Forward Observer: COVID-19 Update

Intelligence analysis and training company Forward Observer sent out an email this morning with some COVID-19 news/updates.

CORONAVIRUS UPDATE: Confirmed cases in the U.S. reached 1,257 — nearly a 24 percent increase from yesterday. Yesterday’s increase was 28 percent. The truth is that these numbers are way off. First, Chinese officials estimate that the U.S. had over 9,000 cases earlier this month, based on international flight data from Wuhan. Some American health officials are saying there’s likely to already be 20,000 cases nationwide.

A happy-medium estimate of 10,000 cases at a conservative 10 percent daily growth rate would put us over 3,000,000 cases in the next 60 days, by mid-May. While there may be some mitigating factors to exponential growth, we’re facing an incredibly disruptive future.

THE BAD NEWS: Dr. Brian Monahan, the attending physician for the U.S. Senate, warned senators on Tuesday that anywhere from 70 to 150 million Americans will contract COVID-19.

To put this into perspective, according to the American Hospital Association, there are 36 million hospital admissions in the U.S. each year. If 20 percent of all COVID-19 patients require hospitalization, then there could be 14-30 million extra hospital admissions. Now, China reports that about 15 percent of patients require hospitalization, but Italy says that 50 percent of COVID-19 patients have required hospitalization! If we see anywhere near that range, there’s simply not going to be enough room or staff to treat that many people.

THE GOOD NEWS: The University of Maryland School of Medicine announced that the spread of COVID-19 should ease this year as temperatures rise. That’s the first medical institution I’ve seen backing that theory. Officials warned, however, that more northerly latitudes could continue to see outbreaks into summer.

AND THEN: That pretty much confirms that COVID-19 will be back in the fall for another round of outbreaks.

U.S.: President Trump announced a series of policy steps he’s taking to stop the spread of COVID-19. By far, the most disruptive policy is that travel from most European countries will effectively end for 30 days starting on Friday. American citizens and permanent residents will be exempt.

Boeing leads the pack of U.S.-based corporations tapping credit lines, saying they’ll take out a $13.8 billion loan as insurance against a cash flow crunch. Hilton Hotels is in for $1.75 billion. Meanwhile, San Francisco is reporting hotel revenue dropping by 46 percent, 35 percent in Seattle, and 20 percent in New York. With spring break upon us and summer break right around the corner, it’s going to be a tough and sparse few months for the tourism industry. Port activity was also down 20 percent on the West Coast for the month of February. (Although, by looking at the charts, they’re used to it: they saw worse in previous years during the height of the trade war.)

ECONOMIC WARNING: BlackRock, the nation’s largest asset manager with $7 trillion AUM, advised clients that they don’t see the COVID-19 pandemic “as an [economic] expansion-ending event” — just as long as an effective federal response is enacted. Still, they see “a sharp and deep economic slowdown in the near term.” (Analyst Comment: This outlook underscores their faith that massive fiscal stimulus and favorable monetary conditions can blunt any effects leading to a 2008-esque meltdown. Yeah, my fingers are crossed, too.)

Goldman Sachs’ David Kostin advised clients that the 11-year bull market run is over, and painted a bleak picture of economic reality: “Supply chains have been disrupted and final demand has declined for many industries. Travel is contracting sharply as both individuals and businesses restrict movement. Airlines, hotels, cruises, and casinos report plunging demand, lower occupancy, and cancellations. Employees are being furloughed.”

JPMorgan Chase is alerting its clients that “a market sell-off of this magnitude implied a 65-75% chance of recession in the next year,” but a “timely, strong counter-policy response” and “a peak of COVID-19” in the coming weeks should prove the market drop an overreaction. (AC: JPMorgan Chase is expecting a peak in the coming weeks, which is at odds with what epidemiologists are saying when they expect a continuation for months.)

SHORTAGES: Coca-Cola warned of potential shortages of Diet Coke, due to supplier disruption. (The next panic buy?) Consumer goods giant Procter & Gamble is warning of coming shortages, as well, for the same reason. According to one economist, the “worst impact for businesses [will] come in April and May.” (AC: At some point, accusations of “panic buying” will no longer be sufficient to explain empty shelves, and the reality of shortages will set in. Based on what I’m hearing from China, there will be a period of weeks where shortages will persist. Those shortages could be sporadic or regional, based on where your local retailers source their goods. Regardless: it’s coming.) //END

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Always Out Front,
Samuel Culper