morishita, there haven't been any severe epidemics in the last 30 years, so your data is meanigless. Cholera? Dengue fever? lol? No one thought they were going global. Swine flu wasn't even close to serious. You may as well have data on celebrity sex tapes vs the stock market, it's about as relevant.

SARS was the closest to a real scare and it took 6 months to get to fewer infections than nCov did in a month. That also happened in the early recovery phase after the 2001/2002 bear market and recession when everything was a bargain.

agree w tooth that we havent had a market-related pandemic in last 30 years. sars was easily containable because it only spread when symptoms were present. spread can happen among asymptomatic this go round.

and ebola didnt really affect stock market too much, but cocoa market got ridiculous since many beans are grown in west africa. so when it can affect things, it matters.

I can agree with that assessment. But presently the market does not agree, and the market is the arbiter. The market won't care unless we go to Spanish Flu/AIDS level, and even then I'm not sure it is enough to overpower the Fed, and Central banks buying the US stock market.

I am very eagerly waiting to be wrong and go all in short after I quarantine myself.

There hasn't been a single death outside of China yet and authorities have made soothing noises (most people trust authorities). Wait until you get dozens and meaningful counts climbing every day in the US and get back to me on "the market doesn't care". It will be full blown selloff.

Well, I am very eagerly waiting to be wrong also.

even if this thing is devastating, it's gonna burn off by may. it's essentially a second flu.

what matters to the market is how it affects travel and business. if china has to get quarantined from the rest of the world for a couple months, that's a hit in GDP and that's a dip in the stock market. but i don't see it triggering some worldwide depression. it would have to mutate into something worse for there to be genuine holy-****-panic.

There is also that adage that one should never bet on the end of the world because you wouldn't be able to collect on it anyway and you probably will have bigger things to worry about.

Hence why I kept buying AGO in 2010-2011, since if it went belly up then the US would have bigger problems than the stock market.

i think whenever that moment happens when there's a spike in cases in the US, the CDC isnt equipped to handle it, and we will definitely see a downmove. but i don't think it's gonna be the kind that causes total market panic. i think we just see more volatility and bigger ranges for a couple months, more choppy action. fewer market participants willing to dip their toes in. likely 5-10% pullback that can totally get washed over by something done by the Fed or another massive US data beat.

Freerolling the apocalypse!

Why do you see it as a second flu? Let's take US data:

- 30 million flu cases
- 500K hospitilizations (1.5%, most stable/not serious)
- 30K dead (0.1%, most already ill or very old)

nCov has 13% serious, 5% critical (together 12x the flu), and about 4% dead (40x the flu). Unless there is a massive undersampling of the sick - to the tune of >95% of the sick being asymptomatic - this is way more serious and destructive than the flu.

Given the known death rates of its close relatives (10% in SARS, 35% in MERS), the 4% death rate and 18% hospitalization rate is probably close to accurate and there isn't much undersampling.

I disagree about the impacts. If it does spread, it doesn't take much for a huge hit to GDP and profits.
Yeah at this stage there's no point on crash puts, plenty of time to realize that it's out of the bag before the rest of the market does. Disagree about market impact. We're at all time highs on increasing corporate profits, and it wouldn't take much of a business and consumer and investing confidence hit to get it to shrink.

ok let me rephrase, it's essentially a second flu because the only people it's killing are the old and sickly. outside of a rare case of a 36 year old guy, it's only taking out the olds. so when i say its essentially a second flu, what i mean is that it's not taking out the general population.

For SARS, the numbers looked like this:

Considering this is a closely related pneumonia causing virus, probably similar breakdowns. 15% death rate of managerial age experienced workers counts as major death in the general population to me. Hospitalization rates for severe pneumonia (not leading to death) are 3x higher than this as well. If this went 1/4 as widespread as the flu it would cause a huge recession.

it's gonna depend on how the death% grades out, right now its looking like somewhere between 2 and 3. SARS was 10% or so.

we'd have to see once more data comes out, but my hunch is that if the death rate is ~2.5%, you're gonna see more death skew toward 65 and older (possibly people only older than 55 unless heavy smoker/drinker/afflicted etc). so probably fewer managerials dying than you assume (imo).

regardless you're already seeing it pan out in china (10% off the highs in lots of stuff) so if it comes to america you're probably gonna see a similar move translate, maybe a tiny bit worse due to not being able to contain it the way china could. but i would still have a hard time seeing it result in a recession. you're not losing a great number of the population and we're still at peak dove everything everywhere. edit - maybe we'd have different definition of recession... to me a big selloff that rebounds within 6-12 months isnt a recession, thats a hiccup.

On infection rate:

Source
Scientists Use DL and Other Tools for Wuhan Novel Coronavirus Host and Infectivity Prediction:
https://medium.com/syncedreview/scie...n-7114f629ccc1

Just getting caught up. Having obsessed over this for about a week, here's my current take:

Agree with tooth that 2-3% is too low for death rate. His 4% might be too low too but probably a decent estimate. But the lack of public data on the infected who have only minor symptoms or no symptoms is making it really difficult to project this.

The German case (4 infected, 4 quick recoveries without any real complications, lol sample size) combined with the lack of deaths or critical illness outside China makes me hopeful wrt to the average severity of symptoms and the fatality rate, and we'll know a lot more over the next few days as cases outside China shed light on the situation. On the other hand, the German transmissions were all presymptomatic, and that's enough to convince me this thing is likely to infect hundreds of millions.

And yes, I'm putting more weight on the reporting of that one cluster of infections than any data we've received from China, because there really is no data from China. We just know it appears to be spreading like crazy there and lots of people are dying and in critical condition. If we actually take the Chinese data at face value (currently 213 deaths, 171 cured and discharged from hospital) the fatality rate looks terrifyingly high. But I think we have to assume far more than 171 have been cured or were just never sick enough to be admitted to hospital at this point?

The obsession with R0 values is silly, whether it's 2.9 or 2.13 or 2.6 is mostly irrelevant. It's impossible to estimate accurately. All that really matters is if we can bring the transmission rate to ~1, and that's far more dependent on factors like asymptomatic transmissibility, quarantines, public education and fear, and eventually vaccines, than the R0 value.

And no, I don't think the markets are pricing the risk correctly at all. I've made some small bets but will likely be ramping that up. I'm pretty sure I want to lose money on these.

Options geniuses: hypothetical scenario. If **** really hits the fan and exchanges close (possibly for a week or more), what happens to options at maturity?

Scenario:

Say I own a $100 strike put and the underlying has been getting smoked from $200 and is now $105. **** really hits the fan and markets shut down for days. It's now Friday, my options expire today, and the exchanges are closed. The markets open again on Tuesday and the stock is at $50.

Is there anything I can do to get paid?

I have no clue about epidemiology but is it possible that European population is better predisposed to handle the virus? It might be that death rate is very low among Europeans but still very high among Chinese (for example). Any data on differences among populations from the past epidemics?

There's nothing comparable in recent history. AFAIK nothing has filled hospital beds like we're seeing in China since the Spanish Flu.

There will be a big difference in the reproduction rate though. The virus was allowed to spread pretty much completely unobstructed for the first month or so in China. Awareness, masks, hand sanitizer/washing, self-quarantines, etc. etc. mean that the spread will be much slower than initially in China.

Elon has posted his take on 2019-nCov, which I can only assume means he's extremely worried about its consequences for Tesla

https://twitter.com/elonmusk/status/1223172311546724352

@elonmusk
Replying to
@georgezachary
There is considerable conflation of diagnosis & contraction of “corona”. Actual virality is much lower than it would seem. I think this will turn out to be comparable to other forms of influenza. World War Z it is not.

Former head of FDA said on CNBC figures from China dramatically understate the # of infections ("...[underestimated by] 10s of thousands... some analyses suggest already 300K cases in China")

If China has 100k+ infections already and the majority of them are in Wuhan, that would suggest the death rate is lower than it appears, which is optimistic for the rest of the world.

If the infection stats are off by an order of magnitude I would expect the death stats to be wrong too, but yes, a lower a mortality rate.

It would also suggest the transmission rate is much higher than current estimates, meaning many more people will get it, and more countries will be affected.

(Not convinced there are 100k infections yet fwiw, situation/data is unclear)

Like I mentioned above, the transmission rate in China in early stages was likely much, much higher than it will be elsewhere, so the transmission rate under those conditions is mostly irrelevant, aside from giving a high upper bound. The first world gets to start with an almost fresh slate (very few infections) with a huge information advantage.

I disagree. There's a very long lead time between infection and death. Given 10K infected and the spread rate, 100K infected is likely, but they will be asymptomatic so far and many weeks from death. Don't forget that two weeks ago there were only a few hundred infected. The 200 dead and 1100 seriously ill belong to first few thousand cases, the other 3rd level/4th level infections which make up the bulk of the numbers haven't had time to incubate, let alone proceed to serious illness and death. The virus takes time to destroy your deep lungs and then it takes more time again for that destroyed tissue to get infected and turn into pneumonia and then sepsis and finally death. Given that there are 200 dead, 800 seriously ill and 290 critically ill in Wuhan, the final death toll from these is probably at least 400 from those 5K infections.

Given that this is a cousin of MERS (35% death rate) and SARS (10%) death rate, given what we see in the early cases. I think it's quite likely it's a 4+% death rate.
Also disagree. China is masked up like crazy, travel banned, the cities almost shut down, and it's spreading rapidly through every province. The rest of the world is still completely open with no precautions. Most Chinese tourists of the thousands I've seen in Europe still have no masks. No one else is wearing masks anywhere.
I think there's close to zero chance of this, but strangely many people are relieved by lack of deaths in the West despite it being completely illogical. Look at the China data. Wuhan has nearly all the deaths. Other Chinese provinces have a death rate of 0 so far. Are Wuhan residents more genetically susceptible to the virus than other Chinese? Obviously not. It just takes a long for it to incubate, progress to pneumonia from lung tissue damage, and then turn into severe pneumonia, and then slowly die from the organ failure that causes. The rest of the world hasn't had time to catch up because there's a lead time of many weeks from infection to death. It's also possible that many of those in the West who've caught it so far are in the 25-44 age group with a lower death rate, given that's it's spreading to travelers and those in contact with them first.