Good Friday Morning! If you’re reading this, you’re one of the few survivors in America, after Joe Biden told everyone that 150 million people died from 2007 forward from gun violence. Nevermind that only 2.8 million people die every year from all causes, or the US population is approximately 330 million. Congrats on surviving the 2010s!
Speaking of surviving, if you’ve watched the media at any extent lately, the national media, in particular, is convinced a pandemic is imminent. It’s a frustrating time because this is pure hyperventilation. Yes, the coronavirus is a real threat, and yes, we need to work on vaccines and ways to combat the symptoms. But there’s also a hyperbolic element to this; the media is pushing a recession or a pandemic narrative. And it’s very frustrating to read or watch if you’ve followed this story or pandemic planning at all.
So I’m going to talk coronavirus and some of the storylines coming out of it. I hit it for a segment in the podcast this week, but this won’t be a retread of what I talked about there—links to follow.
Where you can find me this week
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In this episode, I talk through the Nevada caucus results, what to expect in the South Carolina primary, and an overview of some of the critical threats from the coronavirus.
One of my main takeaways from the Nevada debate is that Democrats are running on a platform that would purposely kill jobs in critical areas of the country where they need votes. And the answers they’re giving about that fact isn’t that reassuring.
More reports came out this last week on the topic of Russia meddling in the US elections. Pundits have gotten everything wrong about this story for four years.
The Coronavirus Fear is trying to become Reality
In the podcast this past week, I talked about the potential long term effects of the coronavirus. Economically, it’s pretty simple: Chinese manufacturers have to shut down plants, which slows down the capacity of US companies to get goods to customers. That leads to shortages and the inability to fulfill orders, which means lower revenues. It’s supply chain 101, and what is currently happening in the US stock markets explains the downturns this week, it’s not the coronavirus that’s scaring markets — it’s the prospect of long-term economic effects.
CNBC reported, in one of their many hyperbolic headlines this week, the following:
The outbreak has also led several companies to issue warnings about its earnings and revenues.
Microsoft said Wednesday it will not meet its revenue guidance for a key segment. It said its supply chain is “returning to normal operations at a slower pace than anticipated,” which led the tech giant to cut its forecast for its personal computing division. Personal computing accounted for 36% of Microsoft’s overall revenue during the previous quarter. Microsoft shares were down 7.1%. PayPal also issued a warning about its outlook.
Big companies like Microsoft and Apple make up a larger share of the DJIA, and also the S&P 500, and when they have to cut revenue and growth forecasts, it affects the broader market. Most things, like the US-China trade war, were expected. The coronavirus did not get anticipated. Investors are re-evaluating the value of each one of these companies in light of lower growth estimates while the coronavirus is spreading.
One of the biggest pro-tips that I ever got about the media was this: when mainstream journalists are reporting about the stock market, you can rest assured everything they’re saying is wrong. And that’s true here. They don’t have a clue as to what is happening, and it’s why I always include news from people who cover the markets and economy day-in and day-out.
One of those sources is the Wall Street Journal, said:
Investors have grown increasingly pessimistic that efforts to stop the spread of the virus will prevent significant damage to the global economy. Some U.S. companies say they could lose as much as half their annual revenue from China if the coronavirus epidemic extends through the summer. American businesses will generate no earnings growth in 2020 if the virus becomes widespread, Goldman Sachs Group’s equity analysts warned on Thursday.
“We have to brace ourselves for wave after wave of earnings downgrades,” said Paul O’Connor, head of multiasset at Janus Henderson Investors. “The globalization of the virus extinguishes confidence in the V-shaped recovery that was the view last week.”
“Everyone is now trying to assess what the economic impact will be,” said Neil Dwane, global strategist at Allianz Global Investors. “The U.S. is looking at Europe and Japan as evidence of how the world is responding.”
If you take a look at the S&P 500 or the DJIA over the last five-year period, we’re still WELL above with record market growth during that time. Right now, the dip looks more akin to the 2018 downturn, which everyone in the media was convinced was the start of a recession.
Markets are down because the expectation of company revenue and growth was “X,” but the coronavirus has shifted that to “Y.” A repricing or correction should get expected.
Right now, there are no immediate recession fears with the coronavirus. Recession is a mid-to-long-term horizon view.
HOWEVER, how that can change is if China experiences a collapse of its business sector as businesses can’t meet debt or payroll expectations because they’ve run out of money due to being closed from the virus. If companies start going under in China, then we’re in for a recession because that would have long-reaching impacts across the global economy. China’s supply-chain reach affects every sector of the US economy.
Some US businesses could face similar pressures if supply-chain issues cause them to experience lower sales/revenues. The key is looking for business closures — retail experiences the brunt of this (see the “retail apocalypse” trend over the last decade).
We aren’t at the point right now. China has loosened the purse strings of its banks to give out loans to keep its businesses alive. The Chinese government does not want a recession — they aren’t prepared to handle that. They should do everything they can to avoid it. But until US supply-chains clear up and get back up to speed — you’re going to see slower growth, which impacts markets.
In other words, if you ever wanted proof we needed to diversify US supply away from China and across the broader world — this is that moment. We always needed to be free of importing oil from the Middle East, and we need to be free from relying so heavily on China for our manufacturing supply. The US-China trade war was a wake-up call in that regard. But if the trade-war was a warning, the coronavirus scare is a tornado siren going full blast.
I bring all this up because the national media is wishcasting for a recession. The conventional wisdom is that if Trump experiences a recession, he’ll get kicked out of office. And the national media has wanted a recession since our last stock market downturn in 2018 — that’s when everyone convinced themselves a recession was imminent. People were abuzz about the inverted yield curve (the jury is still out on that).
Preparing for the virus
If the media’s coverage of the markets is annoying, it’s at least expected. What I didn’t expect, but supposed I should, is that the coronavirus is a political issue. But this is also weird because it’s not the political issue I’d expect it. There’s PLENTY about to criticize the Trump admin. Typically, you’d assume the minority party would talk about doing more than what the President proposed, which Democrats did on the funding part. But Democrats, while criticizing the Trump administration, are strangely free of specifics. Ross Douthat at the NYT noticed the same and suggested:
Liberals have partisan incentives that run the other way, toward emphasizing the White House’s unpreparedness in the face of a clear and present threat. But these incentives have so far been outweighed by liberalism’s ideological bias toward global openness, its anxiety about saying or doing anything that might give aid and comfort to anti-globalization forces, its fear of ever sounding too, well, Trump-y in the face of foreign threats. Thus the liberal instinct toward minimization: It’s not much worse than the flu, panicking makes things only worse, don’t spread conspiracy theories about its origins, racism toward Chinese people is the real danger here. …
As of this week, with the virus finally infecting the stock market, this bipartisan minimization looks like a serious mistake. The coronavirus is not a civilization-ender, not Stephen King’s Captain Trips come for us at last, but it’s increasingly obvious that we do have a lot to fear from it, both medically and economically — and the American response seems to lag substantially behind where we should want to be right now.
Douthat nailed this, to me, because when Trump first shut down air travel from China to the US earlier in the month, the best Democrats mustered up was “bad coordination.” That’s an eternally valid point for this administration, but Democrats are staying quiet on closing ports of entry, and not suggesting more closures. Trump could close down the border tomorrow, and they wouldn’t say much except criticize the coordination — which should tell you how unserious they are about dealing with this disease. They’re telegraphing the administration is taking the right steps — just with lousy implementation.
And that’s the truth. Trump’s press conference hit all the right points. The coronavirus acts very similar to influenza, which means the public treatment of it should match. If you’re sick, don’t go around healthy people, use smart sanitation, and stay clean.
Watching everything unfold on Twitter, I saw journalists mock the notion of doing simple things like washing hands and covering your mouth when you cough. The point is — this stuff works. It’s what you’re supposed to do. We’re not at a point of walking around with masks on and sheltering in place. America can mostly slow the coronavirus just by practicing good hygiene — something nearly impossible in China.
There’s a reason that the virus is less lethal outside China than inside it. The rest of the free world has built sound healthcare systems with robust sanitation systems. We’re going to have to rely on that for the near future.
If the coronavirus follows influenza, then we’ve just passed the peak season for both. In the northern hemisphere, the flu shot and season peaks in February. The southern hemisphere is next, and we’ll probably watch whether or not there’s an outbreak there next. If the coronavirus powers through and impacts the US during the summer — all bets are off.
Until then, the best plan is doing things like updating emergency preparedness kits and making a plan. If you’re new to preparation, I highly recommend the free checklists provided by FEMA as a starting point. The only main thing you have to do with the FEMA lists is augmenting them to include essential medicine and first aid that focuses on cold/flu symptoms. I’d also include immunity boosters. The CDC has pandemic resources if you’re preparing for larger organizations.
If you’re capable of sheltering in place, which is something requested of people in China and Italy — you’re in good shape. If not, working towards that as an end goal is something put on a checklist.
What isn’t warranted is either the hyperbole of the media.
One last piece of good news…
One last good piece of news: Israeli scientists think they could be a few weeks away from a vaccine.
Israeli scientists are on the cusp of developing the first vaccine against the novel coronavirus, according to Science and Technology Minister Ofir Akunis. If all goes as planned, the vaccine could be ready within a few weeks and available in 90 days, according to a release.
“Congratulations to MIGAL [The Galilee Research Institute] on this exciting breakthrough,” Akunis said. “I am confident there will be further rapid progress, enabling us to provide a needed response to the grave global COVID-19 threat,” Akunis said, referring to the disease caused by the novel coronavirus.
For the past four years, a team of MIGAL scientists has been developing a vaccine against infectious bronchitis virus (IBV), which causes a bronchial disease affecting poultry. The effectiveness of the vaccine has been proven in preclinical trials carried out at the Veterinary Institute.
In preclinical trials, the team demonstrated that the oral vaccination induces high levels of specific anti-IBV antibodies, Katz said. “Let’s call it pure luck,” he said. “We decided to choose coronavirus as a model for our system just as a proof of concept for our technology.”
But after scientists sequenced the DNA of the novel coronavirus causing the current worldwide outbreak, the MIGAL researchers examined it and found that the poultry coronavirus has high genetic similarity to the human one, and that it uses the same infection mechanism, which increases the likelihood of achieving an effective human vaccine in a very short period of time, Katz said.
“All we need to do is adjust the system to the new sequence,” he said. “We are in the middle of this process, and hopefully in a few weeks we will have the vaccine in our hands. Yes, in a few weeks, if it all works, we would have a vaccine to prevent coronavirus.”
MIGAL would be responsible for developing the new vaccine, but it would then have to go through a regulatory process, including clinical trials and large-scale production, Katz said.
Links of the week
The Coronavirus Is More Than a Disease. It’s a Test. – Ross Douthat, NYT
Don’t Test, Don’t Tell – Ben Hunt, Epsilon Theory
The Sanders Tax: How our Electoral College ratings might change if he becomes the presumptive nominee – Kyle Kondik and J. Miles Coleman, Sabato’s Crystal Ball
Taking President Sanders Seriously – Sean Trende, RealClearPolitics
Iran Can’t Hide Its Coronavirus Explosion, But It’s Trying Hard—and Putting the World in Danger: Tehran’s efforts to conceal the spread of coronavirus include intimidation of whistleblowing doctors. China tried this when the epidemic began. We know how that worked out. – IranWire, The Daily Beast
“I Haven’t Exhaled in So Long”: Surviving Harvey Weinstein: Rose McGowan on what it felt like to watch the convicted predator be taken into police custody after being found guilty of sex crimes. – Ronan Farrow, The New Yorker
[Feb 3, 2020] How the Coronavirus Could Help Trump: A U.S. pandemic that originates in China could make the president’s nationalism seem justified. – Tyler Cowen, Bloomberg Opinion
Bellamy’s Children: Notes on nationalism, an occasional series. – Jonah Goldberg, The Dispatch
Twitter Thread(s) of the week
Satire piece of the week
U.S. — Presidential candidate and Senator Bernie Sanders offered words of praise for China’s successful reduction of poverty in many parts of the country by killing off all the poor people through government control of the economy.
Sanders pointed out that the country has been very successful in eliminating vast swathes of poverty and also the poor.
“America still has a lot of poor people, and that’s because we haven’t been aggressive in implementing socialist programs that cause mass starvation,” Sanders said, his fingers flopping around like ten tiny wacky inflatable tube men. “Firing squads, death camps, breadlines—all of these are humanitarian tools in the arsenal of the government to shoot poverty in the face, and sometimes also the poor in the face, when it’s necessary.”
Thanks for reading!