Market comment 2020

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The World Health Organization (WHO) says that the mortality rate from the Wuhan Coronavirus (formally known as 2019 nCoV) is 3.4% globally. The Spanish Flu of 1918 – which killed between tens of millions of people – had a lower mortality rate, estimated by the WHO as between 2 and 3%. But surely, you say, the Coronavirus is not as contagious as the Spanish Flu … Unfortunately, it’s more contagious.  The Center for Infectious Disease Research and Policy notes:

The novel coronavirus has an R0 of 2.2, meaning each case patient could infect more than 2 other people. If accurate, this makes the 2019 nCoV more infectious than the 1918 influenza pandemic virus, which had an R0 of Based on calculations, the authors of the larger study estimate the novel coronavirus has an R0 of 2.2, meaning each case patient could infect more than 2 other people. If accurate, this makes the 2019 nCoV more infectious than the 1918 influenza pandemic virus, which had an R0 of 1.80 ….

WHO says that the R0 of Coronavirus in China was initially between 2 and 2.5.< But scientists from the Los Alamos National Laboratory said that the R0 for the Coronavirus is actually between 4.7 to 6.6 (although that number drops to between 2.3 and 3 after quarantines and social distancing are implemented). According to the Director of the US Centers for Disease Control and Prevention, the Director of the National Institute of Allergy and Infectious Diseases and others, Coronavirus can be spread even when people have no symptoms. On the one hand, this is bad news, as it is very hard to screen and locate carriers when they are symptom-free or have only mild, cold or flu-like symptoms. On the other hand, this means that the real R0 might be much higher than WHO estimates … which would make the mortality rate lower.

 According to the WHO, Coronavirus Is WORSE Than the Spanish Flu ... Which Killed Tens of Millions of People | naked capitalism

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The American health care system fails at every one of these tasks. Nearly 30 million Americans are uninsured, and a further 44 million are underinsured — meaning they will likely hesitate to go to the doctor if they start developing COVID-19 symptoms. This problem is seriously exacerbated by the rampant predatory profiteering that infects every corner of the health care system. Indeed, responsible citizens who have gone in for tests have already started getting slammed with multi-thousand dollar bills. A father and daughter who were evacuated from China and then forcibly quarantined for several days (luckily they were not infected) went home to find $3,918 in bills.

If you are working-class person with a $10,000 deductible (not at all uncommon), going to the doctor simply because you have flu-like symptoms (which is how most cases of COVID-19 are experienced) could very easily send you into bankruptcy. If infected, millions of Americans are likely going to take their chances — and keep spreading the virus... 

The United States is one of only a handful of countries (almost all of them desperately poor) with no national sick leave program, which means many workers who come down with COVID-19 will be forced to choose between starving or spreading the disease. Food service workers are especially unlikely to have sick leave from their employers, and are generally not paid well either. So-called "gig economy" companies naturally provide no sick leave either. In China, food delivery services have been critical for feeding cities under lockdown, but in America they are likely to become just another vector of infection.

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Trump Has Sabotaged America's Response to the Coronavirus Pandemic

Article detailing the cutbacks on response capacity for viral outbreaks..

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A former Treasury chief economist predicted that the lockdown measures were reducing Italy’s economic output by around 10-15%, with the tourism and transport sectors down about 90% on their normal levels... The Milan stock exchange fell a further 3.3% on Tuesday, meaning it has now slumped 29% since Feb. 20. Italy’s borrowing costs are also shooting up, reviving fears that an economy already on the brink of recession and struggling under the euro zone’s second-heaviest debt pile could be plunged into crisis.

 Italy in coronavirus lockdown as deaths soar and economy fades - Reuters

 The goal, business groups and economists say, is to get more cash into the pockets of workers and companies quickly. As administration officials head to Capitol Hill to discuss their plans with Senate Republicans, the method and recipients of any stimulus are still in flux. The president has been pushing for a broad payroll tax cut but others inside the White House want a targeted response that benefits industries and areas hardest hit by the virus, advisers say.

 Trump's coronavirus stimulus is still evolving. Here's what it should include, experts say - Reuters

German Chancellor Angela Merkel has warned that according to experts, 60-70% of the German population could become infected with the coronavirus. She said that since there's no cure yet, governments need to focus on slowing its spread. "When the virus is out there, the population has no immunity and no therapy exists, then 60 to 70% of the population will be infected," she was quoted by the Reuters news agency as telling reporters in Berlin. "The process has to be focused on not overburdening the health system by slowing the virus's spread. It's about winning time."

 Coronavirus latest: Virus cases rise rapidly in Europe and US - BBC News

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Goldman Sachs said on Wednesday the S&P 500 bull market, the longest on record, is likely to end soon, forecasting a 28% slump from its February peak as the fast-spreading coronavirus is seen taking a toll on corporate profits. The bank expects the S&P 500 to hit 2,450 points, down 15% from current levels, by mid-year, followed by a bounce back in the fourth quarter to 3,200 points.

 S&P 500 bull market will soon end: Goldman Sachs - Reuters

The president of the European Central Bank has warned that the coronavirus outbreak will spark an economic downturn in Europe similar to the 2008 financial crash unless EU governments provide financial support for their economies. Christine Lagarde held a call with EU leaders on Tuesday night to urge them to take action and raise spending in order to counter the economic effects of Covid-19, a source with knowledge of the matter told Bloomberg.

 Coronavirus could cause crash on scale of 2008, Lagarde warns | World news | The Guardian

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For those with more discerning minds who do, in fact, recognize the public health threat this type of outbreak creates, they are confronted with a practical question: If I feel like I may be sick, or if I may have come into contact with someone who is, can I really afford to stay at home? The answer to that question for 7 in 10 low-wage workers in the United States is: no. In fact, 34 million working Americans have no access to paid sick days at all. This means that even if people are taking the outbreak seriously, they cannot monetarily afford to take the precautions necessary to keep themselves and their loved ones — or your loved ones, who are also at risk of catching disease from them — safe. 

The United States is unique in this way. It is the only industrialized nation without any federal paid sick leave policy. The extent of the US federal sick leave policy is the requirement in the Family and Medical Leave Act (FMLA) that requires that companies with 50 or more full-time employees allow their workers to take time off – unpaid. This, of course, offers no paid sick leave for people at all. It also provides no unpaid leave for individuals who work at small businesses. According to the Small Business Administration, as of 2015, small businesses employed 47.5 per cent of the United States’ private workforce, so basically half.

 Coronavirus will spread much more in the US because of one work policy they refuse to change | The Independent

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“We will be suspending all travel from Europe to the United States for the next 30 days. The new rules will go into effect Friday at midnight,” Trump said. The outbreak threatens Trump’s legacy and reelection outlook as he’s struggled to stop spread of the virus and its economic impact. Trump said there would be limited exceptions to the unprecedented and open-ended travel restriction. “There will be exemptions for Americans who have undergone appropriate screenings,” Trump said. “And these prohibitions will not only apply to the tremendous amount of trade and cargo. But various other things as we get approval, anything coming from Europe to the United States.”

 Trump suspends travel from Europe over coronavirus fears

• Somebody explain to Trump there is no coronavirus in French cheese..
  
• Actually a couple of hours after the speech the trade war is off, according to a clarifying tweet from Trump..
  

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Statistical models meant to project the potential reach of the coronavirus and the COVID-19 disease suggest more than a million Americans could die if the nation does not take swift action to stop its spread as quickly as possible. At least three different models built by epidemiology experts suggest that millions of Americans will contract the coronavirus, even in optimistic projections, based on what they know of its spread in China and the United States so far.  One model from the Centers for Disease Control and Prevention (CDC) suggested that between 160 million and 210 million Americans could contract the disease over as long as a year. Based on mortality data and current hospital capacity, the number of deaths under the CDC's scenarios ranged from 200,000 to as many as 1.7 million. It found as many as 21 million people might need hospitalization, a daunting figure in a nation with just about 925,000 hospital beds.

 Worst-case coronavirus models show massive US toll | TheHill

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Malaysia has confirmed 41 new coronavirus today. All of the cases are connected to a religious event which occurred on the outskirts of Kuala Lumpur and was attended by around 10,000 people. This brings the total number of cases in Malaysia to 238, 81 of which were linked to the same event held at a mosque between February 27 and March 1.

In Brunei, 38 of the total 40 coronavirus cases in the country had been linked to the religious gathering, as of Saturday. A total of 85 Bruneians were present at the the gathering, 18 of whom went on to test positive. The remainder of the 38 are their immediate family members, friends or co-workers, the health ministry said.

Indonesia’s capital, Jakarta, will shut schools and organise remote teaching for a minimum of two weeks in an attempt to halt the spread of coronavirus. The announcement was made today by Jakarta’s governor, following reports of 27 more cases, bringing the total to 96. The number of deaths increased to five.

Rio de Janeiro is starting to go into shutdown mode because of the coronavirus crisis, which looks set to worsen in Brazil in the coming days

 Coronavirus latest updates: WHO questions UK response, Apple closes all non-China stores | World news | The Guardian

• Cases in the tropics, warm weather doesn't seem to make much difference
  
• Religious gatherings are risky (as we know from South Korea already)
  

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Analytics firm Oxford Economics also discouraged dip buyers, noting in a report that companies’ price-to-earnings ratios remain elevated and corporations may eventually find it difficult to service their debt at a time when leverage is near all-time highs. The firm urged investors to trim exposure to a broad variety of asset classes, including European stocks and the local currency debt of emerging markets. They are also warning investors to brace for more alarming headlines concerning the virus’ spread in the United States. “In the foreseeable future, and with a vaccine for the virus still nowhere in sight, it is reasonable to assume that Western containment strategies are unlikely to succeed and the peak in the incidence is at least some weeks, if not months, away,” the firm said.

 Investors prepare for more market swings as virus spreads in the U.S. - Reuters