The day after tomorrow

[Spekulatius]

1) What is the Economy going to look like when the epidemic is over?

2) How long is it going to take until the economy turns

3) Which industries may take irreversible damage, which may benefit?

4) Economic changes? Are tax rates going up or down? For whom?

5) Political changes?

6) Bailouts, what is likely to happen, who is going to pay for it?

7) Will there be lasting changes to the health care system in the US?

 

I hope we can do some crowdsourcing here and get some new ideas and variant opinions.

 

 

[Viking]

I would love to hear from people who have first hand knowledge of what is going on in China, South Korea and Taiwan right now. Like how fast the economy is ramping back up (if it is).

 

Companies with operations in China, like Starbucks, will have an advantage as they will have already established ‘best practices’ in China that they can now fast adapt to operations in other parts of the world.

[montizzle]

 

Companies with operations in China, like Starbucks, will have an advantage as they will have already established ‘best practices’ in China that they can now fast adapt to operations in other parts of the world.

 

I work for a global building materials company in Canada. What I've seen at work is spot on with what you've said. We began getting emails as early as mid january about the coronavirus and how it may effect operations, long before anyone in this part of the world was taking it seriously.

 

My workplace has been surprisingly more co-ordinated and prepared for all of this than from what I've heard from friends in non-international companies. I think a lot of it is corporate learning from experiences in China a few months ago. Interested to see what material impact (workplace infection rates, maintaining level of productivity, etc.) this preparedness will translate to.

[ValuePadawan]

For how long Coronavirus effects last the way I've been thinking about it is the outer bound will be 18-24 months when a vaccine is available and mass manufactured. If developed countries can "pull a China" and lock down their countries for 6 weeks and effectively track back flow cases, cases coming in from other countries, I think domestic business less reliant on global supply chains and commodities can get back to normal whatever normal is at that point.

 

That will take probably at least 12 weeks from now and will only happen if they perform excellent at contact tracing once the cases begin to decline which is a big if in countries that have had responses that weren't exactly swift to say the least (looking at you Iran, Russia the USA etc).

 

The airlines are going to be hurting for the next two years at least and if I was the government dust off the Buffett playbook and go for perpetual preferred shares with warrants. Their investment will pay off so taxpayers will be happy and airline shareholders will be grateful for the liquidity. Both sides win.

 

I think this will make companies reconsider the level to which their supply chains are globalized and along with nationalism having a resurgence the last 5 years more companies will modify their risk by moving production closer to where the products are sold.

 

This is mostly speculation but it will be interesting how things shape up!

[fareastwarriors]

I would love to hear from people who have first hand knowledge of what is going on in China, South Korea and Taiwan right now. Like how fast the economy is ramping back up (if it is).

 

Companies with operations in China, like Starbucks, will have an advantage as they will have already established ‘best practices’ in China that they can now fast adapt to operations in other parts of the world.

 

Owner of a soap, shampoo/conditioner factory in Guangzhou is back to full capacity. They supply lower end SE Asia market. Probably still working through back orders...

 

His family is back to eating dim sum every day. I guess things are not That bad anymore.

[Jurgis]

1) What is the Economy going to look like when the epidemic is over?

2) How long is it going to take until the economy turns

3) Which industries may take irreversible damage, which may benefit?

4) Economic changes? Are tax rates going up or down? For whom?

5) Political changes?

6) Bailouts, what is likely to happen, who is going to pay for it?

7) Will there be lasting changes to the health care system in the US?

 

I hope we can do some crowdsourcing here and get some new ideas and variant opinions.

 

Just for fun:

 

1) Same as it looked pre pandemic

2) Depends on how the pandemic is handled. Best case: 1-2 quarters, worst case: probably a year. Yeah, I know that vaccine is not gonna be ready for a year-18 months. Economy won't stop for 18 months. People won't shelter-in-place for 18 months.

3) Likely none. There will be companies that go BK though.

4) At some point tax rates will likely go up. Quite possibly not soon.

5) This is not politics section

6) Yes. Deficit will go up. Money will be printed.

7) No.

[Spekulatius]

For how long Coronavirus effects last the way I've been thinking about it is the outer bound will be 18-24 months when a vaccine is available and mass manufactured. If developed countries can "pull a China" and lock down their countries for 6 weeks and effectively track back flow cases, cases coming in from other countries, I think domestic business less reliant on global supply chains and commodities can get back to normal whatever normal is at that point.

 

That will take probably at least 12 weeks from now and will only happen if they perform excellent at contact tracing once the cases begin to decline which is a big if in countries that have had responses that weren't exactly swift to say the least (looking at you Iran, Russia the USA etc).

 

 

I think the timeframe should be the starting point  to think about how this is playing out. There is still a lot of thinking going around (besides those that still believe in the flu variant) on that this is over in a few weeks. The longer it lasts, the greater the economic damage is going to be.

 

The 3 month timeframe until things clear up and the normal live more or less can restart sounds about right to me. When we look back at China, this thread got started early in January and now the normalcy returns mid March, so for us starting in March, it seems that June is our best case scenario, assuming a similar timeline. Most likely, it is going to be a longer drawn out affair though.

 

We do not know if this epidemic is seasonal, but if it is, it might reoccur in Winter. Then we are most likely talking Spring next year. Even if not seasonal, I expect new infection hotspots popping up, but hopefully they will be easier to contain when part of the population is already immune and the government and states know what to do. In any case, it’s going to be a 3 month best case, but more likely one year affair.

[Cigarbutt]

^Frankly, I don't even know what tomorrow will bring so forget about the day after tomorrow.

Also, from an advice you gave me in September 2018, the aim is to move from understanding to observation, as far as unknowables are concerned.

 

So, only 7) is discussed here. I'm more optimistic than Jurgis and I think that change will occur from the inside and/or will be imposed from the outside and that may impact many private entities involved in health care. And even if the virus is significant, it's the evolving status of the (economic) host that I worry about. Something along those lines just came out from somebody who is looking for an opportunity:

https://www.newyorker.com/magazine/2020/03/23/why-americans-are-dying-from-despair

[Viking]

Here is a summary of where Italy is at. Not out of the woods yet. And lots of unanswered questions about what the future holds.

 

https://www.thelocal.it/20200318/when-will-the-coronavirus-epidemic-in-italy-peak

[cubsfan]

So, only 7) is discussed here. I'm more optimistic than Jurgis and I think that change will occur from the inside and/or will be imposed from the outside and that may impact many private entities involved in health care. And even if the virus is significant, it's the evolving status of the (economic) host that I worry about. Something along those lines just came out from somebody who is looking for an opportunity:

https://www.newyorker.com/magazine/2020/03/23/why-americans-are-dying-from-despair

 

Cigarbutt - great article on the human side of the disaster.

 

thank you

[Spekulatius]

^Frankly, I don't even know what tomorrow will bring so forget about the day after tomorrow.

Also, from an advice you gave me in September 2018, the aim is to move from understanding to observation, as far as unknowables are concerned.

 

So, only 7) is discussed here. I'm more optimistic than Jurgis and I think that change will occur from the inside and/or will be imposed from the outside and that may impact many private entities involved in health care. And even if the virus is significant, it's the evolving status of the (economic) host that I worry about. Something along those lines just came out from somebody who is looking for an opportunity:

https://www.newyorker.com/magazine/2020/03/23/why-americans-are-dying-from-despair

 

Yes, I am looking at this thread as a means to develop a framework. I am not keen on predicting the future, but I do want to have a framework in place, in order to understand what might happen. It is easier to make sense of events as they unfold, if you have a mental model (or several of them ideally) and then test them against the new developments and data coming in.

 

Simple example - Andrew Young’s UBI. This was fringe idea proposed by a fringe candidate and seems outlandish and quite frankly it is socialist, but look at where we are know? This idea has gone from fringe to mainstream and Trump may sent out checks very soon. That’s a huge paradigm shift.

 

I asked in the Coronavorus Thread if a health insurer could go bankrupt. Most seem to think no, which probably is right. But what happens if we get a pandemic and it makes a large insurer like UNH insolvent? Quite frankly, their capital cushion isn’t all that impressive and if there is a huge surge in claims, I could see that happen. What would happen then? Nationalization? Bailout? In what Form? And what would happen to the insured? Medicare for all? It‘s just a possible scenarios and purely speculative, but I guess we will see in the next 12 month things that we never thought to be possible.

 

At least that’s my thinking. I also like the term New Deal 2.0 because I think that what I think we will be getting. I have no idea what it will look like though.

 

It’s an interesting time to be alive and hopefully stay that way.

[Cigarbutt]

...

It’s an interesting time to be alive and hopefully stay that way.

...I guess we ain't seen nothing yet.

It's the story of a guy who got a transmissible gift because he didn't think that flattening the curve mattered that much in the heat of the moment.

The best is yet to come and we'll make it, somehow.

Looking forward to your framework(s).

 

[Castanza]

^Frankly, I don't even know what tomorrow will bring so forget about the day after tomorrow.

Also, from an advice you gave me in September 2018, the aim is to move from understanding to observation, as far as unknowables are concerned.

 

So, only 7) is discussed here. I'm more optimistic than Jurgis and I think that change will occur from the inside and/or will be imposed from the outside and that may impact many private entities involved in health care. And even if the virus is significant, it's the evolving status of the (economic) host that I worry about. Something along those lines just came out from somebody who is looking for an opportunity:

https://www.newyorker.com/magazine/2020/03/23/why-americans-are-dying-from-despair

 

Yes, I am looking at this thread as a means to develop a framework. I am not keen on predicting the future, but I do want to have a framework in place, in order to understand what might happen. It is easier to make sense of events as they unfold, if you have a mental model (or several of them ideally) and then test them against the new developments and data coming in.

 

Simple example - Andrew Young’s UBI. This was fringe idea proposed by a fringe candidate and seems outlandish and quite frankly it is socialist, but look at where we are know? This idea has gone from fringe to mainstream and Trump may sent out checks very soon. That’s a huge paradigm shift.

 

I asked in the Coronavorus Thread if a health insurer could go bankrupt. Most seem to think no, which probably is right. But what happens if we get a pandemic and it makes a large insurer like UNH insolvent? Quite frankly, their capital cushion isn’t all that impressive and if there is a huge surge in claims, I could see that happen. What would happen then? Nationalization? Bailout? In what Form? And what would happen to the insured? Medicare for all? It‘s just a possible scenarios and purely speculative, but I guess we will see in the next 12 month things that we never thought to be possible.

 

At least that’s my thinking. I also like the term New Deal 2.0 because I think that what I think we will be getting. I have no idea what it will look like though.

 

It’s an interesting time to be alive and hopefully stay that way.

 

My opinion of this bailout is changing very quickly. Seems like there is no hope of it being a loan and therefore no personal responsibility attached. I plan on mailing mine back if this is nothing but a handout.

[RadMan24]

The focus is always on the vaccine which is so far away, but I think there's positive outcomes in anti viral or other treatments in reducing inflammation in severe cases that's causing most of the deaths. If a treatment is approved here in the next week or two that greatly reduces deaths, the quarantine we're all in should reduce cases in a month or so that business can start to rebound, and the load on the health care system won't be too bad. This is all unknown, but at today's prices for quality companies with solid balance sheets in beaten down sectors, it's about as good as it gets.

 

Also, there's no way the vaccine takes longer than 12 months. Even Regeneron is prepping doses just in case its effective along side clinical trials.There are 19 other developments as well, but a Vaccine could hit the market as soon as Summer if stars align.

 

And, to be frank, it needs to happen or people won't trust the industry any more nor believe the efforts in R&D are worth the sky high drug prices, high health care costs, etc. and this industry will be hit hard going forward, imo in such a case..

 

 

[bergman104]

I'm sure there are other health professionals on this, but I'm a surgical resident at a large academic center in the midwest. The reports we are hearing from people across the world are pretty startling. In the US were are in the early early innings of this. I very much hope I am wrong and the economy bounces back in 4 weeks, but I'd be pretty shocked. This is going to get bad folks.

 

My reasoning is simple. The vaccines and drugs are not going to help simply because there won't be enough time to test them. The anti-inflammatory drugs like chloroquine have only shown to be beneficial in a petri dish, not in large groups of people. No physician I know would actually prescribe chloroquine to their patient unless it was a hail mary. By then it will likely be too late. We simply have no way to fight this other than physically distancing ourselves. The problem with that economically is it drags out the process. My best would be late June or July.

 

We are 1 week in. I'm waiting 5-6 weeks and hoping like hell I'm wrong and miss the rebound.

 

 

[ERICOPOLY]

The anti-inflammatory drugs like chloroquine have only shown to be beneficial in a petri dish, not in large groups of people. No physician I know would actually prescribe chloroquine to their patient unless it was a hail mary.

 

Montefiore Medical Center in New York has already started seeing the surge of Covid-19 patients that public health experts have been warning about. The hospital is participating in the remdesivir trial and is giving Covid-19 patients chloroquine. “All of our patients get put on chloroquine, as well as on antiretrovirals. We’re using Kaletra. Different places are using different antiretrovirals,” says Liise-anne Pirofski, chief of infectious diseases at Albert Einstein College of Medicine and Montefiore. “Everybody gets that, unless they have some contraindication.”

 

https://www.wired.com/story/an-old-malaria-drug-may-fight-covid-19-and-silicon-valleys-into-it/

[Packer16]

IMO the key is an effective treatment not a vaccine.  Treatment will prevent deaths.  There a tension between closing stuff down (which has a huge economic impact on everyone) and public health.  I think if this goes the way of China which IMO should be the mid case (as we are learning from others & should have a better treatment available within weeks) is 2 months (January to March).  Maybe folks are in panic mode to such an extent when someone uses China as an example, they cannot even count the months correctly.  My concern is an over ambitious politician that will keep the close business order on too long.  We still have essential services operating so most of our economy is running fine.

 

I think this crisis has shown how fragile some portions of our economy is & how levered certain portions of our system.  We are seeing margin calls which are causing contagion in other unrelated sectors (especially real estate and banks).  The unknown here is contagion or fear of contagion reflected in some security prices.

 

Packer 

[Uccmal]

I'm sure there are other health professionals on this, but I'm a surgical resident at a large academic center in the midwest. The reports we are hearing from people across the world are pretty startling. In the US were are in the early early innings of this. I very much hope I am wrong and the economy bounces back in 4 weeks, but I'd be pretty shocked. This is going to get bad folks.

 

My reasoning is simple. The vaccines and drugs are not going to help simply because there won't be enough time to test them. The anti-inflammatory drugs like chloroquine have only shown to be beneficial in a petri dish, not in large groups of people. No physician I know would actually prescribe chloroquine to their patient unless it was a hail mary. By then it will likely be too late. We simply have no way to fight this other than physically distancing ourselves. The problem with that economically is it drags out the process. My best would be late June or July.

 

We are 1 week in. I'm waiting 5-6 weeks and hoping like hell I'm wrong and miss the rebound.

 

I would agree with your synopsis, and I am not a surgical resident :-). 

 

There are far more questions than answers.  The West, particularly the US is going to get hit way worse than China.  China has high level leadership. 

 

Its many times more complex than working out a chess game 20 moves downstream for a human being. 

[rb]

1) What is the Economy going to look like when the epidemic is over?

2) How long is it going to take until the economy turns

3) Which industries may take irreversible damage, which may benefit?

4) Economic changes? Are tax rates going up or down? For whom?

5) Political changes?

6) Bailouts, what is likely to happen, who is going to pay for it?

7) Will there be lasting changes to the health care system in the US?

 

I hope we can do some crowdsourcing here and get some new ideas and variant opinions.

For the economic side the answer really depends on what was the real shape of the economy before covid hit. If the economy was in decent shape like the headline numbers would suggest then the economy is gonna snap back. If the economy was more sluggish the the recovery is going to be slower.  This can very well be the case because other indicators were softer than the headline numbers would suggest. Inflation was weak in 2019, you had a rate cut, and the 10 year yield was coming down way before every finance guy started looking up the word "epidemiology".

 

I'm actually quite optimistic about this despite being in the economy was more sluggish bucket.

 

This basically started with a supply shock (china) but then got hit with a massive demand shock. The way to think about it is that it's equivalent to the Fed doing a massive rate hike, sucker punching demand, and causing a recession. This is basically every recession pre 2000. In those cases as soon as the Fed took its foot of the break the economy came back because the demand was there. Furthermore, this time around there will be substantially less feedback loops normally happen in a recession. Because the banks won't foreclose on you, you'll be able to delay payments, fiscal help, etc.

 

As for time frame I think we're looking at about 3 months. China is a good example. As soon as the locked down you see them getting this thing under control in about a month. Right now pretty much everyone is pulling a China, not with the military and police but because people have scared themselves senseless. In America because they're pussies and have twitter. In Europe because of Italy and whoever wasn't scared before looked at Italy and is good and scared now. So basically you're looking at 1 month to get it under control then 2 months to clear out the cases.

 

The other side of this is that they have to solve it in 3 months otherwise we're screwed. I don't think that we can keep at this level more than 3 months before things start to fall apart. I think the longer it goes the more talk you're gonna hear about how we need to get back to normal and the old folks need to take one for the team this time around. So 3 months, assuming the economy wasn't in the crapper going in, with decent monetary and fiscal stimulus behind it. I think the economy recover well.

 

I don't think there are tax hikes on anyone for a while. While would you tighten fiscally when you need to stimulate. Plus it's an election year.

 

Regarding industries permanently affected. I don't know that they'll be one. People are pretty good at forgetting bad things and are quite hedonistic. So I think that they go back to their pleasures. There may be a while until someone books a cruise though.

 

Politically I think changes have already occurred. The Republican party has been completely transformed from what it was. I'm referring to the base as well as the politicians. We knew for a while now that they don't care about deficits. But what we've seen with this crisis is that they're perfectly ok with outright spending as well. So going forward i think that there will be more of a fiscal response to shocks than in the past. This is a good thing, but we'll see.  Republicans have been pretty good at changing their economic policies depending on who's in office.

 

I don't think there will be changes to the health care system. Americans are really good at keeping it permanently screwed up.

[Castanza]

SARS was primarily treated with antibiotics. A vaccine didn’t arrive until the end of the outbreak.

 

For those in the medical community wouldn’t antibiotics generally have a quicker response? Vaccines typical take a week or so to build immunity and still might not be effective.

[SharperDingaan]

No one has any idea what the economy will look like once this is done. Relax social distancing and the restaurants, bars, etc. can start back up (benefiting the owners and staff who really need it). But it is going to be a while before anyone starts taking trips, or buying anything major again. Best guess is 4-6 months to 60% of prior activity, and in 2-3 progressive stages.

 

Most industries are going to substantially change. Supply chains that are more local, and robust. Industry consolidation into oligarchs. QE bailouts via debt to equity swap, FDR type mega-projects, injecting thousands of predictable well-paying jobs, to get the economy going again.

 

Reregulation. For the most part, airline travel was a far better experience when there were just 1-2 national airlines per nation. Similar thing with cruise ships, hotels, supply chains, etc. Price is important, but no longer king.

 

Same old. People still need to do things, and most cannot afford much. The sports, concerts, etc. will still go on. Just fewer and smaller until the population becomes comfortable with mass crowds again.

 

Accelerated social change. Strident calls, but directionless in the early stages; too early to tell where it goes yet.

Unlikely Trump gets a second term, as we ‘the people’ will demand someone to blame.

 

Trump. Different views, but most would agree that Trump and his enablers, have been toxic to the process.

Change the channel, and the recovery can accelerate. 

 

Obviously, lots to chew on

 

SD

 

[Cigarbutt]

SARS was primarily treated with antibiotics. A vaccine didn’t arrive until the end of the outbreak.

 

For those in the medical community wouldn’t antibiotics generally have a quicker response? Vaccines typical take a week or so to build immunity and still might not be effective.

Disclosure: this post is based on incomplete knowledge supplemented by a 5 minute search, so...

There are several efforts and trials now based on the SARS experience and human ingenuity should not be underestimated but, AFAIK, the coronavirus that caused SARS has no real effective treatment. When people come in the hospital with symptoms and respiratory distress, they are typically put on a large-spectrum antibiotics (because that treatment works for bacterial and other pneumonias) but these medications have no effect on the CV itself, if that's the cause. There are potentially anti-viral agents but the evidence appears weak, in terms of a widespread and convincing benefit and side effects are significant. With respiratory failure, steroids are used (evidence very weak) and, typically, only general and supportive measures (including respiratory support) can be used until the natural immunity kicks in.

When "infection control" is mentioned at this point, it is meant at the community level, in terms of the spread.

Hoping for progress here...

[Guest roark33]

I would love to hear from people who have first hand knowledge of what is going on in China, South Korea and Taiwan right now. Like how fast the economy is ramping back up (if it is).

 

Companies with operations in China, like Starbucks, will have an advantage as they will have already established ‘best practices’ in China that they can now fast adapt to operations in other parts of the world.

 

The main problem with looking at China and SK is missing the comparison that we have let the horse out of the barn, so to speak. The virus has already spread throughout the US and therefore it will only spot once we develop herd immunity, which is around 15-20% of the population.  Until then, the only real goal for the US is to slow the spread to help defer the impact on the medical capacity.  So, if you look at China and say, well, Starbucks is back up and running, that's not going to happen in the US.

[TwoCitiesCapital]

I would love to hear from people who have first hand knowledge of what is going on in China, South Korea and Taiwan right now. Like how fast the economy is ramping back up (if it is).

 

Companies with operations in China, like Starbucks, will have an advantage as they will have already established ‘best practices’ in China that they can now fast adapt to operations in other parts of the world.

 

The main problem with looking at China and SK is missing the comparison that we have let the horse out of the barn, so to speak. The virus has already spread throughout the US and therefore it will only spot once we develop herd immunity, which is around 15-20% of the population.  Until then, the only real goal for the US is to slow the spread to help defer the impact on the medical capacity.  So, if you look at China and say, well, Starbucks is back up and running, that's not going to happen in the US.

 

Agreed on this. Also, like any data out of China, you need to take it with a very LARGE grain of salt. No idea how much bigger it is than they're saying, but guarantee its bigger than what they've said.

[rb]

I would love to hear from people who have first hand knowledge of what is going on in China, South Korea and Taiwan right now. Like how fast the economy is ramping back up (if it is).

 

Companies with operations in China, like Starbucks, will have an advantage as they will have already established ‘best practices’ in China that they can now fast adapt to operations in other parts of the world.

 

The main problem with looking at China and SK is missing the comparison that we have let the horse out of the barn, so to speak. The virus has already spread throughout the US and therefore it will only spot once we develop herd immunity, which is around 15-20% of the population.  Until then, the only real goal for the US is to slow the spread to help defer the impact on the medical capacity.  So, if you look at China and say, well, Starbucks is back up and running, that's not going to happen in the US.

 

Agreed on this. Also, like any data out of China, you need to take it with a very LARGE grain of salt. No idea how much bigger it is than they're saying, but guarantee its bigger than what they've said.

I think the data coming out of china is ok. Let me explain.

 

The numbers don't matter that much. There's too much noise is the data anyway. Korea tested too much, US and Italy not enough. It doesn't really matter what the numbers are. Whether 3,000 or 10,000 died in china is not that important. What's important is that at some point it started, at some point it went exponential, and at some point it ended. Those are the important data points. I don't think China is lieing about that. So the data is ok.