Tired of Covid-19; thinking about the next “regime”

Manage
21

Frederic,

Me too on stocks. And I do have to admit that I wake up worrying about my small community hospital.

I have dreams that all the doctors are sick and the hospital has no choice but to call me in to help in the intensive care unit.

What a nightmare! I wake up and realize that will never happen. I don’t think they are licensed for that. But I have my concerns too.

There are clearly some reserves. They can cancel my eye cases and have anesthesia work in the ICU. They are probably the best doctors for that anyway.

Our hospital never turns anyone away. The people who work there would not do that to their friends and family even if the administration wanted to.

Best,

Jim

22

The obvious reason why Asian countries have been so much more adept at handling this than the US/West is they’ve already been through this several times with SARS, H1N1, MERS, etc. and have worked for years to build adaptive systems around infectious diseases that most of the US/West haven’t put much time and effort into. In fact, infectious disease has been so far removed from the periphery in the West that anti-vaccination movements have taken hold.

23

What specific measures are they more adept at?

I get that they might quarantine people better. Something that has rightly been questioned in the US. How should we limit travel for example?

Honestly, if I started running a temperature I might get one of my friends to give me a prescription for a medicine in the Tamiflu family but they probably do not work. I would just move upstairs (and not go out) and call an ambulance if I became dehydrated or had troubles breathing.

What would I fly to China to do for me? I am open to ideas but I seldom hear specifics.

The exception being CNN first bringing up concerns about the number of respirators. We are not the worst on that for sure. But a real concern nonetheless.

It is probably true that there is a shortage of N95 masks. Regular surgical mask are not thought to be effective. The person with the disease may be asked to wear one—essentially for when they sneeze. Can someone confirm for me that rural China was flush with N95 masks?

Will you wear a mask in public if they are more available? I will not in my office. I do not get too intimate with anyone in the supermarket so probably not there either, but maybe.

Testing when there is no treatment: good for quarantining. South Korea excelled in this. Maybe China was good at locking down the country. Maybe not. I have heard both. Maybe this is a good thing. Maybe not.

Maybe South Korea got it about right and probably better than the US. It is a real debate. One where specifics can be missing.

I am already convinced on South Korea. I will need to learn more about China. Probably not from their press if I am to be convinced. And I might actually see what happens in the US before my final judgement.

Best,

Jim

24

More of a cultural mindset. In Asia they take infectious disease seriously enough to wear face masks when traveling even when there isn’t an active epidemic. In the west people concoct conspiracies that vaccinations are government mind control experiments and hold Smurf rallies.

25

Cary,

Let me just agree that Hong Kong, South Korea (not limited to these) are beautiful places. I hope I never get sick there but I know I would be in good hands if I did. There are absolutely some better hospitals there than my local one. And some of the best in the world I am sure.

I will pass on North Korea and maybe some of rural China. I might ask to be flown out of there. You may question my preference for rural Kentucky over these but I am not in complete disagreement with you. And to be honest, I might get in a car and travel to the University of Kentucky—if the ER doctor did not helicopter me there without my asking. Do they have a lot of helicopters in rural China?

You clearly have many good points about the high quality of medical care in most of Asia. And I am no expert on where the best hospitals are, even in America.

No Smurf in charge of any US hospital that I am aware of, however.

Best,

Jim

26

This might be less of a “next regime” and more of a “coronavirus accelerates this trend.”

With people working from home, won’t this further push the trends towards digital services, cloud computing etc?

Personally I like QQQ and TQQQ because they are tech focused, and others in this forum have built models revolving around SKYY (First Trust Cloud Computing ETF).

Here’s a “well duh kids staying home from school will play more online games” but nonetheless, it confirms the trend.
https://www.nintendolife.com/news/2020/03/coronavirus_isolation_is_causing_a_spike_in_online_gaming_traffic_in_italy

I’d like to see revenue drops, for the physical industries, vs the digital. If you source your supply from China, it got disrupted. If your company writes code, from developers working remotely all over the world, and your product and customers are also all remote, do we actually expect significant revenue drops? Might we actually see revenue growth?

And on the topic of inflation, that is why I buy bitcoin. It is digital gold, and better than gold. It is more scarce than gold. It is impossible to counterfeit. It is easier to store, transact, and transport than gold.

27

“A new coronavirus infection has been confirmed and its type is being identified. Inform all family and relatives to be on guard,” Li Wenliang typed into a chat group with his former medical school classmates on Dec. 30,

Not everyone appreciated Li’s bombshell warnings. After he shared information about the strange infections he was seeing, he was reprimanded by local authorities for “making untrue comments” and “severely disturbing social order.”

Li, a 34 year old ophthalmologist, caught the virus “His condition deteriorated and he was pulled off life support.”

Extracorporeal membrane oxygenation? If I need one of those I want someone to find my living will.

“Germany has around a 0.2 percent mortality rate”

“China: National mortality rate was basically stable, as of Feb. 4 at 2.1%”

28

Jim,

As a doctor, does it concern you that US wlll be running out of hospital beds if virus spike despite having the highest ICU beds percentage in the world?

Regards
James

“No State Is Prepared” - Mapping Where Hospitals Will Run Out Of Beds First If Virus Cases Spike

by Tyler Durden
Sat, 03/14/2020 - 18:05

A USA Today analysis of American Hospital Association (AHA) hospital bed data shows that if confirmed Covid-19 cases and deaths follow similar growth curves as in China, Italy, and Iran, there could be six patients for every existing hospital bed. This means that no hospital system in the US is prepared for a pandemic.

“Unless we are able to implement dramatic isolation measures like some places in China, we’ll be presented with overwhelming numbers of coronavirus patients – two to 10 times as we see at peak influenza times,” said Dr. James Lawler, an infectious disease researcher at the University of Nebraska Medical Center.

Lawler warned that “no hospital has the current capacity to absorb” a massive surge of Covid-19 infections.

USA Today estimates that 23.8 million Americans could be infected. That number is based on an infection rate of 7.4%, similar to the common flu. Some experts say the infection rate could be much higher.

The Johns Hopkins Center for Health Security says infections could hit 38 million, including 9.6 million who will need to be hospitalized, and about 33% of whom would need ICU-level care.

With an infection rate unclear, USA Today’s analysis used that of a mild flu season. It said if everyone in the US who gets infected is hospitalized, that would be 4.7 million patients, which is about 6 per every hospital bed.

The fast-spreading virus could overwhelm the US’ healthcare system if confirmed cases and deaths surge in a 2-3-week period, as it did in China, Italy, and Iran. Currently, Italy’s health care system has been crippled with the lack of hospital beds and respirators. The result of not providing ICU-level treatment to the most critical patients has resulted in the country’s extraordinarily high 6.8% mortality rate.

The doomsday scenario that could play out in the US is an overburden healthcare system, where the most vulnerable cannot get ICU-level treatment, leading to a mortality rate comparable to Italy.

“When hospitals become much more crowded, literally stretched beyond capacity, if I have a heart attack, will I be able to get care? If I have an auto accident, will I get care? How do we triage that?” said Michael Osterholm, director of the Center for Infectious Disease Research and Policy at the University of Minnesota. “We can’t approach this like I approach a game of checkers with my 10-year-old grandson,” he added. “We have to approach this like a chess master thinking 10 to 15 moves down the board.”

Many hospital systems across the US aren’t designed to handle a mass influx of patients from a viral outbreak, indicating that no state is ready for a pandemic.

During the next outbreak, USA Today notes that many West Coast states would experience 20-24 seriously ill patients per available hospital bed. The odds of getting a bed are significantly higher in Rocky Mountain and Plains states. As for the East Coast, sick patients in Maryland and Connecticut would have the most difficulty in obtaining a bed.

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29

James,

Definitely concerning.

I have to wonder about the article however.

Any comparison to Italy would have to discuss and adjust for the demographics wouldn’t they?

“Italy has the oldest population in Europe, with about 23% of residents 65 or older, according to The New York Times. The median age in the country is 47.3, compared with 38.3 in the United States, the Times reported. Many of Italy’s deaths have been among people in their 80s, and 90s, a population known to be more susceptible to severe complications from COVID-19,”

In fact the median age of deaths in Italy 81 years.

Then this:

“With an infection rate unclear, USA Today’s analysis used that of a mild flu season. It said if everyone in the US who gets infected is hospitalized, that would be 4.7 million patients, which is about 6 per every hospital bed.”

Did I read that assumption correctly? Yep: “everyone in the US who gets infected is hospitalized”

Maybe this is just an error but it has me wondering about the entire article’s numbers/assumption.

If I were a hospital administrator—or even a financial analysts for Wall Street—I think I might be obligated to look at some more articles.

Still it is a serious question. What can/will the US do if there is a need to expand the number of hospital beds? I am not sure I have an answer for this important question.

And while we are at it am I sure we have enough respirators? I suggested the per-capita number of respirators as a number that could be looked at. That probably is something worth looking at but that is far from a detailed analysis.

Obviously one would have to make some determination of how quickly the infection is likely to spread. And those who say the US won’t be doing as well as South Korea, for example, as far as slowing the spread are almost certainly correct, I think.

If this were not such a serious subject (or I actually had more expertise in the area of hospital administration) I would be willing to guess some numbers. Instead, I think I will hope and pray for the best for everyone.

Edit after looking at the graphs closer. Why does Japan have so many sick people (or empty hospital beds)? Or what is the cause for a 3X discrepancy? I think I am missing something.

Regards,

Jim

30

I think the situation will be much worse in the USA than Italy due to the administration not getting a handle on it early.

31

WHOA!!! WTF!

The title of this thread starts with "Tired of Covid-19 . . . " So why did it morph into a discussion of covid-19.

Come on folks, staying on topic is alway desirable in on-line communities, and in moderated forums, off-topic posts are subject to deletion and persistent off-topic posting could lead to expulsion. P123 is not moderated so those issues don’t exist here. But as matter of basic etiquette, I think it’s fair to ask people to stop talking about covid-19 in this thread. There are others in which you can do it, and/or you can start new threads.

But as investors, there’s a more challenging issue. If you can’t keep a focus on something, what hope do you have to invest successfully in a market dominated by highly sophisticated folks who have massive technological resources and never lose focus for even a nano-second! The whole point of p123’s being able to empower you to invest against such a crowd is the way its tools can help you turn off the noise and focus on objective evidence; i.e. data. The human brain should never be turned off, but instead of allowing it to wander at whim, successful p123 investors control where it goes and doesn’t go.

As to one thing I’m doing right now to while away the social distancing is creating simple screens, so simple I don’t even need to save them, to see which stocks/ETFs are holding up through the crash (relatively speaking of course) and which rate well under ranking systems I like and use. I get the tickers into a watch list and then start going through stock/etf by stock/etf to see why its holding up and assess whether I think there’s something there for beyond the current mess. That’s how I’m combining my judgment and data-evidence to look ahead, and in so doing, possibly pick up cues as to how near- or not-near term I should be thinking.

You don’t have to do what I’m doing. Do your thing. But whatever your thing is, PLEASE GET THE COVID-19 DISCUSSIONS OUT OF THIS THREAD SO THOSE WHO WANT TO STAY ON TOPIC CAN DO SO WITHOUT HAVING RELEVANT POSTS SWAPED. Please ask Marco to delete your off-topic posts, or at least edit them down to an -x- so they can easily be skipped by those of us who care about the topic (actually, do that even before asking Marco to delete since it’ll save him time having to hunt down deletable posts; he’s go enough else on his plate.

32

I’m not sure what holds up well going down are the biggest winners coming back up.

Wouldn’t it be like any other crash? That the industries hit the hardest bounce back the quickest?

Hotels, for example. Won’t they come roaring back after we return to normal travel levels?

33

There might be some decent early rebound data available for those who analyze Chinese stocks. By doing so, some insight might be gained into sector impacts and early recoveries, etcetera, that might also apply to some extent to European and U.S. markets at the right time (whenever that is). I have avoided them so am ignorant of the information value, but China has thus far been much better at responding and their stocks likely reflect that.

34

After a quick compare it looks like there are 3 top SPDR’s for every major correction since 2008. These 3 are the only ones that consistently have less DD than SPY.

XLP Consumer Staples has been the best bet
XLU Utilities
XLV Health Care

35

Well, we need the Top SPDRs for the next big rally. For the downside it is too late.
The next rally will come. When? Nobody knows.
If you still have powder, keep it dry.

36

Werner,

Agree if I understand, I have been in exactly those for while (XLU, XLP and XLV). Buying a little SPY over the next little bit. Probably should be QQQ or XLK soon.

More on another thread. My apologies for responding on this thread (where the post was made).

Best,

Jim

37

That’s certainly something to think about. But we can go further.

One of the things we learned from past crashes is that life after the crash, although it recovers in the aggregate, is not quite the same. Sometimes, there are structural changes in society/politics/the market. Sometimes its a matter of seeing which companies in down-and-up industries fall by the wayside and never really reach the up-phase, because they disappear or are permanently weakened.

We can and do all have our high-level views. But one of the unique things a platform like p123 offers is the ability to do some further digging . . . At the individual stock levels. And nickel-and-dime screener can show you which companies are crashing less. But we have the advantage of being able to prequalify sorts like that using ranking systems we have or newly create that put some fundamental substance into the picture. And we can see which companies are defying or doing worse than narrow peer groups (it’s not just sector; we have sub-sector, industry and sub-industry). And we have those data panels (for more, see chapter 7 of the A to Z Guide).

This terrible time presents a great opportunity to step back from all the ways you worked before and to think about and explore new things. Another characteristic of crashes is that there are always some who come out on the other side better and stronger than they were went it turned bad.

Don’t feel pressured to put real money to work right now. (You don’t have to catch the absolute bottom. If the first 10%-20% of the recovery runs ahead of you, you can always do what most people do - lie and claim to have caught the bottom; that’s cool, believe me, you won’t be alone.) Create and track watch lists for as long as you feel unready to buy.

38

I just want to reiterate that Portfolio123 was originally built for the purpose of creating automated models that would reduce the hard work and emotional turmoil of discretionary stock-picking, and that there is considerable evidence that automated portfolio selection works better than discretionary portfolio selection, especially during and after crises. At the very least, you should, if you’re a stock investor, do what Marc has always advocated: develop a four-step system for buying and selling stocks. 1. Find potentially attractive stocks; 2. analyze these stocks; 3. buy the best of these stocks; and 4. sell stocks that have weakened from the same perspective. These can steps can all be automated using our tools. I worry that the quantitative point of view is being lost among so many threads that promote discretionary stock and ETF trading or guessing about the future of the market.

One of the essential aspects of a quantitative (or behavioral) world view is admitting what you don’t know. I have absolutely no expectations about where the market is going to go. I have no expectations about whether we’re going to see a zero interest-rate environment for the next two months or twelve years. I have no idea whether the value inversion we’ve been witnessing for the last two years is going to continue for the next two years or is going to vanish as soon as the current crisis abates. I know that there is a tendency for small-cap value stocks to outperform other stock categories in the twenty-four months following a crisis (defined by a 20% drop in the S&P 500). But that may not be the case with the present crisis.

While I can’t work with certainties, however, I can work with probabilities. It is more PROBABLE that stocks like NVS, MSTR, ABBV, and AMKR will do well than stocks like CARA, CVNA, WPG, ZGNX, and VSLR. It is more PROBABLE that stocks that rank highly on quality, value, and growth metrics will succeed than stocks that rank poorly. The purpose of Portfolio123 is to help you with all that.

Marc is right: it’s a fine idea to take the opportunity that this crisis represents to use our tools and rethink your processes. But don’t throw the baby out with the bathwater. If you have a quantitative strategy that has worked pretty well over the last five years, don’t throw it out now that it has crashed. Modify it, tweak it, improve it; think about what opportunities might arise; think probabilistically; and read, read, read, read, read. Take your best ideas and put them to use. Improve your domain knowledge. Experiment with different systems and strategies. Take advantage of everything that we offer.

39

Well said Yuval.

Taking emotions out is key and this is why we have spent years building models for. Now is the time to use them.

For those that do not have their own models, there are good “conservative” P123 free models here → https://www.portfolio123.com/app/investment/add-new?browse=1

Jerome

40

The next regime…

Haven’t we seen (or about to see) the end of the bond bull market going back to 1981? Long term treasuries bottomed at 2.1% in 1946, topped at 15.2% in 1981, and just hit 1% earlier this month.

If so, shouldn’t we expect a 30-40 year bear market in bonds? A rising interest rate environment.

Long term, as the cost of capital rises and high price-earnings multiples become less and less attractive compared to bonds, this is generally bad for stocks. The Dow earned 4.4% annualized from 1946 to 1981 in the last rising rate bond bear, and 9.2% from 1981 to the February peak during the bond bull.

Regarding bonds, short term treasuries do better than long term treasuries in rising rates. They mature far quicker, allowing repurchase at higher and higher yields. Long SHY, short TLT would probably work well except for those periods when bond yields fall. And yields will fall during stock corrections as investors will continue to turn to bonds as a safe haven.

Stocks that will do well during rising rates include banks and insurance companies. If rates are rising due to inflation, then commodity producers and basic materials companies should perform well.

Ultimately, I have a feeling we get inflation (or stagflation). Not from wage growth/increasing corporate & personal debt creating more demand than supply, but from supply destruction from a variety of factors resulting in more demand than supply. Plus too much liquidity in the system may or governments printing their way out of debt may lead to a loss of confidence in currencies.

On the other hand, Dalio projects interest rates to be sticky near 0% for awhile under MMT.