Cigarbutt

https://www.icelandreview.com/sci-tech/icelands-coronavirus-testing-global-pandemic-response/ The article is dated April 2nd.

Here in Iceland there have been tests made by random sampling of the population. Based on random sampling, around 0.3% of the population tests positive. Obviously, this is not representative for other countries or populations. In Iceland most of the effort has gone to tracing infections and quarantining people who have been in contact with infected people. By now, over 50% of people who test positive are already in quarantine when tested. https://www.covid.is/data Yeah, Iceland seems to be doing well, but a small country with a concentrated population in a small area (like Singapore) would be much easier to manage w something like this. The random sampling showing only 0.3% infected obliterates the "this disease has been widespread for a long time" thesis. Makes you realize how impossible achieving herd immunity will be (without having large magnitude of deaths/healthcare overload). That's excellent. From Iceland link: Confirmed infections: 1417 Total samples: 23640 (1417/23640) * 100 = 5.99%. How are you getting 0.3%? Assuming your random sampling comment is correct, 6% of Iceland being infected with a swab test that does not even tell people who are already infected, nonsymptomatic and cleared of virus in a country we dont consider to have Covid outbreak is pretty high. The Iceland data is really interesting for testing (understand the virus and compare testing strategies globally). There are two vectors for testing: one is targeted and looks similar to many countries, the other is "random" although the methodology does not reach the pure random definition. At first, for the 'random' part, people self-selected and more recently people can accept to be tested after a random call. In the 'random' group, the positive rate has recently been reported at 0.9% and it may be around 1.0% now but is unlikely to be too far from the 'true' number related to the prevalence in the population. There are limitations: sensitivity and specificity of the test, a negative test today does not mean a negative test tomorrow. Although they report a large number (about 50%) of asymptomatic people in the 'random' group, they may catch the disease before the onset of symptoms. However, this (and the age group profile they show) suggests that most people who get CV have mild or no symptoms, especially if young. The 'random' sampling is done by a genomic sequence entity and the analysis is revealing potentially very potent analytical aspects: -the virus mutates to a degree so that it becomes different from other CV virus elsewhere once it has reached a country or a region -the genetic makeup (and possibly previous exposures to other or more benign forms of CV) of the individual appears to be a key independent variable vs risk of becoming really sick -the virus mutates relatively slowly (good) but it's spreading quite effectively (bad) which makes it quite 'unique', in a way.

Can you talk a bit about pricing. What's risk/reward. What is fair value for these assumptions.

The following link's substance has little value (unless you're into trend following and a master at getting out in time :) ) but the graph is interesting. Sir Isaac Newton was a genius and also had a high degree of financial sophistication. It's hard to resist when 75% of Parliament members and other 'friends' create and follow the trend, in a self-feeding loop. http://www.tradeplacer.com/login.action?task=viewArticle&id=52545&title=Here%27s----What----Happens----After----a----Huge----Rally----[3----Must-See----Charts]

-Follow-up to StubbleJumper and orthopa about expectations in Ontario (largest province in Canada) and potential implications. They have just released data, 'projections' and rationale for policy making (see slides): https://www.cbc.ca/news/canada/toronto/ontario-covid-projections-1.5519575 The info shows what is expected to happen during April, which is the critical time period although the effects may evolve over many months. Slide on page 4 shows that 90% of people dying are age 60 or older. The typical mortality for flu episodes is about 1400 cases per year. Some could argue that they may overestimate the effects of previous policy actions but they're within reasonable territory. Slide on page 13 shows the projections for deaths, with and without measures. Slide on page 14 shows the ICU projections. @Orthopa You may want to make your own projections and compare to what is being presented today and may consider commenting about the public policy costs versus person-year savings. @SJ The evolution of Ontario or Toronto and Quebec or Montreal is very similar even if a superficial assessment of some data would suggest otherwise. The number of 'cases' is higher in Quebec but can be explained by a proportional higher testing rate per capita. The death rates, which are not liable to such distortions, show very comparable new daily deaths by one million population (3-day moving average) and come to 0.43 vs 0.46. I've often felt that the two-solitudes problem was primarily related to the fact that people simply did not talk with one another.

I think it's both a demand and supply issue but the supply chain disruption (at local, regional, national and international levels) seems to be the most important factor. https://marker.medium.com/what-everyones-getting-wrong-about-the-toilet-paper-shortage-c812e1358fe0 https://www.thechronicleherald.ca/business/reuters/us-dairy-farmers-dump-milk-as-pandemic-upends-food-markets-433349/

However, the USD is also the global funding currency. For some time, it seems that the world has been looking for USD liquidity and last week, the IMF announced that they had received demands for USD by 80 (!) countries (mostly emerging) and the Fed (as the head of the virtual but global central bank) has recently expanded the swap lines to emerging partners (who happen to have a lot of debt denominated in the appreciating currency {ouch}), not to China however.. Above, Spekulatius suggested to consider buying at the periphery of damage, something I did when the housing bubble deflated (ie soundly financed manufacturers of carpets, building products, paints etc) but this strategy implies that one has to assume how easy (or hard) it may be to hide and to assess the degree and effectiveness of various bailouts. Linking back to the BP spill, there may have been ways to play that but a possible relevant exercise was to consider that the Deep Horizon disaster was first and foremost the result of an imbalance between expediency and caution. https://mitsloan.mit.edu/LearningEdge/CaseDocs/10%20110%20BP%20Deepwater%20Horizon%20Locke.Review.pdf

The social inflation movement on this aspect is building up and it's hard to know the outcome. It's fascinating that this could end up as a form of retroactively imposed adverse selection. Mr. Buffett has often mentioned that many large investments (utilities, insurance) are a bet that there will be a fair compromise between the end user and the private capital trying to earn a reasonable return. In 1988 (annual report), when Geico was not wholly owned, Mr. Buffett had said the following: "The antagonism that the public feels toward the industry can have serious consequences: Proposition 103, a California initiative passed last fall, threatens to push auto insurance prices down sharply, even though costs have been soaring. The price cut has been suspended while the courts review the initiative, but the resentment that brought on the vote has not been suspended: Even if the initiative is overturned, insurers are likely to find it tough to operate profitably in California. (Thank heavens the citizenry isn’t mad at bonbons: If Proposition 103 applied to candy as well as insurance, See’s would be forced to sell its product for $5.76 per pound. rather than the $7.60 we charge - and would be losing money by the bucketful.) The immediate direct effects on Berkshire from the initiative are minor, since we saw few opportunities for profit in the rate structure that existed in California prior to the vote. However, the forcing down of prices would seriously affect GEICO, our 44%-owned investee, which gets about 10% of its premium volume from California. Even more threatening to GEICO is the possibility that similar pricing actions will be taken in other states, through either initiatives or legislation. If voters insist that auto insurance be priced below cost, it eventually must be sold by government. Stockholders can subsidize policyholders for a short period, but only taxpayers can subsidize them over the long term. At most property-casualty companies, socialized auto insurance would be no disaster for shareholders. Because of the commodity characteristics of the industry, most insurers earn mediocre returns and therefore have little or no economic goodwill to lose if they are forced by government to leave the auto insurance business. But GEICO, because it is a low-cost producer able to earn high returns on equity, has a huge amount of economic goodwill at risk. In turn, so do we." Then, there was the possibility that private players would be forced to underprice policies. Now, there's the possibility that policies written before may need to cover outcomes not intended to be covered initially. For those that think that bailouts for everyone, everywhere and everything don't come with moral hazard and unintended consequences, this is food for thought although a reasonable compromise should be maintained in the end but strong players may be punished more than zombie players which is not, typically, a winning strategy at the aggregate level.

^Mr. Stiglitz has a lot to 'teach', especially about market failures but he's known to be unable to consider his own, assuming nobody's perfect. He's a laureate but was also an admirer of Hugo Chavez and his economic 'model'. Both 'economists' mostly agree on the trade topics and on the disproportionate burden of having the USD as an international reserve currency. As typical for uni-dimensional specialists, they simply each tend to focus on opposite ends of the spectrum when considering the trade or capital component of the Account when, maybe, the reality is somewhere in between, as two dependent variables, in terms of a 'causation' discussion. A few years ago, Mr. Pettis wrote something about unsustainable distortions (The Great Rebalancing). He seemed to imply that unsustainable imbalances were about to correct. He should have heeded one of his introductory quotes (and be more patient): "The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought." (Rudiger Dornbusch) For those interested about inequality, Mr. Pettis' assertions have become more relevant since 2011, with saving rates going up, but more and more concentrated in the top of the pyramid while a growing portion of the pie increasingly lives from paycheck to paycheck. I guess his next book could be titled: The Great Redistribution.

Quite frankly, that’s a third grade comment. That's generous. The 95% "accuracy" comment is derogatory. The 95% number is often used in statistical analysis (including epidemiology) as a "confidence interval" number. For example, you could say, given this set of assumptions, the value of GSE preferred shares lies between...and...and there is a 95% chance that the real value lies within this range. Some could suggest that the range is quite large, even if underlying assumptions are considered first-rate. One of the problems is that a lot of the decisions being applied now require a confidence interval to be lower (precautionary principle) but the range of potential efficacy (or lack of, on a cost basis) remains very large, because of the underlying weak evidence related to the measures taken. Just last year, there was a good report published about the potential efficacy related to social distancing measures. And there are economic and freedom costs. https://wwwnc.cdc.gov/eid/article/26/5/19-0995_article

How to qualify an expert? What if different experts come to different conclusions with the same data? How to deal with fallibility and biases of experts, especially in uncertain situations? What if if policy conclusions are based on values and a subjective aggregation of experts' opinions rather then pure epidemiological data? Disclosure and an example: i'm in the process of getting ready to approach the front line on this thing. As part of the preparation, one of the questions that has come up is: Will there be other waves? The three defining criteria for this question are: 1-social distancing methods 2-the mutagenic potential of the virus and the directionality of that potential 3-herd immunity 2- is unknown and is independent. 1- and 3- are clearly in conflict in the process of policy setting. How do you deal with that? I could provide my own answers but submit that the answers are far from clear, especially at this point. Experts don't know the future, don''t have all the answers, and make mistakes. But they at least know what they're talking about and know what the data means better than laymen and have studied past epidemics (don't have to make all the first-timer mistakes when the stakes are this high, like saying ahead of time you're thinking about quarantining an area, making everybody flee from it and infect other places), and epidemiologists have recommended all kinds of measures forever that were never put in place except in places like Singapore and Taiwan (where epidemiologists are actually now in high offices). They should also be put in charge of the response and best practices should be followed (clear chains of commands and such), rather than have the politicians play reality-TV stars for hours on TV muddling up the message and contradicting them and giving bad advice to populations (it's a hoax, it'll go away on its own, go to restaurants, etc), not coordinating states, not using power to produce equipment fast enough, closing down pandemic groups and offices, making false promises (where are the 5 million tests and fancy websites and drive-through at CVSes etc), no doing statistically significant random testing of the population, etc. If I was going to have brain surgery, I'd certainly rather that a brain surgeon was in charge rather than a TV personality that had never thought about brain surgery until a few weeks ago, or his son in law. Politicians need to get out of the way, every day matters. That's a fair answer. These days, people (in higher offices and on the ground) have to make tough decisions based on incomplete information, with both short-term and long-term consequences. Given challenging conditions, I wonder if less energy should be spent pointing fingers and sunk costs. i was part of an international virtual meeting (listening mostly) yesterday and was impressed by comments made by MDs working around Ground Zero in New York. I would say people are doing their best under the circumstances which, to some degree, are related to bad luck and very resistant historical path dependency. They keep making mistakes while adjusting but remain hopeful about the outcome. BTW, if you were expecting brain surgery in NY (and in most places), you'd be on a waiting list as Covid patients have taken center stage.

How to qualify an expert? What if different experts come to different conclusions with the same data? How to deal with fallibility and biases of experts, especially in uncertain situations? What if if policy conclusions are based on values and a subjective aggregation of experts' opinions rather then pure epidemiological data? Disclosure and an example: i'm in the process of getting ready to approach the front line on this thing. As part of the preparation, one of the questions that has come up is: Will there be other waves? The three defining criteria for this question are: 1-social distancing methods 2-the mutagenic potential of the virus and the directionality of that potential 3-herd immunity 2- is unknown and is independent. 1- and 3- are clearly in conflict in the process of policy setting. How do you deal with that? I could provide my own answers but submit that the answers are far from clear, especially at this point.

FWIW, the European Commission cleared the merger on Feb 26 (simplified merger review procedure).

That study is a very interesting and relevant input. Thank you. This is early, so please provide follow-up in due course, if the authors make updates. There will be second and third-order effects as well as unintended consequences from the virus itself, from spontaneous adaptation and from collective efforts. And human nature being what it is, we will likely revert back to the 'normal' course of human events.

For defense companies, the pensions are paid by the tax payers. The costs are rolled into the contracts. Your sentence is correct, assuming the absence of a redefinition of what is an american unsecured creditor. Until very recently, it was felt that Boeing would never need a bailout because of its defense contracts. Things can change fast and pendulums do swing. I still think that investing in those makes sense (oligopoly etc) but investing in the sector may require reading the following: https://www.amazon.com/Prophets-War-Lockheed-Military-Industrial-Complex-ebook/dp/B0047T86BA Republicans typically hate the book, while Democrats love it. Sorry to bring politics but IMO it doesn't matter if you love or hate the book. What matters is who is (or will be) in power. The pension numbers are so large and, because of the long term nature of the numbers, moderate changes (especially if correlated) in assumptions could result in massive implications.

Disclosure: Department of defense contractors are on a long term watchlist and would make them easily 10% of invested funds if the price is right. i may contribute to this discussion more fully in due course. IMO, the pension issue is very significant. I guess it has the potential to be smoothed away over time but the potential long term cash flow implications are significant. If interested: https://www.gao.gov/assets/660/651387.pdf https://us.milliman.com/insight/Pension-Funding-Index-March-2020

Some days I wish the Fed did not exist (at least for investment decisions). The post implies that the Fed succeeded in bringing back the Global Financial System from the abyss (per Bloomberg). From a humble perspective (especially very short term), they have met very unusual liquidity conditions and, as a lender of last resort, have been right to open the valves to the fullest and more. But apart from futures limit up or down being part of the landscape now, are there other long term considerations that may be relevant? https://fred.stlouisfed.org/series/EXCSRESNS What does the graph tell us (in a potentially schizophrenic way)? -I've kept a file of articles from 2010 (including many from the Fed itself) discussing how unusual the situation was around 2010. (!) -10 years into the 'recovery', the Fed hasn't been able to normalize (in simpleton terms, they have injected money in the system but have forced (regulations and paying for reserves) money back at the Fed) -Weird things started to occur last September (way before the virus appeared on the scene) -The above graph needs to be updated: -yes, the Fed has seen some easing last week (net reverse repo action with rates closing in on the fed fund rates) -what did it take (dosage and type of financial drug) to get this relative ease? -the graph does not show the absolute vertical rise that happened after the last update; it was the most impressive vertical rise ever. (from the March 26 report, estimate of relevant number for the Fed graph (as of now), about 2,000B): Mar 25, 2020 Wednesday Wednesday Mar 18, 2020 Mar 27, 2019 Liabilities Reverse repurchase agreements (12) 359,114 +125,168 +117,514 Other deposits held by depository institutions 2,347,747 +402,353 +714,959 -the Fed graph does not show that once again, 3mo-LIBOR has completely disconnected (rising) the Fed fund rates (basically at zero). It's impossible to know what the disconnect means but one can suggest that the Market wants more (financial) drug. Who knows if this is going to be a V, a U or an L recovery but a lot of hope has been placed on the Fed. The Fed has done great for the liquidity and the 2007-8 episode has shown that it can ease the pain. However, the Fed cannot ultimately hinder price discovery. I hope your hope is right.

I mean could we ever really know if the bullet killed the man, or if he happened to die from complications of hypertension just as the bullet entered his skull? Causation can be tricky after all, and we should study it further before deciding conclusively! M. Why would anyone assume the hole in the head was caused by the gun going off? People are always jumping to conclusions. The liberal media has brainwashed everyone. The real question that everyone is waiting for, did this person has covid-19? If he did, he obviously died from it. In real life, things are not so simple and binary. In many cases, there's the immediate cause of death, the proximate causes in the chain of events and also contributing factors. When Newton sat under a tree, he could have concluded that the reason (cause) the apple fell was a gust of wind and one could argue, under a certain framework, that this would have been the right conclusion. I was not familiar with the US death certificate but the model is quite universal: https://www.cdc.gov/nchs/data/dvs/blue_form.pdf Personal note: One can get used to see people dying, to some degree and depending on the person, but filling out this form requires to evaluate the person (corpse) to confirm the death, an act that cannot ever become routine, at least from my perspective. Why is this relevant for CV and investment implications? Individual death is dramatic by definition but this post is about investment implications. In a cold and actuarial way, the excess mortality that will be caused by the CV will rise but will likely not cause a large visible outlier curve, especially if seen from a long term perspective, although there will be a certain amount of concentration of events in the short term with visible consequences given the relative lack of spare capacity inherent to most health care systems. In comparison to the Spanish flu for instance, the economic impact of the virus itself would be moderate and short term in nature. However, the investment and cost related to mitigation have been and will be very large (one may agree or not with this social 'investment' and how the NPV is calculated but I guess it's the underlying question). https://www.nber.org/papers/w26866.pdf "There is clearly a difficult tradeoff here concerning lives versus material goods, with very little discussion about how this tradeoff should be assessed and acted upon."

1-From the link: "What we really need right now is to recognize that this virus is not a pandemic or a mass killer. It's probably more like an unusually nasty flu. We need to lift the economic shutdown as soon as possible and get back to work. Trump is right." 2-From today on Bloomberg: "Trump Says May Quarantine New York, New Jersey, Connecticut" Are you suggesting that the considered quarantine measures are aimed at keeping insanity isolated?

The funny thing for me with Taleb is that I like his advice for everything other than financial systems. Take his barbell method and in general his writings on anti-fragility and adaptability. I do not use this for an investment portfolio. But think about applying them to a healthcare system (topical, I know). It's actually pretty good advice: you want 90% of your activity to be maximized at dealing with the average caseload. But you also want adaptive systems at either end of the curve to deal with unexpected events (in either direction). Mr. Taleb spends some time defining (un)expected and different swan colors. https://medium.com/incerto/corporate-socialism-the-government-is-bailing-out-investors-managers-not-you-3b31a67bff4a

Thank you wabuffo for sharing your knowledge and wisdom. I work with the assumption that you're right but I dunno also. The difference in approach for this specific question is conceptual. Canada has moved from biweekly to weekly treasury bill auctions, something it has never done, even during the 2008-09 crisis and it seems to me that both the GFC and the CV are not black swan events, despite what the bailout crowd is saying. It really feels like a debt addiction and it's getting kind of hard to put odds on the risk appetite.

I don't know anything in particular about WAsh numbers, but check this story out. https://www.buzzfeednews.com/article/nidhiprakash/coronavirus-update-dead-covid19-doctors-hospitals So what has changed in Washington State in the last 25 days that might explain why they only have 130 deaths? At the end of Feb, Washington State was not testing people, the President was telling people the ‘numbers might be going to zero‘ and Larry Kudlow was telling investor to buy the dip because stocks were cheap. ... The challenge moving forward, after an Italy type disaster has been avoided, is what should Washington State do? The war will be waged on a new front and this is what i am trying to understand. I am looking out the front windshield not the rear view mirror. Viking, your open-minded approach has been useful in assessing the potential investment implications. Keep the comments coming. An interesting aspect with the US (and Canada, to a certain extent) are the large regional variations of the critical variables (socio-economic status, level and efficiency of health care resources, institutional strength for policy design and application) as a function of consequences (more Italy-like vs more others-like). For example, New Orleans and the Louisiana area have been and will be interesting to watch (it's almost like a natural experiment), with the evolution of the disease and consequences after the Mardi Gras celebrations at the end of February. Speaking of a natural experiment and referring to the concept of eating one's cooking, it's been revealed that Mr. Boris Johnson has tested positive.

What you ask requires a lot of work and integration of heterogeneous data on many levels. Some people are trying and the picture is slowly taking form: https://ourworldindata.org/coronavirus Go to: What information about test coverage do we currently have? They give their methodology, the data is regularly updated and the graphs are interactive.

The causation of unemployment is very different in this situation when compared to the GFC. One was mandated by government, the other was not. The underlying factors as to why unemployment is spiking is important. The time to discuss is not when picking up the pieces. I disagree on the causation aspect, keeping in mind the trigger and leading context. In 2004, the person in charge of governance marvelled at ARMs and was happy to spill gas on the fire, as part of the mandate. https://www.federalreserve.gov/boarddocs/speeches/2004/20040223/ CV is an error of commision. GFC was an error of omission. Acutely, we have to come together but let's not forget the underlying theme.

You're absolutely right. But like the post-GFC period, government debt to GDP will presumably jump higher again. The question no one seems to know is how high that ratio can go. Indeed, is it even a relevant metric? My understanding is that the last time debt to GDP was this high was post WWII: https://tradingeconomics.com/united-states/government-debt-to-gdp [i believe the U.S. government also has much higher off-balance sheet liabilities now than it did then.] Debt/GDP fell quite quickly for various reasons, including, I believe, a few bouts of high inflation: https://tradingeconomics.com/united-states/inflation-cpi (Of course, high real GDP growth, helped higher population growth rates than we have today.) So, today we appear to be going toward higher government debt to GDP ratios than we had post-WWII, higher off-balance sheet government liabilities, with significantly lower population growth. I don't know where all of that leads, but I don't think it's ultimately headed towards a free lunch. If you want to go through history, I think Britain is the best example. It had debt to GDP ratios higher than this for most of its history. I submit that the previous statement is simplistic and misleading :) especially if it implies that it's been done before without specifying context. Pre-industrial debt levels were essentially tied to war efforts between ruling classes and debt default was the norm, not the exception, with the ordinary people paying a heavy toll during the debt build-up and during the social "restructuring". Britain started the 19th century with a huge debt due to multiple and lengthy war efforts and it was able to 'manage' the off the chart debt then only because: 1-it happened to be a winner of most wars, 2-war efforts diminished considerably during the Victorian era and up to WWI and 3-England's GDP started to take off (a first in the entire history of civilization) as a result of the Industrial Revolution. The debt levels (debt to GDP) we see now in our 'developed' and not so 'developed' nations have never been seen outside of war time episodes. This is an experiment on a large scale that has never been attempted in the entire history and wabuffo's right that the outcome is anything but certain but, conceptually, I find it hard to see a good outcome when the solution to get out of the hole is to dig deeper. "Getting out is easy. But getting back in is the hard part." ---) I don't agree.