By Denny Gulino
THE WHITE HOUSE (MaceNews) – Judging by all the talking heads on TV, the chatter in some news rooms, some key Twitter feeds, Thursday was a buckle-the-seatbelts kind of day when realization spread that there will be a pandemic that reaches the U.S. causing many, many deaths, that stocks may still not be done with repricing lower even after the day’s 950 point Dow drop and in the economy, damaging credit events lie ahead.
Looking for good news, the pairing of artificial intelligence and virology is rewriting the book on corona viruses, of which four are already endemic in the population with COVID-19 joining as the fifth. That means it will come back year after year and only adding its footprint to the evolvingly effective seasonal flu vaccine will stop the carnage.
The vaccine really will arrive sooner than anyone expected, goes the whispering rumor mill, but that’s still many months away and for the elderly and ill, the challenge will be staying alive until it gets here.
Meanwhile it’s likely the outbreak will redirect many young people into careers that combine computing power with the fascinating field of virology, as Google searches for virology blogs increase day by day.
As followers of @macenewsmacro already know, traders are watching one particular dashboard to track the spread of COVID-19 minute by minute, at the John Hopkins site. It’s sobering to see how fast the total infected is approaching 100,000 on six continents.
What does all this have to do with the White House, from where this is being written? That’s the White House where noted virologist Donald Trump told Fox news last night he has a “hunch” the World Health Organization estimate of the novel virus’s lethality is too high.
“Well, I think the 3.4% is really a false number,” the president told his pal Sean Hannity. “Now, this is just my hunch … based on a lot of conversations with a lot of people that do this, because a lot of people will have this, and it’s very mild.” What’s a more reasonable fatality probability? He said 1%.
For everyone wearing a MAGA hat as they read this, wait a minute before trashing your computer. Because Trump may be proven right. Of course 1% lethality is still no joke, being at least a couple orders of magnitude greater than for ordinary influenza which two years ago killed more than 60,000 Americans.
So you don’t need to be conversant with logarithmic progressions to know why that suggests to some that eventual U.S deaths could be in the hundreds of thousands if it takes longer than a few months to implement a vaccine.
The rate of lethality varies with the size of the population known to be infected. In the United States no one has any idea since those promised testing kits are only beginning to dribble out to where they’re needed. Forget that assurance from the vice president that a million and a half people will soon be tested. But in areas, like South Korea, where testing has been under way on a mass scale, there are signs that the lethality rate could be as low as 1%. Again, among the elderly and the ill, it’s much higher.
Also who was it today praising President Trump for quickly turning the anti-virus effort into a top priority for the entire government? None other than the head of the World Health Organization. He said there’s a long list of countries that haven’t yet gone to that extent and so are falling farther behind the curve of readiness. The cost will be steep, he warned.
With COVID-19 confirmed in New York City and now nearby Ft. Lee, N.J. the media capital will not need any more persuading about the profound threat. Food carts and trading rooms will have to adjust. China’s command economy and autocratic leadership has been able to tamp down virus transmissivity with the massive containment of hundreds of millions of people unimaginable in the United States. Or is it?
The credit rating agencies Thursday started to spew out unsettling analyses of potential virus effects. One major firm withdrew theirs soon after posting but the documents are out there for any intrepid user of the search engines. And quants began to talk about their look at past correlations of Treasury security prices with stock prices, suggesting equities are still, even at today’s levels, very much overvalued in the new context.
It was all subsumed late in the afternoon by the very candid comments from Dallas Federal Reserve Bank President Robert Kaplan in his Chicago speech and interview on Bloomberg radio and TV.
It’s too soon to know what the Federal Open Market Committee, on which Kaplan’s a voter this year, will do at its meeting in a little over two weeks, he said.
“Strong” spillovers from Asia to China and the United States are to be expected. This week’s half-point rate cut had nothing to do with volatile stock market roller coaster moves, but with a forward-looking concern for the tightening financial conditions to be expected in the weeks ahead, he said. Friday’s jobs report will be looking the other way.
As to credit events, he said he is already seeing, in the overleveraged oil patch in his neighborhood, signs of coming defaults. OPEC production cuts may help stabilize plummeting oil prices.
The Fed is likely to look past inflation effects of the virus for the next couple of quarters, including “transitory” spikes caused by supply shortages, he said. Business contacts, incidentally, say the supply line disruptions are much more significant with Mexico than with China. Companies have “come to grips” with supply problems. It’s the demand destruction they are having trouble estimating.
The Fed may employ some regulatory “forebearance” as banks are faced with uncertain conditions. The uncertainty will not prevent FOMC participants from formulating an updated dot plot, Kaplan said..
At the start of the year the Dallas Fed president said he believed a 2.25% growth year was possible. Now, there’s “going to be an interruption.”
There was no briefing on the corona virus at the White House Thursday with the Corona Virus Task Force visiting Washington State.
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Contact this reporter: denny@macenews.com