Monday, April 6, 2020

Covid-19 green shoots

Eighteen days ago I guessed that March 18th "marked the extremes of panic, despair, capitulation, short-covering, and anguish," and that we were beginning to see some light at the end of the tunnel. I'm feeling even better about things now, and I note here several "green shoots" that I have run across which make me quite optimistic that the covid-19 epidemic is peaking. We've seen the worst and we are now turning the corner in a positive direction, especially in hard-hit Europe.

Chart #1

As Chart #1 shows, the peak of financial panic was indeed March 18th, and the bottom of the stock market came just a few days later, on March 23rd. Since then the Vix index has subsided from the mid-80s to now 45, and stock prices have rallied almost 20%. The market is looking across the valley of despair, and seeing lots of lights at the end of this tunnel: 1) the end of the seasonal flu season, 2) the emergence of very effective therapeutic drugs (e.g., hydroxycloroquine, Azithromycin, zinc), 3) the rapid development of multiple vaccines, 4) declining new daily cases and new daily deaths in most of Europe, and 5) declining rates of feverish illness throughout the US (see below). Furthermore, increasing numbers of analysts are looking at the covid-19 data and realizing that the lethality of the virus is far less than originally feared; in that regard, Dr. Fauci's guess a few weeks ago that it is about 0.2% (as compared to 0.1% for average flu and original estimates of 4-5%) seems better and better.

The "experts" who in February were predicting millions of deaths in the US and Europe accomplished only one thing: they scared the bejeezus out of presidents, governors, and local health officials, who then found it easy to persuade the public to surrender their liberties. We must pray that this process reverses quickly.

Chart #2

Chart #2 comes from Kinsa smart thermometers around the country. I highly recommend looking at your own county using this map ( and its many different views. In this particular view, we see that the northeast is no longer a hot spot, and neither is Washington nor California. Spreading rates of illness are largely confined to the Rocky Mountain states. Most of the country is seeing a decreasing number of people with fevers. This doesn't necessarily correlate to cases of covid-19, but it's likely pretty close. Where there are a lot of people with fevers these days (flu season), it's quite likely that a lot of people have the flu or novel coronavirus. I highly recommend exploring this website and its many charts.

Chart #3

Chart #3 shows the data from Richmond County, NY, formerly one of the nation's "hot spots," with by far the greatest number of covid-19 cases of any region. The observed (orange) line plots the percentage of people in the county with fevers, while the blue dots represent the expected number of people with fevers given the experience of past years. Illness rates normally decline at this time of the year as flu season slowly wears off. Note that the number of people with flus started to (atypically) increase in early March (shortly after De Blasio in late February encouraged New Yorkers to enjoy themselves outdoors), but then started to decline beginning in March 21st, and is almost back to "normal" levels. This strikes me as good evidence that telling people to stay home has dramatically reduced the number of people catching the virus. Extrapolating from this, we should probably soon see a topping out of new cases in the NY area (indeed there are already preliminary signs that this is occurring), followed in a week or so by a sustained daily reduction in new deaths. In other words, this chart might well be the best leading indicator we have that quarantines are producing results, and that they are in fact "flattening the curve."

Chart #4

Chart #4 shows the data from Los Angeles County, where the number of new covid-19 cases has not been particularly alarming. Here we see that the sudden imposition of "shelter at home" orders beginning March 19th has resulted in a remarkable (especially for this time of the year) decline in the number of people with fevers. Almost no one is getting sick of late, thanks to the fact that nearly everyone is practicing extreme social distancing.

Chart #5

Meanwhile, as Chart #5 shows, the Fed's aggressive efforts to add liquidity to the financial system—in response to a sudden and dramatic increase in the demand for money and liquidity—almost immediately resulted in a $800 billion increase in the M2 money supply, most of which went to bank savings deposits and demand deposits. The abundance of liquidity will go a long way towards easing the pain of the sudden onset of depression-like conditions.

Chart #6

Yet the market overall is still extremely risk-averse, as seen in Chart #6. Treasury yields have almost never been so far below the prevailing rate of inflation. The world is so desperate for security that investors are willing to accept deeply negative real yields on Treasuries (which now guarantee that investors will lose purchasing power) in exchange for their safety and liquidity.

I am very hopeful that local authorities begin to lift their lockdown orders as soon as possible. I think the covid-19 stats are going to support that, and I think the public will soon grow increasingly restless as it become obvious that deaths from this virus turn out to be far, far less than they were told. The only sensible policy at this point is to keep vulnerable citizens (the elderly and infirm) under lockdown while allowing most other people to resume their normal lives while—of course—continuing to observe some level of social distancing and frequent hand-washing. I suggest you watch the first 8 minutes of this video, in which Professor Knut Wittkowski says the pandemic is already over. Parents (and those who are easily "triggered") take note: he is adamant that closing our schools is a bad idea.

UPDATE, from my comment yesterday on this post. I think it's important to give this more visibility:
My prediction: in the fullness of time, we will come to realize that the shutdown of the US economy was the most expensive self-inflicted wound in the history of mankind.
UPDATE: Here's a bit more from Prof. Wittkowski. He is truly an expert at epidemics, and it's a shame his voice was not heard until recently. If you haven't seen the video I linked to above, at least read this summary. If we don't reopen schools soon, we will miss the chance for the US to develop herd immunity, and that will expose us to another wave of the virus in the Fall, with yet more deaths of the elderly and infirm predominating.


Rick Jones said...
This comment has been removed by the author.
Rick Jones said...

Scott said:

>The "experts" who in February were predicting millions of deaths in the US and Europe accomplished only one thing: they scared the bejeezus out of presidents, governors, and local health officials, who then found it easy to persuade the public to surrender their liberties.

You could not be more wrong, Scott. What the "experts" did was persuade politicians and the public to take actions to help prevent the spread of coronavirus, and hence help prevent a much, much larger death toll.

Please don't act as though this virus would have just passed through like a seasonal flu if people had just sat around and done nothing.

But speaking of scaring the bejeezus out of people, I will remind you of what you wrote in your 3:00 pm update on 11 March:

It's getting very UGLY...The number of cases is shooting higher, deaths are mounting...test kits are in very short supply in the U.S., it's a full-fledged global pandemic that can't be stopped, it's a real bear market...nothing is going to work, we're all doomed...there's no light at the end of this tunnel...

And I find it interesting that you don't refer to it as a pandemic in this current post. You call it an epidemic. Is that because you cannot admit you were wrong in your last post of 27 March:"Maybe it's not a pandemic after all?"

Scott Grannis said...

Re my comments that it was getting very ugly. You misunderstand what I was saying. I was repeating the memes that I thought were driving the market back then. I was tracking the mounting fear, since I thought that was the driver of the declining market. I was looking for the moment when the market was telling itself that all was lost, there was no hope, etc. I still maintain that this has not been a pandemic. It has been a period of mass hysteria, fueled by the media with the help of those looking for yet another opportunity to sink the Trump administration. The numbers do not add up to a pandemic. The level of fear was consistent with what you might expect from a pandemic, yes.

My prediction: in the fullness of time, we will come to realize that the shutdown of the US economy was the most expensive self-inflicted wound in the history of mankind.

Rick Jones said...

>I still maintain that this has not been a pandemic.

Is that because you have some definition of "pandemic" that no one else uses? Because by every definition that I've seen, it is a pandemic: it has spanned the globe, it has spanned nations. What, pray tell, is your definition, and where does it come from?

>My prediction: in the fullness of time...

Yeah, well, that's a little bit like Keynes's observation that in the long run we'll all be dead. It's sort of meaningless regarding anything in the near- or mid-term.

Johnny Bee Dawg said...

Sounds like Rick Jones didnt watch the video interview.
One cant keep parroting wrong info like Rick does if you've comprehended anything in the video interview.
WATCH THE WHOLE THING, not just the first 8 minutes.

Closing the schools was the worst decision made in the entire debacle.
The REASON the schools were closed was to hope that this flu would last until election.
This was just another flu, and the data proves that. Except that almost everybody who gets it has little to no symptoms.

Watch the interview.
Our Diminutive Doctor and Shawl Lady and Gottlieb should be drummed out of decent society.
They have been a complete disaster.
Trump should fire them all immediately, and get the schools open.
Isolate those at risk, and get on with life. Save lives.

Meanwhile, the market knows the truth will get out about this BS, and is surging.

The most true statement on this entire blog is Scott's comment: "the shutdown of the US economy was the most expensive self-inflicted wound in the history of mankind."
People are too docile, and allowed our own government to crush our nation in just 30 days.

Rick Jones said...

>Closing the schools was the worst decision made in the entire debacle. The REASON the schools were closed was to hope that this flu would last until election.

So who closed the schools?

If it was all local and state actions, then it doesn't make sense that both Democratic and Republican officials would have the same goal of keeping them closed until the elections.

If it was a federal action, then that falls on Trump. Was it his bad decision? Because if so...

>Trump should fire them all immediately...

No, Trump should resign.

He promised us he would surround himself with only the best advisers. He told us he is a very stable genius. How could he possibly have made the horrible decisions he's made if he only has the best advisers and he's a very stable genius?

steve said...

I sort of half agree with you here Scott but firstly I would like to thank you for the Health Meter map. That is wicked cool and I'm sending to all my kids.

The definition of pandemic is "(of a disease) prevalent over a whole country or the world."

People please, Covid 19 is a pandemic. Case closed.

To state that schools should not have been closed is fatuous and just wrong. The reason we're starting to turn the corner (hopefully) is due to shutdowns and quarantine. This is a highly contagious disease. Honestly, it boggles my mind that anyone could argue otherwise. There is not a single serious scientist who would argue to continue business as usual during a damn pandemic!

All of that said, it sure looks like stocks want to go higher and we could have put in the V bottom on March 18 which if so is EXTREMELY unusual for a bear market. Bears usually die of exhaustion NOT panic but then again this one came on faster than any bear in history so there you go.

I'm always fascinated to watch the delta between stocks and bonds. I've been a bond trader for over 20 years (way easier to trade, almost all the gain and minimal drawdowns) and the stock traders are WAY more emotional and optimistic. Bond traders are more staid and stolid. Of course, that doesn't mean that stock traders won't find a bottom first, they usually do but it's a bit of a crapshoot.

I'm happy to admit I'd be wrong if we've bottomed in stocks if that is the case and I most certainly hope it is. In the meantime I am long "risk" also.

Scott, I disagree with your basic stance on this pandemic but respect your perspective and admire how you respect varying opinions to yours.

steve said...

"Update (April 1): Social distancing is slowing the spread of feverish illnesses across the country. See the data here. Note: This does not mean that COVID-19 cases are declining. In fact, we expect to see reported cases continue to surge in the near term."

That message at the top of the Health Meter map Scott posted.

steve said...

Good piece from of all places, the NYT;

steve said...

Just to be fair and balanced;

steve said...

The last post should be read alongside this;

K T Cat said...

I'd like to recommend some gentleness to all. No one knows what would have happened had the decisions been different. All we know is that everyone involved tried to do the best with evolving information from a wildly unanticipated crisis. Parse out blame if it makes you feel better, but it sure looks to me like people learned pretty quickly in the middle of a crazy situation.

Forgiveness isn't such a bad thing.

randy said...

Steve - the NYT author: " Gabriel Leung is an epidemiologist and dean of medicine at the University of Hong Kong. He is the founding director of the World Health Organization Collaborating Center for Infectious Disease Epidemiology and Control and is an adviser to the Hong Kong and Chinese governments on the new coronavirus."

The article says a lot of smart things, don't want to take away from that. At the same time, it's really hard to look to a WHO, Chinese collaborator for advice. The Chinese hiding and outright lying made things so much worse and the WHO has been complicit in covering for them. I'm not a rabid "swamp" anti-globalist hunter, but we'd be better off looking to US scientists. In fact, the "boorish" America First themes should justifiably get a lot more traction.

Same for the NYT. I really don't like Trump myself. But, everyday, the NYT frames nearly EVERY story as a reflection on Trump. It's ridiculous. Unreadable. Especially in regard to the virus response, the claims of racism, incompetence, science denial, regarding Trump are just not fair. They all suppose saint Obama would have produced ventilators and vaccines as Jesus and the miracle of the five loaves and two fishes while leading a round-table of all the worlds great humanitarians..

On the NR article, the comparison between Sweden and Switzerland is fascinating.

steve said...

Randy, gotta agree with you the the NYT is a rag but it's an interesting piece nonetheless. You have to read the NR piece with a grain of salt especially after reading the next one AND considering that Sweden is now reconsidering their response due to high number of recent deaths.

TWB in Va said...

Scott, I am interested in your opinion of Bob Farrell's "10 Rules" with regard to current conditions. Let's say S&P 500 and his rules 3, 8 and 9. Thanks!

Indypass said...

I would like to believe that the epidemiologists and other medical professionals are true to the science and not skewed by political biases, but alas that is naive on my part. The range of projections of death and infections makes little sense. I'm agnostic on Trump, Pelosi, Schumer, etal, but it does seem to be a game of political gotcha versus whats good for the country overall. Unfortunately, we have some scientists with political biases advising politicians who (uncharitably I know) want to use the crises to impose their political will on the country. Time will tell if the virus wrecks more lives or the economic shutdown. My gut reaction is that the shutdown will cause more pain & suffering.

Scott Grannis said...

Re Bob Farrell's 10 Rules. His rules contain a lot of wisdom. But current conditions are unlike any we've had before. We went from a healthy economy to a recession/depression in a matter of weeks, if not days, because of decisions which resulted in the cessation of economic activity on the part of almost one quarter of the workforce, and fears which resulted reading and watching how a new virus was spreading rapidly around the world and killing thousands of people. All prior recessions/depressions were ultimately the result of government policy mistakes (fiscal policy a few times, monetary policy for all other times). The shutdown may prove to have been a mistake, but we don't know for sure. It's unquestionable that many lives were saved as a result of the shutdown, but the cost may end up being astronomical.

In any event, the decision to turn off the shutdown, or even the anticipation that such a decision is forthcoming, could change the economic panorama suddenly and profoundly. It will probably take a long time to get back to normal, but we could see something like a sharp, V-shaped recovery. It all depends on so many variables.

Whether Rule #8 (which says we are in the midst of a reflexive rebound, and there is a drawn-out fundamental downtrend just around the corner) plays out is the real question. How fast can we get over this crisis? I honestly don't know.

From a long-term perspective, I think there is a compelling case to be invested in the stock market.

Ron Gruner said...

The 1918 Spanish Flu grew slowly in the spring and summer of 1918, and then exploded in the fall eventually killing 675,000 Americans. Here's a chart, made at the time, of how the Spanish Flu evolved in major cities...

steve said...

Farrell's rules are useless in the real world. Way too abstract.

"From a long-term perspective, I think there is a compelling case to be invested in the stock market."

Agreed with the proviso that there is ALWAYS a case to be invested in stocks for the long run given that stock market timing for 99% of the population is an exercise in futility.

Johnny Bee Dawg said...

Scott, it is very questionable whether lives were saved as a result of the shutdown.
That is the prevailing view, but there is little evidence to back it.
With proper herd immunity, the virus would likely be over by now.
We could have protected the sick, and killed off the virus by letting the rest of us build anti-bodies.

Japan didnt shut down, and they've had less than 100 Corona deaths.
Packed trains, subways and cities.
Sweden 600 deaths
New Zealand 1 death.

"Flattening the curve" makes the virus survive longer and kills more people in the long run.
And we risked creating a Great Depression, which causes its own set of deaths.
And now our nation is swimming in debt...with more on the way.

Id rather fight a seasonal flu virus, than an ill-advised government bureaucrat who cuts off my livelihood with an unscientific policy.

Bryon said...

I agree that schools and business should not have shut down and vulnerable people should have stayed home or wore PPE.

KB said...


Excellent post. I really like the Kinsa map. Very impressive.

Kurt Brouwer

AL said...

Scott, is the data coming from "US Health Weather Map" website reliable? I'm based out of Orange County, and thus far, we have 931 total cases, including deaths (15 deaths total), but according to the "US Health Weather Map" site, no one is reporting influenza-like symptoms in my county. Am I missing something? Also, what do you think about the case of Taiwan, in which the citizens self-quarantined very early on, for about 2 weeks, and then the government used the citizens' cellphone GPS to make sure they were self-quarantined. The local magistrate would visit and call daily during the quarantine to make sure folks were not wandering around town during the quarantine (there was a 6k USD equivalent fine if you did). After those 2 weeks, everyone wasout and about, albeit with PPE everytime they step outside. This comes directly from friends and family based in Taiwan, and the numbers of Taiwan on the Worldmeter website speak for themselves. Is Taiwan a clear example that self-quarantines are effective? What are your thoughts? Please let me know, thank you Scott for your time and your blog.

AL said...

Scott, is the data coming from "US Health Weather Map" website reliable? I'm based out of Orange County, and thus far, we have 931 total cases, including deaths (15 deaths total), but according to the "US Health Weather Map" site, no one is reporting influenza-like symptoms in my county. Am I missing something? Also, what do you think about the case of Taiwan, in which the citizens self-quarantined very early on, for about 2 weeks, and then the government used the citizens' cellphone GPS to make sure they were self-quarantined. The local magistrate would visit and call daily during the quarantine to make sure folks were not wandering around town during the quarantine (there was a 6k USD equivalent fine if you did). After those 2 weeks, everyone wasout and about, albeit with PPE everytime they step outside. This comes directly from friends and family based in Taiwan, and the numbers of Taiwan on the Worldmeter website speak for themselves. Is Taiwan a clear example that self-quarantines are effective? What are your thoughts? Please let me know, thank you Scott for your time and your blog.

Al said...

J B to the doggy

From Canada, smarten up!

Benjamin Cole said...

I may disagree with Scott Grannis from time to time on this or that topic---so what? I enjoy reading different perspectives. I come to this blog to learn, and I won't learn anything by reading only that I agree with.

And I will never disagree with Scott Grannis' optimism. Without optimism, we would not get out of bed, start a business or a career, enter a marriage or anything else. (BTW, I have variously flopped at all the aforementioned enterprises...but recovered :)

I agree with Scott Grannis that the self-inflicted wounds of COVID-19 lockdowns are catastrophic. What do we say to restaurant owners, hoteliers, convention-industry denizens, mortgage servicers, landlords and millions upon millions upon millions of workers?

We just raised the bar again on investing. Why risk capital if the government can shut down your business periodically? What if governments can tank whole economies by lockdown ukases?

One more note: Right or wrong Scott Grannis stayed true to his libertarian instincts. Other well-known "libertarians" have become statist martinets. If you like big government, then shutting down everything and bailing out everybody everywhere---why, it is nirvana!

Benjamin Cole said...

PS....Not to be a Gloomy Gus, but the threat is that we still have: 1. government, and 2. a naive population and a novel virus.

Once the lockdowns end, people will get exposed again, and sadly, very sadly, some will die. This may incur more lockdowns. There are no exit strategies from lockdowns that make sense. They are dead ends.

Rick Jones said...
This comment has been removed by the author.
Rick Jones said...

Johnny Bee Dawg said:

> is very questionable whether lives were saved as a result of the shutdown...Japan didnt shut down, and they've had less than 100 Corona deaths...New Zealand 1 death

Yo Dawg...

New Zealand isn’t just flattening the curve. It’s squashing it.

And for future reference, it's "ready-aim-fire," not "ready-fire-aim."

Frozen in the North said...

Part of the problem is that America is not testing its population. When people get sick (eventually) they will head to the emergency room. By then it will be too late. The transmission rate in NY seems to have been in the order of 1.3x per day. It's possible that NY has turned the corner, but since Covid-19 can be asyptomatic for up to 14 days...there is still a lot of time to go before the US knows that this thing has been beaten. To give an order of size, if this week 900 as sick, next week it will be 7,000 and the week after that it will be 49,000 and the week after that it will be 300,000 -- the power of exponential growth!

As for Benjamin: Buddy you should know that the private sector is absolutely incapable of dealing with public health. Even America's government seems unable to see reality. As it has emerged that the WH was aware of the risks in early January -- they even wrote memos about it...

You are correct that when governments don't want to see the problems (is it not Trump that said that "America was not at risk for Covid-19" and that it was all under control. It's not about blame allocation its just a reflection of a reality that when governments don't want to see an inconvenient truth... it's easy to avoid it.

There is no doubt that there is no longer anyone in the WH that is able/willing to speak truth to power. The single most common factor among those who work in the WH are their allegiance to the president above all else. It's fine, it is what it is, but it has implications when a crisis emerges (BTW this is not particular to the WH but any organization).

America is not out of the woods yet! It could get lucky but then again

AL said...

I wanted to know your folks’ thoughts on the following article:

Rick Jones said...

Benjamin Cole said:

>Right or wrong Scott Grannis stayed true to his libertarian instincts. Other well-known "libertarians" have become statist martinets. If you like big government...

Ralph Waldo Emerson famously said, "A foolish consistency is the hobgoblin of little minds."

So when is a consistency foolish?

Well, as John Maynard Keynes allegedly said, “When the facts change, I change my mind. What do you do, sir?”

Whether Keynes actually said that, or whether you happen to like Keynes or not, it sure seems reasonable. When facts change, you should consider changing your mind. Or perhaps better put, when things you thought were facts turn out not to be the case, then perhaps you should consider changing your mind.

The coronavirus has exposed a lot of flaws in the libertarian economic worldview. For example, we allowed the markets to decide where things were made, and when the pandemic hit, it turned out the economic efficiency was not necessarily the summum bonum across the board.

Actually, the coronavirus hastened the exposure of economic libertarianism's flaws. Tyler Cowan, at George Mason University, started seeing it a while ago and began this year with a pretty good essay:

State Capacity Libertarianism

As I read it, the essence is distinguishing between a big state and a strong state.

Michael Munger, at the American Institute for Economic Research, expounded on this just a while ago with:

A Government That Does Everything Can't Do Anything Well

The fact is, as both of them point out, governments can and should do certain things well, and public health is one of them. Public health was, by and large, one of the great government success stories in the 20th century. It goes hand-in-hand with "provide for the common defense." We need to accept that, and most importantly, we need to fund it in good times and bad.

As Munger put it:

"Given that we have a state, it must have the capacity to carry out the functions our political system has assigned to it. That may mean we have to increase the funding of the FDA."

Staying "true to libertarian instincts" and refusing to acknowledge any flaws in the theories at a time like this is not something I find particularly laudable. I turn to Milton Friedman, who said in the July 1991 issue of Liberty Magazine:

"It is of course desirable to have a vision of the ideal, of Utopia. Far be it from me to denigrate that. But we can’t stop there. If we do, we become a cult or a religion, and not a living, vital force."

"...a cult or a religion..."

Sounds like someone who stays true to their instincts regardless of any and all contrary evidence.

I don't find the libertarian ideologues who put free market principles first and foremost any different from the Bolshevik ideologues who put collectivism first and foremost. In both cases ideology trumped or trumps facts. In the Soviet case, millions died. The U.S. is, very fortunately, a relatively pluralistic society, and those whom Friedman terms "a living, vital force" are keeping the cults and religions at bay.

Ron Gruner said...

The ultimate libertarian was Herbert Hoover. During his first State of the Union address, on the eve of the Great Depression, he lectured Congress:

"Economic depression cannot be cured by legislative action or executive pronouncement. Economic wounds must be healed by…the producers and consumers themselves. Recovery can be expedited, and its effects mitigated by cooperative action. That cooperation requires that every individual should sustain faith and courage; that each should maintain his self-reliance; that each and every one should search for methods of improving his business or service…The best contribution of government lies in encouragement of this voluntary cooperation in the community."

By 1932 he had changed his mind, and began to institute federal programs Roosevelt later adopted as his own.

Benjamin Cole said...

Rick Jones--You make a lot of good points. And yes, public health is everyone's business and thus is government business.

There is no right to infect other people with a lethal disease, or to release carcinogens into the environment.

But there is also the concept of balance. About 600,000 people a year die in the US from cancer, often triggered by carcinogens. But we do not shut down the economy to remove carcinogens.

Moreover, unlike removing carcinogens which would have a permanently beneficial effect, lockdowns will have only a temporary effect. Sooner or later we will gain herd immunity, and very sadly some people will die when exposed.

By the way, and this is not a joke, evidently dogs and cats can catch coronavirus too. No one even knows how much this could complicate strategies for eliminating the virus through lockdowns or quarantines.

The lockdown strategy has all the hallmarks of the public healthcare sector's Vietnam. We will lose the war against the virus but at fantastic expense.

Rick Jones said...

Benjamin Cole said:

>The lockdown strategy has all the hallmarks of the public healthcare sector's Vietnam. We will lose the war against the virus but at fantastic expense.

Well, first of all, I don't think we're going to lose the war against the virus.

Second, I live in France, a country that -- along with others -- was decimated by WWII. They all recovered. Perhaps we need something like a Marshall Plan for this.

Third, can you distinguish, Benjamin, between the coronavirus and a well-designed nation-state biological warfare attack? I don't think you can. And is this how we're going to react to a nation-state biological attack? After Pearl Harbor did anyone say, "The cure cannot be worse than the disease?"

Here's a little story...

In the mid-00s I was the Principal Investigator for a DARPA project at a government research laboratory. The DARPA project was meant to evaluate whether U.S. industry teams could defeat a nation-state worm attack on a certain type of wireless communication network (and a worm on a computer network is analogous to a virus in the human population).

The DARPA director at the time -- a guy named Tony Tether -- laid out the following rule: "The cure cannot be worse than the disease." And then the DARPA program manager and some of his colleagues went about quantifying that into metrics. And I would note this: DARPA program managers are not career government bureaucrats; they are generally the elite in their fields in industry and academia. They know whereof they speak.

So I was responsible for the design and construction of the testbed...developing the test plan...and overseeing the testing.

At the end of the two-year project we had six-weeks of testing. On one side were about 100 of U.S. industry's best-and-brightest, divided into three teams. On the other side was one guy from Lincoln Lab, outside of Boston, who was writing worms.

In six weeks of testing, I don't recall a single industry team defeating any of the worms. Maybe one or two runs, but nothing that anyone was able to deem: "Success!"


Because of that notion that the cure cannot be worse than the disease. That notion translated into: the network must remain open for business. And without shutting down the entire network at least temporarily that worm was going to eventually infect every single node. And it did.

That was a pretty unambiguous situation. The disease and the cure were basically in the same domain: network throughput. What about this virus?

We've all heard the term, "The cure cannot be worse than the disease" with respect to the coronavirus, but what does that mean in this situation?

The disease is killing people, and human societies throughout history have rallied together to defeat these types of things, be they imposed by nature or other humans. I can't think of any society in history that has ever put that on the back burner and said, "Yeah, it's killing a lot of us, but there are more important things than trying to stop it." We sure as shit didn't say if after Pearl Harbor.

The cure is some economic hardships. They'll be tough, granted. But as with the creative destruction of capitalism, even though there will be economic displacement, there will be a lot of new and exciting companies and industries coming out of it. And who knows...perhaps certain governments will start taking this sort of thing seriously so that if a biological warfare attack should occur, we are better equipped -- materially as well as psychologically -- to deal with it.

Johnny Bee Dawg said...

Rick Jones:
"Flattening the curve" just preserves the virus, postpones herd immunity and kills more people.
The good news is that this virus is no more deadly than a seasonal flu.

In the meantime stocks are soaring as this virus panic hoax is unwinding. Media confounded.
So glad I bought at the lows instead of listening to doom & gloom. (As I told you)
States are suddenly trying to unload all those ventilator their Governors were DEMANDING from the Federal Govt.

Absolutely nothing about this virus has turned out anywhere NEAR as bad as our government health bureaucrats insisted.
Now its time for Trump to correct their policy errors, and get the economy open, and get the herd immunity going so we can end the virus spread. Old and sick need to shelter in place so the rest of us can save you.

The economy may very well have a "U" shape recovery, but the market is looking like a "V" so far.

Rick Jones said...
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Grechster said...

Rick: I'm with JBD. The govt's response has been pathetic and wrong all the way. That will become more evident (to you) as we deal with the economic fallout of the govt's stupidity.

I wasn't as good as JBD to buy at the bottom (as I'm not convinced it's actually the bottom).

I remain very disappointed at the US' response to this, both the govt's and the people's. We're not nearly as tough as we think we are, or as we used to be. Just my opinion, and I'm not ashamed for having it.

Rick Jones said...

Johnny Bee Dawg said:

>"Flattening the curve" just preserves the virus, postpones herd immunity and kills more people.

Yo Dawg...take a look in the mirror...

The image of Johnny Bee Dawg

Rick Jones said...

Grechster said:

>We're not nearly as tough as we think we are, or as we used to be. Just my opinion, and I'm not ashamed for having it.

I spent 23 years on active duty. Three as an enlisted Army paratrooper, and 20 as a Navy SEAL officer. I think I have some insight into what being tough means, and I agree: as a nation we are nowhere near as tough as we used to be or as tough as we like to think we are. Too many people are unwilling to face a little economic hardship to whip a foreign invader (albeit a biological one). Too many people in the nation are willing to let their fellow citizens die so that they can continue to be consumers (as opposed to citizens).

During the early days of the Iraq war, there was a poster floating around Marine Corps barracks. It said: "America is not at war, the Marine Corps is at war. America is at the mall."

That's where we are today: afraid of a little economic hardship, and anxious to rack up the credit card bills...willing to sacrifice our fellow countrymen in order to continue getting dividends and capital gains. Thank you for pointing it out, Grechster.

Grechster said...

Rick: Well, yes, but...

That's not quite what I was saying... This is likely not going to be "a little" economic hardship. It's probably going to be a massive economic hardship and especially so for those who can least afford it. And we SHOULD be afraid of that. You watch: mental health issues, including suicide, are going to soar as they always do in economically lean times. There's a story out today, on Zerohedge, that discusses the high suicide rate in Tennessee. But the critical point is that it didn't have to be this way.

The govt reacted hysterically and got it all wrong. And I think they did so because they now instinctively react with an abundance of caution, just like corporations do. "Abundance of caution" should be the new American motto. And it has enormous implications when what we need is some stoicism. We seem to lack the wherewithal to hold up a hand to crazy/PC. And while it's easy to blame our lame-o leadership, I think you'll agree that the American culture, in the end, is to blame for this development. It wasn't always thus either... JBD is basically right to keep hammering away at the virus numbers versus the economic implications. We aren't weak because we can't absorb economic hardship. We're weak because our reasoning for creating the economic hardship is soft-headed. I see evidence of soft-headed thinking all over our society as I'm sure you do too.

On a more positive note, I think materialism is on the downswing in America. I complain quite a bit about the younger generations. But they are less materialistic than America of the past. And they certainly don't go to the mall. Credit card debt is a problem for many but not for the country as a whole.

Richard H. said...

A few issues. One, herd immunity is another way of saying let the healthy live and let the unhealthy (obesity, elderly, maybe wrong blood type) die. You cannot have herd immunity without a lot of deaths before a vaccine. It might be worth it for people's econimic survival, but it should be said.
As to the amount of deaths, there seems to be no consensus yet. You mention Dr. Fauci as saying .2%, but in the video of Knut Wittkowski, he says 2%. As a personal note, he seems to have an ax to grind. How can he be so sure this is like other respiratory viruses? People in their 50's, like Boris Johnson, don't usually go into critical care, let alone on a ventilator for 10 days, from a "normal" respiratory illness.
The fever map shows that social distancing is working, nothing about the lethality of Covid. Also, how many people use these thermometers. I have read a million have been sold, but there website does not give the numbers underlying the map.
As far as the markets, is it consistent to say that panic is over, as evidenced by the drop in volatility and rebound in the markets, and at the same time say "Treasury yields have almost never been so far below ... inflation. The world is so desperate (i.e. panic) for security that investors are willing to accept deeply negative real yields on Treasuries"? One has to be right, not both.

Johnny Bee Dawg said...


Dr. Wittkowski actually said to isolate the elderly and infirm. The rest of society develops herd immunity.
We isolate & protect the slice of population who dies from this.
There will be the occasional horrible case of somebody younger, but Boris Johnson is not the picture of health.
Obese people are at high risk of this virus.

Dr. Wittkowski gave a death rate of 2% of symptomatic cases, not all cases.
The US has only a half million official cases so far.
The 2 Stanford med school professors in the WSJ posit that this virus has a tenth of the death rate of seasonal flu, because there are likely millions of asymptomatic cases already. (More herd immunity)

The Scientists make more sense to me than our government health bureaucrats who have misjudged every single thing about this virus.
Every model they relied upon was spectacularly wrong, and overstated death and hospital usage by multiples.
They predicted up to 2 million US deaths, and now have reduced that estimate to less than 100,000.
Wild unsubstantiated claims for panic policies have turned into routine flu numbers.
Will they be held accountable?

Would America have thought it wise to destroy our economy to stop 100,000 flu deaths?
The US had 80,000 flu deaths just 2 years ago.
Virus data just doesnt add up for the actions taken. This ginned up virus panic is BS.

The 10 Year yield has plummeted from 3% ever since Jay Powell's disastrous unwarranted, surprise rate hike in Oct 2018.
That suspicious action was done a month before the mid-terms, which curiously put the House back in Socialist hands.
The virus doesnt even show up on that chart of 10 Year yield. This recent yield plunge started end of Nov. No virus news.

The market is far more worried about the people infesting our government, than it is about any virus.
I dont know a single person who is afraid of the virus, itself. That includes people I know who have it.

I know dozens of super successful people who are afraid of the people in government power who are executing the ongoing 3 year coup attempt.
There is something else going on in this crash & response, and its not a virus.
It is Election Year, after all. Anybody remember Mark to Market accounting changes in Oct 2007?

Benjamin Cole said...

Rick---Most of the science crowd says, sotto voce, you have to get to herd immunity, if you do not have a vaccine. This is not politically popular.

So governments are devising lockdown schemes.

I respect your background and experiences.

I have a different background, as a small-employer and employee my whole adult life. Worked in the private sector and paid taxes my whole adult life. I know what it is to run a struggling business, meet payroll by borrowing money on credit cards, or to become suddenly unemployed. Oh, I had successes too, no crying here. Call it checkered. Never drew a government paycheck, and do not qualify for the VA or government pension.

My perspective is government lockdowns are an economic catastrophe, and our house-of-cards financial system...well, too ugly to contemplate. And the positive effects of lockdowns dubious---we still have a naive population and a novel virus.

Suppose COVID-19 is in fact a Community Party of China virus-lab bio-attack?

I would say, "The last thing we want to do is surrender our economy. We will need our strengths to enter the next stage of a very ugly confrontation with a superpower."

Ahmad Sherhan said...

Just look at the bodybags needed. This is not yhe normal flu, who knows how many bodybags needed if not for the measures taken by the government. Life is more precious than money, i guess economist cannot understand that

Rick Jones said...

@Benjamin Cole...

So tell me how developing herd immunity would work, Benjamin.

For example, in Scott's most recent edit, some guy named Knut Wittkowski says we need to open schools soon to develop herd immunity. OK, we've been cruising along with this idea that coronovirus is primarily an old or sick person's death sentence, and if that be true then there might be some logic to exposing the kids en masse. But the average age of teachers in the U.S. is 42, and almost 20% are over age 55. What do we do when a large swatch of the education establishment with the bulk of the experience gets hit?

Or how about airlines, where the median age of pilots is 53 and the median age of flight attendants is 46. These are both jobs where experience matters, and not just in doing the job, but in training and mentoring others.

Or funeral homes, where the median age is also 53. There's already a nationwide shortage of funeral directors, what do we do when a large swatch of them goes down in the name of herd immunity?

How about the Generals and Admirals in the military? Are we willing to lose decades of warfighting and leadership experience to develop herd immunity? It takes over 20 years to develop a General or an Admiral, you can't just hire them out of college.

I could go on and on, but this is the problem with concepts like "develop herd immunity" one thinks through the potential second- and third-order effects. Sort of like, "The cure cannot be worse than the disease"...sounds great on paper, but try coming up with an implementation plan.

And how about this: Should President Trump be part of the "develop herd immunity" process? I mean, that was Boris Johnson's idea for England and you see how that worked out for him.

So does Trump get a pass? Does Mike Pence? Mitch McConnell? Nancy Pelosi? And here I must say that -- having spent 23 years in the military -- to me one of the core leadership principles is leadership by example. So if the President of the United States is going to be telling the nation that we must develop herd immunity, then I think he or she needs to be part of the herd. Is that how you see it?

Again, it's great, catchy phrase: Develop herd immunity. But like so many great, catchy phrases, it sort of falls apart when you start talking about how it might be fairly and rationally implemented.

The interesting thing is that at some point we'll get a better sense of what the best approach is. Some nations -- like New Zealand -- went into total lockdown and isolation very early. At the other extreme Belarus is completely ignoring it. And in the U.S. we have some states and localities that went for the big guns early, and others don't seem to be paying any heed at all. So we'll get to see and learn a lot over the next year or so.

You take care there in Thailand, Benjamin. I've only been there once, and that was to Phuket Island, which I see is now being called Thailand's "coronavirus hotspot" for having the highest per capita infection rate. If I understand correctly, they decided to wait before implementing any control measures. They perhaps got an extra week or so of economic value out of that, but now we'll see what the long-term economic impact turns out to be.

Rick Jones said...

Benjamin Cole said:

>Most of the science crowd says, sotto voce, you have to get to herd immunity, if you do not have a vaccine.

I don't know anyone who would disagree that herd immunity is a good thing. But as I said, earlier, it's the implementation plan that's a bitch. No one -- and I mean no one -- is going to endorse just conducting business as usual and let those who can't deal with it die. That's not going to happen in any universe I know of.

I think of this in three phases: the prophylactic phase, the treatment phase, and the inoculation phase. (And there are certainly going to be overlaps.)

Right now we are in the prophylactic phase. The emphasis needs to be on stopping or slowing transmission. We have social distancing, masks (for those who can get them), shelter-in-place orders, etc. What this mainly does is buy time. It buys time to better understand the virus, it buys time to get things like ventilator manufacturing capabilities developed, it buys time to expand treatment facilities, it buys time to work on treatments, etc. Some herd immunity will develop.

At a certain point we will transition to the treatment phase. The virus will be better understood on the macro-level (i.e., how and how fast it propagates, what real fatality rates are, etc.), and on the micro-level (i.e., which treatments are most effective). More treatment facilities will be available, ventilators will be produced in larger volume, etc. The prophylactic phase will loosen and non-essential businesses will be allowed to open and certain social activities will resume. As people go out and get exposed, more effective treatment regimes will keep more alive. Herd immunity will increase.

Eventually a vaccine will be developed, and we will move into the inoculation phase. At that point you can probably realistically start comparing this to our yearly influenza season. And keep in mind that herd immunity is not fully developed for influenza. Even with vaccines and massive marketing efforts, tens of thousands still die every year.

And yes, there will be economic devastation. But it will be nowhere near that of WWII. Factories will still be there ready to function...transportation infrastructure will still be there...the buildings along main street and the shopping malls will still be there.

What we might need to kick start the economy is something analogous to the Marshall Plan. And we did a Marshall Plan worked. Furthermore, as the Fed and other central banks have shown in the past month or so, there is absolutely no shortage of money to do another one.

And let me say this as clearly as possible: If you and others can compare the coronavirus to the flu and traffic deaths and such and say, "Oh, it's not as bad as them," then we can also compare the economic effects of the coronavirus shutdown to the economic devastation in Europe after WWII and say, "Oh, it won't be as bad as it was then."

I will leave you with something from Albert Einstein. He said, "Everything should be made as simple as possible, but no simpler."

Similarly, we should get the economy back into full swing as soon as it is safe to do so, but no sooner.

Benjamin Cole said...


You make good arguments.

However, should everyone be called on to sacrifice?

Would you accept say, a one-third reduction in your military pension for two years? You are asking various private-sector taxpayers to make similar sacrifices, and by government ukase.

My brother in Portland, employed by an optometrist association, just got laid off.

Re Thailand: The workers are saying, "We are not going to die of COVID-19. We are going to die of hunger."

steve said...

With all due respect to the advocates of "reopening the economy, you're pissing in the wind. The economy was not SHUT DOWN by the Feds but rather by the states and the states are going to have to reopen it so 90% of this argument is moot. If Trump ever gets beyond his own ego (doubtful) he will realize he has virtually no power to "reopen" much of anything.

One can argue whether this shutdown should have been better coordinated with the federal government but one cannot argue that it hasn't been. You know damn well that King Trump will try and mandate the states to come back online when-despite advice from the experts he doesn't listen to, he "feels" like they should and it's further likely that the states will in large part ignore him. As well they should. I am a big US history fan and I'm thinking that this nation has not been more poorly lead since either J Buchanan or A Johnson.

We're embroiled in a health and economic shock and lead by cartoon character who does some sort of weird shit to his face and who's press conferences have been reduced to him denigrating "fake news".

How the HELL anyone can look at their children and say "I support Donald Trump" defies my imagination.

Rick Jones said...

Benjamin Cole asked:

>Would you accept say, a one-third reduction in your military pension for two years?

Benjamin, I've never particularly trusted the government to be there for me through thick and thin, and I've been actively preparing for something like that to happen for years.

There were a few years in the late-00s when I was a government contractor during the "war on terror" and the money was pretty good. At the same time my wife hit a home run in her particular field and she had some discretionary cash. What we did was sock away three years' worth of living expenses in a series of $1,000 CDs. They were structured in 1-year, 2-year, and 3-year ladders so that each month we could cash in living expenses above and beyond retirement income.

And it turned out we needed it. The government did a sudden about face with me, and one day I found myself unexpectedly unemployed. So I ended up using that money to go back to graduate school and reinvent myself.

After that -- and in conjunction with Trump getting elected -- I did a serious rethinking of my investment goals. There was absolutely no doubt in my mind that Trump was going to blow the deficit and debt through the roof, and I could foresee my military retirement and health care taking hits. So I changed my goals to be able to survive in an acceptable manner should my retirement income take a hit...should my health care take a hit...should 70s-style inflation return...should the dollar collapse, etc. And I've been actively working for a few years now to deal with those things should any of them happen.

So if you're asking me if I would take a one-third hit for two years, my answer would be that be that I would prefer not to, but I would (a) if the economic pain were being distributed equally, and (b) if the benefits were being distributed equally (to wit, Main Street as well as Wall Street).

I mean, I spent 23 years prepared to go in harm's way for the country (and in a few cases actually going in harm's way)...I'd surely sacrifice some of my standard of living if I thought it was going to be efficacious in a time of crisis.

Benjamin Cole said...


Ok, good answer, IMHO.

But see this:

"Another 6.61 million Americans filed initial claims for jobless benefits last week, fresh evidence of the dramatic decline in the economy caused by the Covid-19 pandemic.

The number was more than the 5.25 million expected but slightly less than the previous week's record number, which was revised up to 6.87 million."


Thats today's initial unemployment claims. And we are in the first inning of this recession (and total hell is not having MLB action, played out of doors).

I cry "uncle." Uncle Sam, do what you gotta do, but let us go back to work.

steve said...

I think we can all agree that to cut vets benefits/pension would be egregious and hopefully never happen.

Rick, thank you for your service.

Johnny Bee Dawg said...

How can we fire 95% of the service industry workers, and have only 17 million claims??
Shouldn't there be more?

FED went BIG. Right at resistance.
Smart move.

Look at High Yield soaring. SOARING.
Spreads, baby.

More and more stocks are actually breaking their downtrends. Just a few, so far.
All major market risk indicators are low, and positive.
Let's see if more and more stocks can get thru resistance.
S&P is fighting with resistance here.

This would be pretty powerful to have more risk ON, going into a 3 day weekend.
Best week since the end of the Great Recession of 08-09.
We will just have to see how it goes.

Johnny Bee Dawg said...

S&P best week since the end of the Big '73-'74 Bear.
BOOM. What a week to be invested!

UP another 1.45% today with 40% increase in trading volume.
Institutions been buying stocks all week.

Markets looking ahead. Fed propping up biz till Donald gets them open.
Markets love Donald more than they fear a virus.
One thing we have learned from 2016 Election....Markets love Donald!!

Johnny Bee Dawg said...

FYI...the "models" yesterday reduced their death predictions ONCE AGAIN.
Thank GOD.
But nothing they have told us has been even close to correct.

Now the model says only 60,000 US deaths. Read that again.
A normal flu season. Except less contagious than regular flu. And less deadly.

And we destroyed the economy, and businesses, and livelihoods, and life's savings for this.
And the US took on massive new debt.

Will "We The People" hold these government health bureaucrats accountable for these HORRIBLE, misguided policies??
Election Year.

Rick Jones said...

Steve said:

>I've been a bond trader for over 20 years...

Steve, what do you make of the fact that the Fed is taking on so much of the bond market:

Bloomberg: Fed Is Seizing Control of Entire U.S. Bond Market

Rick Jones said...

One interesting thing that's coming out of this entire coronavirus thing is that different economic philosophies and models are being taken seriously:

Amsterdam to embrace 'doughnut' model to mend post-coronavirus economy

And of course here in the U.S. we are well along the path of modern monetary theory.

Sometimes you have to break something to fix it. Despite all the economic hardships that are here and are still to come, it might end up being worth it in the long-term if we can break out of the post-WWII world economic order and start experimenting with new approaches for the new century.

steve said...

Rick, well from a selfish perspective I LOVE that the fed is backing up non treasury bonds. I'm having a great year having sold beginning March and reentered last week of March. As I've said, trading bonds is WAY easier than stocks.

From a policy perspective I think it makes sense although it was unexpected. The fear in mid March in the bond market was way worse than on '08. Crazy drawdowns in several tranches of the market. Unprecedented. As usual, the bond market anticipated a savior and starting rallying like a mother BEFORE the fed got involved. At that point, you gotta close your eyes and buy-come what may and VOILA! (I some french too, Rick) the fed shows up.

Be that as it may, it will be interesting to see this unwind. We're def not out of the woods yet.

steve said...

Johnny, I don't know what planet you live on to ignore the fact that the reason the deaths in the US are lower than expected is because of isolation mandated by the STATES NOT your beloved DT.

What about this do you people not understand?

Rick Jones said...
This comment has been removed by the author.
Rick Jones said...

Thanks, Steve.

>As I've said, trading bonds is WAY easier than stocks.

I've done pretty well with stocks over the years, but I've always been interested in understanding bonds better. And by that I mean, how to invest in them. Any beginner's books or websites you can recommend?

> will be interesting to see this unwind. We're def not out of the woods yet.

Do you have any thoughts about that? What an intelligent way forward might be? What stupidity could arise? What best case and worst case scenarios are?

>Johnny, I don't know what planet you live on...

Oh I can help you there: A Guide to Understanding Johnny Bee Dawg

Frozen in the North said...

The bond market is about to get very interesting with the new Fed/Treasury policy of managing the yield curve and having Blackrock do the heavy lifting. Obviously, Treasury has announced that it will "only buy IG bonds" but with Moodys indicating that the number of IG bonds that are about to lose their IG and become junk, the work of the Treasury and Blackrock is about to get very interesting. (Also how the US banks will behave towards the massive number of defaulting bonds in the Shale sector.)

Note that the bond yield management strategy is the policy that Japan deployed on the early 00s when it tried to go beyond the usual tools -- its easy to forget that the Feds' discount window has become redundant for the past few years -- and it's clear that this happened when the Repo market went crazy.

The Treasury/Blackrock are entering a new environment with one objective: managing the yield curve. The last question that this also brings out is managing the USD; not only inside the US but with all of America's trading partners. Since the crisis started the Euro has lost almost 7% of its value against the greenback. Many foreign corporations are dependent (Germany et all) on finding US dollars for their operations. The same is true for China; lest we forget China and its US dollar requirements -- that PBOC could easily solve with selling part of its stocks of US Treasury -- which brings us right back to the whole issue of managing the yield curve since if the PBOC starts selling T-bonds it will impact the yield curve -- that the Treasury is trying to manage...

Unchartered territories indeed

steve said...

Rick, re trading bonds I have yet to run across a website or book (thankfully) that glimpses what I do. In 1999 I was interviewed for and subsequently included in a book called "Stock Market Wizards" written by Jack Schwager. From 1995-2000 I compounded $ at right about 72% with a max drawdown of 3% trading equity mutual funds. Sounds impossible I know. But remember that it was a time when computer technology was at its nascent stages and I exploited an anomaly in the market-and then it went away. In the book I said that "all systems have lifetimes" by which I meant that all inefficiencies will be rooted out sooner or later and when they are-POOF, they're gone!

Therefore, it should come as no shock that I am reticent to talk much about what I do now but suffice to say it's been working very well for 20 years now and I'm pretty sure no one else is doing it.

99% of people should NOT trade. It's a JOB. (I suspect even Johnny agrees with me on this). If you've had success with stocks by all means stick to it. I do not have the personality to hang around while my portfolio gets whipped all over the place.

I hope I don't come across as cavalier.

Re moving forward, no one wants to get back to normal faster than me. I've got five kids and two grandchildren (just born in the past 3 mos) who have to endure this. It SUCKS! But we have to do intelligently and not rush into something we're not prepared for. The US is in a real bind. We simply do not have enough testing available to safely reengage our economy anytime soon. Moreover, if you study PANDEMICS there is always a second wave of infection. The GOOD news is we have the greatest technologists in the world working on this thing full time and the red tape will be cut. I'd be shocked if we don't have a vaccine by the end of this year ready to go and hopefully a palliative soon. We're going to have to experiment our way through this until then. I think we're experiencing pretty much best case now and worst case is if we reengage too soon and then infections/deaths will reignite.

As re the markets I LIKE what the fed is doing. They are injecting CONFIDENCE more than anything but it would defy history to believe that we are not going to have another swoon sometime this year. Doesn't mean we will but it would be damn unusual.

Rick Jones said...

Steve said:

>In the book I said that "all systems have lifetimes" by which I meant that all inefficiencies will be rooted out sooner or later and when they are - POOF, they're gone!

Yup, I know what you mean. I have to shake my head (inside) when I see people reading Ben Graham's "Intelligent Investor" and start talking about computing book value, etc. Those days are by and large long gone.

That's kind of why I am thinking about expanding my scope beyond stocks. For a long time now we seem to have been in a new era where stocks keep getting pushed up -- not because the fundamentals are all that good -- because bond yields and other safe havens have been returning so little that risk assets are the only place to go. To me it seems like musical chairs, and one of these days the music is going to stop.

And now it seems we have a near-permanent Fed put to keep the market afloat. I personally don't see how anyone can form an investment strategy in equities right now. I just don't see it.

And to be clear, I don't really need to hit home runs at this point. My yearly investment goal -- you're not going to believe this -- is only about a 6% return. That's all I need to keep from drawing down on our principal. This year I had it on Thursday, 30 January and at about 11:30 am EST the next day I closed out everything (Whew!).

So it's not like I'm still trying hard to beat the S&P 500 and build up my nest egg. I do, however, enjoy making money in financial markets -- it keeps me sharp -- and the way you talked about it earlier I thought bonds might be worth exploring. But I have a couple of other things I've been putzing around with that I'll keep digging into, and when the world returns to some semblance of normalcy perhaps I'll start dipping my toes into those waters.

In the meantime, this is a quite interesting sideshow to watch.

Johnny Bee Dawg said...

Countries that didn’t shut down their society are having outcomes as good as ours, or better.
There was never any data on Earth to warrant our policy reaction.
There was never any data to reasonably show/predict unprecedented contagion or death.
I live on planet reality.
Bottom line: my view has proved right, and yours has not.
We will have to see how it works out from here.

Ron Gruner said...


Here's a question. The U.S. population is 327 million. How many pandemic deaths should our government tolerate before locking down the country as it largely has the last month? 100,000? 1,000,000? 10,000,000? More? Never?

Johnny Bee Dawg said...

Ron Gruner:

Your question betrays some misconceptions about the Science of pandemics.
Let's use Science, instead of authoritarianism. Keep Bill Gates at home.

The seasonal flu had 80,000 US deaths just 2 years ago.
I do not think "We The People" should shoot ourselves in the chest to stop a seasonal flu. Ever.
We never have until now.
This particular 2020 flu is now projected to have 60,000 US deaths.

Our policy response has been insane, Ron Gruner. Tens of millions of business failures prove my point.

I would NEVER "lock down the country," Ron Gruner. Ever, ever, ever, at the expense of Individual Liberties. There is no "number" worth that. Involuntary sacrificing of the individual at the expense of the collective is pure evil, AND it is a false choice. Satanic.

Lets depend on modern medicine, data, logic, common sense, and history, instead.
I would depend upon the actual Scientists (NOT government health bureaucrats) to quickly identify the groups that are most at risk from each new virus, and isolate/protect them. Voluntary protection. It is THEM at risk of dying, not the rest of us. THEY will decide if they want to comply. Offer help to those at risk.

Use government to provide that "at risk" group compassionate support. Food delivery, testing, therapeutic care.
Dedicated health workers. Volunteers. ETC. But encourage them to stay out of the herd.
This is infinitely cheaper than bailouts, and subsidies of every worker in America.

Protecting that group cuts the vast majority of all deaths in a viral spread. Read that again.
For instance, the people who've been killed exclusively by COVID-19 is a fraction of a percent of all symptomatic cases.
Everybody else had an underlying condition. This virus is no more deadly than flu.
Realize that caring for this group has never been untenable. And it should be voluntary.

Then I would allow Mother Nature to crush the virus, like every time in Man's history thru herd immunity.
Keep the rest of us free. It actually works for everyone. Spread the virus around to those who wont die, and allow our society to build antibodies. Every virus has worked this way, unless governments have intruded to thwart it.
Then the virus has nowhere to jump. Nobody else to infect. No manmade solution can ever match this natural cure.
Every virus in history has ended this way. God knows more than Man. (Read that again, too)

Respiratory viral deaths come from pneumonia. Make sure that is treated early and aggressively with antibiotics.
This method will have less cost, and less deaths than any other policy, and will end the outbreak in the shortest number of weeks. It is time-tested.
The only way any virus in Man's history has ever ended is thru exhaustion from herd immunity.

I could go on.

honestcreditguy said...

65% of deaths in England are obese.....

this is just a flu, like all the other corona born viruses...its more then the flu for those over 70 and obese, diabetic, hypertensive and stressed....

for the rest of us, its nothing....barely a whimper, being in San Francisco, the Wuhan hub, I'm certain I had it in Jan. I live in high immigrant area west of the city, little china town I call it, It made me tired and little fever but that was it, but of course I keep in shape and walk groceries to seniors all around me.

the reason the death rate is high in East, South and Midwest is because America is obese and full of diabetics.....Weight is the killer here...many were going to die of heart disease to begin with...the numbers are inflated, you have heart attack, CV19, you have heart disease CV19, you have AlZ, CV19, you have old age issues, CV19....they get more funding with more numbers...

Rick Jones said...

Johnny Bee Dawg said:

>The seasonal flu had 80,000 US deaths just 2 years ago.

Not quite, Dawg.

First of all, flu deaths for the past two years are still under the "estimated" stage as the data is sorted out. Specifying flu deaths is a bit like looking at a can only see it in the rear view mirror after a lot of factors get clarified and revised.

Furthermore, there is not really a specific number, because of uncertainties involving circumstance and other possible causal factors. There is normally an upper and lower limit...sort of like a confidence interval.

That said, here are the CDC numbers for the years 2010 - 2017. The first number is the estimate, then the numbers in brackets represent lower and upper limits respectively:

2010-2011: 37,000 (32,000 – 51,000)
2011-2012: 12,000 (11,000 – 23,000)
2012-2013: 43,000 (37,000 – 57,000)
2013-2014: 38,000 (33,000 – 50,000)
2014-2015: 51,000 (44,000 – 64,000)
2015-2016: 23,000 (17,000 – 35,000)
2016-2017: 38,000 (29,000 – 61,000)

As you can see, the average is about 34,500 deaths per flu season. The average lower limit is 29,000, and the average upper limit is about 48,700.

Here are the estimates for the past two flu seasons:

2017-2018: 61,000 (46,000 – 95,000)
2018-2019: 34,157 (26,339 – 52,664)

The 2017-2018 flu season did, indeed, have an unusually high number of deaths. But it was well above average, and clearly an anomaly. If you bother reading about it, it was an unusually virulent strain of flu, and the vaccine was not particularly effective.

When you factor that outlier in, the mean average number of deaths becomes about 37,500, and the upper and lower ranges become 30,500 and 54,200, respectively.

So let's compare apples to oranges here. 37,500 is the current mean average number of deaths during an influenza season since 2010.

When all is said and done, there will be a lot of data to look at. And because some countries locked down and others either did not or lagged, and because some U.S. states took early action and other dicked the dog, we should be able to get a pretty good idea of how bad this would have been had we taken no action.

But at this point, we're still just waving our hands in the dark.

Ron Gruner said...


I have to say I admire your unwavering conviction, but disagree on most of the issues you've raised.

The only way any virus in Man's history has ever ended is thru exhaustion from herd immunity.

Not true at all. Polio and measles are both virus-based. Vaccines, not herd immunity, conquered those diseases. As some parents have recently learned, stop the vaccines and their children get sick, and sometimes die.

Involuntary sacrificing of the individual at the expense of the collective is pure evil, AND it is a false choice.

That's a phrase Ayn Rand wishes she had written. Rand claimed "The only proper purpose of a government is to protect man’s rights, which means: to protect him from physical violence." Who would disagree with a government that asks its citizens to leave their homes to fight a foreign enemy? Likewise, who should disagree with a government that asks its citizens to stay at home to fight an internal enemy such as the Coronavirus?

This virus is no more deadly than flu.

My wife was a nurse at Mass General Hospital in Boston for 22 years. She's retired now, but still has many friends there. They tell her, that in their 40 years experience, there has been nothing like the Coronavirus. The hospital is besieged. Two weeks ago, nearly 50 staff had contracted the virus. Nurses who have been retired, or in one case a Ph.D researcher, are being moved back into staff nursing on floors which have been converted to full-time Coronavirus wards.

In late-March, when President Trump extended the national lock-down, deaths in New York were climbing an average of 40 percent a day. 35 dead on March 20. 1,941 dead April 1.

Back in mid-March people scoffed at some of the mortality projections comparing the Coronavirus to car fatalities and the seasonal flu. We now consider those deaths unavoidable and except them. That shouldn't be true of a new virus invading the population.

By late summer, if the revised "low" estimates are accurate, 60,000 Americans will have died -- 2,000 more than all we lost in Vietnam.

This is not the normal flu.

steve said...

One thing is for sure; we'll never know how many would have died if we had done "nothing" and just stayed at work. Of course, in the real world (talking to you, Johnny) that would NEVER have happened. Sort of like sitting on your hands after Pearl Harbor.

Undoubtedly, the peak would have come sooner and have been steeper but like with the pandemic of 1918, the second wave could be worse than the first! It's kind of startling to see how disjointed we are as a nation in our "isolation". Here in Florida there are still some beaches open. You read that correctly. Maybe you should move here Johnny! The states and in many cases localities have total control over isolation practices while the federal government essentially "suggests". So you have to be severely skeptical when the feds talk about a plan to go back to work. You think NY, CA and WA are going to listen to that?

steve said...

You know I've been thinking that all the great optimism of this blog and by many of the commentators have IMHO been thwarted by a temporary self imposed downturn. Seriously, WTF?

There is much to be positive about;

-in a fairly short time we WILL be back to work and normality and given that the bones of the economy have not changed, we will come roaring back.

-a lot of weak hands will have been shaken out and that is NOT a bad thing. Happens all the time during a typical business cycle.

-American TECHNOLOGY will shine and get us out of thing faster then people think (my prediction)

-we were at some point going to recess and this will undoubtedly replace what would have inevitably happened.

-the stock market was vulnerable to a pullback anyways. Suffice to say that happened...

-we will obviously be far better prepared NEXT time this happens

So chin up and suck it up. We'll get through this and and be a better America in another 12 months.

Rick Jones said...

Steve said:

>There is much to be positive about

I completely agree.

In economics there is the notion of "Schumpeter's gale," or the creative destruction inherent to capitalism.

Just so, from time to time we have something similar at the broader societal level. Call it "Nature's gale," or the creative destruction of nature (and I include human nature as part of that).

WWI comes immediately to mind, when the Edwardian order was turned on its head and a new world emerged out of the ruins.

Same with WWII.

Those sorts of wars are pretty much out of the question now as a result of nuclear weapons, but nonetheless the social order gets rickety and brittle from time to time and something comes along that lays waste and turns it on its head.

A lot of good can come out of this...there's a tremendous amount of potential across all domains. I just hope we have wise people on the order of George C. Marshall and the like who can construct something similar to the post-WWII order.

Johnny Bee Dawg said...

Ron Gruner:
We never vaccinate everybody. Vaccines saved countless lives, but herd immunity actually ended the virus spread, as always. Otherwise, everybody not vaccinated would have died, and mankind would have been wiped out thousands of years ago.

I keep hearing that "there is nothing like this". Except almost everybody who gets this has mild or no symptoms, and the cases are LESS than flu, and the deaths are LESS than flu. Current US cases are a bit over 1/100th of the flu season. Of course they are building...but so did the flu when it came on. It is a horrible death for those who succumb...just like flu. I am not diminishing the loss of life. But hardly anybody is dying from this virus alone. 99% of deaths have something else already killing them. And now our officials openly admit they are inflating the reporting of "death by COVID", and ordering doctors to do so. Deaths from other causes have curiously declined during COVID-19. Read that again.

It is sad to hear that so many hospital staff contracted the virus at Mass General. The doctor with the "viral" video at nyc's busiest COVID hospital who has probably personally treated more COVID patients than anyone on Earth, explained how it spreads, and why he will never get it. Those Boston hospital workers need to watch his video. There are procedures to ensure that kind of thing doesn't happen. His video is personal DIRECT testimony, not word of mouth. Too lazy to link it here. Not really an HTML wizard.

Its important to remember that hospitals in "hot spots" got super busy, but never succumbed. All the medical staff on the front lines are heroes. Amazing people with amazing skill and grit and adaptability. But nobody went without a needed ICU bed or ventilator. Nobody had an actual shortage of masks or gowns or gloves. We heard people scream they were GOING to run out, but it never happened. Trump made sure of that. He bailed out all kinds of unprepared state & local health agencies in record time, with PPE and extra hospital capacity...almost all went unused.

In fact, hospitals all over the country are empty, and are starting to lay off staff. They cleared their schedules of everything to prepare for the onslaught of COVID cases which never came. More evidence of false panic.

Curious thing...this is a "pandemic" with worldwide empty hospitals. Let that sink in.

I respect everyone's good intentions. Just don't trample my liberties with your "emergency" policies.
"We have to destroy Liberty in order to save it"....says the tyrant.

This debacle is a huge lesson for freedom lovers. I'm not sure the lesson will be learned as much as it should be.
The market seems to get it. It is hoping for the rebound. We will have to see if it comes.
I just want my Constitution to protect me from the Lefties & the Deep State, and the World Government cult (like that corrupt buzzard at the WHO). Once we abandon Liberty, we are done.

I hope everyone has a glorious Easter! God Bless America, and God Bless our President.

Johnny Bee Dawg said...

I would never advocate "doing nothing" or "sitting on hands". Quite the opposite.
Spend all our $$ and effort to protect the vulnerable group, and move on with the rest.
Get the antibodies building quickly to save lives.
Wash your hands often, and dont touch your face. Work up a vaccine for that vulnerable group as fast as possible.

Each local area should decide on their own if/when they wish to re-open.
In many towns, the bars and restaurants would be packed on Day One...with customers AND workers.
In shell-shocked communities racked with fear, like nyc, I can imagine the people would not want to mingle so soon.
So be it.

Happy Easter!

Welschman said...
This comment has been removed by the author.
Grechster said...

I think I've decided to write in Chamath Palihapitiyah for pres this November. I've long respected his mind but that interview he gave on CNBC on Thursday was just outstanding... After all, I can't vote for the Tangerine Monster or the Dementia Patient. Plus, I live in a state that renders my vote moot in any event.

Rick Jones said...

Grechster said:

>I think I've decided to write in Chamath Palihapitiyah for pres this November...that interview he gave on CNBC on Thursday was just outstanding.

Thanks for pointing that out. I just watched it. Freakin' awesome!

He made a great point that very few people understand: when an company declares bankruptcy, it doesn't necessarily or typically shut down. It just restructures its finances. Employees often get saved, those who funded the company's profligate ways don't. Boo hoo.

Johnny Bee Dawg said...

That Chamath interview was literally one of the worst Ive seen.
Dude sold his stocks at the bottom. Says the stock market doesnt work anymore.
Is frustrated that is doesnt "reflect what's going on, on the ground"
He forgot that stocks look ahead.

Wants Universal Basic Income for all the people!
Wants the airline industry to go bankrupt so we can divvy up their assets.
The government destroyed their sad, too bad. Screw the owners. Idiocy

He was a smart man to build his tech companies, but is a dolt about most everything else.

Rick Jones said...

Johnny Bee Dawg said:

>That Chamath interview was literally one of the worst Ive seen.

Yo Dawg,

That says more about you than it does about him.

Grechster said...

Well, that's why we have horse races... Btw, he wasn't born here. I might vote for him anyway.

steve said...

I have to part company and go with the Dawg here. Had we let the chips fall where they may have and had the fed not backed up the markets we would have had a cataclysmic fall that would have belied description. I mean, what is government for if not for shoring up the markets when they face annihilation? And despite what Palihapitiyah says, the fallout would not have benefited the little guy. That is complete nonsense. It's all about CONFIDENCE at least as much as about financial. People, all people have to have the confidence that our economy will function in the face of catastrophe.

That said, I LOVE " After all, I can't vote for the Tangerine Monster or the Dementia Patient". Me, I'm going to write in Frank Ryan, the NYPD commissioner in Blue Bloods. Didn't work in '16 but maybe this time?

Rick Jones said...

Steve said:

>...what is government for if not for shoring up the markets when they face annihilation?

Well, how about "establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty".

Nothing in there about shoring up markets.

Ron Gruner said...

A perspective from 1931...

President Hoover and Treasury Secretary Mellon were both Liquidationists believing the system would eventually recover, far stronger. In his memoirs Herbert Hoover wrote that Mellon told him to, “liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate. It will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people.”

Abandoning the economy didn't work for Hoover. It was Roosevelt's New Deal which pulled the nation out of the Depression.

steve said...

"Well, how about "establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty"."

Thank you Rick, I know my Constitution and I agree with you.

Having said that, I will remind you that in roughly two weeks stocks dropped 30%, the quickest in history and that PALED to the destruction in the bond market. We were in full blown off the
precipice mode. WAY worse than '08. So to have the feds come in and backstop was IMHO a damn good idea that will save much consternation.

No, they did not HAVE TO. It's not in the constitution but I for one am glad they did.

Rick Jones said...

Steve said:

>No, they did not HAVE TO. It's not in the constitution but I for one am glad they did.

OK. But that's a far cry from: ...what is government for if not for shoring up the markets when they face annihilation?

steve said...

Roger that. My bad.

Rick Jones said...

@Ron Gruner:

I always had this idea that Herbert Hoover was the guy who screwed up the great depression.

I recently read a book review of his biography, "Hoover: An Extraordinary Life in Extraordinary Times," by Kenneth Whyte. It gave me an entirely new perspective on the man, and now that book is on my reading list.

Here's the link to the review:

Book Review: Hoover

Rick Jones said...

Johnny Bee Dawg said:

>Curious thing...this is a "pandemic" with worldwide empty hospitals.

Yo Dawg,

The definition of a pandemic has nothing to do with filling hospitals. It has to do with crossing many national boundaries or state boundaries.

Johnny Bee Dawg said...

Empty hospitals.

randy said...

Amid Life in Lockdown, There’s Joy in Having the Family Together
Against the sad backdrop of the coronavirus, parents are discovering—or rediscovering—the pleasure of spending time with their children

“There’s a sense of shared vulnerability, and it’s when we’re vulnerable that we connect to each other, because that’s when we realize we really need each other,”


Gotta agree. Our son recently graduated, got a great job in another city, fully launched. Proud but sad we wouldn't spend time together easily. But with lockdown he's spent the last month with us. We've enjoyed dinners, conversation, running, fishing and a good bit of whiskey - it's been an absolute wonderful gift of time.

Johnny Bee Dawg said...

OPEC agrees to largest ever oil production cut in history. 9.7 million barrels per day.
Trump was right again, and he got those negotiations going.

Virus is a bust. Economy begging to open.
Relief payments going out.
Might give the markets a little boost.

We will just have to see.