RichardGibbons

This is an extremely good question (though I think you really mean "counter productive"), and is totally right. It's a hard one to answer. I'd certainly say that stocking up on PPE makes sense, as PPE is relatively inexpensive, and there could be large stores of PPE that get cycled through before expiry. Devices, not so much, but I think going forward, 3D printers could actually solve "just in time" device problem for most countries. I think it's pretty clear that the AOC crowd who seem to be saying "no price is too high for a life" doesn't make any sense. And it's clear that the "don't do anything" crowd has also been wrong, since USA could look like South Korea or Taiwan, but by not doing anything has ended up in a situation where the economy has crashed.

Come on, you weren't at all right, and the evidence has proven it beyond a doubt already. The main interesting thing now is that "character development" story, whether or not you'll recognize that and concede that you were completely off base. (That said, you were adding value, just different value than what you thought you were adding. It's useful to understand the perspectives of people in the front line.)

I'd agree with you except the real issue is the healthcare system getting overloaded causing the morbidity rate to skyrocket. I think that's one of the big problems in Italy. With the cruise ship, everyone who needed access to ventilators got them, because the system wasn't overloaded. If the healthcare system were infinitely expandable, this pandemic wouldn't be a big deal. Oddly enough, I agree with you on this one. The government reaction, particularly in the USA, was terrible, and that's going to kill the economy. Yeah, this is what I meant when I said on the coronavirus thread that Trump was doing the standard playbook, encouraging his supporters to focus on the "us vs them" and rally around him rather than focus on his incompetence.

Well, it could be second-order thinking--by creating an enemy, he might hope his supporters will focus on "us vs them" rather than the actual crisis, as they have been trained to do. (But I don't think he's actually sophisticated enough to do second-order thinking any more, so I agree that it's best to take him at face value.)

FWIW, I agree that the optimal economic solution was the South Korea/Taiwan solutions, but I don't think that solution is available now. The optimal all around solution is the hammer one described in the Medium article, or maybe there's a third, hybrid way, which would be to close state borders, and attempt to do a South Korean solution in the states with low cases, and a hammer in states with high cases. If that were possible, maybe that would actually be best. (I actually think you do pretty well at lowering the R0 just by giving everyone masks and telling them to wash their hands.) WRT herd immunity, I have no clue, and no good basis for an opinion. But if forced to opine, I'd say that herd immunity will work for the same virus, and even with mutated versions, it may confer a reasonable degree of resistance. Even with mutations, I suspect the odds are low of getting perpetual waves of mutated viruses with similar infectivity and morbidity as COVID-19. But I have no basis for that suspicion except an observation that that non-manmade things which change the natural world forever are unusual.

I'm pretty optimistic about the medium term. However, the way to look at Iceland is that we're dealing with a disease that has exponential growth and takes 3-4 weeks to kill people. Few enough people are infected that most of the cases are likely to have happened in the last few weeks, which means that it hasn't had enough time to kill people. Using the number of deaths as a numerator and the number of infections as the denominator to figure out a mortality rate doesn't make sense early in a pandemic.

Well, not totally--some businesses won't survive. But if we literally get everyone infected in 2 months and all those infections resolved in 3 months, then there really isn't anything to worry about (economically speaking) after that. I think the faster this happens, the smaller the economic second-order effects, and the more businesses will survive. Even if bad stuff remains economically, it's much easier to, say, do bridge financing after it's clear the pandemic has run its course and customers have returned to the business. I'm putting aside the millions of deaths as not mattering that much to the economy, and not having that many second-order effects. (Also, I'm not suggesting this is what should happen. I'm saying, "if I were a psycho trying to do nothing but maximize economic outcomes and taking nothing else into account, that's what I'd do.")

Yeah, I'm more bearish on the USA, because--regardless of what no_free_lunch seems to be saying--the Canadian response has been far superior to that of the USA. BC, Ontario, and Quebec have put in preventative measures that will cause the infection numbers to fall, peaking probably next week or sooner. Trudeau's economic response has been mediocre (he shouldn't have tried to shove payments to individuals through the EI system), but I think over the next few weeks, the virus numbers will be driving things, and Canada has done way better than the USA on the virus. The economy's going to suck for everyone. (Of course, all this is speculative--I'm betting on the SPY, but I'd also bet that the divergence between the S&P 500 and the TSX won't be huge....) I agree that it's a terrible time to be converting CAD to USD. It's also worth noting that I see light at the end of the tunnel. So I'm only very short-term bearish based on future infection numbers, but medium- and long-term bullish.

LOL, it's kind of ridiculous, but also kind of true. Do you remember in late 2007/early 2008, when a bunch of people on this board were saying "all this crap is happening, and the market is barely reacting negatively. Are we insane, or do we just not get it?" Then in summer 2008, everything collapsed. This felt the same way in February--all this bizarre stuff was happening in the world, but the market remained high for no apparent reason. I could've put 5% percentage of my portfolio in VIX calls and doubled my portfolio. I wouldn't do more than 5%, because you don't need to, timing is hard, and I could be wrong. But it was really obvious from around mid-February that we were in trouble (basically, once containment failed and the virus started popping up all over outside China.)

More likely. The optimal outcome for the economy is to get everyone sick over the next 2-3 months, let all the old people die (they don't contribute much to the economy anyway), and then have life revert to normal when everyone has herd immunity.

I mean that I'm not buying VIX calls because the VIX is at 62, and it's unlikely to get much beyond 80. What's more, the VIX options are European exercise, which means that they converge to intrinsic value only right at expiration, which makes them a bad speculative bet right now (because they won't move much compared to how much an American exercise option would.) Betting on the VIX going down is perhaps a more reasonable bet, but it's also hard to make that bet because the timing's tricky. And if you go way out in time--like a year out--the European exercise makes it hard to take profits quickly. Oddly enough, I had VIX $16 Mar 18 calls that I bought for $1.90, and sold for break even a week and a half later in late Feb, right before the market plummeted. I was getting cute, hoping the VIX would fall a point so I could rebuy slightly farther out in time for the same price. Didn't happen. I wouldn't have held all those calls to expiry regardless, but on the day of expiry, the VIX was above 80. But a potential (80-16)/1.90 = 33 bagger was there. Oops. (New rule: if the market's obviously going to crash because of a massive pandemic, don't trade away your hedge in order to pick up pennies.)

I have been buying SPY puts (in tiny quantities... not a serious hedge) because that's where the liquidity is. I'm not doing the VIX because it's too high to make bearish bets, and I'm not doing the Dow because I'd rather not bet on 30 stocks.

Interesting article. If the authors are right, it's a game-changer. What's the push-back to this? What are they missing? The thing they're missing is that their model doesn't match the evidence. In the UK, they're testing 8000 people a day, but until yesterday were finding fewer than 1000 cases per day. Presumably they're testing the people most likely to have COVID-19, yet far fewer than half the tests come back positive. The only way that half the population could be infected and yet only a small percentage test positive is if either the tests are far more likely to have a false negative than a correct positive, or if the people they're testing are far less likely to have the disease than everyone else. By far, the most reasonable hypothesis is that their model sucks.

Thanks for your honest response--I really do appreciate it when people are willing to act with intellectual honesty. So much of that is missing in the world today. That said, your 86% asymptomatic rate isn't credible. The most credible number I've read is ~30% (though at this point, I'd be delighted if it were 86%. Asymptomatic people are bad early in a pandemic, and good when it's out of control.) In any case, we'll have to keep watching New York to see when they get overloaded. New York's normal capacity is about 60K hospital beds and 3000 ICU beds. So, I'll assume that if we go over, say, 70k simultaneous hospitalized COVID-19 patients or 3300 simultaneous COVID-19 ICU patients, that means that you'll have recognized that "this isn't a big deal, there are already hundreds of thousands if not millions infected and there's been no problems" analysis was incorrect. It's nice to have goal posts planted firmly in the ground, and clearly if COVID-19 patients alone--without even taking into account people in the hospital for other reasons--exceed hospital capacity, then it was a pretty big deal. All that said, I'm pretty surprised that you don't understand why people would care much more about an epidemic than heart disease deaths.

Wow. I find it bizarre that USA is on track to be the worst hit country on earth and several people on this board are absolutely convinced that the federal leadership has nothing to do with that.

Hey Orthopa, you said that when you realized that you were wrong, you'd eat crow. I don't care about you eating crow, but took that as a statement that you'll be intellectually honest enough to change your hypothesis when the evidence contradicts your view. So, I'm curious when you'll decide that your hypothesis is incorrect. Quite a while ago, you seemed to believe COVID-19 would likely not be a big deal because you believed that there were already millions of cases in the USA (but almost none of it had showed up at the hospitals)? Have the exploding number of cases in New York changed your perspective yet? (Note that right now, New York state has 5% of the worldwide diagnosed COVID-19 cases, with 2,635 patients bad enough to be in hospitals, 621 in the ICU, and 114 deaths.) If you haven't changed your mind yet, do you have any thoughts about evidence that would make you change your mind?

The irony is that axing the CDC expert probably wouldn't have made a difference, as Trump ignored everything until March anyway. There's no reason to believe that an additional CDC expert would have resulted in Trump being less stupid or pigheaded.

So, I'm curious how you resolved the cognitive dissonance between being a passionate Trump supporter on China with the belief that the government should try to keep away from business. It feels like, if America wants to go this path of eliminating China from supply chains, it requires either massive tariffs or extreme regulations--basically the government completely destroying the supply chain of many businesses. (FWIW, I agree with you that Western countries ought to disassociate from China for all the reasons you say, but I can say that because I'm fine with government interfering with business for the greater good. But I don't see how one solves this problem if one believes the non-interference of government in business is the greater good. Can you enlighten me?)

Yep. By my calculations, it'd be roughly 3 months assuming 20K people infected now. (20K * 2^14) = 327M. We'd need 14 doublings to infect everyone in the USA, and we double every 6 days, so that's 6 * 14 = 84, or 12 weeks. Plus, say, a month for the disease to go from incubating to healed. Of course, this would result in lots of unnecessary deaths, but it's probably optimal for the economy (barring second order effects like a revolution from people being annoyed at the widespread deaths and the government seemingly not doing anything.)

I try to be evidence-based (don't always succeed), and since that post I've got substantially more evidence. Cobafdek's explanation makes sense to me. Essentially, when it comes to math, until I have evidence to the contrary, it sounds like I should assume that a typical doctor is roughly as knowledgeable as someone who's never taken a math course in college. And that's fine. If you're a surgeon, I imagine I as a patient gain more from you doing another medical course than a statistics course. It just means that, I should have little confidence in your analysis of math things like statistical sampling and exponential growth, just like you have no confidence in me for medical things. (I have a math degree and a couple computer science degrees. I'm completely ignorant of how to operate on people, and basically trust my doctor 98% for anything medical. So you're welcome to call me ignorant too.) Sure. While people talk about average rate to double of about 6 days, there's high variance in the number of people infected by any given person. The typical infected person infects 2 others, but one person in South Korea seemed to have infected a thousand people. So extrapolating doubling from tiny numbers doesn't work. Once you get a bunch of cases (say, 40), the infection rate converges on the average, and you can start to play the 6 day doubling game. (Which, as a percentage of the population starts to take social distancing seriously, should increase, decreasing infection rate.) For the USA, it's also worth noting that deciding who to test based on different criteria than other countries will affect the results of tests, and that seems to be true in the USA. (e.g. suppose you test one person, and find them positive, and then never test anyone again, identifying no more positive people. Is it reasonable to conclude that the virus has stopped spreading? USA isn't quite this extreme, but it's doing way fewer tests, particularly per capita, than pretty well every other developed country.) LOL, for a few years in middle school, one of my nicknames was Gibble Dick. That was unfortunate. :)

Yeah, basically one of several reasons South Korea had fewer problems was because the did a bunch of testing early on, basically the stuff some people were saying was a waste of time (which probably is a waste of time now). That said, the most fascinating thing of this thread today is that a professed MD on an investing board seems to believe there's little difference between cases doubling in 3 days versus 6 days. If we're talking 55 days since the first case, that's the difference between 2^9 = 512 cases and 2^18 = 262,000 cases. Is it really possible to become and MD without a basic understanding of exponential growth and no understanding of statistics/sampling theory? (This is a serious question, not rhetorical, because I don't know the answer and I'm curious if such big holes are normal in doctors' education.) (Cobafdek: this is why I'm at the 2% rather than the 70% number for orthopa's theory. If someone doesn't understanding even the most basic concepts of exponential growth or statistics--ideas you'd learn in your first year courses--them, when it comes to a pandemic, their hypotheses about the meaning of anything they observe are likely to be worthless.)

I'd put the chance that Orthopa is right at less than 2%. But I've been continuing to mull the issue, since it's an interesting thought experiment--how can Orthopa's data point be reconciled with the 100 data points that contradict his claims? One way it could be true is if the area around Orthopa previously had a coronavirus that infected people and gave them some sort of heightened immunity compared to everywhere else. Or, maybe the COVID-19 came early to his region, but was a mutated version that happens to have a much lower rate of serious consequences. That said, I think both of these cases are super low probability, that it's much more likely that multitude of experts saying "this is a big deal" are right, and Orthopa isn't. In fact, in my case, I view the evidence Orthopa's brought to support his argument as weakening his argument since it's showing that he's confidently making large, unwarranted leaps to support his thesis. To me, this increases the chance that he's a guy who's comfortable squeezing evidence into odd shapes in order to support his conclusions. (e.g. a few days ago, 2 cases was enough for him to extrapolate conclusions about 100,000 people infected. Today, he's saying that 140,000 tests isn't enough to extrapolate anything.) At this point, I'm curious whether he's a troll or just completely locked into an incorrect mental model. I still lean toward the latter.

Over the last couple of months, I've bought calls on the VIX and sold puts on SVXY, all profitably. The problem with the VIX calls is that they're European exercise, so I ended up selling them for less than I could have because there was still a few weeks of time value left in them. The issue with VXX puts are that when the VIX is high, the futures flip from contango to backwardization, which basically means that until the VIX gets below, say 22, there will be a built in upward bias to the VXX (kind of like the VXX is short something that has time decay.) So it's harder to make money there than you might think. Also, the return of the VIX to sub-20 will likely be slower than you think. Recently, I've been limiting my options bets to 1-2 week options on SPY. They've also all been profitable, but I think my overall strategy would be unprofitable, since I've been flipping them for small profits before I get massive wins (and one 100% loss would wipe out all my wins.) Still, if I believed the virus were to be proven no big deal in 3 weeks, I'd buy at the money calls about 3 weeks out. (Because with implied volatility skew, the price you pay right now for 3 weeks isn't that much more than the price you pay for 1 week.)

Yeah, Dalal, I know it wasn't random testing. But right now, they have identified 2 cases that meet the criteria. If they test 10,000, they can see whether or not the "2 cases ==> 100,000 cases" is reasonable. (i.e. if they test 10,000 and find no cases, they'll have enough evidence to prove that whoever wrote the paper saying "two cases implies 100,000 cases" made a colossal error.) I suppose it would also say something about the number of people who have contracted COVID-19, but my point was just that it can used to refute or bolster the paper's bizarre "2 cases implies 1%" theory.

Thinking about Ohio a bit more, this is actually a great time to test that 2 leads to 1% infection rate hypothesis. If they randomly test 10K people, they can get a 95% confidence interval on the 1%, providing decent evidence of the original claim. If they test 20K people, they can do better than a 1% confidence interval. Too bad that during pandemics, nobody's thinking about expending medical resources to test theoretical hypotheses. :)