Coronavirus
Coronavirus
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“Ignorance is a virus. Once it starts spreading, it can only be cured by reason. For the sake of humanity, we must be that cure.” ~ Neil deGrasse Tyson
“Only one form of contagion travels faster than a virus. And that’s fear.” ~ Dan Brown
This week’s newsletter focuses on the Coronavirus international dimensions, local dynamics, and market ramifications. To be prudent and prepare for any scenario, please go to ready.gov … Also:
Analysis:
source: bbc.com
Before exploring specific countries and dynamics, there is one factor that defines the possible outbreak. That is the nature of the virus itself and how it spreads. For all the talk of comparisons to the flu, it is very different on the mortality rate as well as the rate it spreads, with one infection being responsible for another four. (some estimates have this higher depending on how restrictive the environment) That explains the exponential curve above, regarding cases outside and inside of China.
I am no medical doctor, but I would never bet against anything that spreads exponentially.
China:
The believed source of the virus currently has over 80,000 cases, and most critics argue that data is too low.
South Korea:
Source: BBC.com
*Note the hot provinces in South Korea
Iran:
Widely seen video of Iranian minister with virus symptoms.
![](https://img.youtube.com/vi/fctowSC1tbI/0.jpg)
![](https://media.newyorker.com/photos/5e59447d53a7e200088ad478/16:9/w_1280,c_limit/Wright-CoronavirusinIran-Primary.jpg)
How Iran Became a New Epicenter of the Coronavirus Outbreak | The New Yorker
The government’s actions appear to have contributed to the crisis.
Europe: 1,700 cases that have resulted in quarantines for the area around Milan. Germany and France each have 130 to 150 cases.
United States:
These reports of new U.S. infections will grow in scope and frequency. We need to develop a coherent, organized system for reporting new cases like other nations have implemented
https://twitter.com/HealthyFla/status/1234307914438889473
From my reading, it is expected that the House and Senate will consider supplemental funding to support the CDC and NIH research and response to the virus. The negotiations suggest it will be greater than $2.5 billion. While there has been general discussion on previous budget requests, those numbers will not weigh on the consideration of funding. Also, the current budget year has budgetary flexibility and authority to utilize funds in response to the coronavirus.
Market:
The market is responding to the news of the coronavirus and the number of people impacted. The market is also responding to the effects the virus could have on trade and productivity.
Source: FRED data on stock volatility
Commentary on the market response has ranged from hysteria to criticizing hysteria. Let’s peel back some dynamics that are reasonable assumptions, which are the result of what we currently know. We know that the virus spreads exponentially (which is the most essential thing to comprehend); however, what we know now is that China’s workers and their output are severely diminished for this month and can be reasonably expected to be diminished into next month, even under the most optimistic scenarios. This will mean that China will very likely fall well below its 5% targeted growth for the quarter. Also, other economies like Japan, South Korea, and Europe can be expected to miss their targeted growth. Some of the market reaction is internalizing this information as well as the collective worry. At the same time, it would be hard to assume, accepting the baseline, that this would not have a significant effect on the stock market globally and in the US. Any additional effects going forward that have to do with the virus can be expected to intervene in general life and the global economy. These are reasonable downside risks to take into account.
Goldman lowers Q1 GDP forecast:
![](https://image.cnbcfm.com/api/v1/image/106371867-1580834532806gettyimages-1198368917.jpeg?v=1603965792)
Goldman cuts US Q1 GDP forecast to just over 1% on coronavirus
The bank slashed its U.S. GDP growth forecast to just 1.2% from 1.4%, seeing a more severe drag from the epidemic.
Singapore expects economic loss:
Singapore cuts GDP forecast for 2020, cites risk to China’s growth from coronavirus | South China Morning Post
The coronavirus outbreak has opened up the possibility of a recession in the city-state, which lowered its 2020 growth forecast to -0.5 to 1.5 per cent.
Answers to popular questions:
Will the virus decline as the weather gets warmer like the seasonal flu? According to National Geographic, because little is known about the virus, they believe it is possible it will not die down like what happens in flu season.
![](https://i.natgeofe.com/n/408cac91-4e09-4cf9-9bcc-26de8c1c0e07/coronavirus-heat_16x9.jpg?w=1200)
Will warming spring temperatures slow the coronavirus outbreak?
Flu season generally subsides in April and March, but will the coronavirus go with it? Past coronavirus outbreaks can offer clues.
Silver Linings (Virus) Playbook:
The increase in public awareness of diseases and proper preparation can be a beneficial lesson for future challenges. Also, the rise in the number of people washing their hands may lead to reductions in cases of the flu. Brill scores this dynamic point
I think all the attention to Coronavirus will lead to more hand washing and other positive cautious behaviors which will then reduce the incidence of the normal flu in the US. If true, this benefit needs to be considered when measuring cost of coronavirus.
Note: As a number of my friends like to point out, I cannot write prescriptions or give medical advice and encourage you to seek the necessary expertise of medical professionals. My area of study draws inferences to their findings and assumes how these dynamics interact in our social world.
Next week we will continue discussing US-China trade relations, although I expect updates on the coronavirus going forward. If you want to talk more about these subjects please contact me anytime.
Thank you for subscribing! I always enjoy the feedback that you can give by replying to the email. Please share it with your friends if you like. ~ Kevin