Coronavirus

[Lance]

For the "it's just the flu crowd":

https://www.smithsonianmag.com/history/philadelphia-threw-wwi-parade-gave-thousands-onlookers-flu-180970372/

 

American delayed action on COVID-19 is a crime against humanity.

 

That is a bold statement.

 

I felt a bit guilty about the hyperbole. Then I heard about Tom Hanks.

 

who gives a flying f about mr and mrs Gump? or frankly the NBA for that matter

 

Perhaps the thousands of people employed by NBA teams or the thousands more employed by their subcontractors who don’t get paid if there aren’t games.  Strange fucking thing to say bro.

 

Thanks

Lance

[KCLarkin]

who gives a flying f about mr and mrs Gump? or frankly the NBA for that matter

 

If they make Americans finally take this seriously, they will save many lives.

[Gregmal]

At least now we have some high profile celebrity endorsements! If nothing else, public people having it will shed a lot more light on the degree of this thing.

[meiroy]

For the "it's just the flu crowd":

https://www.smithsonianmag.com/history/philadelphia-threw-wwi-parade-gave-thousands-onlookers-flu-180970372/

 

American delayed action on COVID-19 is a crime against humanity.

 

That is a bold statement.

 

I felt a bit guilty about the hyperbole. Then I heard about Tom Hanks.

 

who gives a flying f about mr and mrs Gump? or frankly the NBA for that matter

 

When I saw the news about the Hunk family I actually thought THIS could be the game-changer that would push the administration into action.

 

Forget about the numbers that a certain political wing can ignore. We're talking now about a demi-god celeb who got sick. Three will be videos of him talking.

 

 

[meiroy]

Banning flights from Europe (except UK) for 30 days. $50 billion to SBA and trying to get congress to do the payroll tax relief. It'll be interesting to see how the market reacts tomorrow.

Downwards if I had to bet.

 

LOL! You are a fierce betting-man LC :)

 

It does start to feel like a real deep shit swamp and maybe it's time to start to consider buying.

 

 

 

 

[Hoodlum]

Banning flights from Europe (except UK) for 30 days. $50 billion to SBA and trying to get congress to do the payroll tax relief. It'll be interesting to see how the market reacts tomorrow.

Downwards if I had to bet.

 

LOL! You are a fierce betting-man LC :)

 

It does start to feel like a real deep shit swamp and maybe it's time to start to consider buying.

 

Why?  We are only at a 12 month low.  I don't think we are close to the bottom.

[meiroy]

Banning flights from Europe (except UK) for 30 days. $50 billion to SBA and trying to get congress to do the payroll tax relief. It'll be interesting to see how the market reacts tomorrow.

Downwards if I had to bet.

 

LOL! You are a fierce betting-man LC :)

 

It does start to feel like a real deep shit swamp and maybe it's time to start to consider buying.

 

Why?  We are only at a 12 month low.  I don't think we are close to the bottom.

 

Yes, probably not the bottom, perhaps far from it, but who knows, I sure don't.

 

When it comes to USA equities it pays to be optimistic.

[LC]

When too euphoric or too depressed, I find it helpful to seek out news from the other end of the spectrum, as a moderating factor:

 

https://nypost.com/2020/03/11/china-shuts-all-16-temporary-coronavirus-hospitals-in-wuhan/

 

In a dramatic sign that the coronavirus crisis is improving in China, the last two of 16 temporary hospitals in the epicenter city of Wuhan have been shut down, according to a report.

 

https://www.reuters.com/article/us-health-coronavirus-china/as-new-cases-of-coronavirus-subside-in-china-wuhan-told-to-go-back-to-work-idUSKBN20Y03W

 

Some vital industries in Wuhan, the Chinese city at the epicenter of the coronavirus epidemic, were told they can resume work on Wednesday, a day after President Xi Jinping visited there for the first time since the outbreak began.

 

https://www.forbes.com/sites/jamesasquith/2020/03/11/when-can-we-expect-travel-to-return-to-normal-apple-reopens-90-of-china-stores-and-wuhan-closes-the-last-temporary-coronavirus-hospital/#47c18e705bc5

 

Today Apple has reopened 38 of their 42 stores on the mainland that were previously all shuttered. Wuhan which was the centre of the outbreak, and entirely quarantined to prevent the spread of the outbreak has just closed the last of their temporary Coronavirus hospitals.

 

Note: there are still new cases and deaths in China ; but, well, it doesn't seem "as bad" as it was weeks ago. At least from an un-informed mainstream news perspective. It's been about 3 months since the virus was active in China - let's say another 3 months for containment, and another 3 on top of that to "return to normal". So maybe a 6-9 month period. I feel this is optimistic now as I am assuming no divergent events that I am wholly unqualified to speculate on (new viral strains, viral jumps to other species e.g. cattle, birds etc.)

[DocSnowball]

Banning flights from Europe (except UK) for 30 days. $50 billion to SBA and trying to get congress to do the payroll tax relief. It'll be interesting to see how the market reacts tomorrow.

Downwards if I had to bet.

 

LOL! You are a fierce betting-man LC :)

 

It does start to feel like a real deep shit swamp and maybe it's time to start to consider buying.

 

Why?  We are only at a 12 month low.  I don't think we are close to the bottom.

 

Yes, probably not the bottom, perhaps far from it, but who knows, I sure don't.

 

When it comes to USA equities it pays to be optimistic.

 

Can we talk market valuation and strategies? Futures in freefall after lack of leadership shown tonight. Means things will get worse before they get better.

 

This is Damodaran's S&P valuation, fair value can come anywhere between 2400 and 3050 depending on how much you think profits fall and how long they take to recover (our assumptions determine our fair value).

http://aswathdamodaran.blogspot.com/2020/03/a-viral-market-meltdown-part-ii-clues.html

 

I think 20%-25% fall in profits and 50% recovery of these profits down the line is reasonable, so anything under 2720 is fair game, under 2600 is better, and under 2425 is a no brainer "when it's raining gold...". I also looked at the daily case detection graphs in China - numbers started to come down in 7-14 days after social distancing (still optimistic that once enough pockets of outbreaks occur, widespread social distancing will be put in place and infection rates will go down over the next 1-2 weeks- can't predict the future but it's my base case). I'm starting to wonder if that is the measure that will calm markets down.

 

My bias is wanting to index once again so I can give more time to my other pursuits, so trying not to get lazy and go in too quick or too slow. I studied from Damodaran so anchor around his numbers more than I should.

 

Thoughts on how you're valuing the S&P500 and what's in the ballpark of fairly valued?

[Gregmal]

The 12 month low is just a figment of where you choose to start. At tomorrows open, we'll basically be trading at around where we were in Q4 2017.

[LC]

Chinese economic production is estimated to have slowed 25% due to the virus, which appears to be waning in China. So there's that.

 

Though the economy is still operating at about 25% below its usual levels, activity should be fully restored by the end of April, Francoise Huang, senior economist at Euler Hermes, predicted in a note to clients.

https://www.reuters.com/article/us-health-coronavirus-china/as-new-cases-of-coronavirus-subside-in-china-wuhan-told-to-go-back-to-work-idUSKBN20Y03W

 

SP500 is down about 23% off the recent high, for context.

[meiroy]

DocSnowball,

 

No idea, I don't buy the index.

[Gregmal]

Chinese economic production is estimated to have slowed 25% due to the virus, which appears to be waning in China. So there's that.

 

Though the economy is still operating at about 25% below its usual levels, activity should be fully restored by the end of April, Francoise Huang, senior economist at Euler Hermes, predicted in a note to clients.

https://www.reuters.com/article/us-health-coronavirus-china/as-new-cases-of-coronavirus-subside-in-china-wuhan-told-to-go-back-to-work-idUSKBN20Y03W

 

I tend to agree and am at least marginally more optimistic this seems to have gone from 0-60 in like a few days. While there is a degree of self mutilization that comes from scaring the bejesus out of everybody, it should also now, stem the spread. EVERYTHING in NY is closed. I think local governments have done a reasonable job jumping in front of this here. To expect anything from Trump other than pushing for stimulus and rate cuts, is stupid. He doesnt have a clue and will likely only be there to try to take credit. But anyone saying people arent taking this seriously just isn't paying attention. Every place I go has attendants with spray bottles and wipes. I've gotten emails from 7/8 banks I use outlining their responses. Almost all offices are closed and people are being told to work from home. So on one end, the fear mongering and hysteria can be short term damaging, on the other end, it forces the pain to the forefront, but will likely result in a quicker resolution.

[muscleman]

When too euphoric or too depressed, I find it helpful to seek out news from the other end of the spectrum, as a moderating factor:

 

https://nypost.com/2020/03/11/china-shuts-all-16-temporary-coronavirus-hospitals-in-wuhan/

 

In a dramatic sign that the coronavirus crisis is improving in China, the last two of 16 temporary hospitals in the epicenter city of Wuhan have been shut down, according to a report.

 

https://www.reuters.com/article/us-health-coronavirus-china/as-new-cases-of-coronavirus-subside-in-china-wuhan-told-to-go-back-to-work-idUSKBN20Y03W

 

Some vital industries in Wuhan, the Chinese city at the epicenter of the coronavirus epidemic, were told they can resume work on Wednesday, a day after President Xi Jinping visited there for the first time since the outbreak began.

 

https://www.forbes.com/sites/jamesasquith/2020/03/11/when-can-we-expect-travel-to-return-to-normal-apple-reopens-90-of-china-stores-and-wuhan-closes-the-last-temporary-coronavirus-hospital/#47c18e705bc5

 

Today Apple has reopened 38 of their 42 stores on the mainland that were previously all shuttered. Wuhan which was the centre of the outbreak, and entirely quarantined to prevent the spread of the outbreak has just closed the last of their temporary Coronavirus hospitals.

 

Note: there are still new cases and deaths in China ; but, well, it doesn't seem "as bad" as it was weeks ago. At least from an un-informed mainstream news perspective. It's been about 3 months since the virus was active in China - let's say another 3 months for containment, and another 3 on top of that to "return to normal". So maybe a 6-9 month period. I feel this is optimistic now as I am assuming no divergent events that I am wholly unqualified to speculate on (new viral strains, viral jumps to other species e.g. cattle, birds etc.)

 

China has no choice but to resume working. I think after another month, we'll see massive infections. The virus is asymptomatic  for a good % and there is no way to sort these folks out.

[Gregmal]

I feel like we could make a movie about quarantining Tom Hanks on an island....

[samwise]

Isn’t the modelling fairly basic here? Cases double every week, 10% get hospitalized,  1% die in 4 weeks. The rest are cured.  Let’s start with a thousand cases today, and only count deaths of these cohorts. You could vary any of these assumptions. Why did I choose 1%? It’s the only estimate I heard which came with a 95% confidence interval of [0.4%, 3%]. Here at minute 16 in this academic lecture. https://m.youtube.com/watch?v=mYTQI2DvAfo,

 

Ok, so let’s run this simple model. Not saying it’s right, but I’d like to hear which assumption to change here, and even better if there is a prediction model developed by epidiomologists which actually can be compared to future outcomes. According to this model, deaths should match the flu in 18 weeks.

 

Week 1: 1000 cases

Week 2: 2000

Week 3: 4000

Week 4: 8000 cases, 10 deaths (1% of the 1000 from week 1)

Week 5: 16000 cases, 20 deaths

Week 6: 32k cases, 40 deaths

Week 7: 64 k cases, 80 deaths

Week 8: 128k cases, 160 deaths

Week 9: 256k cases, 320 deaths

Week 10: 0.5 million cases, 640 deaths

Week 11: assume a miracle and no new cases, 1280 deaths

Week 12: no new cases, 2560 deaths

Week 13: 0 new cases, 5000 deaths

Week 14: happy days

 

Total cases ~1 million

Total deaths ~ 10k

Hospitalization~ 150k total

 

Seems very manageable at this point. Hopefully the infections start decreasing around here, but I have no idea when that will happen, so i’ll just extend this simple model until there are almost no humans left to infect.

 

If the miracle doesn’t happen for 5 more weeks , deaths double every week as well, following the infections with a four week lag. So deaths continue as 10k, 20k dead, 40k dead, 80k dead, 160k dead. Now the total deaths cross the flu at 320k approx, and the infected number are about 32 million (100 times the dead, remember this model is with a 1% mortality assumption). Doesn’t seem too bad compared to the flu. But hospitalization is now, 3.2 million, so outcomes may be worse than 1%(or whatever number you assume, as long as a 10% hospitalization rate holds).

 

Another 4 weeks without a miracle and you get, deaths per week of 320k, 640k, 1 million.

But now the deaths are 2 million total, and infected are 200 million. The series cannot go on much longer as there aren’t many un infected humans left in the USA. Let’s bookend the worst case at 1% mortality at 3.2 million deaths. Lower if some people escaped infection.

 

Very basic model, but tells me some numbers I can track in the future. If anyone has seen a published  predictive model like this somewhere, please share. To be clear, I am not making a prediction, just modelling outcomes with numbers that get thrown around. I’ve tried to use the best estimate for those numbers that I remember, but please correct them if I got them wrong.

 

Economic costs:

In 1918-19, there were no long term economic effects. As per a fed study. https://www.stlouisfed.org/~/media/files/pdfs/community-development/research-reports/pandemic_flu_report.pdf

Of course there were permanent effects on certain people, but society as a whole bounced back.

 

 

Extinction:

 

I see a lot of people got riled up by my extinction joke in the jokes thread. You guys are way to serious if you can’t take a joke. I obviously don’t believe this is the extinction event. But I do find reasoning of this type funny: “if something has never happened so far, it can never happen in the future.” To me it’s as funny as “I won’t join any club which will have me”. Others in this class are “house prices never go down”, “I don’t believe I can die, show me”, “humans will not go extinct. I won’t believe it until I see it”.

 

On the possibility of extinction by some other pandemic: we have been lucky so far as all the viruses that emerged so far are not that deadly, or not easy to spread, or turned out to be easy to contain. I certainly hope there is some natural law that prevents the emergence of a virus that spreads like measles and kills like Ebola.

 

Yours sincerely

Extinction dude

Signature: “Cold never bothered me anyway” /

[Gregmal]

https://www.yahoo.com/news/dont-panic-says-us-woman-recovered-coronavirus-055155667.html

 

Interesting story seems to vibe with some of the things orthopa mentioned earlier.

[james22]

Where are my "this is concerning, and we are watching developments with caution" folks?

 

And be thought a fool by everyone with a strong opinion? Better to remain silent.  ;)

 

Mr. Marks, in your new memo to Oaktree clients, you discuss the coronavirus outbreak and the uncertainties surrounding the impact on the global economy. What’s your advice for investors in this volatile market environment?

 

The great American author Mark Twain once said: "It ain’t what you don’t know that gets you into trouble. It’s what you know for certain that just ain’t so."

 

In our business as investors, there is no room to be certain about anything, and especially not today. Nobody knows what’s going to happen with the new coronavirus or what the implications are. But if you’re sure you know the answers and you bet heavily on it and it’s wrong, then you lose a lot.

 

What does this mean for investment decisions?

 

In our industry, a sentence that starts with "I may be wrong, but ...," or "I don’t know, but..." is unlikely to get you into trouble. You have to know what you know, and you have to know what you don’t know.

 

If you think you know and you really do know, then your investment decisions are going to be very profitable. But if you think you know and you really don’t know, then it’s very dangerous. You have to know the difference, but too many people have too high an opinion of their opinion.

 

Then again, is there really nothing we can say about the economic impact of the new coronavirus at this stage?

 

No, too many things are currently unknown and unknowable. So clearly, there can be no such thing as a reliable statement regarding the implications of the virus. We don’t know how long this outbreak will last. We don’t know how many people will be affected. We don’t know how many will die.

 

So how can we possibly estimate the impact on the economy? Yet, many brokerage firms come out and say GDP growth for the US economy will be 1.5%, for instance. There are as many forecasts as there are forecasters. They tell you what’s going to happen in the second, third and fourth quarter.

 

But how the hell do they know? They may feel an obligation to make an estimate, and it may be their best guess. But there’s a big difference between "this is my best guess" and "this is correct."

 

So how are you personally dealing with uncertain times like today?

 

I don’t feel I have to make an estimate.

 

https://themarket.ch/english/howard-marks-of-oaktree-capital-nobody-knows-ld.1674

[meiroy]

I feel like we could make a movie about quarantining Tom Hanks on an island....

 

...and while having feverish hallucinations he would imagine himself as a charlatan scam artist turned president

 

Then the fever breaks and he finds out it wasn't real.

 

He is saved and taken back home.

 

Where he finds a god sent pseudo-evangelical sycho with a personality disorder is leading the world in a fight against a zombie apocalypse.

 

The last scene shows Hanks, in a drunken stupor, after giving up on his life, putting all his money into Wells Fargo.

 

"Fuck NIM compression", he says "Just fuck it."

 

The End.

 

 

 

 

 

[Guest]

When too euphoric or too depressed, I find it helpful to seek out news from the other end of the spectrum, as a moderating factor:

 

https://nypost.com/2020/03/11/china-shuts-all-16-temporary-coronavirus-hospitals-in-wuhan/

 

In a dramatic sign that the coronavirus crisis is improving in China, the last two of 16 temporary hospitals in the epicenter city of Wuhan have been shut down, according to a report.

 

https://www.reuters.com/article/us-health-coronavirus-china/as-new-cases-of-coronavirus-subside-in-china-wuhan-told-to-go-back-to-work-idUSKBN20Y03W

 

Some vital industries in Wuhan, the Chinese city at the epicenter of the coronavirus epidemic, were told they can resume work on Wednesday, a day after President Xi Jinping visited there for the first time since the outbreak began.

 

https://www.forbes.com/sites/jamesasquith/2020/03/11/when-can-we-expect-travel-to-return-to-normal-apple-reopens-90-of-china-stores-and-wuhan-closes-the-last-temporary-coronavirus-hospital/#47c18e705bc5

 

Today Apple has reopened 38 of their 42 stores on the mainland that were previously all shuttered. Wuhan which was the centre of the outbreak, and entirely quarantined to prevent the spread of the outbreak has just closed the last of their temporary Coronavirus hospitals.

 

Note: there are still new cases and deaths in China ; but, well, it doesn't seem "as bad" as it was weeks ago. At least from an un-informed mainstream news perspective. It's been about 3 months since the virus was active in China - let's say another 3 months for containment, and another 3 on top of that to "return to normal". So maybe a 6-9 month period. I feel this is optimistic now as I am assuming no divergent events that I am wholly unqualified to speculate on (new viral strains, viral jumps to other species e.g. cattle, birds etc.)

 

China has no choice but to resume working. I think after another month, we'll see massive infections. The virus is asymptomatic  for a good % and there is no way to sort these folks out.

 

Well...I don't think this is priced into the market.

[meiroy]

muscleman,

 

I'm not so certain we will see a second wave, for various reasons.

 

What is clear, though, that for many people who are already going to work, there is simply not much to do. Consumption is really low.

 

 

[wescobrk]

I think I'm reading Whitney Tilson's weekly email for comedy now. The man actually wrote yesterday the coronavirus is the most irrational thing he has ever seen.

It makes me bullish of being able to profit from idiotic behavior even when someone graduated in the top 5% of his class at Harvard Business School and has been to every Berkshire and Wesco meeting for more than 20 years. This guy says Tesla will go below $100 (wtf?) and every week how more sure he is of Tesla to the coronavirus to the most irrational thing he has ever seen from how it is impacting markets.

No wonder all of his investors left and now he is a writer.

[Read the Footnotes]

muscleman,

 

I'm not so certain we will see a second wave, for various reasons.

 

What is clear, though, that for many people who are already going to work, there is simply not much to do. Consumption is really low.

History shows that a second wave is all but guaranteed if controls are lifted too early. Hopefully decision makers around the world have good models and good data and will make decisions for the right reasons.

[merkhet]

Extinction:

 

I see a lot of people got riled up by my extinction joke in the jokes thread. You guys are way to serious if you can’t take a joke. I obviously don’t believe this is the extinction event. But I do find reasoning of this type funny: “if something has never happened so far, it can never happen in the future.” To me it’s as funny as “I won’t join any club which will have me”. Others in this class are “house prices never go down”, “I don’t believe I can die, show me”, “humans will not go extinct. I won’t believe it until I see it”.

 

On the possibility of extinction by some other pandemic: we have been lucky so far as all the viruses that emerged so far are not that deadly, or not easy to spread, or turned out to be easy to contain. I certainly hope there is some natural law that prevents the emergence of a virus that spreads like measles and kills like Ebola.

 

Yours sincerely

Extinction dude

Signature: “Cold never bothered me anyway” /

 

Actually, my quip wasn't direct at you. There was someone else who (seemingly seriously) was describing this as an extinction level event on a different thread (not this one or the joke thread). I thought your backtest joke was funny.  :)

[alwaysdrawing]

LOL at the guy using a Damodoran DCF model for the S&P.  Good luck buddy. 

 

Don't you guys see?  Companies are going to revenue comp -20, -50, -80%--how many businesses can survive that?  Airlines, theme parks, cruise ships, restaurants by the 1000s are dead companies walking.

 

Hundreds of thousands of people, and 1000s of businesses are going to close.  Unemployment is going to skyrocket.

 

The gov't doesn't have enough money to bailout the people, to say nothing of the current crazy plans to bailout hotels and cruise lines.  Your stocks--many of them anyway--are going to ZERO.  The Democrats control the house--they aren't bailing out big business.

 

BUY FOOD FOR A LONG TERM QUARANTINE.  PRACTICE SOCIAL DISTANCING. Stay safe folks.  We have a long way to go from here, so strap in.