Viking

I am shocked that people do not understand the absolute importance of doing everything possible to slow this virus in the very early stages. And every stage after that. Sounds like people still do not understand this virus and its potential to cause a severe human and economic tragedy. We have a real world example of what happens when a government does not take the issue seriously and do everything possible to slow this virus in the early stages: Wuhan If you do not find a way to slow it the virus it will overwhelm your medical system. If you do not understand why, then you need to educate yourself. If you think this virus is simply a little worse than the flu (so what's the big deal?) then you need to educate yourself. Holy shit! I posted a video of what Wuhan has been through and what they had to do to get the virus under control (re-posted below). Watch this video if you haven’t. Their key mistake was their inactivity the first two weeks. The incompetence of the government resulted in a human and economic tragedy. - And if you want real-time information of how well the US is currently responding to this virus I posted this CNBC interview from yesterday. The doctor (who is on the front line) explains in very clear language what the issues are and what needs to be done. -

Thought provoking post. Why does it blow up in some areas and not others (in the same country)? Making me think :-)

So if this is being "handled" incorrectly, what is your hypothesis? Is it: 1) People in the US are actually getting sick from Covid-19, but are electing to not seek medical help? 2) Doctors across the US (who generally work in private practice and are not public employees) are treating people for respiratory illness, they suspect Covid-19, but are failing to inform local public health authorities? 3) Local public health agencies in thousands of cities in the US are collaborating to not test people to confirm the existence of Covid, and they are also collaborating to not forward presumptive diagnoses or suspected cases to the state public health agencies? 4) The 50 different state public health agencies are in cahoots to hide the real numbers from the federal government and are forwarding incorrect numbers to the CDC? So, in your book, where are the facts being hidden? SJ SJ, did you watch the 8 minute CNBC video i recently posted? I think the doctor more than answers your question.

LOL Russia. 3 cases. 2 cured. They must be rigging the virus. Im still waiting for someone to connect why the likely or even less likely and more severe scenario warrants, lets say, Google losing $100B in value? One quarter of really ugly numbers? Two? A year? How ugly should those be? Lets say it goes on for a full year and figures contract 35%! Surely a rational investor would pay, lets say 20x trough earnings for a company like Google. Is the doomsday scenario 11% downside? How scary. No one seems to be quantifying anything in any terms that translate to anything of significance for investments. And no one has really answered the question, what if we only end up with numbers that resemble the flu? Does that kill the markets? I mentioned early last week how people I was speaking with were telling me restaurants in Chinatown were seeing traffic down 40%. And that people in other parts of the country have noticed nil. So obviously the effects will ripple into some areas of life. Others probably not. You want to give me Madison Square Garden at a $5B EV because of a year of the flu? OK.... give it to me. All day. If nothing else, thing is perfect long/short territory. You'll likely have such volatility for a short while that you dont even need to be a good investor just cover shorts when market goes down and flip longs when it goes up and gradually taper short exposure as this plays out. I think the real economic risk is if the US has to lock down regions where this really breaks out. Kirkland, Washington will be the first test and we should know more in about two or three weeks. If lock down is the answer then this will cause significant economic disruption. After that, it really depends how many ‘clusters’ in the US are incubating currently. Because of pretty much no testing the past month one has to assume a fair bit as this virus is very contagious. It is like a small meteor randomly hitting a region in the US. Not causing a huge amount of death but causing short term economic damage. We just don’t know how many meteors are coming and what their size will be. The crazy thing is we still know so little. Will warm weather slow it? Perhaps, but don’t know yet. Will it resurface in the fall? Probably, but don’t know yet. Will it ‘bomerang’ and re-infect already hit areas? Don’t know. Bottom line, fasten your seat belts as the ride is just getting started. Looks to me like the bond market sees what is coming with the yield on the 10 year treasury down again today to 1.12%. The stock market? Up 5%. It is rallying because of expected central bank easing. Not sure that is going to help in this situation.

If you want to hear the unvarnished truth of where the US is at and what is coming next watch this CNBC video. Dr. Scott Gottlieb, member of the boards of Pfizer and biotech company Illumina and former FDA commissioner, and Dr. Matt McCarthy, an infectious disease physician, join "Squawk Box" to discuss the latest on the coronavirus outbreak. NYC ER doctor: I have to 'plead to test people' for coronavirus Guest 1: Dr. Matt McCarthy - The problem right now is I still do not have a rapid diagnostic test available - In New York State 32 tests have been done. That is a national scandal. - We know there are 88 cases in the US. There are going to be hundreds by the middle of the week. And thousands by next week - The message today we are hearing from this administration that the risk is low, that things are probably going to be OK, that you don’t need to change your lifestyle. That is simply not true. - You are going to see widespread disruption to daily life. Do not believe the false reassurance. - We are hearing that life is going to go about normal. This is just not true. - The longer we wait to get testing up and running the worst this will be. - A week or two from now is when we will begin to get real information. Now we are still largely flying blind. Guest 2: Dr. Scott Gottlieb - A vaccine is a year or two away. - Hopefully this will start to dissipate in July and August - We need a backstop in place – it is likely going to come back in the fall - For a while this is going to be regional. We are probably a couple of weeks away from significant measures in Washington state. - There is probably low thousands of cases currently in this country 

Stubble, you make excellent points. We will find out in the coming months how well the government in BC is doing. I would think that testing is an important part of the plan and at least on this metric they are executing.

Um... I for one would like to know how the virus is spreading (or not), for my own and my family's health, if for no other reason. How is this controversial? Its not controversial. There are other website that tracks this stuff and plenty of information on cases being updated regularly. There is a difference between that, and say purposely peddling propaganda and fear mongering for no reason other than clicks or hatred of the president. One is useful, the other, serves no purpose. As I pointed out earlier, several of the big left media outlets have entirely reconfigured their websites to play in to these things. How does the "total tested" column have anything to do with your family's safety lol? If you think its an issue, take precaution. If you dont, do whatever floats your boat. Heck, they could test 50% of the population and tomorrow its meaningless because of spread and transmission. The "coverup" part is whats laughable, and you can clearly see the agenda if you spend 3 minutes looking around that fellows page. Greg, here is a real example. The provincial government where i live (British Columbia) published on the weekend that they had performed well over 1,000 tests to date (and 1,400 total as some people were tested more than once). To provide perspective, they said the US up to that point had performed less than 500. The population of BC is 4.8 million. The population of the US is 328 million. To put this in perspective, if the US government was testing at the same per capita rate it would be up over 68,000 tests. It had done less than 500. This informed me of two things. 1.) Our provincial government is testing a shitload more people than the US. That made me feel better about our level of preparedness. 2.) the US has completely missed the boat on stopping the virus from quickly getting established in the country. This is the most important step in the whole ‘deal with the virus’ playbook. WTF? This then helped me decide to not go to Oregon on vacation in March. It also has resulted in me moving my portfolio to cash (as i think this will likely impact the broader economy in the US in the coming months). Maybe there is no impact to the broader US and global economy; i am comfortable forgoing some return until more is known. I hope the US continues to publish lots of statistics. Just like i hope Canada and all countries do. Source data will help individuals understand how their governments are doing and hold them more accountable (particularly when they look to be underperforming). The fact that both sides are going to politicize everything is not a reason to stop the flow of source information. If we are told to trust Donald Trump to do the right thing i think we can all agree that would be another big mistake in trying to manage this virus (and a few have clearly been made already). We all can agree that he is not to be trusted, especially in this situation (and that is not a political statement - we have 3 years of proof).

If you do not test for the virus you will not find any cases. If you do very few tests you will find very few cases. I think the math is pretty easy to understand. The US is not yet testing for this virus (in any meaningful way). The article below says the US has done a total of 459 tests (the article is dated Feb 28). Now that might be the right number for the US. Perhaps there was no need to test many people in the US during the month of February. I think in the month of March we will see much more testing buy my guess is it will take a few weeks to ramp up (the testing). As more testing is done we will better understand what the virus is doing in the US but it will likely be a couple of weeks before we have an accurate picture. The United States badly bungled coronavirus testing—but things may soon improve By Jon Cohen Feb 28, 2020 - https://www.sciencemag.org/news/2020/02/united-states-badly-bungled-coronavirus-testing-things-may-soon-improve “Speed is critical in the response to COVID-19. So why has the United States been so slow in its attempt to develop reliable diagnostic tests and use them widely?” “The rollout of a CDC-designed test kit to state and local labs has become a fiasco because it contained a faulty reagent. Labs around the country eager to test more suspected cases—and test them faster—have been unable to do so. No commercial or state labs have the approval to use their own tests.” “In what is already an infamous snafu, CDC initially refused a request to test a patient in Northern California who turned out to be the first probable COVID19 case without known links to an infected person.” “The problems have led many to doubt that the official tally of 60 confirmed cases (as of Feb 28) in the United States is accurate. “There have been blunders, and there could be an underlying catastrophe that we don’t know about,” says epidemiologist Michael Mina, who helps run a microbiology testing lab at Brigham and Women’s Hospital. “It’s been very complicated and confusing for everyone with almost no clarity being provided by the CDC.”

Greg, well laid out post. My experience is most Americans will only pay attention when it hits the US and in large numbers. Will they change behaviour with what is happening in China, South Korea, Italy or Iran? No. Perhaps my spidey senses are wrong on this virus and the US escapes with few cases and little impact. If this is the case then investors are getting a fat pitch right now. —————————- I read the thread from page 1 (as i actually ignored it for most of the first 20 pages of posts). Crazy the speed at which everything has developed and the scale of the tragedy to those closely impacted. Hat tip to Muscleman for nailing the outbreak; hope the rest of your family is ok :-) I was in living in Toronto when SARS hit. Crazy what rational people start to think when in the eye of the storm.

By far the most level headed logical approach to this situation. So can someone please square what this ‘level headed’ guy is saying and what we are seeing in China, South Korea, Italy, Iran, Japan? Why are these governments instituting such extreme measures (shutting down whole regions) to contain the virus? Clearly some pretty smart people are taking the other side of the argument that this virus is a serious health problem (and not just another flu). 1.) Barry from Texas@solar2029 46m Replying to @ElonBachman “2 months of data is not enough yet... incubation period is 1-2 weeks and disease course is ~1-2 weeks ... even with say 0.2-0.5% CFR - still 2-5x flu with higher transmissibility than flu - also ~5-15% end up hospitalized or in ICU - huge$$$ and strain” 2.) @merlinvestor 2h Replying to @ElonBachman “Hands down biggest issue is strain on the health system. I have zero faith in china data but in Northern Italy, 1 / 11 goes in ICU.” 3.) Merl investor@merlinvestor 2hReplying to @ElonBachman “Old people survive this thing *IF* they get proper care.. Lockdowns slow the spread so that health system can keep up. Therefore economic impact of the virus is real.”

For those who think this virus is a short term blip watch this video on U-tube. Gruesome stuff. No sugar coating. One could make the case the media (and the WHO are asleep at the wheel). I am not suggesting what happened in China is going to happen in the US or elsewhere. What I am suggesting is this virus is a serious problem that is still being underestimated. Let's hope I am very wrong. It has been an absolute tragedy to those who have been affected. It has been consistently underestimated by health authorities. It is only after an outbreak happens that authorities take it seriously. And of course, at that point in time it is too late for those affected. Coronavirus: How the deadly epidemic sparked a global emergency | Four Corners - China is at the epicenter. Fortunately, they have been very transparent through the entire process. The information coming out of China is excellent. They are saying things are getting much better so I believe them. Just a short term blip to their population and economy. Should be back to normal soon. (Sarcasm, just to be clear)

Cherzeca, my read is people are not panicking enough right now. 450 tests in all of the US? Really? People need to call their elected representatives and tell them to get the necessary resources allocated to this issue. A month ago! Why? Look at the devastation when an outbreak hits... northern Italy, Iran, South Korea etc. There is a reason health professions are sounding the alarm bells. These are smart people and they are genuinely concerned. Unless handled very well, this virus will become an even bigger health/economic problem for all of us. We are all in this together. Does anyone think the US is the global leader in how they are handling this virus? Maybe we need a little panic to get people focussed on doing what’s needed.

Greg, i the more i read the more i think the US is just ending the first inning of dealing with this virus. Look at the carnage in markets already. My province (BC) with a population of 4 million says it has up to now done 2X the number of test versus the entire US with a population of 327 million (as of 2 days ago). 1,012 versus 459. My guess is BC is not testing people who should not be tested. What this tells me is the US has not been testing incoming people nearly enough. So there is a very high likelihood the virus is now in the US in multiple locations and silently spreading. There was a window to vigorously test and dramatically slow the spread of the virus from late Janaury until now; the US did not do this. The proof of this starting to morph and really get out of control is when cases are found that cannot be traced to a known source. And these are just starting to pop up in the US. If this thing breaks out in the US in multiple locations then look out below. The US is not ready to deal with a pandemic. I am sorry if i sound all doom and gloom. But i see no facts (i.e. US has been vigorously screening) to give me comfort that this is going to blow over in the next week or two or even month. All i see are red flags on this issue. Regarding when to get back in i agree that some stocks are starting to look cheap. And i will likely start to buy if markets continue to sell off. The problem we have from an investment perspective is we really have no playbook. Yes, there was SARS and a few other outbreaks. But each one is so different it is not really possible to compare. Bottom line is we still do not understand what we are up against with this virus. The news flow will likely get worse from here. The impact on the global economy will get worse. This tells me to be patient. Yes, stocks could be higher in 6 months and the bull market will re-emerge; perhaps this time will be different. - https://globalnews.ca/news/6610416/bc-covid-19-testing-more-than-united-states-premier/

Gregmal, i think the general population in the US is still in the Disney stage of this virus; it is a concept but not a reality. People in parts of Washington State are graduating to the next stage; no longer a concept but a reality. When the fear stage hits people start adjusting their behaviour pretty quickly. We were planning a family trip to Oregon for March spring break. Not anymore. One reason is the risk of getting stranded and quarantined. Another big reason is the insane cost of medical care in the US; uncertainty around medical costs in the US (coming from Canada) should someone need care; yes, we are covered through our provincial health plan for some things and there is travel insurance but this can get quite messy depending on the fine print. Why take the chance is what we are thinking. My son has a class trip scheduled for April to Oregon for a Shakespear festival (60 people). My guess is it will be cancelled; there is no way the school will be taking on the risk of travel to the US with this blowing up. This is real economic loss and will quickly start to add up.

So much that is not understood about the virus... 14% of Recovered Covid-19 Patients in Guangdong Tested Positive Again - https://www.caixinglobal.com/2020-02-26/14-of-recovered-covid-19-patients-in-guangdong-tested-positive-again-101520415.html

Expert: There's a 'million-dollar question' surrounding coronavirus https://finance.yahoo.com/news/coronavirus-contagious-winter-204159834.html Other experts have asserted that the virus may simply become a permanent part of illnesses that transpire as a result of cold weather, like the common cold or the flu. Marc Lipsitch, a Harvard epidemiology professor, told The Atlantic that if the virus continues to spread and be as severe as it is now, “cold and flu season” could become “cold and flu and COVID-19 season.” Other infectious disease experts echoed a similar sentiment. "We know respiratory viruses are very seasonal, but not exclusively," William Schaffner, an infectious disease specialist at Vanderbilt University, told CNN. "One would hope that the gradual spring will help this virus recede. We can't be sure of that." Regardless of whether the coronavirus is likely to be a winter phenomenon or not, "this is going to be with us for some time — it's endemic in human populations and not going to go away without a vaccine," Amesh Adalja, an infectious-disease expert at the Johns Hopkins Center for Health Security, told Business Insider.

The key problem for investors right now is ‘headline risk’. Fundamentals are not going to matter for a while. Everything i am reading right now tells me the US is failing badly in how it is handling this developing crisis. And the key factor in how severe the outbreak gets is how it is handled in the initial stages. This tells me the ‘headlines’ are going to get much worse in the US. And political leadership are going to make it even worse. We may ge at the early stages of a slow moving train wreck.... Equity investors are going to see their resolve severely tested as we see 1,000 point swings (both ways) in the coming weeks and months. Here is a recent negative example of ‘headline risk’: China PMI horror show to trigger Q1 downgrades https://asiatimes.com/2020/02/china-pmi-horror-show-to-trigger-q1-downgrades/ China reported its lowest purchasing managers’ index (PMI) figures in 15 years as the coronavirus outbreak and the glacial pace of resumption after the Lunar New Year holiday thwarted economic activity. The data has raised doubts around claims by Beijing about companies making a high rate of work resumption. This has sent analysts scrambling to rework their quarterly GDP forecasts as the world’s second-largest economy reeled from travel restrictions, supply-chain disruptions and a lethargic resumption of business. China’s Purchasing Managers’ Index in February plunged to 35.7 from 50 in January. This is the lowest reading since January 2005 when it was first released and even lower than November 2008’s figure of 38.8 during the Global Financial Crisis. The market had expected a reading of around 46, according to a Reuters poll and this shocking data had analysts recalibrating their numbers. “The sharp drop in China’s manufacturing PMI in February reinforces our view that the normalization in economic activity will be delayed, as reflected in high-frequency growth trackers,” ANZ economists Raymond Yeung and Zhaopeng Xing said in a note.

The key problem for investors right now is ‘headline risk’. Fundamentals are not going to matter for a while. Everything i am reading right now tells me the US is failing badly in how it is handling this developing crisis. And the key factor in how severe the outbreak gets is how it is handled in the initial stages. This tells me the ‘headlines’ are going to get much worse in the US. And political leadership are going to make it even worse. We may ge at the early stages of a slow moving train wreck.... Equity investors are going to see their resolve severely tested as we see 1,000 point swings (both ways) in the coming weeks and months. True, but is this not one of, if not the biggest argument in favor of active managers and astute capital allocators outperforming? The saying "fundamentals dont matter" is valid on the way up and on the way down if you are rationalizing cash yielding zilch. But on the way down, how is people not caring about fundamentals not a huge advantage? The worst thing that can happen, when people dont care and fundamentals dont matter, is multiple contraction, however history has plainly shown us that this only really sticks to things that deserved it. IE who suffered long term from 08? Probably only the financials. Everything else went back to normal and received healthy multiples. Here? Its probably retail and travel stuff. Except retail already carries a shitty multiple, unlike say, financials did in 06. I think if we talk about bias, the big one here is a lot of people who have thought valuations where out of line for a long time see the market crashing and think "I was right, and its about time" and then anchor to that in assessing how much more it "should" go down. But the two are totally unrelated. I mean theres people in that crowd who have thought valuations where out of line since 2013.... Its similar in thought to what I experienced in YE 2018. Everyone I talked to about why the market crash there made sense, at least the ones with semi intelligent rationalizations, gave some kind of derivative spiel about "the Feds been propping things up and oh we were in a bubble all this time", but at the end of the day the market didn't just wake up in November 2018 and go "shit, today we're going to abandon everything thats mattered for the last decade or so and now only consider "this"...thats just not how it works. Further, as far as spread goes, I am curious to see how many cases are found in warmer weather regions. Typically these are much lower. Which could create opportunities in those areas. Particularly places like Florida and Texas. And then for the rest of us, Spring is 3 weeks away, which may bring on some weather related relief, but who knows. Its not hard to see, if say containment is successful at least until warmer weather, there being a vaccine by October/November of next year. Thats often more time than it takes to generate one for the annual flu. I am in the active management boat :-) My goal is not to stay in cash forever. The decision will be: 1.) when to start buying 2.) what stocks 3.) how fast to be more fully invested Not easy. But i do enjoy the journey (although it is stressful at times) And the input from this board is a great help as well :-)

We will find out in the coming months how individual countries are handling the outbreak. My focus on the US is i am coming at this from an investing perspective. If things get ugly in the US then financial markets are going to tumble.

The key problem for investors right now is ‘headline risk’. Fundamentals are not going to matter for a while. Everything i am reading right now tells me the US is failing badly in how it is handling this developing crisis. And the key factor in how severe the outbreak gets is how it is handled in the initial stages. This tells me the ‘headlines’ are going to get much worse in the US. And political leadership are going to make it even worse. We may ge at the early stages of a slow moving train wreck.... Equity investors are going to see their resolve severely tested as we see 1,000 point swings (both ways) in the coming weeks and months.

BRK; decided to lock in my still small gain of 1.5% for 2020 (total portfolio) and move to cash. Too many unkowns that are important inputs to investment decisions (like that will US GDP, corporate profits etc be in 2020?). Will know much more in the next month :-)

I am looking at it from four angles: 1.) market was up 35% from Dec 2018 to Feb 2020. Likely now fairly valued pre-virus. Now let’s look at the impacts of the virus: 2.) current economic impact to China (GDP): bad and will take time for economic activity to recover; risk to downside (takes longer than a couple of weeks or a month for China to get back to normal). 3.) impact to global supply chain: bad and impact is only now starting to be felt. How many companies in China are still shuttered? How many are back up and supposedly running but experiencing staffing issues? Needless to say it will take some time to ramp up production. Companies outside of China are not issuing new guidance yet because they can’t quantify the issues yet; this will change and downward revisions to earnings and profits are coming in the coming weeks and perhaps months. 4.) economic impact of virus arriving in US in numbers: this will slow economic growth further I do not think 2, 3 or 4 above are factored much into current stock prices. Needless to say, the next couple of weeks will be key. And this will likely take many months to play out with lots of downward revisions and ‘surprises’. I am now 100% cash. I was able to lock in a 1.5% gain for 2020 (and all my gains from a 10 year bull market). If markets go higher from here i miss some upside. If markets go lower i will be positioned well. May we live in interesting times :-)

What I am also trying to understand is potential to slow / damage the economy. Not just the direct effects but also the secondary. What will GDP look like in Q1, Q2, Q3, Q4 and the year (which is what ultimately drives corporate earnings)? Will the virus take China, Europe and parts of Asia into a recession in 1H? Does the US and Canada also slip into a recession? If so, is it shallow? How low do financial markets go in the near term? And how fast? At what point does the disruption in financial markets start to bleed into the larger economy? Does lending start to freeze up to 'out of favour' sectors (tourism/travel, oil and gas, companies with exposure to China supply chain, companies with too much debt etc)? And what are the policy responses by the government? Do we get another injection of liquidity from the Fed? If so, will it help? What else can the government do to help? Hopefully in a couple of weeks I can look at my post and ask "What on earth was he thinking!" :-) PS: Citigroup, Goldman, JPMorgan Slash Earnings Estimates for Stocks - https://finance.yahoo.com/news/citigroup-goldman-jpmorgan-slash-earnings-032720946.html (Bloomberg) -- Citigroup Inc. now expects zero growth in global earnings for 2020 as the coronavirus throttles economic growth. And it warns even the new forecast may prove too optimistic. The bank’s call on earnings per share follows moves Thursday by Wall Street peers Goldman Sachs Group Inc. and JPMorgan Chase & Co. to cut profit estimates on U.S. companies. Goldman expects no earnings gain for American firms this year.

Wow. Big moves :-) The light bulb for me went off on Monday. Tuesday and Wed I was mostly selling; raised cash position to 80%. Was a big buyer of BRK today at the close. This will take some time to play out. I need to be patient on the buy side...

I just updated my spreadsheet for tracking Fairfax Equity holdings (attached below). If anyone sees errors in the spreadsheet please let me know :-) From the start of the year (Jan 1) to today (Feb 27) my estimate is their mark to market equity holdings are down $520 million (Eurobank is down $406). I believe they also mark to market the Seaspan warrants; they are down an additional $108 million. The majority of their equity holdings are Associated and Consolidated Equities and I am not sure exactly how all of these are valued on the financial statements at each quarter-end. I like to track what the stock prices are doing to get a handle on how Mr. Market is valuing these holdings over time. These holdings are down $632 million ($740-$108 Seaspan warrants). All three of these items: $520 + $108 + $632 = $1,260. Please note, this is not the hit that Fairfax would take if the quarter ended today; the $632 would not flow through the financials :-) Fairfax is in a very tricky position. They hold a lot of equities in their portfolio. Great with a 'risk-on' trade which is how they have been positioned since Trump was elected. Absolutely brutal position to be in should we get sustained, large stock market sell-off. PS: the portfolio of Fairfax India is actually up nicely since Jan 1 (still even with the global equity sell off). Their holdings are another tab on the spreadsheet. I estimate their mark to market equity holdings are actually up $128 million this year. Pretty interesting :-) Fairfax_Equity_Holdings.xlsx