsured increase risks of spreading the
coronavirus.
“COVID-19—commonly known as
the coronavirus—is now a potential threat for the United States and we all “need to be preparing
for significant disruption of our lives,” warned the Centers
for Disease Control and Prevention (CDC) this week.”
· New modeling from The
Australian National University looks at seven scenarios of
how the outbreak might affect the world's wealth, ranging from low severity to
high severity.
· In the low-severity model —
or best-case scenario of the seven — ANU researchers estimate a global GDP loss
of $2.4 trillion, with an estimated death toll of 15 million
In the high-severity model — modeled after the Spanish flu pandemic,
which killed an estimated 17 million to 50 million globally from 1918 to 1920 —
the global GDP loss could be as high as $9 trillion. In that model, the death
toll is estimated to surpass 68 million.
MUST READ:
· Let’s conservatively assume
that there are 2,000 current cases in the US today, March 6th. This is about 8x
the number of confirmed (lab-diagnosed) cases. We know there is substantial
under-Dx due to lack of test kits; I’ll address implications later of
under-/over-estimate.
· We can expect that we’ll
continue to see a doubling of cases every 6 days (this is a typical doubling
time across several epidemiological studies). Here I mean *actual* cases.
Confirmed cases may appear to rise faster in the short term due to new test kit
rollouts.
· We’re looking at about 1M US
cases by the end of April, 2M by ~May 5, 4M by ~May 11, and so on. Exponentials are hard to grasp, but this is how they go.
·
As the healthcare system
begins to saturate under this case load, it will become increasingly hard to
detect, track, and contain new transmission chains. In absence of extreme
interventions, this likely won’t slow significantly until hitting >>1% of
susceptible population.
· What does a case load of
this size mean for healthcare system? We’ll examine just two factors — hospital
beds and masks — among many, many other things that will be impacted.
· The US has about 2.8
hospital beds per 1000 people. With a population of 330M, this is ~1M beds. At
any given time, 65% of those beds are already occupied. That leaves about 330k
beds available nationwide (perhaps a bit fewer this time of year with regular
flu season, etc).
· Let’s trust Italy’s numbers
and assume that about 10% of cases are serious enough to require
hospitalization. (Keep in mind that for many patients, hospitalization lasts
for *weeks* — in other words, turnover will be *very* slow as beds fill with
COVID19 patients).
· By this estimate, by about
May 8th, all open hospital beds in the US will be filled. (This says nothing,
of course, about whether these beds are suitable for isolation of patients with
a highly infectious virus.)
· If we’re wrong by a factor
of two regarding the fraction of severe cases, that only changes the timeline
of bed saturation by 6 days in either direction. If 20% of cases require
hospitalization, we run out of beds by ~May 2nd.
· If only 5% of cases require
it, we can make it until ~May 14th. 2.5% gets us to May 20th. This, of course,
assumes that there is no uptick in demand for beds from *other* (non-COVID19)
causes, which seems like a dubious assumption.
· As healthcare system becomes
increasingly burdened, Rx shortages, etc, people w/ chronic conditions that are
normally well-managed may find themselves slipping into severe states of
medical distress requiring intensive care & hospitalization. But let’s
ignore that for now.
· Alright, so that’s beds. Now
masks. Feds say we have a national stockpile of 12M N95 masks and 30M surgical
masks (which are not ideal, but better than nothing).
· There are about 18M
healthcare workers in the US. Let’s assume only 6M HCW are working on any given
day. (This is likely an underestimate as most people work most days of the
week, but again, I’m playing conservative at every turn.)
· As COVID19 cases saturate
virtually every state and county, which seems likely to happen any day now, it
will soon be irresponsible for all HCWs to not wear a mask. These HCWs would
burn through N95 stockpile in 2 days if each HCW only got ONE mask per day.
· One per day would be neither
sanitary nor pragmatic, though this is indeed what we saw in Wuhan, with HCWs
collapsing on their shift from dehydration because they were trying to avoid
changing their PPE suits as they cannot be reused.
· How quickly could we ramp up
production of new masks? Not very fast at all. The vast majority are
manufactured overseas, almost all in China. Even when manufactured here in US,
the raw materials are predominantly from overseas... again, predominantly from
China.
· Keep in mind that all countries
globally will be going through the exact same crises and shortages
simultaneously. We can’t force trade in our favor.
· Now consider how these 2
factors – bed and mask shortages – compound each other’s severity. Full
hospitals + few masks + HCWs running around between beds without proper PPE =
very bad mix.
· HCWs are already getting
infected even w/ access to full PPE. In the face of PPE limitations this
severe, it’s only a matter of time. HCWs will start dropping from the workforce
for weeks at a time, leading to a shortage of HCWs that then further compounds
both issues above.
· We could go on and on about
thousands of factors – # of ventilators, or even simple things like saline drip
bags. You see where this is going.
·
Importantly, I cannot stress
this enough: even if I’m wrong – even VERY wrong – about core assumptions like
% of severe cases or current case #, it only changes the timeline by days or
weeks. This is how exponential growth in an immunologically naïve population
works.
· Undeserved panic does no one any good. But neither does ill-informed
complacency. It’s wrong to assuage the public by saying “only 2%
will die.” People aren’t adequately grasping the national and global systemic
burden wrought by this swift-moving of a disease.
· I’m an engineer. This is
what my mind does all day: I run back-of-the-envelope calculations to try to
estimate order-of-magnitude impacts. I’ve been on high alarm about this disease
since ~Jan 19 after reading clinical indicators in the first papers emerging from
Wuhan.
· Nothing in the last 6 weeks has dampened my alarm in the slightest. To
the contrary, we’re seeing abject refusal of many countries to adequately
respond or prepare. Of course some of these estimates will be
wrong, even substantially wrong.
· But I have no reason to
think they’ll be orders-of-magnitude wrong. Even if your personal risk of death is very, very low, don’t mock
decisions like canceling events or closing workplaces as undue “panic”.
· These measures are the bare
minimum we should be doing to try to shift the peak – to slow the rise in cases
so that healthcare systems are less overwhelmed. Each day that we can delay an
extra case is a big win for the HC system.
· And yes, you really should prepare to buckle down for a bit. All
services and supply chains will be impacted. Why risk the stress of
being ill-prepared?
· Worst case, I’m massively
wrong and you now have a huge bag of rice and black beans to burn through over
the next few months and enough Robitussin to trip out.
· One more thought: you’ve probably
seen multiple respected epidemiologists have estimated that 20-70% of world
will be infected within the next year. If you use 6-day doubling rate I
mentioned above, we land at ~2-6 billion infected by sometime in July of this
year.
· Obviously I think the
doubling time will start to slow once a sizeable fraction of the population has
been infected, simply because of herd immunity and a smaller susceptible
population.
· But take the scenarios above
(full beds, no PPE, etc, at just 1% of the US population infected) and stretch
them out over just a couple extra months.
· That timeline roughly fits with consensus end-game numbers from these
highly esteemed epidemiologists. Again, we’re talking about discrepancies of
mere days or weeks one direction or another, but not disagreements in the
overall magnitude of the challenge.
·
This is not some
hypothetical, fear-mongering, worst-case scenario. This is reality, as far as
anyone can tell with the current available data.
· That’s all for now. Standard
disclaimers apply: I’m a PhD biologist but *not* an epidemiologist. Thoughts my
own. Yadda yadda. Stay safe out there. /end
Virus expert: Harvard
University epidemiologist Mark Lipsitch says that as much as 70 percent of the world’s population could get the coronavirus.
Today I finished tweaking the first draft of a pandemic projection model
that simulates the spread of the coronavirus in the United States. The assumptions of the model are explained here, and you will find they
are extremely conservative (using R0 value of just 1.82, for example).The model’s predictions are nothing short of apocalyptic if the virus is
allowed to spread without restraint across the United States.
According to the model, there will be 2.16 million dead Americans by July 4th
if domestic travel is not aggressively halted very soon… This is not a
prediction, since I believe that state governments and the federal government
will intervene long before July 4th to declare, essentially, medical martial
law.
That is now the only remaining option to stop the
spread. It must be done soon. It may already be too late to prevent
millions from getting infected.
… These numbers are nowhere near “worst case,” however, since they only
use an R0 value of 1.82 (the real virus is believed to be closer to 6.6).
an expert laid out "best guess" estimates about how many
Americans could be impacted. He projected that there could be as many as 96
million cases in the US, 4.8 million hospitalizations, and 480,000 deaths
associated with the novel coronavirus.
China’s
aggressive measures have slowed the coronavirus. They may not work in other
countries.
The
rapidly growing spread of COVID-19, the disease caused by the novel
coronavirus, has forced the closure of schools in 22 countries on three
different continents, according to UNESCO.
Another MUST READ:
Open letter to
the Prime Minister and my fellow citizens. Marc Wathelet, Doctor of Science, specialist in human coronaviruses.
government experts demonstrate a lack of knowledge of the characteristics
of this new coronavirus. They follow the situation closely but refuse to
anticipate it, and communication remains incoherent, for the simple reason that
they do not sufficiently understand the nature of the danger we face.
… Contrary to epidemics where the foci of infections remain localized in
certain regions of the globe as was the case for both SARS and MERS, in a
pandemic these foci continue to spread uncontrollably in most countries.
… Usual dangers and unusual dangers: People are, in general,
well prepared for the dangers they face regularly, because these dangers
correspond to their usual experience. No one is psychologically prepared for a
pandemic, the last one occurred just over 100 years ago and therefore no one
has personal experience of a pandemic. It is very difficult for people to
anticipate the explosive aspect of the spread of an infectious agent, when it
is scientifically established that a virus spreads exponentially.
… Exponential multiplication: Apart from financiers,
engineers and scientists, the properties of the exponential function remain
very abstract for members of government and the general public, and I will try
to make them more concrete
… A pandemic is halfway between a compound interest loan and a stick of
dynamite. The three phenomena are explosive, but at different time scales of
the order of the week, year and millisecond.
The two key figures in epidemiology, what do they
mean?
From a public health perspective, the most important figure is doubling
time, the time required for the population of symptomatic people to double,
because it is the one that allows to anticipate the progression of the number
of cases that will have to be absorbed by the hospital system. For a loan with
2.5% annual interest, the doubling time is thirty years. For a stick of
dynamite, the doubling time is a very small fraction of the millisecond. In the
case of COVID-19, different groups of epidemiology experts conclude that the
doubling time in the absence of public health measures is only 2.4 days, which
is extremely short and explains the meteoric increase in the number of cases.
… if we continue the progression of the exponential curve, what do we
find? In the absence of public health measures, the epidemiologist calculates
that from a COVID-19 case we obtain 1000 cases after 24 days, OK, a million
after 48 days, oops!, and a billion cases from a single case after 72 days …
and nobody wants to believe it‼ This is the explosive power of the exponential
curve, this is a pandemic, and these numbers are rejected because we do not
have personal experience, a living memory, destructive power of a pandemic.
A nuclear reactor to explain the number of
reproduction of the virus.
Let’s turn to the second key figure in epidemiology: the number of
reproduction, which represents the contagiousness of the virus. The exponential
function is a series of multiplications: in a loan at 2.5% over thirty years we
multiply 1.025 thirty times in a row, that is to say 1.025 to the power of 30,
and we get 2. The figure 1.025 corresponds at number of reproduction, as long
as it is greater than 1, the cost of interest increases exponentially over
time.
In a nuclear reactor, the reaction is controlled by maintaining the
number of reproductionneutrons just below one, and the heat from this reaction
can be converted to electricity. If the number of reproductionneutrons exceed
one, the operator must very quickly take action to reduce this number below
one, otherwise the neutrons multiply exponentially, the reactor becomes
critical. Result? BOUM: Three Miles Island (U.S.A.), Chernobyl (U.R.S.S.) and
Fukushima (Japan).
The basic reproduction numberof the new coronavirus on leaving Wuhan,
calculated by the same groups of epidemiologists mentioned above, is ~ 7,
namely that an individual infects 7 others on average, and one doubling time2.4
days. In the presence of the first public health measures in China on January
23, the number of effective reproductionof the new coronavirus is reduced to
3.24, its contagiousness decreases, and the doubling timeincreases to 3.5 days.
Extreme quarantine measures have been taken in China to reduce the number of
effective reproductions below one and thereby control the spread of the virus.
The objective of public health measures is to reduce the number of
effective reproduction of coronavirus to bring it below one and thus stop the
exponential spread of the virus. When the basic reproduction number of a virus
is 7, think about the contagiousness of mumps before vaccination, it is
extremely difficult to reduce it below one, extreme measures are called for
… We must recognize, as China does in January, that every country
infected with a pandemic virus is essentially in a war situation, not against a
military power, but against a much stronger power, nature, in the form of a new
infectious agent in an immunologically naive population. ….
(The author has a Ph.D. in molecular biology, studied the interactions
between viruses and the innate immune response throughout his career, led a
small group of researchers in the US to work on human coronaviruses in general
and on the one responsible for the 2003 SARS outbreak in particular, both as a
faculty member of the University of Cincinnati College of Medicine, and as a
scientist at the only institute focused exclusively on respiratory diseases, in
Albuquerque.)
"The Worst
Is Yet To Come": Nomura Now Sees As Many As 1.5 Million Covid Cases By
June.
Steve Keen: Thinking
exponentially about containing the coronavirus.
One reason why we react far too slowly to threats like the Coronavirus is
that thinking about processes that involve exponential growth just don't come
naturally to us: we tend to extrapolate linearly instead. That is seriously
hampering our reactions to this threat. If we did think exponentially, we'd be
practicing serious containment, right now. I want to illustrate why…
How The Pandemic
Crisis Will Probably Develop Over The Next Year
For a while now I have been hearing it said that Americans are “in a
panic” over the coronavirus outbreak in the US, and that mainstream media
outlets are “feeding the fear”. This is
an odd conclusion to come to and something worth noting, because the truth is
mostly the opposite. For the past couple
of months the WHO, the CDC and even Donald Trump have been dismissing Covid 19
as nothing much to worry about. The WHO
actually still refuses to call it a pandemic even though the virus meets all of
their own criteria. …
The new strain of Coronavirus has added novel genetic features to the
same family of pathogens that brought the world the SARS crisis in 2002-3 and,
a decade later, the less lethal MERS outbreak. This Novel Coronavirus strain,
COVID-19, is showing itself to be much more contagious and lethal than was SARS
and MERS.
Some have anticipated that, if not dramatically countered, the Wuhan Coronavirus epidemic could be headed in the direction of the Spanish flu outbreak of 1918. This prediction flows from the assessment of, for instance, Prof. Gabriel Leung, Chair of Public Health Medicine at Hong King University. Looking at the very fast rate of COVID-19’s spread from human to human through the air, Dr. Leung challenged any residual sense of complacency. He anticipated a possible 60 per cent infection rate of the world’s entire population with deaths numbering in the many tens of millions.
…
Especially when the stakes are extremely high, the need is great for objective, third-party adjudication to establish what really happened irrespective of official interpretations. History provides abundant evidence to demonstrate that official interpretations of transformative events often veer away from the truth in order to serve and protect the interests of entrenched power.
All semblance of due process and the rule of law can quickly evaporate when powerful institutions advance interpretations of catastrophic events used to justify their own open-ended invocation of unlimited emergency measure powers. The well-documented examples of the misrepresentation and exploitation of the 9/11 debacle demonstrate well the severity of the current danger.
Globalization
and Our Precarious Medical Supply Chains.
The grave risks and dangers in the process of worldwide out-sourcing and
so-called globalization of the past 30 years or so are becoming starkly clear
as the ongoing health emergency across China threatens vital world supply
chains from China to the rest of the world. While much attention is focused on
the risks to smartphone components or auto manufacture via supplies of key
parts from China or to the breakdown of oil deliveries in the last weeks, there
is a danger that will soon become alarmingly clear in terms of global health
care system.
If the forced shutdown of China manufacture continues for many weeks longer, the world, could begin to experience shortages or lack of vital medicines and medical supplies. The reason is that over the past two decades much of the production of medicines and medical supplies such as surgical masks have been outsourced to China or simply made in China by Chinese companies at far cheaper prices, forcing Western companies out of business.
China’s
coronavirus recovery is all fake, whistleblowers and residents claim.
"The Lights
Are On But No One's Working": How China Is Faking A Coronavirus Recovery.
Why must the owner of the empty factory pretend the factory is operating?
Because "Higher ups are watching the electricity numbers." And why
are higher ups watching the electricity numbers? Because they know that not
only the rest of the world is also watching these numbers, but so is China's
population. And absent a rebound in
electricity usage, which remain far below prior years even if it is to power
unused machines in empty factories, China can't hold out hope to pretend that
February was the kitchen sink month as the level of economic activity simply will
not rise for months... unless of course Beijing orders the local population to
simply consume for the sake of giving the outside world it is consuming as if
things were back to normal. Only they aren't, and as we warned last weekend,
"instead of Chinese ghost towns, we now have Chinese ghost factories whose
only purpose is to try to fool its population and the world that the
coronavirus pandemic, which is still raging in China, is under control and the
Chinese economy is back on solid footing. Of course, neither is actually
happening."
Covid-19 Will
Mark the End of Affluence Politics.
The possibility of a global pandemic will reveal our inability to make
and distribute the things people need—just in time for a presidential election.
Don’t Test,
Don’t Tell: The Bureaucratic Bungling of COVID-19 Tests.
With the exception of South Korea and Italy (and perhaps Australia and
the UK), pretty much every nation in the world has adopted some form of Don’t
Test, Don’t Tell. The offenders include rich countries like the United States
and Japan, vast countries like Indonesia and India, communist countries like
China and Vietnam, theocracies like Iran and Saudi Arabia, oligarchies like
Russia and Nigeria, social democracies like Germany and France. Don’t Test,
Don’t Tell knows no geographic or ideological boundary.
Canceled Games
and Empty Stadiums: Will the Coronavirus Spread to Sports?
Why so many
epidemics originate in Asia and Africa – and why we can expect more.
“I am a virologist and associate director of the Animal Diagnostic
Laboratory at Penn State University, and my laboratory studies zoonotic
viruses, those that jump from animals and infect people. Most of the pandemics
have at least one thing in common: They began their deadly work in Asia or
Africa. The reasons why may surprise you.”
British
Supermarkets prepare for FOOD RIOTS as part of emergency plans to feed the nation as panic buying Brits
strip shelves faster than they can be refilled.
2 of my favorite economists on coronavirus:
James K. Galbraith: How America Can
Beat COVID-19.
Steve Keen again: A Modern Jubilee
as a cure to the financial ills of the Coronavirus
Regular Related Fare:
Steven Blitz, TS Lombard: Fear Takes
Growth to Zero or Worse
Economics: Recession at the doorstep
·
Real growth in Q2 will be recessionary by virtue of
the policy responses
·
Fed needs a response to the risk to Main Street credit
·
Fiscal response will come in waves, tax cut waits for
job losses
Markets: Covid-19 – A double whammy for stocks
·
Corporate profit growth to stall as Coronavirus shock
spreads to demand
·
Equity valuations have cheapened, but are not yet
cheap
·
Further downside for stocks likely from lower EPS
estimates, more de-rating
Charles Dumas, TS Lombard: The Bear and
Fear Stalk the World
|
BCA: The Credit Market is an Economic Risk
BCA Research has long argued
that excess corporate debt would not be the cause of a recession, but would
intensify recessionary pressures if a shock large enough threatened
debt-servicing capacity.
COVID-19 may represent such
a shock. Our Corporate Health Monitor (CMH) was already in “deteriorating
health” territory, and the recent tightening in lending standards for C&I
loans pointed toward an uptick in corporate default rates. Now, the spike in
the VIX and the collapse in net earnings revisions reinforce the message of the
lending standards and the CMH. Moreover, junk bond issuance is drying out. If
this trend continues, refinancing will become increasingly hard, especially for
borrowers in poor health. The ensuing wave of default would make any weakness in
the economy even worse.
Robert Kavcic, BMO:
COVID-19: Clearly this is the factor behind most of
everything we’ve seen in financial markets this week, including the massive
plunge in bond yields. Coincidence or not (probably not), daily stock market
moves have tracked the change in daily reported cases outside of China, without
fail. The concern is that, if the market is truly keyed in on how the virus is
spreading outside China, we are almost certainly some time away from seeing
daily cases decelerate.
"The Market
Slump Is Just Beginning" - Covid-19 Is Not The Cause, It's The Catalyst.
The majority of people today are not worried about stocks but instead
about the Coronavirus. Most of us don’t understand it since authorities around
the world suppress the truth when it comes to numbers of infected and
fatalities. China seems never to have told the truth about the virus and many
countries have followed suit.
The pandemic is spreading exponentially and it can take 3-4 weeks before
it breaks out from the time you are infected. In that time every infected
person can meet many hundreds of people. In Italy for example, there were no
cases a few days ago and it jumped to 150 in a couple of days and now 2,500 are
reported to have caught the disease with 80 deaths.
Guy Haselmann: Coronavirus - The Catalyst For
System Failure?
Overview: Today’s global economic system is more
intertwined than at any point in history. For the past 30 years in particular,
globalization and the Theory of Comparative Advantage have been alive and well.
Technological advancements and transportation improvements have truly ‘shrunk
the world’, allowing more countries to participate and benefit from
international trade.
The globalized world economy has become a vast network of complex supply chains, interconnectedness and co-dependence. The benefits have been wide-spread and done more to lift the human condition, and more people out of poverty, than any development in history. However, this increase in economic complexity has magnified global vulnerabilities, opening up the risk of rapid and large-scale failure and contagion: a period of anti-globalization. COVID-19 is the catalyst that is triggering a supply-side crisis; one that is further exacerbated by a simultaneous demand-side shock.
ECRI’s Lakshman Achuthan: We're on the
Road to Japanification.
The relevant question is whether we were headed into a recession. In
answering that question – based on not just one, but more than a dozen ECRI
leading indexes for the U.S. alone – our key insight is that, going into this
epidemic, the economy was not in a cyclical window of vulnerability when negative
shocks are actually recessionary. Despite all of the drama in the markets, the
economy still isn't in a window of vulnerability.
… If we end up sidestepping a recession – not because of the Fed’s
actions but because of the economy’s cyclical resilience and the efforts of
medical professionals – will the Fed be able to take back those rate cuts? We
are doubtful, and believe it’s now left with just two more 50-basis-point rate
cuts to use when a recession really threatens.
The Fed may have intended the rate cuts to be a booster shot for the
economy, but they’ve administered the wrong vaccine – because they don’t know
that the economy isn’t in a recessionary window of vulnerability. So, when we
really need that anti-recession vaccine, the Fed will be out of stock.
Supply Shock and
a Demand Shock Coming Up.
US Factory
Orders Tumble In January - Sixth Straight Month Of YoY Contraction.
US Mortgage
Rates Plunge To Record Low.
SaxoBank: Equities Are In
Rough & Unpredictable Seas, Central Banks Will Not Alleviate The Pain.
Bank Of America:
"We Are In A Global Recession"
After Crushing
Its Clients, JPMorgan Now Sees 50% Chance Of Zero Rates This Year.
An update of our US recession probability framework
based on market pricing as of today finds that rate markets are now implying
that something that looks like an average US recession is at a very high 90%
likelihood scenario
BMO: Negative Rates
Are Coming To The US
With VIX Hitting
50, The Fed Must Now Step In Or A Catastrophic Crash Is Inevitable.
Employment, Trade, Rails, Earnings.
Also: BofA: “We Are In An Adverse Feedback Loop"
Also NBF: leading indicator flashing red
Nothing to do with COVID – economy was already much softer than most
believe.
Putin Launches
"War On US Shale" After Dumping MbS & Breaking Up OPEC+.
Oil Markets
Predicting Risk Of A Global Recession.
Hussman: Clearing Rallies
and Crashes (Buckle Up).
Ray Dalio: "Imagine
The Worst Case Scenario, Protect Yourself"
Containing the virus (i.e., minimizing its spreading) will occur best
where there are:
1) capable leaders who are able to make executive decisions well and
quickly,
2) a population that follows orders,
3) a capable bureaucracy to enforce and administer the plans, and
4) a capable health system to identify and treat the virus well and
quickly.
… The most important assets that you need to take good
care of are you and your family. As with investing, I hope that you will
imagine the worst-case scenario and protect yourself against it
(not just) for the ESG crowd:
Planet Plastic: How Big Oil and Big Soda kept a global environmental calamity a secret
for decades.
Tropical forests losing their ability to absorb carbon, study finds.
Why Our Food Systems Need a Radical Overhaul.
Other fare:
Connectedness to Nature: Its Impact on Sustainable Behaviors and Happiness in Children.
The Pentagon promises to use artificial intelligence for good, not evil.
Jack Welch Inflicted Great Damage on Corporate America.
related economic article: How the Wealth Was Won: Factor Shares as Market Fundamentals.
Fun Fare:
30 Reasons You Should Never Let Your Dog Play In The Mud (New Pics)
Tweets of the Week:
Taleb: Saying the coronavirus panic is dumb is dumb.
If the word "panic" means "exaggerated" reaction,
could be so at the individual level but NOT at the collective one.
We MUST reduce connectivity for 20 d to avert a serious problem.
We have survived for zillion years thanks to "irrational"
"panics".
Ben Hunt: Italy is a time machine that shows us our future. Why do we ignore it?
Also: Don’t Sneeze in Public.
Quotes of the Week:
The current belief is the “virus” is limited in scope, and once the spread is contained, the markets will immediately bounce back in a “V-shaped” recovery. Much of this analysis is based on assumptions that “COVID-19” is like “SARS” in 2003, which had a very limited impact on the markets.
… “Following a nearly 50% decline in asset prices, a mean-reversion in
valuations, and an economic recession ending, the impact of the SARS virus was
negligible given the bulk of the ‘risk’ was already removed from asset prices
and economic growth. Today’s economic environment could not be more opposed.” …
“Unlike today, the S&P 500 ETF spent about a year below its 200-day moving
average (dot-com crash) prior to the SARS 2003 outbreak. Price action is much
different now. SPY was well above its 200-day moving average before the
coronavirus outbreak, leaving plenty of room for profit-taking.”
….
The End Of The Bull
I want to reprint the last part of this weekend’s newsletter as any rally
that occurs over the next couple of weeks will NOT reverse the current market
dynamics. “The most important WARNING is the negative divergence in relative
strength (top panel). This negative
divergence was seen at every important market correction event over the last 25-years.”
For longer-term investors, people close to, or in, retirement, or for individuals who don’t pay close attention to the markets or their investments, this is NOT a buying opportunity. Let me be clear. There is currently EVERY indication given the speed and magnitude of the decline, that any short-term reflexive bounce will likely fail. Such a failure will lead to a retest of the recent lows, or worse, the beginning of a bear market brought on by a recession.
from: Technically Speaking: Sellable Rally, Or The Return Of The Bull?
Also: No Time to Die.
If even Bond, James Bond is being pushed back by months, why not every
other movie? Is anyone going to go to cinemas, theatres, pubs, restaurants,
parties, festivals, hotels, conventions, sports events, etc., if this virus
continues to spread? Of course, many events are still going ahead for now: SXSW
in Texas, for example, or the Olympics,…apparently. Little green bits of paper
take priority over little green viruses, despite the risk that this provides
perfect conditions for Covid-19 to spread, and public-health havoc this will
wreak. Yet some are being more proactive. Nobody in Italy will be seeing any
movies for a while as all theatres are shut down, along with schools, and universities
likely to follow. The elderly also being advised to stay inside.
Regardless, most of the West and the world continue to lag far behind the aggressive virus-containment tactics that China has employed, and the results are obvious.: case numbers and fatalities are growing exponentially, even with limited testing. Germany’s finance minister says this is “a global pandemic”, saving the WHO the work. In the US we now have 11 deaths, up from 1, and a state of emergency declared in New York, Washington, and Florida. No internal travel restrictions are being imposed though even as – so hope the person you sit next to at SXSW doesn’t come from one of those states.
As we published yesterday, at this stage the economic damage is done. Either governments close things down at great cost, as in China and Korea, or they don’t – and the virus and public panic close things down anyway.
And:
Richard Hatchett, the doctor leading efforts to find a vaccine for coronavirus, says "This
is the most frightening disease I've ever encountered in my career, and that includes Ebola, it
includes MERS, it includes SARS. And it's frightening because of the
combination of infectiousness and a lethality that appears to be manyfold
higher than flu."
Photo of the Week:
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