Coronavirus

[Dalal.Holdings]

Finding a drug to treat a new condition is very hard. Esp when that condition is very new (months old).

 

Hydroxychloroquine (immunosuppressant, anti malarial, ?antiviral), Azithromycin (antibiotic, unlikely antiviral), BCG vaccine I personally assign very low probabilities of them working out. It's possible Hydroxychloroquine may help when this progresses to ARDS due to anti-inflammatory action (other anti-inflammatories are being used in ICU COVID patients).

 

I put the world's best hope on this:

 

https://www.bloomberg.com/news/articles/2020-03-28/gilead-says-it-s-expanding-access-to-covid-19-drug

 

Gilead Sciences Inc. will expand access to its experimental anti-coronavirus drug remdesivir to accelerate its emergency use for multiple severely ill patients.

 

The drugmaker said it’s switching to “expanded access” from a “compassionate use” program under which remdesivir was given to more than 1,000 Covid-19 patients.

 

Multiple clinical trials of the medication, developed for Ebola, may report initial results in the coming weeks, O’Day said. If it is approved, the Foster City, California-based company “will work to ensure affordability and access so that remdesivir is available to patients with the greatest need,” he said.

 

[mloub]

So if I shoot a bullet through the head of a fellow with hypertension, the cause of death is:

 

1) bullet wound

2) Hypertension

3) Hard to tell

 

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.

 

[mloub]

I know some have complained that this thread has gone off the rails and is of little or no value from an investment perspective.

 

Let me share some thoughts that hopefully have some investment merit, along with my level of conviction.

 

1) We are in the bottom of the third as far as this pandemic is concerned (High Conviction). This pandemic still has a long way to run - maybe 3-6 months (maybe longer), and the worst in terms of headlines and quarantines is in front of us, imho, not behind us. It is clear now that the response has been botched, especially in the United States, and what comes next is likely to have a deep and lasting impact on our collective psyches and the economy. Even now, before the infection rate has peaked, hospitals across the country are running low on personal protective equipment for their health staff. As supplies run out, and HCWs are forced to improvise, the infection rate among them will soar. This will weaken our capacity to care for infected patients even further. Our mortality rate in North America will likely track somewher between Italy and China's, but I would guess closer to Italy. Those who are comforted by the low mortality rate are celebrating too soon. Once the healthcare system starts to creak under the strain, and the new infections of the past weak start weakening their hosts the mortality rates will go up significantly;

 

2) The effects of the pandemic on unemployment, consumer spending, and credit will be long lasting (Medium Conviction). Just because case rates start to fall in the spring/summer doesn't mean we will be economically out of the woods. If we look at the number of folks who will be financially wrecked by this pandemic - service workers, small business owners, uber drivers, hair stylists, plumbers, construction works,... - it is not a stretch to say that the impact will likely be as large as the GFC, if not larger. Those who think everyone will pick up where they left off, and the damage will be minimal need to think more about human behaviour, and the typical household's balance sheet.

 

So actionable investment insights:

 

1) It's not too late for Cash or Hedges - There is a lot of talk of lifting hedges and starting to buy out there. In my opinion, that talk is premature. If you are the sort of person who is inclined to hedge or buy long-dated puts in the first place, there are still opportunities to do so out there. For example, Shopify (SHOP) trades at a 48B market Cap ($46B EV) currently and is about 20% off of it's all time highs, even though it had operating losses of $141m in 2019 (and as far as I can tell, has never turned a profit). In fact, operating losses in 2019 increased by 53.5%, while revenue increased by 47%, a modern 2020 business miracle, which of course explains why the market has wisely priced it at 30.5x its 2019 Sales even in the middle of the worst global pandemic in living memory.

 

2) Wait to make new investments, or if you just can't help yourself, buy Berkshire - If you think all the bad news re: covid-19 is already priced into the market, refer to SHOP above. The vast majority of the market seems to believe the worst is behind us and happy days will be here again very soon. I would not be inclined to jump in to hotels, airlines, cruise lines or any of the battered names until we have more clarity on covid-19's course. Prices remain too high if you assume we are entering a recession or even just reverting to mean valuations. Of course there maybe some truly under-valued gems out there, but I would stress test even these ideas against a very bleak potential demand situation. And, ofcourse, YMMV.

 

TL;DR - We still have along way to go before this thing is over.

 

M.

 

Edited: SHOP is 20% off of it's all time highs

 

That was a really good post.  I have had a conference I was to be at in early July Cancelled.  It was to have 30000 - 50000 in attendance.  July... think about that for a minute.  Hundreds of full time jobs for months eliminated.  Multiply that across the globe out to July and August now.

 

Even if Covid were bought under control tonight, it would take months for the economy to recover.  And it doesn't matter what the public is told in terms of social distancing, the damage is done.  It doesn't matter if a President says everything opens back up in three weeks, he will be ignored.  The 24 hour news cycle will keep feeding the hysteria whether it is justifiable or not. 

 

The economy and the markets are going way down.  Last week was just a head fake. 

 

Eventually, some semblance or normalcy will assert itself either due to better treatment, protections, or an outright vaccination, but it will still take months to recover after that. 

 

And Elon Musk should stick to his circle of competence, which is building great companies, with exciting vision, not opining on public health.

 

Agreed re: Musk. Here's his latest unsupported tweet claiming many doctors are not treating patients because they are afraid of getting or transmitting C19 -

https://twitter.com/elonmusk/status/1244034540995137536

 

While ofcourse the opposite is happening as thousands of doctors of all specialties, and some in retirement, volunteer to come forward and help in the pandemic - https://bit.ly/2JqyFnC

 

Musk seems hellbent on destroying any goodwill he has earned with Tesla and SpaceX by shooting his mouth off on C19. I have to say, his poor judgement on this topic - one where I feel slightly more knowledgealbe because of my training - makes me wonder what other terrible choices he is making in other domains that I am not as equipped to notice.

 

M.

[StubbleJumper]

So if I shoot a bullet through the head of a fellow with hypertension, the cause of death is:

 

1) bullet wound

2) Hypertension

3) Hard to tell

 

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.

 

Nope, no debate at all.  The bullet killed the guy.  But, the question is how much quality of life the guy gave up due to the bullet?  Was it a day, a month, a year, a decade of quality of life?  And this is the point that Eric and I made about two weeks ago about Covid-19 mortality.  If you look at the existing mortality rates of people by age, and then if you look at the Covid-19 mortality rates by age, you can observe something basic.  If you are sick enough that you need medical attention and you are actually clinically diagnosed with Covid, you seem to incur about 2 or 3 years of incremental mortality risk, ignoring pre-existing co-morbidities.  So, as Eric noted, if you are 40 right now and you are formally diagnosed with Covid, it's more or less like worrying about whether you'll make it to 42 in the absence of Covid.  And it's roughly the same deal if you are 80.  If you catch covid at 80 and it's bad enough that you are tested and formally diagnosed, your risk of dying is more or less the same as your risk of whether you make it to 82 or 83.

 

So, no debate at all about what ends up killing the guy, but lots of room to reflect upon what exactly he "lost" due to the illness.

 

 

SJ

[drzola]

Have at it here folks You may actually learn something see below

 

https://wwwnc.cdc.gov/eid/pdfs/vol21no8_pdf-version.pdf

[mloub]

So if I shoot a bullet through the head of a fellow with hypertension, the cause of death is:

 

1) bullet wound

2) Hypertension

3) Hard to tell

 

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.

 

Nope, no debate at all.  The bullet killed the guy.  But, the question is how much quality of life the guy gave up due to the bullet?  Was it a day, a month, a year, a decade of quality of life?  And this is the point that Eric and I made about two weeks ago about Covid-19 mortality.  If you look at the existing mortality rates of people by age, and then if you look at the Covid-19 mortality rates by age, you can observe something basic.  If you are sick enough that you need medical attention and you are actually clinically diagnosed with Covid, you seem to incur about 2 or 3 years of incremental mortality risk, ignoring pre-existing co-morbidities.  So, as Eric noted, if you are 40 right now and you are formally diagnosed with Covid, it's more or less like worrying about whether you'll make it to 42 in the absence of Covid.  And it's roughly the same deal if you are 80.  If you catch covid at 80 and it's bad enough that you are tested and formally diagnosed, your risk of dying is more or less the same as your risk of whether you make it to 82 or 83.

 

So, no debate at all about what ends up killing the guy, but lots of room to reflect upon what exactly he "lost" due to the illness.

 

 

SJ

 

This is a fair and rational point. And from a population perspective losing a large proportion of folks who are already at the later stages of their lives is, as you say, not a huge loss in terms of life-years.

 

But we should also consider the retail side of things. When those 80 year olds, who likely would have died in the next 1-3 years, all die in a short span, it causes bedlam. Each of their families will bring them in, want them treated, want them ventilated. Even more so for the 60 year olds and the 70 year olds with pre-existing conditions. The strain those cases cause is real. And from my experience, folks don't tend to take an actuarial view of their own mortality. When they or their family members are the ones gravely ill, they almost always want everything done that could possibly extend their lives.

 

The truth is almost all our healthcare capacity is already going to treat folks between 60-80 who have pre-existing conditions. Most healthcare expenditures a person incurs are in the last years of their life. While a respiratory virus that disproportionately killed the young would be more damaging economically, C19, which mainly harms those over 60, still has the capacity to bring our healthcare system to its knees. That is the cause for concern, in my eyes.

 

M.

 

[Viking]

So if I shoot a bullet through the head of a fellow with hypertension, the cause of death is:

 

1) bullet wound

2) Hypertension

3) Hard to tell

 

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.

[undervalued]

So if I shoot a bullet through the head of a fellow with hypertension, the cause of death is:

 

1) bullet wound

2) Hypertension

3) Hard to tell

 

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.

[zippy1]

https://www.ruv.is/frett/two-types-of-covid-19-in-one-individual

Two types of COVID-19 in one individual

slensk erfðagreining (deCODE genetics) has so far sequenced around 40 different mutations of the COVID-19 coronavirus in its testing in Iceland, and one individual has been found to be infected with two variations of the coronavirus at the same time, the company’s director Kári Stefánsson told RÚV.

 

I wonder how this affects the effort of finding a vaccine....

[minten]

4 or 5 labs outside France really need to duplicate this experiment.

 

https://techstartups.com/2020/03/27/coronavirus-cure-new-results-french-study-shows-combination-hydroxychloroquine-plaquenil-azithromycin-successfully-treated-80-coronavirus-patients-significant-dr/

 

If this works, I think this is hugely important, not just because it would reduce deaths, but because it would greatly reduce loads on hospitals.  Heck, Trump would even be able to claim he discovered the cure, since one of the two drugs is hydroxychloroquine.  :)

 

I agree. Results of an independent trial (with control group) backing this up are hugely important.

 

This French Dr. Raoult does appear to be somewhat of an idiot with a questionable past. We need to take out the risk that he's just faking it all.

[Cigarbutt]

So if I shoot a bullet through the head of a fellow with hypertension, the cause of death is:

1) bullet wound

2) Hypertension

3) Hard to tell

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."

[Investor20]

So if I shoot a bullet through the head of a fellow with hypertension, the cause of death is:

 

1) bullet wound

2) Hypertension

3) Hard to tell

 

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.

 

False comparison.  A bullet through head will kill 100% of time, immediately.

Covid-19 doesnt kill 99%+ and definitely not immediately.

 

So you cannot assign a 80 year cancer patient to Covid automatically.

At least they should check for lungs and breathing problems etc.

My understanding is a whole lot of times old and sick die of "infections" but is reported to be dead of cancer/stroke, and resultant complications. Not infection (flu, bacteria etc).

 

 

[Spekulatius]

So if I shoot a bullet through the head of a fellow with hypertension, the cause of death is:

1) bullet wound

2) Hypertension

3) Hard to tell

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."

 

Obviously, My example is extreme, but I want to make a point of the difference between a chronic and acute conditions, where the letter is probably the cause of death or is it caused leading cause?

 

The question about the cost to keep the containment up is a Real one. So far, people have only seen the epidemic numbers (infection rates, death rates), but not the economic ones. Nobody has added up cost of the lockdown either and how impacts the future. It’s clear we will get higher taxes from this, because it is truly a war every war that I know of has lead to higher taxes, often much higher taxes.

 

Once the Virus infection rate start to fall, which hopefully will be these questions and economic tradeoffs will have to be decided. My guess is by May will will have decide on economic economic impact vs saving lives. If we can’t get the disease under control by then, goodnight all.

 

There will be flareups when the open the Economy for a while, it will be a whack a mole game, until we have a vaccine. I wonder  about the anti vaccers....

[MarioP]

Simple put : we are in a health crisis after we’ll be in an economic crisis and after we’ll be in a public finance crisis.

 

We are not oui of the wood for at least a year

[Dalal.Holdings]

Thanks to bond market, USA can borrow like no other. Wouldn’t worry too much about fin crisis. End game of all of this will be inflation and taxes on wealthy and ultimate narrowing of wealth gap that has widened over decades. Wealthy folks will lose some of their (current) large share.

[patience_and_focus]

So if I shoot a bullet through the head of a fellow with hypertension, the cause of death is:

 

1) bullet wound

2) Hypertension

3) Hard to tell

 

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.

 

False comparison.  A bullet through head will kill 100% of time, immediately.

Covid-19 doesnt kill 99%+ and definitely not immediately.

 

So you cannot assign a 80 year cancer patient to Covid automatically.

At least they should check for lungs and breathing problems etc.

My understanding is a whole lot of times old and sick die of "infections" but is reported to be dead of cancer/stroke, and resultant complications. Not infection (flu, bacteria etc).

 

Type II diabetes is a good example of how silly it is to haggle about the exact cause of death when it is clear that a disease is clearly a major factor in contributing towards death. Most patients with severe type II diabetes die of other causes that are essentially a result of secondary damage from the disease (infections that do not respond to antibiotics very well, kidney failure, more cardiovascular complications than otherwise, etc). Clearly Covid seems to accelerate the underlying pre-existing conditions towards death, in particular cardio-vascular and any lung related pre-existing condition is what we know so far.

[no_free_lunch]

Thanks to bond market, USA can borrow like no other. Wouldn’t worry too much about fin crisis. End game of all of this will be inflation and taxes on wealthy and ultimate narrowing of wealth gap that has widened over decades. Wealthy folks will lose some of their (current) large share.

 

I don't see how you can have higher inflation without a financial crisis. Not with everyone geared up to the debt levels they are.  Higher inflation leads to higher interest rates and then lower spending the way I see it.

 

[Dalal.Holdings]

Thanks to bond market, USA can borrow like no other. Wouldn’t worry too much about fin crisis. End game of all of this will be inflation and taxes on wealthy and ultimate narrowing of wealth gap that has widened over decades. Wealthy folks will lose some of their (current) large share.

 

I don't see how you can have higher inflation without a financial crisis. Not with everyone geared up to the debt levels they are.  Higher inflation leads to higher interest rates and then lower spending the way I see it.

 

My basic understanding is--inflation good for long term debtors. Deflation is what kills debtors (seen in Great Depression). If you have a 30 year mortgage and locked in at 3% interest a year, inflation of 4-5% would make it easier for you to pay the interest/debt off (negative real interest rate for you), especially if you earn a salary which rises with inflation.

[no_free_lunch]

Thanks to bond market, USA can borrow like no other. Wouldn’t worry too much about fin crisis. End game of all of this will be inflation and taxes on wealthy and ultimate narrowing of wealth gap that has widened over decades. Wealthy folks will lose some of their (current) large share.

 

I don't see how you can have higher inflation without a financial crisis. Not with everyone geared up to the debt levels they are.  Higher inflation leads to higher interest rates and then lower spending the way I see it.

 

My basic understanding is--inflation good for long term debtors. Deflation is what kills debtors (seen in Great Depression). If you have a 30 year mortgage and locked in at 3% interest a year, inflation of 4-5% would make it easier for you to pay the interest/debt off (negative real interest rate for you), especially if you earn a salary which rises with inflation.

 

Correct but the new debtor now faces substantially higher payments.  New buyers drive prices, in particular in housing. It could cause another housing crash.

 

The 70s and early 80s had rising interest rates and it was a disaster.  I don't really know the preceding period very well but I don't think they had the huge household debt Bubble we have now. This could be worse.  The current set of asset prices, stocks, bonds, housing are all baking in low interest rates. We are in a corner and it's going to be ugly to get out.

 

It won't just be the rich who take the damage here. It will be savers. I'm a saver.

[thowed]

Isn't the fundamental problem here that the biggest debtors are governments?  So they want inflation to inflate away their debts.

 

This seems one of those total common-sense no-brainers, but perhaps got forgotten somewhat as it was supposed to happen after 2009, but didn't happen.  Now the stakes are even higher.

 

And yes, it will punish savers.

 

Separately, I'm wondering what tomorrow will bring?  The bill is signed (good, though should be priced in by now) but the news from Europe (and US?) has not been so good, and suggests US has much worse to come.

[TwoCitiesCapital]

https://aatishb.com/covidtrends/

 

A nice chart to have a reference. It does show that Japan is an anomaly relative to ALL other countries in terms of the break out - but also doesn't appear to be out of the woods yet as growth rate is still exponential despite some effectiveness at slowing it in the beginning. (Anything along the diagonal line, or the same slope of that line, is exponential growth as it's not anchored to time).

 

Also shows that Italy and Spain have been making slight progress in getting off the exponential growth train which is good.

 

The rest of us have work to do.

 

 

[mcliu]

So far best response: South Korea, Taiwan, Singapore.

Is it because they all have mandatory military service for men and the people are more alert about incoming threats (from North Korea, China, Malaysia)?

Something to consider?

[rb]

Isn't the fundamental problem here that the biggest debtors are governments?  So they want inflation to inflate away their debts.

 

This seems one of those total common-sense no-brainers, but perhaps got forgotten somewhat as it was supposed to happen after 2009, but didn't happen.  Now the stakes are even higher.

 

And yes, it will punish savers.

 

Separately, I'm wondering what tomorrow will bring?  The bill is signed (good, though should be priced in by now) but the news from Europe (and US?) has not been so good, and suggests US has much worse to come.

What you're missing is that Governments behave differently than wall street CEOs. They tend to not like inflation. Developed country governments have also behaved quite responsibly with this stuff despite what all the op-ed pieces say.

 

Besides, if you manage to have 1% yields and 2% inflation aren't you already inflating your debt pretty well?

 

Separately, if I knew what the markets were gonna do tomorrow I'd be richer than I am. I've definitely been getting a "buy the rumor, sell the news" vibe lately. So we'll see. My guess is that valuations at the point as still optimistic and we'll see 2200 on the S&P again as bad news keeps pouring in.

 

[rb]

So far best response: South Korea, Taiwan, Singapore.

Is it because they all have mandatory military service for men and the people are more alert about incoming threats (from North Korea, China, Malaysia)?

Something to consider?

Lot's of countries all over have mandatory military service. Maybe ask yourself why all those countries you named are in SE Asia.

 

Btw, at this point the Chinese response starts to look pretty good as well.

 

 

[minten]

Separately, I'm wondering what tomorrow will bring?  The bill is signed (good, though should be priced in by now) but the news from Europe (and US?) has not been so good, and suggests US has much worse to come.

 

What news from Europe has been "not so good"?