Read the Footnotes

DocSnowball, James22, Viking, SamWise, and Meiroy: Thank you for your contributions. It definitely takes more time and effort to make thoughtful contributions like these to the board. SamWise and Meiroy thank you for trying to quantify the complexities of trying to construct a more robust model for the likely path and outcomes of this situation. I think for some readers of this board it will be very instructive. The real crux of the issue is what is being seen in Italy right now, which is the fact that the healthcare system can easily become overwhelmed if the curve is not flattened. Exponential growth in cases after tipping points are reached will cause case fatality rates to increase exponentially. At some point those presenting at hospital will be triaged and some will receive no treatment. In an absolute worst case the marginal patient presenting at hospital will be offered nothing and the fatality rates of a marginal case presenting will start to approach 100%. In order to avoid this doomsday situation where hospitals in a region are non-functional, enormous costs will be incurred over a longer period of time than what most of society is considering at this point. Eventually our government and our private institutions will likely function very well. If there is tragedy in the USA it will be because they did not act fast enough and an ounce of prevention proved to be worth a pound of cure at a point when we did not even have a cure and only had supplemental oxygen and ventilation to offer.

In the worst case scenarios, -6% GNP annually is too optimistic, and a year is even more likely to be too short. Maybe a really bad outcome is not likely and only a possibility that lies in the tail of the distribution, but it is easily imaginable for me, while it does not even seem to be considered as a possibility by most. Leadership and preparation will be what prevent that, and so far we seem to be lacking in both. I expect the response will improve substantially in the coming days. US Federal officials in the last 24 hours have started acknowledging that we are going to be dealing with this for more than a year. So modeling some sort of ongoing impact for 24 months might be prudent. I bought some today too. I mainly bought because the range of imaginable outcomes is too broad to ignore the possibility that we could see one of the best possible scenarios, in which case I would regret not buying. Most of my dry powder is still dry.

Agreed. Bunch of wussies. Give me 20% down *&@&ers! I am finally starting to get interested.

1. I dont think the public is being misinformed about what mild is. Honestly I do not see any of the panic that anyone of this board, or social media, or media itself is portraying. The presentation of the disease will be and can be very different for different people. As always older people and immunocompromised are at higher risk, but they always have been and always will be. This is common knowledge in the medical community and a reality we deal with every day. This goes for nearly every disease, an especially those infectious. The vast, vast majority of people who contract the virus will have moderate to severe cold symptoms, some may feel like they have the flu. As always just as investing there can be a "black swan" event and a young or healthy person dies. 2. Long term consequences for those who have had covid should be minimal to none...unless you have a restrictive or significant lung diagnosis such as severe asthma, COPD, Lung cancer, and then severe pneumonia. I would think of the long term consequences comparable to the worse cold or flu you have ever had, likely none. 3. Again I don't think that young people are being lulled into a false sense of security. Their expectation of the disease should be similar to the flu/mono/pneumonia, etc all of which happen on a daily basis to everyone. I cant remember the last time I saw a young patient that was worried about getting the flu and under estimating its effect. It just isn't pertinent. Couple of other things I think is miss construed by non medical people esp on social media is the need for testing, testing, testing. For one testing is used to treat a diagnosis. Not prevent the spread of a disease. As I mention in another post we test for the flu every year like crazy. Does nothing to prevent the spread of the disease. What does? Standard precautions!!! Sure knowing someone has covid19 would allow a quarantine but by then its way, way too late. Its been spread on, or has had potential too multiple times. A reasonable understanding of incubation time, spread via respiratory droplets and close contact with others should make this quite clear. FWIW I went down to the 20 bed ICU today. 8 beds are open. The ventilators are all ok and unused lol. ER was slow too. Idk guys, believe what you want but there is no panic here. We will see I guess. Thanks for sharing your opinion. Hopefully we will get a few more medical professionals to comment, although I suspect no one with first hand knowledge will be chiming in here for quite a while. Plus, the market will likely be a bit distracting for a while. I completely agree that testing is the number one most important thing. Hopefully something similar to S. Korean drive through clinics will be available soon in the rest of the developed world, or the Bill Gates back mail in testing program model would be another giant advance. 1. Regarding my first question, I didn't mean to imply that the public was being mislead, just that the resolution is not very fine. For the most part we have everything sorted in to three or four buckets, 1) did not require hospitalization, 2) hospitalized, 3) hospitalized with supportive oxygen, and 4) hospitalized with ventilation. Some reports indicate that the disease is largely binary, other reports indicate there is a large disparity of experiences within the non-hospitalized cohort. 3. Regarding my third question, I have heard reports from college teachers that undergraduates are openly saying that they will not comply with requests to isolate, that they can't be forced to not attend classes, that they will come to class whether they are sick or not, etc. I am looking for some way to explain that behavior. Is that simply the hubris of youth? Or are these students underestimating their risk and believing this only effects Boomers?

Gates also funded the program that discovered the outbreak in Washington. Bill Gates has a very good chance at looking like a saint or hero when this is all over.

A few weeks ago people were saying "it's just a cold, it's just the flu, it's not like it's SARS." Actually, it is SARS. In case you haven't noticed the official name of the virus is SARS-CoV-2. So the next time someone tells you it's not SARS, you can say, "actually it is SARS. SARS-CoV-2, or simply SARS 2.0."

I think at least three healthcare professionals have contributed to this discussion in the past couple of days, hopefully they and others are still with us and might be willing to respond to a couple of questions. So especially for the healthcare professionals or others well educated on the subject, would you be willing express an opinion on the following three questions? 1. My understanding is that "mild" in the case of COVID-19 is any case that ultimately was not hospitalized. That means that symptoms for "mild" range from almost asymptomatic, which is believed to be extremely rare, to something that survivors have described as being the worst experience of their lives and feeling that they couldn't breathe for extended periods of time, etc. I understand that other conditions that would be horrifying to experience are often graded as "mild" relative to the other outcomes, such as death, disability and coma. Could the general public be misunderstanding the medical usage of the term "mild" and that is creating a false sense that this virus is nothing to worry about? 2. I have heard there are concerns for the long-term outcomes and there has been some debate regarding long-term consequences for those that survive one of the worst cases of COVID-19, specifically those cases requiring hospitalization. 3. Finally, the triaging of patients and prioritizing patients with the greatest chance of survival would further bias the outcomes making COVID-19 look even more dangerous to older people and people with preexisting conditions and less dangerous to those who are younger and healthier. It seems this could create a sense of false confidence in some younger healthier people that they personally don't have to worry about their risk from this virus. Thank you in advance for any feedback that could make this community more informed and safer.

Did you even read what he wrote? Where does it say anything about spending money? Taxpayer money? Isn’t it assumed? Maybe I read it wrong, but isn’t he saying govt SHOULD take precaution? I mean govt effort or lack of efforts seems to be the core theme in this thread. I meant nothing in this post about government at all, and I don't believe that this thread is or should be about politics. Nor do I believe that arguing about domestic politics has that been the motivation of most people here. Personally, I was thinking of Taleb's comments with respect to reducing health risk for individuals and with respect to portfolio management. If there are those who would like to argue about the government response, and argue in a non-productive way as we have seen before on CoB&F, I would suggest this topic has become large enough to create a separate thread within the Politics section and potentially another thread within investment strategies to discuss portfolio management in the context of COVID-19. Ultimately we are all here as investors, but let's not forget that some of us have already lost friends or family to this epidemic and more certainly will. I have many close friends on this board who I value immensely. Many of them are older and some are older with health issues that could put them right in the cross hairs of this virus. I worry for them and selfishly I fear for my loss were there something to happen to them. I just found the original context of Nassim's comments, and I have to admit I don't fully understand the context, especially the disagreement: I especially don't understand his spat with Tetlock: Taleb's deragotory comments addressed at Tetlock seem unnecessary and I think engaging with a variety of viewpoints would be valuable in this situation. I think this board would similarly benefit from a variety of viewpoints and we could all be more welcoming by focusing on the ideas and not attacking individuals, but focusing on the specifics of an argument and responding with an argument that is even more well reasoned. From watching the interactions of several others on this board in the past couple of days I think the discussions would have been better if everyone could have refrained from the use of "you" and tried to refrain from making assumptions or at least questioned their assumptions about other people's motivations.

Well, I’m more in the Taleb camp on this one: https://twitter.com/nntaleb/status/1235663235573067777?s=21 I particularly liked his comments about forecasters. He essentially said that just because you put your seat belt on does not mean you are forecasting a car crash and just because you lock your doors does not mean you are forecasting a burglary.

Northern Italy now under lockdown. https://www.bbc.com/news/world-middle-east-51787238 So far I would rank the response of the USA's federal government's somewhere between Iran and Italy. Hopefully the USA will look more like South Korea, Taiwan, or some of the other well organized responses soon, if necessary, which I suspect it will be necessary. My impression is that many people in leadership positions have given up on the Federal government in the past week or so. I have heard and seen evidence that State and Local governments and private institutions and businesses are making behind the scenes preparations to take matters in to their own hands and start making their own decisions. I have a feeling that this will be necessary and will prove to be one of our saving graces in the USA. Interestingly, in some pandemic simulations, this sort of autonomy has led to better outcomes, and I believe there are also many precedents that also indicate that assuming a failure of leadership and ability in this case will lead to better outcomes. An interesting example is Walmart during Katrina. If we face a major epidemic in the USA, it has the potential to be many times more difficult to coordinate that the Katrina response, and so far this leadership seems much worse than "Brownie" was. By the way, we are very unlikely to be hear from the people who are responsible for making these preparations on this board. Trust me, the ones I know are too busy and about the most stressed I have ever seen them. They won't have downtime to post here. Hopefully their preparations will remain just preparations.

I thought this reply was more insightful. https://twitter.com/TomGartner/status/1236421954770538507

I agree with everything you have said, except I would like to add that I believe there are many wild cards.

https://www.businessinsider.com/presentation-us-hospitals-preparing-for-millions-of-hospitalizations-2020-3 https://i.insider.com/5e62a449fee23d58c83a9e62?width=1300&format=jpeg&auto=webp

My view, with respect to a virus, is it constitutes all the available resources of a country that can be harnessed to ensure it is managed as well as possible: you do whatever it takes as a nation to avoid the red coloured curve in Liberty’s chart. King County is now buying motels to house the surge of people who need to be quarantined. That motel is now part of the health care system. Creative solutions will be found. In the USA, there are roughly 2.8 beds per 1,000 people. Canada is a bit lower, China about 30% higher. Early reports indicated that roughly 20% of patients received hospitalization. If that were the experience in the United States, then with a population of 330 million people, we could house at most 4,620,000 patients, under the ridiculous assumption that all elective procedures are cancelled, and that all unscheduled accidents, illnesses and disease are cancelled indefinitely. That works our to 1.4% representing an upper limit on how much of the population could suffer from the illness at once without the need of temporary hospitals etc. In practice the real number would obviously be much lower. Beds are not going to be the bottleneck in the system. Roughly 19% were reported to need support breathing, primarily meaning the provision of oxygen. More disturbingly, 5% needed assistance breathing. So the real limit is likely not the number of beds or the number of respirators, but the number of ventilators. Making things worse, many needed ventilation for weeks. If 5% of those affected need access to a ventilator, that provides a much lower estimate of the bottleneck and system capacity. There are roughly 20 full feature ventilators per 100,000 people in the USA. Doing the math again with 5% needing access would give you an estimate of a maximum capacity for 1,320,000 people to be sick at once in the USA, or only 0.4% of the population. Again these estimates assume no elective procedures and no other illnesses. The number is a little fuzzy because access varies substantially by region, and ventilators can be repurposed from the OR, but might need reprogramming which has been done before in these types of situations. Given estimates that 40% of the population could contract the virus within the first year, it quickly becomes evident that the system capacity could be exceeded. When the access to oxygen therapy and ventilation is not available, the outcomes previously were terrible. The death rates absolutely skyrocket. If the patient needs oxygen or needs life support and it's not there, it will not go well for that patient. Standard of care may have already improved, and social distancing may help dramatically. Every days delay might make a difference in the outcomes. In that case these inputs may not be relevant. Early detection seems to make a big difference. Antiviral treatments might also make a big impact. So although the bad news is that this is a exponential process with multiple tipping points, and when the final tipping points are crossed the case fatality rates skyrocket. The good news is that this is not a determinate process, we are all players in the game and can change the outcome. There are many things that we can do and that have already been done to delay the spread, to buy time and to prepare. Hopefully leadership at all levels around the world will improve. There are many encouraging reports along those lines in North America today.

I work in healthcare. The only advances that we have come up with in that time that are effective against this are 1) hand washing, 2) contact isolation, 3) mechanical ventilation (but by this point it is already way too late). Also, we severely lack # of ICU beds and resources which will become apparent soon. It is already apparent we lack resources if you look at how testing for this has rolled out. Can someone help me reconcile dalal's (and some others' I've read, including healthcare professionals) view that we haven't really made advances in fighting this stuff and this headline today from Gilead / Seeking alpha. how should one handicap this? Gilead up 3% ahead of expected COVID-19 drug data readout Mar. 6, 2020 1:56 PM ET|About: Gilead Sciences, Inc. (GILD)|By: Douglas W. House, SA News Editor Evercore ISI's Umer Raffat says that preliminary data from a China-based study of Gilead Sciences' (GILD +3.4%) remdesivir for the potential treatment of COVID-19 could be available this month, ahead of the expected release in April. The study began in early February at Wuhan's Jinyintan Hospital, in the epicenter of the outbreak. Health experts believe that the antiviral will show sufficient efficacy to warrant widespread deployment in an effort to corral the outbreak. A little over a month ago, the first confirmed case in the U.S., a man in Seattle, responded well to treatment. All symptoms, except his cough, resolved within a week. Remdesivir (GS-5734), a nucleotide prodrug that blocks a key enzyme needed for viral replication, is also being developed for Ebola virus infection. I agree with Dalal for the most part, but having studied drug development, I would also say that there is some chance we will get lucky and a known agent or preexisting drug may prove efficacious. Since it is new, the search for a treatment for this novel virus might prove to be low hanging fruit where drug development is as easy as it was 20-60 years ago back when random assay's might get lucky. In the old days it was as simple as throwing pasta against the wall to see if anything sticks compared to what most pharma and bio research consists of today. So there's a chance we will get lucky. We might even get very lucky. That doesn't mean the risks to society should be dismissed, even if we get lucky. If we manage to dodge a bullet, it won't mean there was never a bullet.

I was thinking, but did not write, "but who knows what happens from here. The response will probably be non-traditional and unexpected". That would have been an insightful comment then and may remain an insightful comment for months to come. There's a lot of following the letter of the law, but not the spirit of the law. All sides can play the game, especially with a parliamentary system with such an emphasis on precedent and so many obscure precedents.

Yet another blow for BoJo, Brexit, Putin, election meddlers, and others. Letwin amendment passed. Boris Johnson required to ask EU for delay until January 2020. No deal Brexit prevented. https://www.theguardian.com/politics/2019/oct/19/mps-put-brakes-on-boris-johnsons-brexit-deal-with-rebel-letwin-amendment

Anyone who doesn't believe that humans are having a massive impact on the environment is a little nuts or just has some self-interested reason to deny the obvious, in my opinion. Forecasting the results of that impact is very difficult though. In this respect the challenges of accurate forecasting are very similar to investing. Any climate change event would obviously be a low frequency event, and low frequency events are particularly hard to forecast accurately. Plus with low frequency events, just because the outcome was not what you forecast does not mean that your methodology was wrong or even that your forecast was inaccurate. In that respect it's also similar to derivatives or insurance. Just because the outcome was such that the insurance did not pay out or the option expired worthless does not mean you made a mistake in buying insurance or an option. These systems are also so complex and there can be unexpected factors. An externality can take what was a good forecast and make it inaccurate. Two good examples are forecasts for power supply needs in the 1970s and peak oil forecasts from the 2000s. Given the information available at the time both forecasts were probably the best that could be done and it likely would have been prudent to build power infrastructure and to reduce oil consumption based on those forecasts. The problem is that energy efficiency increased well beyond expectation which meant that we ended up with excess generative capacity rather than a deficit and fracking technology delayed peak oil by decades. The problem is whether you want to bet on some deus ex machine externality saving you, or whether you want to try to plot some prudent course based on the best information available. What I don't get though is how we have gotten to the point that we have nutcases who think the world is going to end tomorrow, or in five years or ten years. That part just seems crazy. I fear someone has set out to manipulate them. It's also interesting that a major ecological issue is just having too many people. Some countries population control policy is to just export people. If you wanted to combat a population explosion, one thing you would want to do is strictly enforce borders to make it difficult for countries to deal with their population problems by exporting people. It's strange to me that these climate activists also seem to favor open borders. Yet another reason it would logically make sense for the US democrats to steal back the immigration control platform from the Republicans. I guess they are more concerned about demographics and polling rather than logic. It seems they have prioritized building a coalition instead of building a logical platform, and those efforts haven't been that successful either. Finally, another issue that doesn't make much sense is that so much worry is being put in to the end of the world while people are being killed by pollution on a daily basis. This a problem with attentional issues and cognitive biases. Americans put so much energy in to worrying about things like protesting the gulf wars while estimates were that simply by driving SUV's vs cars we were killing more people every year than all American that were killed in the gulf wars. That is an attentional issue, we are like asteroid fearing frogs in the pan, we get used to the water rising in our pan around us and instead we worry about the asteroid that might get us some day.

Yes. Since most of us probably have no clue what we are talking about on this subject, it would seem to have more in common with the Politics section. ;D

BTW - back to the original post for a quick sec. Anyone else noticed that this bolded statement is plainly untrue. Here is Wedgewood's holdings of BRK.B shares over the last few years according to the 13Fs. He actually started selling in late 2015 (when BRK got cheap and very near Buffett's 1.2x book value buyback level). There was more selling there than this year. How does one reconcile his statement and his many media appearances as a BRK bull with his actual record? Perhaps I'm missing something. wabuffo Nice find. That seems to be further indication of my point, which is that they sound more like a contrary indicator than anything else. https://www.morganstanley.com/wealth-investmentsolutions/pdfs/uma/wwp-1.pdf If you check out the Morgan Stanley doc linked above, you will see net returns have substantially underperformed their index in every time period presented. Also, they actually describe themselves as large cap growth, but from the Morgan Stanley doc, you can see the portfolio is primarily mega-cap, not large cap. I won't argue with their assertion that they are growth investors, although I suspect there is a good bit of momentum there, too. Growth and momentum are a bit hard to separate though, so I can accept just calling them growth investors. The most impressive part of their portfolio is that fact that they managed to achieve an R^2 of 0.96 over the past 3-year period. It requires effort if not skill to attain such a high R^2 with only 18-22 positions. I have noticed that closet indexers are getting better at their craft, and this might be yet another example. What is interesting is that the R^2 was so high and yet 10-yr net returns trailed their index by roughly 4.25% per year. Is it possible that they actually sold Berkshire because it was introducing too much of an active management risk component to the portfolio, and therefore created career risk for management if the portfolio started to drift from the index?

I was hoping that this thread would be differentiated from previous "who's worth reading on Corner" types of threads by putting the focus a bit more on the process and skills of contributing well. Wrister, thank you for taking a moment to share your thoughts and for expressing yourself through "rational, independent analysis". There is obviously no one right way to contribute and we benefit from different styles of participation, so it would be great to get more input along the lines of what Wrister contributed. For those of you who stopped by to accept a round of applause (Wabuffo, SharperDingaan, Viking and Ben Hacker, for example), would you be willing to share some similar analysis? Some possible starting points: What you like to see in posts by others? What about your own background and process contributes to others appreciating your contributions? Do any of you have rules or guidelines you use to think about when deciding whether or how to post? Do you think about your reader when posting? If so, how do you think about readers? Thank you in advance for keeping it a positive, constructive conversation.

We are at a point in the markets that might prove to be the end of one of the longest and worst time periods for the relative performance of value investors. To abandon Warren Buffett or any value investor at this point may say more about the person removing their funds than about Warren Buffett or any other (formerly) great value investor. One qualitative indications of this situation is that Justin Sun, a cryptocurrency promoter paid $4.6 million to have lunch with Buffett in order to explain to Buffett how he was mistaken about cryptocurrencies. He sought media attention and talked about how he was going to educate Buffett. Almost immediately after attracting attention to himself, he was investigated, accused of fraud and criminal activity, and his business seemed to collapse. As far as his coin, it has fallen from an all-time high last year of 0.22 USD to 0.016 USD today. So much for TRON being a store of value. It looks like Buffett's statements that cryptocurrency is a "gambling device" or "rat poison squared" are more likely to stand the test of time. People who claim that he has lost touch risk eventually looking like the people who said the same thing in the late 1990's. It's hard for anyone pursuing a sound, conservative policy to look good on a relative basis when surrounded by bubbles inflated by easy money monetary policy.

And he also deserves our appreciation for keeping out the grifters that would otherwise try to join the party.

At a recent CoB&F meet-up, a board member was speaking about how much he appreciated the some of the great contributors to Corner, and he specifically complemented Packer16. He mentioned how Packer is always professional, always respectful and always concise and to the point. I would also say that Packer is generous with his time and really shows his passion for investing by always being willing to respond or contribute to a conversation. I especially appreciate how Packer is always respectful and professional in his posts as many others here are. I hope that this thread can be an inspiration to bring out the best in all of us and to inspire us to be even more collegial and helpful to each other. I'd like to start us off by asking Packer: What are your thoughts are on how to be a great contributor to CoB&F? Are any tips he'd like to share for people who would like to improve their contributions to the board? Are there any other board members you'd like to thank and ask for their thoughts? I asked Packer via email in advance if he'd be willing to participate in this discussion and to try to widen the discussion to more members a he said he thought it was a great idea. I also noticed how many of the great contributors to CoB&F stopped by this thread (http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/poll-have-you-set-the-politics-message-board-to-ignore/) to contribute, and it was interesting to think about how each of them contributes in different ways. I hope some of them will join in this conversation by naming members whose contributions they appreciate and naming the behaviors or contributions that they appreciate. I've also noticed that those members who search for the elusive 10 bagger really appreciate the input from each other, so it might be interesting to hear from them and their unique 1000+ page long relationships.

CTO has 5 different segments. Several of those segments have significant geographic dispersion as Packer mentions. In addition it is hard to see common themes in the assets within each segment. That would not be an unusual situation to find in REITs. To me the portfolio looks like a "jack of all trades, master of none" sort of situation or at least that is a risk to consider. When I see a portfolio like that in a REIT, I immediately start questioning the history of the company and the quality of the management and culture that produced the portfolio. Personally, I believe portfolios like that can be the outgrowth of issues specific to REITs with respect to management and manager compensation, perverse incentives, and other agency issues. I believe these agency issues specific to REITs result in many of the issues with REITs mentioned previously by other commenters in this thread. Regarding the potential for an acquisition, if I have accurately described the portfolio, another issue that would be whether it will prove harder than anticipated to find (or even imagine) a single natural acquirer. If acquired, any premium might be lower than you might hope if the acquirer is taking on some properties they see little value or alignment in. The longer it takes for management to work through the portfolio and position for sale, the lower your IRR and the longer you're an investor with what may be questionable management. The more complicated the M&A, the longer it will likely take and the higher the drag. That doesn't mean it won't work out, but the longer it takes the longer you might be on a ride that is becoming increasingly frustrating.