“There Will Be a Lot of Death”
Round the World in Markets – “Unprecedented Times”
Companies around the world are in a race to find a treatment for the COVID-19 virus. Johnson & Johnson, Moderna, Novavax, and more have dedicated substantial resources to come up with a workable solution in the past weeks. Currently available drugs are being tested as an effective treatment for the coronavirus, including those for malaria and arthritis. New York, the US city with the most active cases, is using all available resources including intravenously administering Vitamin C. There is currently no cure for COVID-19 and vaccines are still likely 12-16 months away.
The 2020 Democratic Convention has been postponed due to the coronavirus. The tentative rescheduling has pushed the event from July to mid-August. The announcement was made by Democratic party front-runner Joe Biden during an appearance on “The Tonight Show.” This is true.
Brazilian President Jair Bolsonaro defies COVID despite increasing cases in South America. Echoing President Trump’s assertion from weeks ago, President Bolsonaro has called the virus “a measly cold.” At this point, Bolsonaro is the only major world leader to ignore the severity of the pandemic which has infected over 1 million people worldwide.
Hungary adopts an authoritarian state overnight. As of Monday, Prime Minister Viktor Orban has wide-sweeping authority to overturn or implement any laws or measures he sees fit. Parliament would be able to overturn the emergency power by a two-thirds vote. This is also the percentage of votes Minister Orban currently controls in the government.
Not to be outdone, Belarus is downplaying the situation as well. President Alexander Lukashenko has taken the unorthodox approach to recommend drinking vodka and visiting a sauna at least twice a week. There is currently zero proof that either of these suggestions is an effective way to treat the virus. Belarus currently has 304 active cases and 4 deaths. This defiance by President Lukashenko is irresponsible and will ultimately destroy lives.
The President of Kenya, Uhuru Kenyatta, has freed inmates through Skype and Zoom to curtail the spread of the coronavirus. Nearly 5,000 criminals with less than 6-months of prison time left have been discharged. As of March 27th, there is also an active curfew between the hours of 7 pm to 5 am.
Thailand is also planning to announce a nationwide curfew. Starting Friday a curfew will go into effect between the hours of 10 pm and 4 am with the patient and medical transportation exempt. Thailand has over 1,800 active cases and 15 deaths from COVID-19 to date.
The Face Mask Controversy
(Image Courtesy of: Las Vegas Review Journal)
One of the most puzzling aspects of the COVID-19 pandemic has been the conflicting message on face masks. Specifically, the N95 model respirator has been at the center of this issue. How has this mask led to so many questions and different opinions from experts?
Face Mask Buzzwords
Face masks are designed to keep things outside of us outside. There are a number of different styles, from the types surgeons wear to full-face respirators resembling scuba gear. As we have discussed face masks before, I will focus primarily on the N95 and Surgical masks.
(Image Courtesy of BBC News)
N95 masks are the gold standard in this case. They form a seal around the face and contain a filter rated to eliminate 95% of particles 0.3 microns in size, much smaller than the droplets that are believed to transmit the virus.
Surgical masks form a more loose seal and have no filtration system. These are designed primarily to protect against droplets and are recommended to be used with a facial shield. These surgeon masks are the kind typically worn in Asian countries, where they are more culturally appropriate to wear in public.
The current data shows that the virus is primarily transmitted from person to person and object to person. A cough, sneeze, or everyday conversation can expel enough droplets to infect someone close to you. The virus can also live on objects like doorknobs, handrails, or anywhere else a person becomes in contact with. Transmission can also occur through fomites, which are small materials like dust contaminated with the virus.
Based on these facts the common sense approach would be to regularly wash our hands, sterilize things we touch (or are about to touch), and cover our faces/mouths. However, while the media, and this newsletter, have made much ado about hand washing the narrative on face masks has been less intuitive.
How very interesting. If masks are NOT affecting in preventing the general public from catching COVID-19, how are doctors and nurses different? Granted there is a correct way to put on and take off the N95 masks, and they should be used only once, but is that really the reason? Even the CDC’s website recommends facemasks for those caring for someone who is sick. Surely preventative equipment should be utilized as asymptomatic carriers of the virus can transmit it without their knowledge.
The real reason for the ban on facemasks is most likely because there is a massive shortage of masks of any kind. Stores are completely sold out of masks of any kind in California, Oregon, Washington, and many other states in the US. Much like a bank run, institutions and individuals are buying up masks anywhere they can get them and driving up prices. This severe shortage has caused Amazon to stop selling N95 masks (along with hospital gowns, gloves, and facial shields) to consumers in order to make them available to hospitals and health workers.
Now that the supply of medical-quality masks is nearly non-existent, the CDC has reversed its decision. The Surgeon General, Dr. Jerome Adams, is now recommending all Americans wear some kind of “non-medical mask” when leaving their home. The reasoning, as previously mentioned, is that people can carry and spread the virus without showing any symptoms, a fact we have known for several weeks, if not months. Subscribe
Now that we have official endorsement of masks from the government the public must scramble to put together makeshift masks. The CDC’s website even recommends wearing a bandana or scarf around your face.
But how effective are these in protecting against infection? Parsing through several research papers on the topic the answer appears to be “Better than nothing.” Doubling up on material is shown to be more effective at filtering out particles and it has been suggested that inserting an activated carbon filter could further increase the effectiveness.
(Image Courtesy of: Smart Air Filters)
Good Housekeeping has a decent template to use for sewing your own mask. Since we all have time on our hands, why not learn how to sew? It might be slightly useful after watching the movie “Contagion” on repeat and rearranging the sock drawer. Extra facemasks may also be welcomed by your local hospital as they are useful to wear outside of an N95 mask.
Carrier Captain Re-assigned for Whistleblowing
(Image Courtesy of: 10 Daily)
Captain Brett Crozier of the nuclear aircraft carrier Theodore Roosevelt has been relieved of duty after raising concerns about the government’s handling of COVID-19. Captain Crozier, who was directly responsible for approximately 5,000 personnel, voiced his opinion that the ship needed to be quarantined due to the 93 people who had tested positive for the virus. In his 4-page letter the captain wrote “Sailors need not die” and “We are not at war. Sailors do not need to die. If we do not act now, we are failing to properly take care of our most trusted asset, our Sailors.”
As a small percentage of the space on carriers is reserved for sailors and staff, quarters are often cramped. Staff are often in close proximity to each other, making the social distancing recommendations by the CDC impossible to implement. Further exacerbating the situation is that the asymptomatic spread of the coronavirus is well documented at this point. These military craft require the highest standards in operational capacity and an outbreak of any infectious disease could greatly reduce its ability to react.
During the daily press conference, when asked about the dismissal of the captain, President Trump responded “He wrote a letter. The letter was a 5-page letter from a captain. And the letter was all over the place. That’s not appropriate. I don’t think that’s appropriate . . . I thought it looked terrible to be honest with you . . . This isn’t a class on literature.” When further pressed he said “I agree with their decision 100%”
The first COVID-19 tests returned as positive nearly two weeks after a shore leave in Vietnam.
Another Relief Bill
(Image Courtesy of: Outside the Beltway)
The bailouts continue. The US leadership are preparing to create an additional relief bill tentatively called “Phase 4.” It is theorized that this could be an additional $2 trillion stimulus focused on rebuilding infrastructure. Likely candidates are the healthcare system that is under the spotlight in states heavily impacted by COVID-19 including New York and California. Any new bills would have to be after April 20th, when Congress comes back from vacation. Legislatively we are at a standstill until then. There will undoubtedly be much more useful data in the next two weeks as the number of active cases and mortalities continue to rise.
If the COVID-19 recommendations extend the shelter-in-place recommendations we could see Phase 4 include more direct payments to consumers, distressed businesses, and hazard pay for front-line health workers. A number of other provisions, including those left out of the Phase 3 bill could be shoehorned in. These could include vote-by-mail and increase the availability of food stamps.
The addition of more bills and stimulus packages does not bode well. The impact of these measures are likely to take weeks or months to be felt in the US as unemployment is increasing at a disastrous rate.
Unemployment and the Economy
(Image Courtesy of: nutsamelitauri)
Until recently the unemployment rate in the US was roughly 3.4%. This means that a very small percentage of the population was unemployed and actively looking for work. The last two weeks of March saw a staggering 10 million people file for new unemployment benefits. Based on the continued social distancing recommendations and shuttering of non-essential businesses this number is expected to rise higher. As of publishing the new unemployment rate is 4.4% Below is a graph displaying the substantial increase in new claims. That red circle is a very worrying number.
(Image Courtesy of: Federal Reserve Bank of St Louis)
The Great Depression had an unemployment rate of over 25% as the stock market lost the majority of its value nearly overnight. Goldman Sach is projecting unemployment to hit 15% in the second quarter of this year, corresponding to nearly 50 million unemployed US citizens and a drop in the GDP of 34%.
In case you missed it the first time, that is a Thirty Four Percent drop in the Gross Domestic Product of the United States of America.
Morgan Stanley has a similar idea, with unemployment topping out at 15.7% and the GDP dropping 5.5%.
Caliber Home Loans CEO, Sanjiv Das believes that unemployment in the double digits could bring forth another mortgage crisis. “So a large number of customers still have disposable cash, and I think that’s helping us a little bit. However, if unemployment gets as deep as some people are predicting, if it gets to the mid-teens, then it could be far deeper than the subprime crisis.”
Expanding on what that could mean, Sanjiv stated “I think in 2009 the crisis peaked at 90 days+ delinquencies at 9%, about 9% of the portfolio. I think this time we will get to that peak in about six months. I think it is completely possible that we will go 40-50% on top of that.” This is a significantly worse projection than the 2008-2009 recession.
No one has a crystal ball in this case. While many may claim to know what will happen, the fact remains that there has never been a pandemic of this size in the modern age. Anecdotally there are those buying equities at these lower prices as experts layout scenarios that could allow the economy to bounce back in weeks instead of months. Those trying to “catch a falling knife” at these levels may be sorely mistaken if unemployment claims, infected individuals, and social distancing all continue to trend upwards as we march forward into summer.
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