Spekulatius

Is the 80k projection based including the shortage of beds and ventilators? Yes, otherwise those input parameters wouldn’t matter. With these models, the absolute numbers are probably less impotent than how the output reacts to changing input parameters. not something they can be done using the website, one would need to play with their model (which is downloadable, but that’s way more than I am willing or capable of doing).

It is very clear that the folks who said “ it’s just the flu” were incorrect. First of all, this is an investing board and this flu has just stole all the headlines and the stock market is down 30%. I don’t think a flu has ever caused a stock market selloff of 30% so from an investing perspective it’s not a flu. Second, the argument that the flu may kill 50k doesn’t hold water either. If that were the case, why did 9/11 which killed just 4000 people and destroyed some asbestos laced building caused such a reaction? Yet it caused a major recession and tremendous expenses to prevent this from repeating. The Vietnam war killed 58k US military personal - equivalent to a bad flu season? What’s the big deal? Why did a generation go up in arms about this? Clearly context matters. Even if it doesn’t matter for you personally, but matters for everyone else, it is going to impact everyone.

The Model (for which I can’t vouch for) expects max medical capacity use mid April. This assumes distancing measures in place. https://covid19.healthdata.org/projections Of course peak usage differs from state to state. 500 peak death/day for NY alone sounds pretty scary. Overall death in the US ~80k.

It doesn't have to be 100% effective. More effective it is, the shorter it is, but I saw something that ~90% reduction in interactions lowers Ro such that infections will decline. 90% is not the same for every area and not exact Depending on how familiar you are with exponential behavior, the talk of Ro may or may not be helpful. What's important is non-perfect shutdowns work if they are generally effective Italy has clamped down and the lockdown is working. If they can do it, everyone can. Yes we can!

The difference in perception how serious this epidemic is clearly split across partylines. I see it not just in this board, but also in other social media platforms I follow (FB, Nextdoor etc). I am trying not judgementAl here, but thats how I see it: Republican leanings : This epidemic is just a flu and a media hoax and grossly overstated. US needs get back to work. The cure is worse than the disease. Democrat leaning: This is not a flu, it is an serious epidemic . Highly contagious, without vaccine and it could kill hundred thousands if not millions in the US. Similar to the Spanish Flu and most likely worse. I don’t know what to make of it, we look at at the same data , but based on our political leanings, we tend to disagree on how to interpret it. Personally, I was leaning to the flu thing until late February and then I changed my opinion, as I saw what happened in Italy and did some simple multiplications probabilities , infection rates, growth and morbidity rates and quickly changed my opinion. To be fair, I also know of one Republican leaning friend, who is scared since late January. I attribute this to extensive extensive contact he has in China (he is product line manager for an US company doing a lot business in Asia including China) so he got some first hand accounts. Everyone else I can pretty much put in one bucket or another based on his political preferences.

My take is that the lower interest rates are an indication of a crappy economy, which doesn’t lend itself to lower discount rates. Japan and Europe are cases in point.

Schwab aus better for OTC stock than Fidelity. Fidelity allows to buy some OTC stocks, but many are restricted.

Last sentence is the key one and why I think the piecemeal to turn back the economy County by county doesn’t work. Air travel for example can’t really be turned back on before the US is essentially Virus free. Even if you would allow it, would people actually travel? Some would but many would not I think. It’s even harder with international flights. I guess you could do it Nation by Nation, but how long will this tear. The Airlines are all Toast if this last anywhere more than a few month.

Yay, Amerika is finally embracing communism! gets a monthly check for doing nothing, but we have to stand in line for toilet paper.

It is not optimistic, the starting point $163 in earnings for thr SP500 in 2021 is and assumes a V shaped recovery. Also Implied is no tax rate increase, which I think is inevitable with all that spending. Global supply chains may be localized, which I think also will pressure profit margins. Another datapoint - the last 2 recessions led to 50% + drawdowns. 50% drawdown would be 1650 the SP500. My conclusion is that we are above where there stocks should/could trade for using several frameworks.

Aren't we trading where the economy is in 6-12 months instead of where it is now? Not saying we won't go down further or anything (who knows), but obviously the market is forward looking. Yes, I understand that. The market also doesn’t really care about death and so forth, it’s a cold calculating machine. But my thinking is that the economy in a year will looks substantially worse than it is right now. I am just not buying into the V recovery. In any case, even if you buy the V recovery, it seems already priced in. The longer L shaped or U shaped recovery like we had in the GFC is by no means priced in. This is worse than the GFC in my opinion. Possibly way worse.

If someone had told me 3 years ago, that the economy is where it is right now and the SP500 at almost 2600, I would have thought this someone would be crazy. Not wanting to sound super bearish , but that’s how I see it.

I trimmed my positions substantially. Too many to mention. I am basically making a call this rally won’t last. I also shorted some SPY at the close for a short term trade.

No the government cannot bailout the entire economy. While the headline number of $2T is large, a lot of this is jut loans and liquidity bridges, it has to be paid back. The US economy is ~$22T in size, so $2T is roughly equivalent to one month of GNP. It is too large to bail out. The $2T is just a stopgap measure to prevent dominos from falling. They pro half will still fall, but slower and more controlled. Also as you noted, a lot of folks will fall though the crack, have no health insurance, might get sick from the virus. How to restart this is going to be a difficult task and a fine line to walk. The Eastern get back to business date seems quite unrealistic to me, but numbers will dictate what is going to happen. Infection rates need to be way doen in order to open up again and even then, it will partly feel like quarantine. As it imagine a lot of measures still remain in place like no large crowds etc. I think this year you can forget about sports for example. might actually be a golden time for esports - Formula 1 did already an esports race they found quite an audience. Another thing, think about litigation risk. You go to work, get infected though a colleague and go into the ICU. Sue the company and then get a good lawyer who proves that the companies practices were endangering employees, which I I can guarantee you almost any company does. Examples - Dirty door handles which are not cleaned, no contactless entry possible, no contactless operation of bathrooms, shared microwaves in cafeterias. In litigation friendly America, that’s going to be a feast for lawyers.

Nice to see you back and thank you. Good thing I didn't have to hold the puts anywhere close to a year for payoff. And don't forget my selling out large chunks and going to cash a month ago because of "precautionary principle" and "11 year bull market and >30% S&P return in 2019, no need in being greedy at this point". More "Twitter worthy" drivel you have no need to pay attention to (but with little in carrying costs for me). Actually, BRK was never trading below book, if you used fluid book value numbers based on the current value of their stock holdings. I don’t disagree it is cheap though. One thing that is interesting though through the epidemic episode that big tech as become the safe haven while value investments utterly collapsed . NFLX, AMZN and even FB and GOOGL are outperforming the greater stock market. Even the SAAS stocks to a great extend have outperformed. Real estate gets utterly destroyed and what seemed cheap just go cheaper and looks partly impaired.

I've been thinking about masks. I'd be ramping up mask production as fast as possible. But, I've never worn one in my life as far as I can recall, and I'd need one or two a day. Same for the rest of my family. A billion or more a week in the US. I figure it would take many multiples of current mask production. How possible is that? Regardless, I'd push hard on masks. Absent a treatment, this will at the least be around in the fall. I agree on masks. It’s the only stopgap measure available and it seem to be proven to work. That’s what the government should be working on, production capcityfor hundred millions of mask/ month.

Yeah, bailing out at the right time certainly was a good decision. I made a half hearted decision to bail on stocks, but then got in too early. Well it saved me some grief, so there is that. Now is the question where do we go from here? The news on the epidemic continues to look grim, but Germany and even Italy have turned the corner, but Spain is getting worse. The economic news will look very grim and even the GFC looks pale to what we are going to be seeing. Turning the economy back on needs to happen, but how and when? County by County downs really when people are commuting from one too the other. I live in MA on the border to NH and while MA has shelter in place, NH is still open for business. many live in NH and work in MA. Also how do you turn air travel back on when cop some cities are still under siege while others are more or less free and clear. Tough decision and I don’t have the answer. You can’t seal of states either, they why most states eventually apply the rules nationwide because nobody know how to make it work otherwise. Italy tried in the beginning the piecemeal thing and it didn’t work. Right now, it’s a traders market because the economic impact is not known yet, it we know it will be huge. At some point the picture will be clearer, but the economy might be looking way worse than many are expecting , so volatility will be lower, but stocks may grind lower just like they did from January to March 2009. I my opinion, the implied timeline that by April we turn on the economy and by May or June this is over just isn’t correct. I can’t see a reasonable secondary where this will be the case. I can see already when I venture outside they the behavior of people has changed. So I think even if restaurants re open again, people might not go back and eat out as if nothing has happened. For once, the economic situation went from being secure to record uncertainty and second, people are scared that Coronavirus infections are lurking and we have no way of knowing. Invisible Enemy are the worst. I did post a short while ago, that the president really should challenge the industry to make a gain leap in testing. It is the only way to make the invisible enemy visible. I am taking about test capacity not in the ten thousands, like we have right now and get results back in couple of days, but thousand times higher and fast - within minutes., so we can test millions and ideally every American many times over. That’s probably the flying a man to the moon project for this decade.

Value investor: Covid-19 is just a minor flu. Flu infects 10-15% of the population and kills 40-50k for a 0.1-0.15% morbidity rate. Covid-19 kills 700 1000 people. It’s just a rounding error. Yawn. Growth investor: Huge addressable market -330M people. no known limit. Doubles every 4 days. Morbidity 0.5-10%. Lollapalooza effect for morbidity when case numbers exceed a certain local density and the health care system breaks down.

Based on how people on Florida behave (Spring, full beaches) I think that state will have its moment too. Lots and lots of old people as well. Perhaps the warm weather will help, but it doesn’t seem to play as much of a role than thought, based on the countries the epidemic is spreading too. So if Trump says that the country is open for business, does it means that people actually will go back into stores, to their hairdressers or the coffee place around the corner. Certainly I wouldn’t. Went for a grocery run yesterday and put mask and a gloves on. I wasn’t the only one either, some Asian family even had the good N95 on it. The GwaiLo’s did will lesser surgical masks or some used their scarfs. I have got one handmade by my wife with some leftover med tech materials. It has some chinese letters on it, which helps with social distancing. ;D

I would agree. We are still up from the low late 2018 and the economy is much much worse. I am personally lightening up, but who knows what is happening next.

Some comments regarding the relatively low death rate for Covid-19 in Germany (article is in German) https://www.spiegel.de/wissenschaft/mensch/corona-krise-virologe-liefert-erste-erklaerungen-zu-niedrigen-todeszahlen-in-deutschland-a-c8fef5d1-9c8e-4e9d-b8cc-3f85c6b00282 Short summary: 1) lots is testing (~0.5M Tests at this point) increases the denominator and leads to lower morbidity rate 2) Health care system is holding up (even supporting the French in Alsasse in proximity) 3) Initial cases seems to have a higher percentage of young people. The initial outbreak was traced partly to folks traveling back from Ischgl (a skiing town in Austria, known for partying) which were predominantly younger people. As the disease spreads into other groups, the fatality rate could well increase. So far the trends seem to have stemmed the rise in exponential growth for infections so I think the health care system in Germany will hold up.

Yeah, the better estaimate would be to calculate how many people were infected 3 weeks ago and use that as the denominator to calculate morbidity. As far as the two strains are concerned, there are report of people who got infected by Covid-19 twice, perhaps by the two differently strains subsequently. Which also implies that getting infected by one strain doesn’t make you immune against the other. This is similar to the Spanish flu, where two strains existed and it was the second wave that killed a lot of people with a more deadly strain. Also, how do you explain Italy and now Spain?

I think that’s correct. If you are concerned about the economic domino effect, prevent the demons from starting to fall rather than go at the end of the domino line and prevent the last big ones form falling. I think that was the issue with the GFC. Of course the central banker was from GS so he would let the big banks fail, but millions of individuals and small business weren’t so lucky.

LOL, more streetsmart than the government. These guys know a bit about surviving.

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.) I think it's also a case of nobody wanting it to be true. "Oh, maybe it just stays in China and never even reaches Europe". "Oh maybe it's just a flu that will blow over" "Oh we can't trust China's numbers anyways" "Oh once the warm weather hits this will all be forgotten" "Oh we have a much better healthcare system". Etc. etc etc. New rule: When some weird shit is going down on the other side of the world, actually try to quantify the probability of it occurring globally and take an appropriate hedge, even if it seems minuscule. For a lot of Americans the simple fact applies that if it it doesn’t happen on US soil, it simply doesn’t matter. It a bit of a mixture between ignorance and exceptionalism. To some extent, you find they view everywhere in the world, but you certainly find it US much more then anywhere else. That’s why an event like 9/11 was so scaring.