Viking

Relying on habit is a slippery slope since it only takes 21 days to 1 year to break or rather change a habit into something else. For most people, it's already 30 days since the lockdown. People have been changed imho. And they can't change back? Not the point. I didn't say spending will end, I said it may be a possibility for it to dry up for the mid-to-long term. If that's the case, it will have tangible effects. EDIT: So even if they can change back, it does not invalidate my argument. Some things never change on a longterm context. 1.) People want to own homes 2.) People want families 3.) People want to be rich 4.) People want nice things Those four things will never change. Why? Because humanity is hardwired to overcome, innovate, and push forward. Those 4 things have survived hundreds of wars, natural disasters, diseases, and thousands of years. Covid-19 isn’t going to change that. If anything on a historical scale humanity has learned to recover and adapt faster and faster from “events”. The beauty of the US model is it will adjust and move forward for all the seasons you state. The Great Recession of 2008 is the most recent example. A huge swath of the population lost everything. But over a 5 year period the US slowly got through the recession. Most importantly if fixed the big banks. And as of 2 months ago it would have received my vote for best positioned economy in the world. So i am optimistic the US will get through the current situation. Just not sure of the duration/severity/timing (this is true for every country). I am less optimistic about other economies (like Italy and even Canada, to a lesser extent). Their economies are not as adaptive structurally.

Relying on habit is a slippery slope since it only takes 21 days to 1 year to break or rather change a habit into something else. For most people, it's already 30 days since the lockdown. People have been changed imho. I disagree and think once lockdown is lifted we may see a 1-2 week period of "tentative" behavior but will revert rather quickly afterwards, as people are quite frustrated with sitting home all day and night. My guess is older and people with underlying conditions will dramatically change behavior until vaccine is available. This is a substantial number of people. Also, people who are unemployed will have muted spending. Tough to buy a house or car when you do not have a job. Even employed people will likely have big bills to pay (back rent/mortgage, higher credit card balances etc). Tough to buy a house or car if you think your job is at risk. Who is going to book an overseas trip any time soon? Who is going to book a big event (wedding etc) any time soon? Movie anyone? Sporting events? Restaurant meal while socially distancing? Yes, a small subset of the population will be wanting to party on the beaches of Florida. My guess is economic activity will be muted initially and will come back slowly. How fast it comes back will depend greatly on all the ‘re-open’ plans. If they are not national, coordinated, well thought out, executed well and effective then economic activity is likely to remain low. Lots we still do not understand. This uncertainty will not be good for the economy.

How long will the government be able to keep consumers, small businesses and corporations on life support? At the same time they are ramping up health case spending? 8 weeks? 12 weeks? At what point does the cost become prohibitive? Absent a treatment (which would provide a short term solution) what it suggests is leadership will determine which countries are relative winners and losers. (The virus is the same everywhere.)

It's hard to say - when we had the bust in 2008, QE worked because implementing it would've helped the US in the short-to-mid term. Banks free up capital, they lend that capital and businesses spend. However, if banks lend capital, and business doesn't spend because they don't know what the world will look like in 6-12 months, then what happens? Fed can't pump an unlimited amount of money in the system, otherwise, it will cause hyperinflation or deflation. Valueinvestor, QE is the part of investing that i have the hardest time understanding over the past 10 years. I think it also messed Fairfax up for many years. My learning (without understanding the mechanics) is every time the Fed begins a new round of QE shortly thereafter we get stocks increasing in price. The Feds goal appears to be asset price inflation to create a wealth effect so people spend more in the larger economy.

WW1 was happening. Spanish Influenza was one of the factors that ended it. The troops returned home. The global economy shifted from war time to peace time and was starting from a pretty low base. International trade and government spending was much lower. Rural economy versus industrial economy. I think it is pretty hard to compare.

Yellin said the key is the duration of the current recession. The longer economic activity is shut off the more severe the economic down turn. More businesses shut their doors permanently. Unemployment moves from temporary to permanent. China, Taiwan, Hong Kong and Singapore provide perhaps the best examples of what the next phase looks like. And it definitely does not look like V shaped recovery. However, recovery in every country was enabled by executing a nationally coordinated test (priority with rapid results), contact trace (built large organization to do this) and quarantine. Personal freedoms were restricted to enable recovery. And culturally the populations follow the governments orders. Even with all these efforts some countries like Singapore have had relapses and had to resort to lock down again. So it looks like this solution is difficult to execute and still not guaranteed to be successful. Most countries are going to struggle to execute an Asian strategy post-lockdown. Either they do not have the testing resources, are not prepared to infringe on personal freedoms or culturally are not able to execute (or some combination of the 3). This likely means their lock downs will last longer, their re-opening of their economies will be slower and new outbreaks of the virus will be more likely (with resulting return to lock down). This situation will be very difficult and will result in negative GDP growth. As Jurgis points out our best short term hope is treatment via the Pill. Timing? How effective? A vaccine is much further out (12-18 months). Bottom line, until we get a treatment (or some medical breakthrough) we will likely be screwed (from an economic growth perspective) resulting in month after month of negative GDP growth. Social distancing measures will remain in place. Older and high risk people will remain in quarantine. Airline, cruise, hotel, sit down restaurants, travel industries will remain in depression type conditions. Group activities (sports entertainment) will continue to be shuttered. Universities will likely remain on line in the fall. International travel will be minimal. Air bnb owners? All of these activities will put enormous numbers of people out of work. Regarding financial markets, all of the Feds actions may in the short term juice stock prices. QE always seems to result in higher stock market prices. And we are getting QE on steroids. Earnings and business prospects do not matter. I think it is likely that the Fed will be buying stocks should financial markets take out recent lows; they are ‘all in’ at this stage. And the White House/Treasury will be pushing them to do this. The good news is the US consumer is in pretty good shape. US banking system is well capitalized. Fed and Congress has been quick to respond. Canada is in a much more difficult economic situation: consumers are highly indebted, oil is big part of national economy, housing bubble. If the current recession causes the housing bubble to pop then Canada is in deep shit.

The crazy thing is we have all these unemployed people. We want to pay them for doing nothing. We also have this virus thing where we need a bunch of people to staff up a bunch of different things (like contact tracing)... Too obvious a fit? I am buying into the suggestion that Trump simply does not want to get involved. Too much personal risk. Better to let States and Municipalities struggle their way through it. Then he can come in after the fact and ‘throw some paper towel rolls to the needy’. Much better to sit in the weeds, let others fight the good fight and then come in as the dust settles with money, lots of ‘i told you so’ and look like the saviour. We lack the institutional capability to do it through existing institutions. The CDC isn't staffed to do nationwide contact tracing and neither are county departments of health. One would hope the CDC would have already created a set of best practices on testing, contact tracing and isolation of the infected, including, where feasible, isolating infected individuals away from their co-habitants (there are plenty of empty hotel rooms to use!). The responsibility for implementing would then flow down to state, then to county, then to townships/cities, then to individual precincts/wards/neighborhoods/blocks. Based on the desire to help that I've seen among my neighbors, I believe there would be a surplus of volunteers willing to, for example, deliver food to the houses of those required to stay at home because of actual or suspected infection. If the President/Governors were to announce that this level of organization needed to happen, and all of our modern communication tools, including Facebook, were harnessed, I believe many areas would be organized down to the block level within a week. But, to my knowledge, none of this has been asked of us, and nothing of the sort is being organized anywhere in the United States. I don't understand why we haven't been preparing for that, even if we hope never to have to use it. The other big benefit of federal leadership would be funding support from the President and Senate Republicans. The money for needed expensive new initiatives needs to come from congress.

The crazy thing is we have all these unemployed people. We want to pay them for doing nothing. We also have this virus thing where we need a bunch of people to staff up a bunch of different things (like contact tracing)... Too obvious a fit? I am buying into the suggestion that Trump simply does not want to get involved. Too much personal risk. Better to let States and Municipalities struggle their way through it. Then he can come in after the fact and ‘throw some paper towel rolls to the needy’. Much better to sit in the weeds, let others fight the good fight and then come in as the dust settles with money, lots of ‘i told you so’ and look like the saviour.

What needs to be done after ‘lock down’ is starting to become clear. The question is when will Trump figure it out? More valuable weeks are being squandered. With limited national direction and lack of funding at the state and local level (to hire needed resources such as armies of contact tracers) then ‘lock down’ will likely need to be in place longer. States that end lock down too early (before having infrastructure set up to test, trace and quarantine) risk seeding new outbreaks. And outbreaks in these states risk spreading virus back to well managed states. It is becoming more clear to me that a national strategy is critical to successfully manage the virus. This also is the quickest solution. But Trump does not want the political heat that will come with this strategy. Looking further out it is also clear that an international strategy is also required. This would get global economy back the quickest. We all know Trump is looking for less international cooperation not more. Bottom line, the next couple of months will be very interesting. Lots of fat tail risks, getting fatter with each passing week. A plan to defeat coronavirus finally emerges, but it’s not from the White House - https://www.washingtonpost.com/health/2020/04/10/contact-tracing-coronavirus-strategy/ A national plan to fight the coronavirus pandemic in the United States and return Americans to jobs and classrooms is emerging — but not from the White House. Instead, a collection of governors, former government officials, disease specialists and nonprofits are pursuing a strategy that relies on the three pillars of disease control: Ramp up testing to identify people who are infected. Find everyone they interact with by deploying contact tracing on a scale America has never attempted before. And focus restrictions more narrowly on the infected and their contacts so the rest of society doesn’t have to stay in permanent lockdown. But there is no evidence yet the White House will pursue such a strategy. Instead, the president and his top advisers have fixated almost exclusively on plans to reopen the U.S. economy by the end of the month, though they haven’t detailed how they will do so without triggering another outbreak. President Trump has been especially focused on creating a second coronavirus task force aimed at combating the economic ramifications of the virus. Administration officials, speaking on the condition of anonymity to describe internal deliberations, say the White House has made a deliberate political calculation that it will better serve Trump’s interest to put the onus on governors — rather than the federal government — to figure out how to move ahead. “It’s mind-boggling, actually, the degree of disorganization,” said Tom Frieden, former Centers for Disease Control and Prevention director. The federal government has already squandered February and March, he noted, committing “epic failures” on testing kits, ventilator supply, protective equipment for health workers and contradictory public health communication. The next failure is already on its way, Frieden said, because “we’re not doing the things we need to be doing in April.”

Liberty, i am not sure where you find all of these sources :-) Please keep them coming... If anyone wants to understand exactly where the US is at today, and what it will take to re-open, watch this interview. - re-opening: perhaps early June, in limited way - key enabler to reopening: nationally coordinated testing capability able to prioritize tests so high priority people get results back within 24 hours and contract tracing can happen immediately. - Today testing results are not coordinated or prioritized at a national level; sounds like a helter skelter approach (he also inferred if you pay $ you can get a very quick result and be tested every day if you want). - Gates was pretty emphatic that what is done with testing in the next 7 weeks will determine how comprehensive and successful the re-opening phase will be. - very confident a treatment will be found in the next couple of months, which will help. - vaccine is likely 18 months away (perhaps a little sooner if all goes well).

A form of what Dr Burry is suggesting is likely what we see as we move to the next stage in the battle.

Here a couple of links i found on Calculated Risk blog: COVID-19: The Square Root Recovery? https://oregoneconomicanalysis.com/2020/04/07/covid-19-the-square-root-recovery/ Three Things Will Determine If There’s an Economic Depression https://www.bloomberg.com/opinion/articles/2020-04-06/how-to-keep-coronavirus-recession-from-becoming-a-depression ...The U.S unemployment report for March foreshadowed the ugly numbers to come as the economy’s sudden stop sidelines entire sectors. The prospect of double-digit unemployment rates raises the possibility that what is now the “Great Suppression” will become the next Great Depression. This raises an important question for market participants: What separates a depression from a recession? A starting place is to consider the three “Ds” of a depression: Depth, duration, and deflation. ...One bad quarter does not make a depression. In reality, the long-run health of the economy depends on controlling the virus. Whether or not this economic collapse turns into a depression still depends on the actions of policy makers in coming months.

Definitely positive. Our President (Cuomo), who has already accomplished the highest volume of testing per capita (even though NY is among the most populated states), is now talking about antibody testing -- those with proven immunity to be let out first. Seems like a decent strategy, but the concern is that may be too small a number to celebrate "reopening". Nice to have a cautious, reasoned leader though. Just elaborating a bit about what's going on here about Denmark [Perhaps Per [CoBF member perulv] will elaborate a bit about what's going on in Norway] : Schools class 0 - 5 will open just after Easter [will create an enormous productivity gain for the parents still working from home! [ : - ) ]]. Pupils in the highest classes will start in school, too, to prepare for exit exams. The intent is to gradually & carefully build herd immunity, in a controlled & closely monitored way [& roll-back, if things start to escalate again]. It reads right to me - We will eventually end in the Stone Age, if this continues - an extreme hard lock-down on March 12th 2020. More oxygen to zombie businesses hit by this under discussion. Better than nothing, & just for starters. - - - o 0 o - - - As a #metooCOVID-19? without access to testing [as of now] to get clarity, I have today found a short-cut : I'm an inactive Danish blood donor [have been a donor since I turned 18]. About 15 years ago I deactivated my account, because I was running on/off on pain killers for a bit less than a couple years because of a bad back. Tomorrow I'll activate my account again. The Danish blood banks use the taps for COVID testing, providing data to get a handle on the dark COVID numbers. John, please keep the updates coming. It is great to get first hand information from countries that are a couple of weeks ahead of us regarding what the next phase might look like in other places :-)

I wonder if this risk (getting sued for not providing a safe work environment) slows getting back to work... https://www.theglobeandmail.com/business/international-business/us-business/article-estate-of-walmart-employee-who-died-from-covid-19-sues-company-for/ The family of a Walmart Inc employee in Illinois who died after contracting COVID-19, the illness caused by the novel coronavirus, has filed a lawsuit accusing the retail giant of failing to adequately screen and protect workers. The lawsuit filed in Illinois state court on Monday by the estate of Wando Evans says the Walmart store south of Chicago was not properly cleaned and employees were not given masks, gloves, antibacterial wipes or other protective equipment. Evans died on March 25, and another employee at the same store died four days later from complications due to COVID-19, according to the complaint.

Exhibits A and B for my point. Not to worry too much about the fools of randomness as the key concern for those who take this seriously was that policy makers would be among these people. Thankfully, we have seen the vast majority--even those that dragged their feet--take it seriously when reality became impossible to ignore. Even the guy calling it a "hoax" just a month ago now claims he was on board the serious person train the whole time! As policy makers have largely understood seriousness (though some variation depending on where you live), the systemic threat is reduced. Those who continue to minimize the threat confine a large part of the consequences of their views (ignorance) to themselves which is the appropriate outcome. TL;DR: don't waste time on the fools of randomness--I certainly will not. i watched a 45 minute documentary of what actually happened in Wuhan, China. It was a health and economic disaster. And then the disaster played out again in Iran and Italy. This was not a Hollywood movie. Not fake news. Yes, people it really happened :-) -

Greg, you might want to watch this video from March 2. The doctor was from one of the hospitals in New York. He was not able to test for the virus. No tests were available. And he was freaking out. Washington State had the exactly same problem. Doctors KNEW they had virus issues. But they were unable to test. - The CDC completely screwed up. Their screw up allowed the clusters to form in Washington State and New York. The clusters in Washington State and New York then seeded the virus in many other regions in the US. This well documented. The current health and economic costs being bourne by the US are primarily due to the incompetence of the CDC. The US did not start testing for the virus in numbers until mid March. By then the genie was out of the bottle. The CDC is a federally funded organization that takes its direction from the White House. Watch one of Trumps daily updates if you dispute how close the White House is directing the actions of the CDC. ——————————- The Centers for Disease Control and Prevention (CDC) is the leading national public health institute of the United States. It is a United States federal agency, under the Department of Health and Human Services, and is headquartered in Atlanta, Georgia.[2]

As the curve flattens (as expected) talk will shift to what is next. Put your seatbelt on as the ride could be bumpy. 1.) Businesses that rely on person-to-person contact will continue to suffer - airlines, hotels, sit down restaurants, cruise/travel etc 2.) How many small and medium sized businesses do not re-open? 3.) What happens to consumer spending? - people will be concerned about employment situation - will be needing to pay back debt taken on to weather lock down (back rent, credit card debt etc) 4.) what happens to manufacturing? - to end 2019, it looked like globe and US was already in a mild manufacturing recession 5.) What happens to US and global GDP? 6.) What happens to US unemployment? - does it remain elevated and at what level? Trump wants quick economic comeback from coronavirus, but China’s incomplete recovery hints at long-lasting problems - https://www.washingtonpost.com/business/2020/04/07/trump-china-economy-coronavirus/#comments-wrapper ...As the Chinese emerged from quarantine, factories reopened more quickly than restaurants and retail outlets. Any business that relies on person-to person contact is suffering, as consumers remain nervous about catching the sometimes fatal respiratory illness. “People are back at work. But they’re not shopping. They’re not going to restaurants. They’re avoiding public places,” Williams said. ... Yet roughly nine weeks after the authorities began urging people to return to work, many Chinese factories are just treading water. They are open for business, but lack orders. Major exporters are especially troubled since their U.S. and European customers have been idled by the pandemic. Lingering Chinese weakness is evident in a Capital Economics index that blends measures of power station activity, property sales, subway ridership and long distance travel. In mid-February, as the government began pushing people to resume work, the index stood at 22 percent of the year-ago level. By mid-March, it reached 52 percent, but today it is only 59 percent.

Not a nice move by the US. But also, Canada should have been stockpiling in Jan/Feb. Yea, its an interesting narrative and application of responsibility from some here. The US/Trump should have foreseen everything months ago and had massive stockpiles of everything one would be able to think of after the fact. Everyone else who is unprepared is the victim of Trump being an asshole. US standing in the world continues to fall to new lows. Disgusting behaviour. It is in times of crisis that you learn about the true character of people and nations. Premier of Newfoundland and Labrador takes aim at Trump over medical supplies - https://www.theglobeandmail.com/politics/article-premier-of-newfoundland-and-labrador-takes-aim-at-trump-over-medical/ Dwight Ball told a news conference today that the province gained international acclaim for the way its residents helped thousands of stranded airline passengers after the 9/11 terrorist attacks on the United States in 2001. Ball says that when the United States was in crisis, Newfoundlanders and Labradorians “acted fast and did what was necessary.”

Agreed. And no feeding the trolls. (Turn the other cheek :-)

I'm actually pretty optimistic, not based on a return to complete normal, but rather a return to normalcy. I think the frequently posted Hammer and Dance article describes nicely what can happen. If you take the Hammer and Dance article as the medium-term objective, you just need to look for ways to reduce the impact on lives. Based on results in Asian countries, everyone wearing masks dramatically reduces the R0. That makes the dance phase much easier. What's more, as each week goes by, we add to our knowledge of how to treat this disease. If we can reduce the transmissibility through masks and reduce the severity and length of time in hospital through new treatments, then we're basically back to the flu. So, I think there's a decent chance we're in a normal--with the addition of people wearing masks--by July. What about group activities (sports and work). I was surprised to read Trumps meeting with sports executives were discussing Aug or Sept as the targeted start up. That means 4.5 months (or more) of lock down for these groups. The length of time the virus will be crimping economic activity keeps getting extended out. This tells me the economic impact is still being underestimated and perhaps significantly so. Analyzing the Legal Hurdles of Bringing Back Sports President Donald Trump told sports executives that he wants leagues to resume with spectators by August or September. However, most of the logistics to return to play are out of his control. https://www.si.com/nba/2020/04/04/legal-hurdles-sports-returning-coronavirus-trump

To be fair, it’s not just the US, 68 countries have banned exports of PPE.. https://globalnews.ca/news/6769162/canada-medical-supplies-coronavirus/ Germany blocks truck full of protective masks headed for Switzerland https://www.thelocal.com/20200309/germany-blocks-protective-masks-headed-for-switzerland More important question is not whether US will provide masks but why a so-called advanced nation like Canada cannot even produce enough masks for its own people.. What I was getting at is it's not that Canada can't produce. It's that Canada doesn't produce. It mostly buys from 3M. An N95 respirator while looking simple is actually a fairly sophisticated product. So it takes time to setup an operation and a supply chain to mass produce them. You can't just flip a switch. But Canada can produce them, and so can Germany, and France, and the UK, and Switzerland, and Austria, and Sweden, and etc. They all have the technology and engineering capacity to do it. So now once the decide to do it local (for a bit more money), cause you've decided to fuck with their supply, do you think that they'll task a foreign controlled company like 3M to do it for them? Or do you think they'll have one of their local companies do it? It'll probably cost a little bit more money since the local companies are not as good at it as 3M is, but now they've already committed to spending more on masks. Expand this thinking to other medical products. A lot of them come from American companies. They're not low margin products either. So lots of shareholder value destroyed there. And the logical next step is for Canada and Europe and Asia to do something about Google, Amazon, Microsoft and Facebook (and every other US company with a monopoly type position in a vertical). If the US can no longer be trusted as a trading partner then it makes sense to me each Country/region needs local champions in all these verticals. Shades of Huawei. Perhaps similar to what China did (restricting these companies so local champions could grow). If the US is going to act like China then other countries had better get at making the transition. And this would be the ideal time to do it (when the economy is already a shit storm). The bottom line is everyone loses. Should be obvious but politics, just like in the 1930’s, will make a terrible situation much worse.

Looks like we may be the early inning of governments executing more protectionist trade policies. The parallels with the 1920’s and 1930’s are growing in number and magnitude. “History doesn’t repeat itself but it often rhymes,” as Mark Twain is often reputed to have said. https://en.wikipedia.org/wiki/Smoot–Hawley_Tariff_Act The Tariff Act of 1930 (codified at 19 U.S.C. ch. 4), commonly known as the Smoot–Hawley Tariff or Hawley–Smoot Tariff,[1] was a law that implemented protectionist trade policies in the United States. Sponsored by Senator Reed Smoot and Representative Willis C. Hawley, it was signed by President Herbert Hoover on June 17, 1930. The act raised US tariffs on over 20,000 imported goods.[2] The tariffs under the act, excluding duty-free imports (see Tariff levels below), were the second highest in United States history, exceeded by only the Tariff of 1828.[3] The Act and tariffs imposed by America's trading partners in retaliation were major factors of the reduction of American exports and imports by 67% during the Depression.[4] Economists and economic historians have a consensus view that the passage of the Smoot–Hawley Tariff exacerbated the Great Depression.[5]

The virus will be with us until a vaccine is available. 12-18 months? If you are older or have underlying conditions it is rational to avoid work (all situations where you will be exposed). Nothing to do with work ethic. Or wanting to watch Netflix. Lots of shades of grey.

Of course it's not - it's the typical armchair quarterback crap. Trump was the first world leader to close the borders, The WHO criticized him, the opposition party criticized him - since they love the Chinese Communist Party. Turns out, the President was correct - and just about EVERY major country followed suit. Any of them ROLL BACK their travel bans? NO These geniuses have all the answers. Agreed. With hindsight, that decision by Trump was a good one. I wish Canada had done the same thing at that time. I also think that his recent decision to extend ‘social distancing’ for 30 days was also a good move. I also like how he is being aggressive in removing government barriers to moving quickly with medical innovations (testing, medical equipment, vaccine etc).

This is one of the (kind of) reasons i am doing what i can to not get the virus. And my wife/kids. There is simply so much we do not understand about what the virus does to the body longer term (lungs scarring, brain etc). Maybe nothing. Maybe something. So why not be cautious until more is known :-)