Monday, March 9, 2020

Thoughts on WuFlu and Markets

I do not think that PdxSag's most recent piece was "bullish". The good news about the WuFlu does seem to be that the virus does not have a 3-5% CFR as once feared, but rather something less. The bad news is that it is worse than the flu (it seems more harmful and more contagious) and it is going to be hard on old, fat, and sick people.

Guess which country has a lot of old, fat, and sick people?

So far, people have been in denial of the implications, even after seeing the results in China, Iran, and Italy. See LoTB's thinking below:

Most people, even most smart people, lack any ability to think independently for themselves. If they see no one else worrying about the virus, that means they don’t worry about the virus, and anyone who appears to be worrying is written off as paranoid, or they are making it up because they are out to get Trump.

Most people lack the ability to think in a non-linear manner. If they see 100 people infected with the virus this week, then they project 100 next week, 100 the week after that, and so on and so on, and conclude that the virus is no big deal. Sucks for 10 people each week who need hospitalization, but a minor health problem compared to even the flu. They don’t understand how epidemics spread in a nonlinear manner, that the number of infected doubles every so many days. If there is a doubling every 5 days, then it only takes 50 days to go from 5000 infected (no big deal) to 5 million infected (a pretty darn big deal) and then only 20 more days to go to 80 million infected. In the absence of action to contain the virus or increase social distancing, epidemiologists say that 40% will become infected before we develop herd immunity.

The number of cases, hospitalizations, deaths will continue to grow exponentially until quarantines are put in place. So far, government officials (at all levels, not just Trump) care more about asset prices than about the pandemic. They only care about the now, maybe partly because they can't visualize or comprehend two weeks ahead. See @toad_spotted tweet:

I'm dense, but I finally understand that all the discussion of "inspiring panic" has essentially zero to do with what people do in their ordinary days. If parents keep their kids home or stay home from work a day, it's hardly going to inspire chaos. It's about stock market panics. Because stock panics can happen in an instant, the attention of politicians is almost entirely on managing day-to-day expectations and the impression of good news versus bad, rather than affecting the actual course of the epidemic by thinking through even one to two weeks from now.

The market is not discounting this yet, except in cruise line and airline stocks. Imagine how well cars are going to be selling for a quarter with rolling quarantines and crashing overvalued tech stocks. Can Tesla survive a quarter with de minimis sales? Because part of his business model is to be a stock promotion, Musk runs the company with a very fragile balance sheet.


Allan Folz said...

Not that the point was in dispute, but I submit that TP & bottle water hoarding is conclusive proof most people do not think for themselves in any way, shape, or fashion.

Anonymous said...

Food-service employees aboard the Diamond Princess hastened the spread of coronavirus on the stricken cruise ship, ultimately contributing to more than 700 cases, according to a government study.

Although the first cases were detected among passengers, the virus spread to members of the crew, according to the study published Tuesday in the Centers for Disease Control and Prevention’s Morbidity and Mortality Weekly Report.

On Feb. 2, a food-service worker became the first known case among crew, and such employees accounted for three-quarters of early laboratory-confirmed cases among staff. The report said those workers prepared food for other members of the crew.

The report highlights the risk of exposure in crowded settings like ships, gyms and concert venues, popular gathering spots that are now shutting down to contain the virus. Major U.S. cruise lines, including Princess parent Carnival Corp., have halted operations temporarily.

“This investigation underscores the need for swift epidemiologic investigation as soon as a Covid-19 case is detected in an area or group where a large number of persons
gather in a closed or crowded setting,” researchers said in the report.