Kaegi2011

This is interesting, and I think highlights several issues being talked about here: 1) unless we somehow eradicate the virus or find a cure, it'll be with us for a while 2) the importance of social distancing and containment early on in terms of the growth rate of the virus I think this is a good example where doing something is better than doing nothing, but even if we do something it's unlikely to change the terminal trajectory of the virus until the cure is found. Bending the curve still seems appropriate where possible. https://www.bloomberg.com/news/articles/2020-03-11/singapore-warns-of-complacency-while-new-virus-infections-surge

Updated for real time info Perhaps some actual numbers to inform the discussion. SPY currently at 280.17 Dec 2022 $225 calls (~20% from here) are quoted at $69 at mid. 225+69 = 294, so let's call it $13 of premiums and $55 of intrinsic value. The way I think about that $13 is that's how much I'm paying to borrow, on a non-recourse basis, $225 bucks for ~2.75 years. If shit hits the fan and it goes below 225, I'm fine as that's my stop loss. Another way to get long exposure is to short the puts, as suggested above. So Dec 2022 $350 puts (~25% from here) have a mid of $90. So intrinsic value of $70 bucks and $20 the premium. You get upside until 350, after which you get paid nothing, but you have full downside and get paid 20 bucks for it. As mentioned above, the deltas on these things are not 1 (though close), so on a daily MTM basis you will not gain/lose the same amount vs. the underlying. However, if you do intend to hold until maturity, the MTM question is irrelevant if you pick the strike prices as to your liking. So the question is - do either options outlined seem "expensive?"

Italy didn't turn their entire economy off overnight because they are having a bad flu season. Commitment and consistency bias. that is my point. Italy while still hit by covid19 is hurt worse by flu every year, and they dont shut their entire country down. pure lunacy. while wuhan is a special case, since the outbreak coincided with a new year celebration with much travel and social engagement, I am not sure even wuhan had more fatalities than a normal flu season. haven't seen Chinese data on normal flu fatalities in wuhan (60MM people) I'm not sure I understand the line of reasoning here. You're saying that as a species we have acclimated to the flu deaths and therefore anything resembling it should cause no further alarm? Putting aside the obvious question of whether they are similar with respect to R0 and CFR, and assume for a moment that they are equivalent to the "normal" flu, are you suggesting that the responses to the flu season is appropriate prior to COVID19? I would have said that we do NOT do enough every year - the percentage of people who get vaccines (at least in the US) is atrociously low despite the fact that it's free to anyone with a health insurance. I will say the same thing about texting while driving, poor diets, etc. Stupidity knows no limits, but sometimes it's only obvious to a population after something traumatic happens (e.g., dangers of opioids have been known for a long time, yet it still found its way back until it became national headlines). Secondarily, as a few have mentioned above, do you think R0 and CFRs are equivalent to the flue? If they are significantly higher (from 2x on R0 to exponentially higher on CFR), isn't that cause for concern? And even if you don't think those numbers could be well established at the moment, which I can understand some level of skepticism, do you think the levels of people who are at hospitals in Wuhan and Italy resemble a "normal" flu season?

Sorry but this is way too broad of a generalization. Deep ITM puts or calls aren't really "expensive" (it is more so vs. two months ago, but not material enough to sway your decision if they're pretty deep in the money). Of course, if one wants to gamble on 20% OTM calls/puts then I think your point holds most of the time, and even then they can work if used as a trading tool (vs. buy & hold).

Another idea would be to go long treasury inverse ETFs or to short zero coupons. However, neither will offer you leverage you might be looking for if you're seeking something really dramatic.

If you're buying OTM calls you'll certainly be paying for the premium of doing so. It really depends on your level of certainty in reaching that price. For me, I wanted to effectively have full exposure for a fraction of the cost. Not saying it's the right one for you, just explaining my thought process.

Is your thinking that you'll just buy the puts back once the underlying has declined a certain %? Like instead of long SPY 250 calls you go short 350 puts, but you'll exit the trade by 250?

I'm not sure where I land on this issue as I'm definitely not a qualified expert, but perhaps I can ask you, who is someone more qualified - why are countries such as South Korea testing like crazy? I'm trying to put myself in your shoes, and please don't take offense, but I'm having a hard time reconciling what govts are doing vs. someone on the internet saying it doesn't matter.

Could you kindly translate this for us, please? A class of drugs commonly prescribed for high blood pressure may (just a theory) increase susceptibility to COVID-19. There is, of course, a correlation between age and high blood pressure medication. Gracias. :)

Could you kindly translate this for us, please?

1) Not many companies now still have *open* DB plans. What you see on balance sheets are legacy plans that companies have not sold off to insurance companies. So I think it's important to distinguish between the two and one way to tell is to read the 10K and/or just look at their service cost for the latest year. I don't think you want to throw out the baby with the bathwater. Of course you may want to avoid organized labor period... 2) I think you'd need to have meaningful deaths related to COVID19 before it starts to be reflected in pensions, and I think that probability is very low. ALso, remember that not all pensions are paid to the pensioner - it could be to a spouse as well depending on how the pensioner elected to receive their pension. So I just don't think COVID / pension is an investible theme unless something dramatic happens. And just as a counterpoint, someone may come up with a gene therapy to colve cancer, so the risk can go both ways.

Sorry if I was not clear. For Boeing I used them as a continuation of the example as posted in the Twitter link, not trying to single them out or to suggest that they have a big issue. Their 737 issues are far bigger (at least from afar, I know close to nothing about the company). For the broader pension comment - I certainly agree that it's not a big problem for most corporates. However, for govt entities I do think it's a reasonably sized issue, particularly the entitlement programs. However, we start to get into politics about intergenerational wealth, which I don't think was the intent. So net net - I think we agree - market won't price securities on pensions until it's a huge problem, and for the most companies, it's not a huge problem.

This is fascinating stuff. I had no idea this was happening. Imagine going to a customer and asking them to pay for your costs & future pension costs! You'd get laughed out of the room! Thanks for sharing. Learn something new every day. :)

THey have 61.7bn of assets at year end, with 49% in FI portfolio. Assume they are using a liability driven investing model (LDI), you can basically assume that 30.2bn of the liabilities are fully covered by the FI portfolio. Alternatively, they could be long duration using derivatives, etc., but given their derivatives exposure I'm not sure that's actually happening. But let's say they are, you can assume more of their liabilities are covered. So let's say 35bn of their liabilities are covered. That leaves ~50bn of liabilities that's matched to equities/PE/RE/HF. Assuming those 50bn of liabilities are now 10% higher, that's now a liability of 55bn. On the asset side for risk assets, they've declined maybe 10% since beginning of the year in total? So 30bn of assets are now 27bn. So now they're in the hole for ~28bn vs. 21bn at beginning of year between pensions & OPEB. That's just quick math. However, rates can go up just as quickly, so that's why these MTM exercises don't really move the needle. Unless the company is going to not pay the pensioners this month/quarter/year, it's not really an issue that anyone focuses on.

So I used to manage pension & assets for a F500, and the twitter thread is absolutely true. A few things to think about (and to continue to use Boeing as the example): 1) PBGC's premiums have been going up as they lost a boatload of money last recession, and they understand the problems better to more efficiently price their premiums. This means it's now more punitive to corporates if their plans are underfunded (it's a sliding scale). 2) I think she's being somewhat sensationalistic to use just the liability side of the equation. It would give her more credibility to also talk more about the assets side. So I looked at Boeing's latest 10k to see what assets they are invested in, and it looks like they're only about 50% in fixed income, which isn't great. Given their minimal derivative exposure I'm going to make the assumption that they are not hedging their entire duration risk (you can effectively hedge the interest rate risk through derivatives and still participate in equities). All this is to suggest that if you assume 50% of their assets hedge an effective $ amount of the liabilities, and the rest of the assets have performed in line with global equities, then their hole has increased pretty significantly since year end. 3) It's not only a balance sheet issue, but also a P&L and cash flow issue. From a P&L perspective, in a world with 1.x% 30 year treasuries, they will need to justify how they reached their EROA assumption of 6.8%. Auditors generally provide flexibility here so it's not black and white, but if rates persist the conversation next year may be more difficult. Similarly on CF - they need to pay ~$5bn of cash per year for their pension and OPEB, yet they've contributed close to nothing over the past two years. So now they're going to have to figure out where that cash will come from. Do they sell equities (potentially selling at a "low") or fixed income (and lose the duration match if rates compress further)? Looks like they have a decent amount of illiquid stuff too between HFs, PE, and RE. All in the context of their 737 issues already pressuring their cash flows. Now for a positive spin - the pension plans seem more or less closed since 2016, but OPEB is still accruing. IN the context of their total liabilities at least the rate of liability growth from service cost is declining. Now, if you care to learn more about how to think about pension plans, etc. the above should give you enough of a start. But having said that, I think in the US, anytime someone can kick the can down the road, you should assume they will. Pension problems are not new - not for corporates, not for munis, not for the federal govt. Despite a decade of growth, our country's balance sheet now looks way worse, even though we knew the issues have been there all along (this is not a political dig at anyone - both Obama and Trump have ignored the issues). So all of that is to say that I don't really think this matters unless a company really is insolvent and this is the issue that pushes them over the edge. Outside of that, I think the equity market will not really focus on this unless it's just a huge problem. BTW - I would bet that most wall st analysts can't really even explain how pensions work if you really probed...

I basically moved to cash last week and went long Sept 2022 SPY 250 strike calls with other long dated, deep in the money options. ~20% of the cash for ~100% of the exposure (although not from a daily $ perspective as the delta on the options are not 1). However, if I'm holding it all the way through then I basically have all the upside and limited downside, at a cost of ~3-3.5% per annum for the "leverage" (on SPY, higher on single names due to vol).

There's a reason why your question above on what precisely one needs to see to change their mind goes unanswered.

Fair enough. I believe you that there may be little to be done for those who are so far gone. What I found distasteful was the lack of apparently concern for those and others who could be saved. However, as someone mentioned above, there needs to be some emotional distance that the doctor keeps, and I can certainly believe that. So maybe I just have the wrong projection on the level of empathy that medical professionals *should* have vs. what's reality. Either way, this has been educational in terms of how inadequately we are prepared for this (and other diseases), so we're all along for the ride. Thanks for the engagement. Again, I meant no disrespect before.

I'm sorry, you work in healthcare? As in caring of people who are ill, with the goal of them getting better? There are goals and there are realities. The reality is if your old and/or immuno compromised your more likely to die if you get the corona virus. Without a cure what exactly would you like a healthcare worker to do in that situation? I know that the internet does not convey tone well, so please believe me when I say that I mean this in the most sincere, non-offense way - I think you should find another line of work outside of the healthcare industry. If your default response whenever someone is ill with an unknown illness or an illness in which there is no cure is to suggest that there's nothing to do, then perhaps trying to help those in need of help is your calling.

The difference is that all the things you mentioned above are controllable by those individuals who make conscious decisions regarding their lifestyle. Any consequence of their lifestyle choices are theirs (and the tax payers) to bear. The issue here is that we have a contagious disease that doesn't care whether the host is one of hte people you described above, or someone on the other end of the extreme. So while I understand how you think your logic applies to specifically the people you are talking about, it is not irrational for other people to be concerned.

I'm sorry, you work in healthcare? As in caring of people who are ill, with the goal of them getting better?

My friend, you're asking a dangerous question. **Apparently**, the answer to your question is not only useless, but also has the potential to be dangerous in the hands of short sellers! Beware! ;)

Black swans are frequently underestimated, esp early on. People don’t think about 2nd and 3rd order effects and are more reactive than proactive which is why fighting things like climate change are difficult. What’s surprising is how dismissive a supposedly intelligent group of investors is of this stuff, but then again you look at the politics section here and then it all makes sense. One does not need to wonder that far to understand.

Have you considered the possibility that conspiracy theories arise due to the lack of information?

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. I'm merely responding to your assertion that it's just the media who has an interest in the data (see quote above). One does not need to have a view of anything political than to want to know the data. And yes, if 50% of the people were tested, it would absolutely inform whether I travel (heck, whether I'm even coming in for work!). It all depends on the numerator. You kind of have to know the top and bottom number to make any type of conclusion. Again, not controversial? Also, I think it's ironic that you would on one hand complain about the spread conspiracy theories (which I agree with is not ideal) and the media, while on the other hand support the CDC (a branch of the federal govt, whom we should be able to trust the data) in withholding the data. One or the other...