Some Random Thoughts on the State of the World

March 27, 2020 – Wow, I’m in a writing mood these days. A second post this week! Here are a few random thoughts about the current situation. All the things on my mind right now that might be too short to put into a separate blog. Since you’re likely all sitting at home feeling bored, I thought you might enjoy this…

We’re doing fine here in Washington State

Given that WA State was ground zero for the COVID-19 outbreak (first confirmed case and first death), many people have asked how we’re doing. Nothing to worry about! We are probably in one of the safest places in the country. Clark County, the southernmost county of the state and pretty far away from the badly-hit Seattle area has only a few cases so far while at the same time, everyone has been extremely paranoid cautious, right from the beginning. Hopefully, this will help curb the spread.

And of course, our pantry is full, we have a lot of free entertainment here indoors and outdoors, so life is good in ERN country! Also, Walmart seems almost fully stocked, with the exception of toilet paper. Which brings me to the next point…

The Toilet Paper Panic 2.0

Amazing, how even here in the Pacific Northwest, we can experience a toilet paper shortage. I mean, we got more trees than people here and water is abundant. The mascot of the local Camas High School is the “Papermaker” because – I’m not kidding – we literally have our own Georgia Pacific paper mill in town. Not sure if they produce toilet paper, though.

Camas HS Papermakers
Camas High School Papermakers. Is that toilet paper in there?

So, the toilet paper shortage can’t have anything to do with supply issues, certainly not from overseas. It’s just another example of a self-fulfilling prophecy. People believe there will be a shortage, there is panic buying and then there’s indeed a shortage. Amazingly, this current toilet paper panic is almost an exact repeat of a previous one. In 1973, late-night show host Johnny Carson, making light of the economic malaise back then (lines at gas stations!), cracked a joke that toilet paper would be next thing to run out! Panic buying ensued and caused an actual shortage.

I wish some clown could spread the rumor that the ERN blog will be shutting down soon, so everybody, get your fill of Early Retirement Now and click through all the 180 or so posts before they’re gone!

The impact on the economy? Prepare for some ghastly numbers!

If you remember the post from a while ago, the drop in the stock market looked like we were running through one of the previous bear markets but in fast-forward at 10x speed!

3 Bear Markets Comparison
Cumulative return since the peak. Running through a Bear Market at breakneck speed!

We’ll observe a similar effect on the economy. It’s because the shutdown is almost perfectly synchronized (“perfectly” in a bad way). Remember the 2007-2009 recession? It started in banking and finance and real estate and construction but then worked its way through the economy and eventually impacted every corner of the country and every sector of the economy. (Well, almost every corner because government bureaucrats and lobbyists and the ZIP codes around Washington D.C. did just fine in 2008/9.) But this time it looks like every industry in every corner shut down at the same time in March 2020 (except the government and lobbyists, again)!

To see how the current situation is a “recession on steroids” take a look at the unemployment claims. The all-time-high used to be 695,000 a week in 1982. Closely followed by 665,000 in 2009. Yesterday’s reading was 3,283,000 (in one week!!!), almost 5 times the previous peak reading!

U.S. Employment and Training Administration, Initial Claims [ICSA], retrieved from FRED, Federal Reserve Bank of St. Louis;, March 26, 2020.
3 million extra unemployed people on top of the “normal” 300k per week! That represents about 2% of the labor force, so this could have added roughly 2 percentage points to the unemployment rate (back-of-the-envelope calculation). During the awful, awful 2007-2009 recession the unemployment rate grew by 5.6 percentage points over 2 years. We now added more than one-third of that in 1 week!

We will have to wait longer for the GDP numbers. The Q1 number will be released in late April, but will not reflect the worst of the crisis yet. We’d have to wait until the Q2 estimates come out (late July) to see the total impact of this mess. Just for comparison, it took 18 months from top to bottom (Decemer 2007 to June 2009) and in those 6 quarters, GDP dropped by a total of 4%. If this same 4% drop peak to bottom materialized all in one single quarter it would be reported as a -15% rate. That’s because quarterly GDP growth rates in the U.S. are reported as annualized growth rates: (1-0.04)^4-1=-0.15=-15%. Ouch!

So, the economy could be unraveling at an unprecedented speed right now, which brings me to the next point…

We’re in the economic “Death Zone” right now

I like hiking and mountaineering analogies. The one that comes to mind right now is the fact that human life is not sustainable in altitudes above 8,000 meters. Forget about the dangers from cold, wind, avalanches, rockfall, falling down, exhaustion, etc.: human life is physiologically impossible at that altitude because the human body disintegrates and slowly dies there. That means mountaineers ought to get to the peak, take their selfies and then get the hell back out of the “Death Zone” to a lower altitude.

Mt. Everest. The “Death Zone” starts at about the saddle to the right of the summit. Source: Wikipedia, Pavel Novak.

That “Death Zone,” that’s exactly where our economy is right now. You cannot shut down the U.S. economy and certainly not the world economy for an extended time without doing irreparable harm. The longer this lasts the more permanent harm we do. The longer this lasts the louder the voices of “the treatment is worse than the disease” will become. So, I wonder, am I the only one getting antsy about these two issues:

  1. That malaria drug that seemed to work in a study in France needs to go through another clinical test in the U.S.? Ohhh-Kayyy?! How long will that take? Years? Months? It should take exactly 7 days: run a controlled experiment with 2,000 patients. 1,000 get the drug, 1,000 a placebo and if there’s a measurable effect then unleash the cavalry on this COVID critter. But I’m afraid that some bureaucrat is worried about side effects. According to this site, it may cause hair loss, oh my! Please, fast-track this one! This is not about approving a new athlete’s foot drug. The survival of the economy depends on this! And maybe now is a good time to produce the drug on a large scale already, so we have a large enough stash to deploy when the clinical study is done.
  2. We need a lot more testing, especially for people with no or light symptoms. Then tell everyone who’s tested negative to go back to work (wearing a mask!!!). And then have a rigorous testing regime to detect people who have a fever and retest them again. It’s mind-blowing that we have tens of millions of healthy people sitting at home and twiddling their thumbs right now, while the economy is going down the tubes!

Update on 3/30/2020: The FDA issued an “emergency authorization” for the malaria drugs. Hallelujah! I’m a lot less antsy now!

You tell me: Am I being too antsy? Maybe this crisis messes with my brain! Which brings me to the next point…

The crisis messes with peoples’ brains!

I saw this headline: “Man Dead From Taking Chloroquine Product After Trump Touts Drug For Coronavirus” ( They didn’t take the malaria drug, they ingested aquarium cleaner because one of the ingredients has a similar sounding name. I’m not sure who’s more stupid here: the couple who thought it was a good idea to digest aquarium cleaner (then again, fishes don’t catch COVID-19, so maybe, maybe, there’s a connection…) or the journalist who blames Trump for this. Trump says, well, Trumpian stuff sometimes. You don’t eat aquarium cleaner chemicals based on that! It says “not intended for human consumption” on the package! I’d nominate this guy for the Darwin Award.

Enough venting. Let’s also look at finance topics:

Now’s a Good Time to Perform a “Retirement Flexibility Reality Check”

Whether you’re retired or not, I’d urge you to do a quick reality check about your flexibility Plan B. That’s because you hear a lot in the FIRE community that you don’t have to worry about Sequence Risk if you’re just “flexible.” I tried to debunk that in my series pointing out that flexibility might not work because a) the magnitude is more than people think and b) the duration might be much longer than some people will feel comfortable. Specifically, in my post in 2017 (SWR Series Part 23), I found that “flexibility” would have meant a 30% tightening of the belt for more 20 years in some of the historical bear markets. Ouch! So, if you rely on flexibility to save your retirement think about this:

  • If you rely on going back to work, what’s the job market like right now. I can attest to you that in my old industry, finance, you can Fuhgeddaboudit (now a word in the dictionary) right now!
  • How about part-time gigs? That might actually work. Amazon is hiring delivery drivers. Pretty much all retailers that have now become essential businesses are looking for part-time workers. Kiplinger had a report about “24 Major U.S. Companies Hiring Now to Meet Coronavirus Demand“.
  • If you plan to rely on your blog for income, monitor how your income has evolved. My ad revenue is down. I think advertising budgets are down and they will likely decline even further. I don’t rely on my blog for more than 10% of our budget, so, no big deal for me. It might be a different story for people that rely heavily on their blog income for retirement!
  • Monitor your spending. For us personally, we have a very generous retirement budget with a lot of discretionary spending. And that spending came to a screeching halt recently. Nothing to spend on! Our upcoming travel plans are now on hold, and all other entertainment spending is down to zero (restaurants, etc.). So, for us personally, the “tighten your belt” flexibility might work. I’m not sure, though, if that also works for retirees with a $20-30k annual budget.

A reality check for some exotic investments

“Only when the tide goes out do you discover who’s been swimming naked.”  Warren Buffett

Another reality check: How about all those exotic new investments: crowdsourcing real estate equity and/or debt deals, hard money loans, etc.? Most of them sprung up after the Global Financial Crisis and they had no true historical robustness check. No way to check who’s swimming naked, in Warren Buffett’s words! That commercial real estate mezzanine loan that only two months ago looked so juicy at 10%? It might turn into a -100% investment if the whole thing goes “poof”! I certainly don’t wish anyone any bad luck, but you might want to prepare yourself for delayed interest payments, delayed principal payback dates and potentially even some losses and bankruptcies.

To be completely transparent, I’m not completely insulated from that either. About 11% of our net worth is in private equity investments, mostly in multi-family rental units. Private Equity is the “original” crowdsourcing platform that’s been around since before the internet, so the providers we use have survived past recessions and bear markets and housing crashes. So, I cross my fingers that the investments will survive but I always expect some disruptions, e.g., more delinquent renters, longer vacancies, lower dividends, maybe suspended dividends, maybe additional capital calls, delayed equity returns, etc.

Thus, I would never ever consider any of the exotic investments a safe asset with a 6-10% yield! I’ve detailed my approach in a safe withdrawal rate case study in 2017, i.e., how to stay honest with the seemingly safe exotic investments in the context of safe withdrawal math:

“Historically, [her] Hard Money Loan has paid in excess of 10% in annual dividends. Peer Street about 8% p.a. The challenge for the SWR analysis is that we don’t have much in the way of historical returns for Peer Street investments. Certainly not going back to 1871! Of course, just because we don’t have historical returns doesn’t mean that it’s a good assumption for us to model Peer Street paying 8% returns every year going forward. It would be a huge mistake to model the real-estate-backed loans as safe Treasury Bonds with an 8% coupon! If we were to have another 2008-style recession I’m sure the Peer Street and private hard money loans would take a big nosedive! So, here’s my proposal for how to “hack” the ERN Google Sheet for this situation.

I assume, for the historical backtests, that half of the Private Equity plus Peer Street portfolio, $258,356, is set aside and will earn a 7% (nominal) yield forever, paid in the “supplemental income” column, while the other half will behave just like an S&P500 equity index portfolio. If we average over the two components we’ll get an expected real return of just about 6%, exactly the same as your current 8% nominal Peer Street yield minus 2% inflation. But we still generate a pretty substantial business cycle exposure in the alternative investments in the simulations.”

In contrast, people who did assume that their crowdsourced investments behave like “Treasury Bonds with an 8% coupon” might be in for a rude awakening.

Crunching some numbers on the virus

The site Worldometers has pretty fascinating and up-to-date data on the infection and fatality numbers. Not just daily snapshots (see Johns Hopkins University for some cool data) but also the time series for most larger countries since mid-February. I looked at the numbers and want to share some of my observations.

I pulled the numbers for eleven countries (maybe more countries to be added later). Here are the confirmed case numbers so far since mid-February. With a log-scale on the y-axis, because any other way is just not very informative!

Confirmed cases Feb 15 to March 26. Source:

The reason I find this chart not very informative is that it’s not adjusted for population size. Of course, the U.S. will have the most cases because it has the largest population! Duh!

Also, notice how countries have a different “take-off” dates. For example, if I search for the date at which the cases per 1 million residents crossed 1.0 for the first time we note that South Korea crossed that first on February 19. In this sample, Poland was last on March 12, a whole 22 days behind Korea. Everybody else is in between, including the U.S. at 17 days behind. Amazingly, Italy is only 3 days behind Korea!

How many days after 2/19/2020 to reach 1 case per 1m population. Source:

If we now do two transformations to the time series chart: 1) plot the cases adjusted for population size and 2) start each line when the cases per 1 million population reach 1.0 (i.e., shift them to the left by the number of days in the bar chart above), then we end up with this chart below

Confirmed cases per 1 million population, setting date 0 when first crossing 1.0. Source:

Very interesting! Most countries had a very similar initial path during the first 15 days after crossing the 1.0 mark. You go to about 100 cases per million residents within 15 days. That’s 100x growth in 15 days, a mind-blowing 36% daily(!!!) growth rate! (UK and Austria seem to buck that trend with a slightly lower growth rate)

After 15 days there’s significant divergence. South Korea managed to bend the curve very nicely and move sideways. Other countries were not so lucky. Cases kept growing, though at varying speed after crossing the 100 marks. Italy looks scary and that’s because it’s only a few days behind Korea. But if people monitor in horror what’s been going in Italy, be prepared for…

  • Even worse numbers than that in Spain and Switzerland…
  • A similar case number trajectory in Germany, Austria and the U.S.,
  • Slightly better numbers in France.

In other words, I certainly hope that the other countries will be able to bend the curve better than Italy because if not, we’re going to see Italy 2.0, Italy 3.0, Italy 4.0, etc. in the other countries really soon. Very likely, Spain will look even worse than Italy soon! Bummer!

How about fatalities? If we plot fatalities in a similar fashion, i.e., fatalities per 1m residents and also shifted by the same lags as above we get the following chart, see below:

Fatalities per 1 million population, setting date 0 when confirmed cases first cross 1.0. Source:

Even though the case numbers took a similar path (if adjusted by population and take-off-date), countries have very different paths for the deaths:

  • South Korea is again looking the best
  • Italy had the worst fatality rate and Spain is on an even worse path!
  • U.S., Switzerland, the U.K. and France are on comparable trajectories, looking a bit better than Italy,
  • Germany and Austria look significantly better than most of the other countries, except Korea.
  • Poland has a very short history so far (22 days behind) but looks really good so far.
  • Iran was able to bend the fatality curve, though, I’d be cautious about data quality there.

So, there’s some hope in those numbers. If you look at the raw numbers, the U.S. looks like the worst country. But neither in the progression of cases nor deaths are we significantly worse than other countries and we’re likely on a better trajectory than some of the other places. Let’s hope we get to the bend point soon!

Hope you enjoyed today’s rambling post! Looking forward to the discussion below!

230 thoughts on “Some Random Thoughts on the State of the World

  1. Thanks for the midnight reading!

    I think maybe you are getting antsy! We all want to get the economy rolling again…but I can’t imagine a scenario where we test enough people to significantly restart business with only those demonstrating negative test results. Beyond that, the matter of whether it’s possible to keep them negative (masks or not)….and where their customers are going to come from (also requires a negative test?). The least impact on our economy would probably be a national lock down for some number of weeks with very strict restrictions. The way we’re doing it, with each state taking a different approach, and no restrictions on travel…well, it truly will be whack-a-mole with areas potentially having multiple debilitating flare ups. Ugh. It’s a mess.

    1. I can imagine the scenario. Portland metro area: around 200 cases so far. Why keep 2 million people confined at home for that?
      But I also see the “Chinese solution” you propose. But since other countries don’t follow that same schedule we are just facing the same problem you describe, just on the international level.

          1. Sorry, I am a physician who is in the planning side of this response, so wasn’t able to get back to this. CDC briefs the test they have has a false negative rate of 23%. The other tests are even higher. The reason is you need a set viral load to be detected (lower is better). The CDC test needs 25 Genome Copies per milliliter. The BioFire need 300 and the Abbott ID Now needs 125. This is from the briefs we get, so I don’t have a link, but below are some that get after your source question.

            This is a product from the CDC that talks about the false negative problem and states “a negative result does not
            rule out COVID-19”.

            This article is a non-medical article talking about how some studies have shown a 30% false negative rate.

            Bottom line, we can’t test our way out. You can test your way into a diagnosis of course.

            1. OK, gotcha.
              These are scary numbers. Normally you design tests to have very few false negatives and trade that off against a few extra false positives.
              I hope that future iterations of the test will get better.

  2. I was surprised at the monster rally after the expected awful jobs report. Sold more stock and added to my short position.
    Which makes me wonder, how much forward looking is the market? Seems like at least 2-3 years out. Or maybe I’m the crazy one 🤷🏼‍♂️

    1. I think part of the disconnect is that people are getting sucked into believing Trump’s overly optimistic assertions that we’re going to be rock ‘n rolling by ver soon, maybe by Easter. Ain’t happening. As to the market’s timeframe, I can say that I’ve been buying for 2-3 years out. Doesn’t bother me much if the market drops to previous lows or even below that. I’ve added significantly at around an average of 35-40% off the highs and am counting on this mess getting sorted out in exactly the timeframe you mentioned. If sooner, that’s upside.

      1. Good strategy. But I’m also worried about the long-term effects of debt, geopolitical hostilities (just around the corner once the virus stuff is over), etc. I’d expect slower growth rates and lower equity expected returns going forward.

        1. Lower than before this March crash? That’s pretty grim if our return expectations aren’t improved by the substantially lower valuations! (He says just as he was contemplating an increased SWR…) 🙂

          1. We shall see how COVID messes with corporate earnings. If they are peramanently down the 10-year rolling EPS might be too high and the CAPE estimate too low.
            But I hope that this is temporary and the lower CAPE foreshadows higher expected returns.

    2. As Larry Swedroe tweeted today:

      “Great example of what most investors don’t understand. It’s irrelevant whether news is good or bad for stocks. It only matter if news better or worse than expected. 3.2MM new claims bad. But DJIA up 430 as I write. Keep in mind as economic news going to get much worse.“

          1. Doubts about it on Monday. Then priced in over the three days Tue/Wed/Thu. Then the market drops the day it passed. “Buy the rumor, sell the news” Markets are sooooo predictable! 🙂

    3. Market reacted to the stimulus package.
      In a way, the unemployment claims are a stimulus packag too. These are all people getting benefits now. The market prices in a short interruption and a roaring expansion again later in the Summer/Fall.

  3. Thanks ERN. Interesting as always. Some of my thoughts:

    1) In the big scheme of things this is actually a small event. Personally it is a big deal – I live with someone who is high risk – but even at worst case there will still be circa 8 billion people on the planet in 2021.
    But the impact on the economy has been huge. I suspect the US stock markets will recover fully from this event but what about the long term impact of the huge global Government debt being created?

    2) The social impact has been huge too. Added to your comments, significant number, no doubt armed with 14 boxes of loo rolls and a months supply of food, seem to think they are immune from ill effects of the virus and are ignoring the advice given leading to crisis in even the best health systems.

    3) If this is the impact of a small event then what would be the impact of a more significant crisis. An actual black swan perhaps. It is fashionable in the FIRE community to think that the ‘stock market always recovers” or if it does not then it is the least of our worries. Is there not a real possibility of something in between those two extremes that we should plan for?

    4) Maybe that plan would include Gold and Silver. However, both have performed badly in this crisis. I was surprised by this. Any thoughts?

    Maybe I am just one of natures natural worriers. Although this crisis is unlikely to hurt me much (I reckon my discretionary “currently can’t” spend is well matched to the market falls) it has left me concerned that economies and markets are no longer that robust.

    1. Gold has not performed badly in this crisis. Where are you getting this misinformation from? Paper gold, which is really dumb investment, has been OK but real gold has actually gone slightly up, while most other investments are down. Who in their right mind will say that equally to having performed badly?

      My personal favorite is paid off RE. The returns (rents) so far are fine but even if a few rents are partially missed, no problem because the key is “paid off”.

        For example on March 8 Gold price was 1700 per oz reducing to 1460 per oz on March 16. It has recovered in the last few days.
        Silver has done much worse and is well below even year end values.

        I would have expected Gold to soar in $ terms on the news that interest rates had fallen to near zero and the printing press was back into overdrive.

        1. Expecting a rally in anything at this time is a folly. This current situation is a worldwide economic and human casualty. The assets that haven’t lost are good enough really. But gold is actually slightly up, except for the odd dip around 3/19 but that can happen when emotions and fear are running so high. So I still stand by my assertion that saying gold has performed badly is incorrect. Silver I don’t care about, it is always quite volatile/unreliable.

    2. 1: I have the same concern. I’d propose sending the bill to China. Ask for reparations.

      2: good point. I’m surprised how civilized everything has been. No riots, no looting yet! Will that come next?

      3: I think even in the current crisis we haven’t seen the worst yet. I hope I’m wrong, but it’s possible that we see much lower equity levels.
      And yes, amazing how a lot FIRE financial experts always believe in the random walk when equities are high, but then potificate about mean reversion and valuation when equities are down. 🙂

      4: Yeah, disappointing indeed. We haven’t seen the whole length of the crisis yet. Don’t count out gold yet.
      Silver is too common to be considered a safe haven asset. With less industrial demand, Silver has to tank. No surprise here.

  4. > We need a lot more testing, especially for people with no or light symptoms. Then tell everyone who’s tested negative to go back to work (wearing a mask!!!).

    Better yet, how about testing for antibodies (people who contracted the virus, had minimal or no symptoms, and are now immune). Those people can go back to work — no mask required! Some estimate that hundreds of thousands may be in this category in the US alone.

    Trouble is, this country can put men on the Moon and shoot roadsters to Mars, but it can’t seem to ramp up testing fast enough. Maybe it’s the same issue as with drug testing. I don’t know what it is. Liability?

    Thanks for sharing your thoughts — great reading always.

    1. Yeah, exactly!
      Like you, I’m shocked how useless our bureaucracy has been. Take NY health officials: a few weeks ago they called themselves well-prepared. Anyone who was alarmed was called a racist and bigot. Now they are swamped and it’s the Federal government’s fault.
      The federal government is also always a step behind. 2 trillion dollars stimulus. I wonder how many corona test kits are included in there. If less than 300 million, that’s a scandal.

    2. Testing would have been great!

      Maybe it’s not too late to test and send those with negative results back to work like you suggest. As Big ERN mentioned in another comment, there’s only about 200 cases (now 500) out of 2MM people in Portland. We could start with them.

      But since a person could test negative but later be infected, how often would we test the 2MM Portlandians? Perhaps just once a day? That would surely be enough. We would only need to test these people for 2 weeks, right? It’s only 14MM tests!

      I suppose some might worry about things like the sensitivity and specificity of the tests but we could have a few extra million tests available for suspected false positives.

      Of course there’s also the problem that tests don’t instantly pick up when a person has become infected, people only test positive after they’ve been infected for awhile. But at least with testing we’ll know who’s infected!

  5. Hi ERN, I’m glad you and your family are ok. It’s always nice to see articles with numbers and facts and I knew that’s what this article from you would have! Sadly, a lot of people are dying. I find it interesting that the mortality rates have been about the same over the past 3 months from most countries (between 1-4%, probably 0.5%). Most of the deaths are people who are 80 years or older or are over 65 and have other health problems. This hasn’t been contradicted by any country or health authority. So, I don’t understand why we are shutting down the workforce when the workforce is not affected.

    One reason for all the fear could be the average person is not able to put new information into perspective and properly evaluate risk, especially when getting real-time notifications on their phone of a new disease for the first time in history. This reminds me of when most people thought violent crime was increasing 15 years ago when it was actually decreasing – people had more access to media online which was reporting violent crime more than before. The normal flu can cause 650,000 deaths in one year and seriously sicken 5 million. What if people got over 1,500 notifications on their phone every day for years whenever someone died of the regular flu?

    Here in Thailand, roughly 100 people die per day in road accidents. Again, what if people got notifications all day long about road accident deaths? Would motorcycles still be so popular? Let’s say on average 3,000 people die per month, or roughly 10,000 people in the past 3 months since the virus became a problem. In the past 3 months, 5 people have died from the virus here, but I have to get my temperature checked when I walk into the bank but the guy who took my temperature doesn’t have to take a driving test on his way to work. People are much more likely to die driving to wherever they’re going than by getting the virus when they get there.

    Since when did democratic countries become ruled by a dictatorship made up of health officials? We need an open discussion that includes all members of society, including young people who want an education and middle-aged people who want to work to put food on the table. Not just health officials when only 0.5% of the population is at risk.

    1. I think we need to listen to experts here. We don’t need a committee of blowhards who may not understand the science making decisions by majority vote.

      1. “Experts” are the same people that come up with climate change models that all prove to be wrong and unable to even replicate the past, let alone predict the future. Maybe the health officials are right, but I have a healthy scepticism of the health officials and politicians especially when they claim they “won’t put a price on human life”. That’s exactly what we do and should be doing. The price being paid by the vast majority of the population that aren’t at high risk is extreme.

        1. The thing you’re forgetting is that it’s not “just” death rates that matter. Hospitalization rates matter as well. The most recent data from the US CDC (already outdated by 10 days) shows that of those tested positive in the US, 14 – 20% aged 20 to 44 require hospitalization, and 21 to 28% of those with COVID aged 45-54 require hospitalization.

          These aren’t small numbers, and when so many people require hospitalization at the same time, you have collateral damage as well. That normal 10 minute pickup for a heart attack becomes 50 minutes and suddenly the heart attack victim doesn’t make it, for example. That’s not theoretical and already happening in NY (and Italy and probably Spain though I haven’t read of it there).


          1. @Cargalmn – Those hospitalization rates are for people who are already sick enough to go to the hospital and that’s why they got tested. Don’t forget 85% of people don’t know they have it and walk around symptom free. Those numbers have been consistent for months and across countries. Yes, hospitals will be full, but governments need to make decisions for what’s best for society as whole, not only a small percentage of the old and/or unhealthy. I know that seems insensitive, but decisions that affect the livelihood of the entire working population of the world need to be based on facts and logic, not emotions.

            @Grant – Be careful which experts you listen to. It was shown that during the swine flu the WHO experts were corrupt with corporate ties to drug companies and used fear to scam the UK gov’t out of 1 billion pounds.

            1. I’m not talking about a few bad apples at the WHO. I’m talking about the American epidemiologists and public health experts that are the best in the world. We are an evidenced based culture. It’s really bad to hear this disdain for experts and deference to someone’s opinion and “hunches” that seems to have occurred in the last few years.

              1. The public health experts already fumbled the testing. They wanted to develop their iwn test first whicle other countries were way ahead with the testing (see Germany!!!).
                Now the same fumble happens with the Malaria drug.
                It’s a bureaucrat turf war. And it kills people.

          2. @Cargalmn – Those hospitalization rates are for people who are already sick enough to go to the hospital and that’s why they got tested. Don’t forget 85% of people don’t know they have it and walk around symptom free. Those numbers have been consistent for months and across countries. Yes, hospitals will be full, but governments need to make decisions for what’s best for society as whole, not a small percentage of the old and/or unhealthy. I know that seems insensitive, but decisions that affect the livelihood of the entire working population of the world need to be based on facts and logic, not emotions.

            @Grant – Be careful which experts you listen to. It was shown that during the swine flu the WHO experts were corrupt with corporate ties to drug companies and used fear to scam the UK gov’t out of 1 billion pounds.

          1. All Models are wrong. Some, however, are useful.

            in Italy and Spain they are deciding who to treat with Covid 19. That is why there is a disproportionate number of younger patients – the older ones are being sent home to die. Tough choices. Pretty much nothing else is happening at the hospitals than treating Covid 19 – if you have something else wrong with you then rather than a delay to a pick up it simply is very unlikely to happen.

      2. These are the same experts that deny experimental cancer drugs for terminal cancer patients. Because, gasp, the patients might die from the side effects.
        I think is already an understanding that even now doctors in the field use the drug(s) as they see fit before the clinical tests are through. So we do indeed rely on experts. While the bureaucrats (the un-experts) twiddle their thumbs with clinical tests for the 3-5 years.

        1. Early evidence that a treatment might work cannot be jumped on to assume that it works. We have made many mistakes by doing this in the past. There is active discussion by healthcare professionals about this specific question over at Reddit, and they are not too optimistic on the potential of HCQ:

          “The existing evidence for [HCQ] use comes from studies in test tubes and from a very small, poorly-designed clinical trial in sick patients in a hospital in France.”

          Hopefully HCQ turns out to be effective. But we need to make evidence based decisions.

        2. This is a straw man argument and inconsistent with the realities of cancer treatment or clinical trial enrollment.
          The other part is true it is common to use drugs despite incomplete or insufficient data. Unfortunately they also often don’t work.

            1. I read the study. I would not describe it that way.
              It’s not really useful to debate the point with you.

              Drug clinical trials fail appx 85 pct of the time. But the individual rates depend on the condition. Failure is much higher for cancer which was your example.

  6. Excellent work BigERN! Finally, some proper context for the sensationalized numbers. Thanks for sharing (and for calling out the stupidity)!

    What are your thoughts on the short end of the yield curve going negative? It seems there’s an arbitrage opportunity afoot: buy 1mo t-bills at auction for a 0% return (current law prevents negative yields from being valid bids) then immediately sell them on the open market which is paying a small premium. Best case: profit on the spread. Worst case: get your principle back in a month when the bill matures.

    1. I doubt that the Fed has an appetite for that. They will likely do some other creative stuff: lending facilities, buying bonds, buying maybe even corporate bonds, maybe-maybe-maybe even stocks. They seem very averse to setting the FFR to <0.

  7. My brother filed for unemployment yesterday. He works for a tiny company that may likely go out of business because of this.

    I’m situated well and am grateful because this isn’t my first recession rodeo. I’m also grateful for my house – it’s in one of those zip codes around the DC area you mentioned and only keeps going up, especially after Amazon announced it’s HQ2 to be very close. My equity in the house is a huge amount of money and since I will not retire here gives me a nice hedge against stocks. I could rent it for about 3x my mortgage, and that’s what I’ll do when I leave.

  8. Good analysis, thanks. I think that you need to add in China to your graphics though. They have a population far bigger than the US and have had a different experience of the outbreak. They went for heavy lock down – and could because of the nature of their state – and seem to be emerging on the other side (time will tell). Countries like the UK (and I think, the US) failed to take sufficient heed of that experience and didn’t do enough soon enough given the breathing space China’s lock down and the knowledge of Italy’s early experience gave us. In the UK we went for a strategy of trying to build up ‘herd immunity’ (mass infection to build up resistance) before realising that this was a much bigger killer than initially thought and reversing to a belated lock down. Now the ‘cat is rather out of the bag’. Likewise, it is only now that we are stepping up production of ventilators for the very sick and protective equipment for front line staff. Its all a bit late and much later than it should have been.

    I take comfort though that we may learn some harsh lessons from this outbreak and see a different and in some ways better world than before. We may see more localism, more community spirit, more home growing of food and more awareness of other potential crises relating to overuse of antibiotics and climate change that are going to create similar shortages in the shops that we see today. Unfortunately there are also dangers – a more authoritarian state and more inequality as the poorest always suffer most in crisis. We shall see. First we have to get through this crisis.

    1. I skipped China because I wouldn’t trust their numbers.
      Also, even if true, there’s no way we can replicate the authoritarian (fascist?) methods they used in Wuhan. So, I thought South Korea would be a better case for an early impacted country. 🙂

      Yeah, I share the same concerns. THe virus is one thing. What kind of mess will come after that? Less freedom, more regulation, geo-political tensions, etc. That’s scarier than the virus!

      1. | I skipped China because I wouldn’t trust their numbers.

        You trust the US numbers? Ha!

        1. Ha, good one. There are two problems with the case number data:
          1: they represent only a fraction of the actual cases because tons of people are asymptomatic and some might still be denied testing due to test shortages (though that might be getting less of a problem now).
          2: the government is actively cooking the books and lying about the numbers.

          Not sure about you but I believe ALL countries are subject to problem #1. China also #2, but I do trust the U.S. not to commit fraud with the case numbers and deaths. Do you?

  9. Hey, have you heard that Early Retirement Now is going offlline?! I heard the guy that writes it died on Mt. Everest, or something like that.

    Quick, read it while you can. Time to go drink some fish tank cleaner (what an idiot, right?!). Crazy times, indeed. Take a breath, people. This too shall pass.

  10. ERN – Thank you for the common sized data related to population, that’s very helpful. Unfortunately when its all done and this is analyzed, some combination of a high smoking rate, physical touch culture, and low ICU beds per capita will be pointed to as the reasons Italy and Spain fare so poorly.

    I also agree about getting the economy back to work, the unemployment claims are understated due to all the state websites being down and we are likely in for another million claims next week. Hopefully the political/hysteria rhetoric will calm down (because Trump says Trumpian things) and folks will realize this is not about the stock market, 401ks, or rich people at all. Four million plus people out of work and fighting a pandemic is a United States problem.

    There’s three steps to working the economic/unemployment disaster:

    – The low/medium/high risk counties idea is outstanding. There’s five million people in my state and less than five hundred active cases. That’s one in ten thousand people, one factor lower than the 1 in 1,000 infection rate the doctors were speaking about yesterday. Many of the large/dense southern cities have less than 1,000 cases. But that requires testing…
    – The US has or will soon have tested more people than anyone else (except maybe China, but data integrity issues may exist there like Iran). But when can everyone who needs a test get it? There’s still enough stories about lack of tests to think the case data isn’t yet accurate
    – An antibody test would be the holy grail to identify people who’ve had the virus and now can’t get it again. It would be great to know if people who “feel” healthy are low or medium risk, just like they could assign to counties.

    Thanks for writing!

    1. Keep in mind, as the remainder of your post accurately suggests, our testing is so far from census level that we have no idea how many cases are actually in your state (or any state). Could easily be 10x the known number or more. Also due to the ability for symptomless carriers to transmit the virus, getting a meaningful penetration figure is nearly impossible when only testing those with sufficient illness to seek the test.

      1. You’re correct. ERN and I are both numbers nerds and garbage in equals garbage out. We need to get to the point where everyone who wants a test can get a test…and get it quickly

    2. I’m not following the benefit of counties being rated for their risk. Travel between counties near a city (ie urban/suburban setting) is gigantic with generally decreasing travel as you get further away from a major city. However, how much of our GDP is produced within that urban/suburban area? These urban/suburban counties would most likely be at high risk levels due to population density and thus have the highest level of restrictions and economic disruption.

        1. I am currently in the UK in a COVID light area. We are locked down. the whole UK is locked down. It is frustrating as the risk in my area is miniscule.
          However, the counter argument to yours is human nature. In Italy then locked down towns first and people moved out of those towns to avoid lockdown. Then they locked down a region in the north and people again escaped by moving down south and infecting their relatives down there. Now they have the worst fatalities in Europe and are in a mess. Partial shutdowns failed. I assume that is why UK went for the total shutdown.
          Obviously USA is lot bigger than Europe but you would have to have really strict travel restriction across regions for partial shut downs to be effective.

          1. Yes, that’s possible. But I doubt that people from NYC are now flocking to Camas to work/shop/party in Camas, WA. I meant the re-opening to be done very cautiously, especially for businesses.

    3. Thanks! All really great points! Same here in the Portland metro area. Very few cases so far, but everything is shut down.
      Yeah, we need many more tests. But politicians are too busy handing out pork and in the 2 trillion dollar package there are probbaly way too few provisions to encourage making more tests. We need 320 million test!

      1. The test is only valid on the day it is taken, not the day before or the day after. Much more helpful to understanding the virus would be a test that determines who has already been exposed and thus has antibodies. A randomized set of data would be very predictive……..

      2. ERN: A few thoughts triggered in my mind based upon your post:

        1) I have been reading a lot of posts, twitter feeds etc. from MD’s, Epidemiologists, Scientists, etc. – such as Scott Gottlieb, Tatiana Prowell, Marc Lipsitch, and others. I think they have some credible ideas about running a number of simultaneous clinical trials on promising vaccines at accelerated rates. At the same time, they are recommending that Federal and State Governments work with vaccine manufacturing Cos. to put in place ability to scale up production, once a vaccine (s) looks like it has promise. This would entail upfront financial assistance, incentives, etc.

        2) I agree with other comments that a lot of very concentrated and coordinated effort has to go towards obtaining PPE, tests, etc. for our hospitals. If our hospital care continues to break down in large population areas, the consequences will not be good for many of us.

        3) Re: Portland area positive cases. Two days ago, some of the media in the Portland area have reported that “Several Portland-area hospital systems have said they have no plans to publicly disclose data about hospitalized patients, even those with COVID-19” (KGW8). Also, in the Seattle area, hospitals administrators have started demanding that medical professionals stop reporting what they are seeing and experiencing in their hospitals, on social media. It has been reported that PeaceHealth St. Joseph Medical Center has fired an ER MD, because he refused to comply. I am not saying this a systemic issue, but certainly may reduce information on how well our hospital system is managing through the issue.

        4) I do not see anything wrong with starting plans now to re-open businesses, get supply chains moving again. However, maybe we shouldn’t have Politicians implying that we will be ready to do this, sooner than we are actually ready. If we re-open to quickly, the resulting continued spread of virus could set us back a lot, and overwhelm our hospital systems.

        1. All really good points.
          Hadn’t heard that about the Portland hospitals. But Clark County, WA (jVancouver, WA, Camas, WA, where we live) also has relatively low case numbers.
          Also FYI: I still still see construction sites in full swing here. Not everything has shut down here.

          And I love your point 4: Yes, already plan for the re-opening. It might still be 2,3, or 4 weeks away, but at least don’t be flat-footed and deer in the headlight when things can open again. Great point!

  11. Hey I I’m a physician not an epidemiologist. Also I like your stuff but this looks more like data fitting. China is conspicuously absent despite it originating from there. Also that just isn’t how a disease at this point works. Population size is not a good marker for total cases until it has affected the whole population. At the early stages population density and frequency of interaction would matter. This would also be important only on a very local level. I would be hesitant to draw any prospective conclusions from fitting this to a population scale. It may not be completely useless because it can function as a surrogate marker for factors related to transmission. But probably pretty close to not helpful. Anyhow I personally would tend to leave this discussion to people with topic expertise. My personal bias and experience is that this is a public health Failure on a massive scale in the US that will lead to numerous preventable deaths.

    1. I’m a physician, too, and I agree with you 100%. We should leave the epidemiological discussions to the epidemiologists and public health experts.

      1. The point of this post was an economic one, although it is certainly 100% tied to the epidemic. Once you get above a certain number of cases recorded per person in a country, governments are making pretty similar decisions on how to shut down their economies….although Korea/China took more extreme action at a much lower number cases as a % of their population.

        Thus, while these numbers aren’t great for predicting the real spread of the virus, they seem to be quite correlated in terms of when economic response measures are put in place in most countries, which, in turn, does seem to generally bend the curves. It’s a medically-induced economic comma, so you cannot just leave it to the medical experts alone—economists need to be involved for the monitoring (unemployment, defaults, business closures, etc.) and (hopefully) revival from the comma.

        1. “It’s a medically-induced economic coma, so you cannot just leave it to the medical experts alone—economists need to be involved for the monitoring (unemployment, defaults, business closures, etc.) and (hopefully) revival from the coma.”

          Yes, yes, yes! Love it! I already replied to some of the comments before I read yours. Couldn’t have said it better. Yes, it has to be a joint effort of medical experts but also policy/economics and other other experts. It’s too important to leave it to the health people alone!

      2. Disagree. This is where medical professinal have to make decisions that have repurcussions and externalities on a 20-trillion dollar a year economy U.S. economy and a 50 or so trillion dollar world economy. I don’t think MDs know enough economics to forbid others having an opinion.
        But I will tell you that: when doctors have to make decisions on the on the next toenail fungus epidemic, yeah, be my guest, you make that decision all by yourself. No need to consult with the economists. But make sure you consult with the great experts at the WHO!

        1. Hi ERN,
          The highly regarded group Our World in Data affiliated with Oxford University have also very recently (today?) added Charts and maps with “Confirmed Cases per 1m of Population”.
          Differences with your Charts above:
          1. Our World in Data has a search function for choosing which countries to show in Chart (useful since their charts have all countries and are so busy it is hard to see anything). Plus, they have some nice drill-down features on their maps to a graph of the historic data
          2. You, Big ERN, in your Chart have defined your Day 0 = First time exceeding 1.0 case per 1m of Population. This seems to reveal trends that Our World in Data charts do not. Plus, you propose some patterns that you are seeing in your charts. Our World in Data does not usually attempt these types of interpretation.
          So, keep up the good work. Nice to see different approaches since they can reveal different aspects of the data.

          I have strong experience in this area with a doctorate, many years in medical statistics (biostatistics), and a several year period working in epidemiology. So, if someone is really interested, I suggest taking a look at the above link and compare the charts with ERNs. The charts are worth following over time to pick out patterns as ERN has tried to do in his comments above and see if they persist over time which gives confidence that these patterns are genuine features of the data generating phenomena and not just due to random variation. And genuine features can then lead to understanding and subsequent actions on an individual and society level to get us into better shape with greater likelihood and more quickly which is the goal of all of us.

  12. Very interesting as always!
    I would argue that the number of confirmed cases could be way off from the real cases in many countries because we know there are many asymptomatic virus carriers.
    Also there’s a difference in the capacity and policy in testing between countries.
    This might cause Garbage In Garbage Out when dealing with these numbers.
    The number of deaths is much more accurate so doesn’t suffer from GIGO.
    If you add a country I’ll happy to see Israel.

  13. Chloroquine and related drugs are mass produced, used by malaria endemic areas around the world for decades. Side effects include cardiomyopathy, and there is a narrow therapeutic window, which is made more narrow by renal failure, which is common with COVID19. They were also widely used by critical care physicians for COVID19 before Trump’s disruptive tweet. Stay in your lane on medicine, please.

    1. Is that why India is no longer exporting the drug? Because it doesn’t work? Wow won’t they look like fools hoarding it in the end. France just allowed its use to fight the virus in certain populations. Seems Trump was correct.

      1. Rick, did I say it doesn’t work? No, Rick, I didn’t. I’m using short sentences. Try to keep up.

        ICU doctors, like myself, were using the drug weeks before Trump’s disruptive tweet. We were sharing case reports across continents in medical journals, emails, and online organizations.

        For a disease with a 1% mortality rate, survival benefit is impossible to prove in a study with 30 patients (that Trump was “citing”). Number needed to treat is a term used in research, and it’s in the thousands before anyone can prove efficacy.

        It’s not about being right, it’s about being disciplined and following the science. We were using it off label for this already, and didn’t need a tweet by a C-minus business major to help us out.

        The drug is now harder to get because people who DON”T need it are using it and hoarding it.

        It has a narrow therapeutic window. Use too much and you damage other organs. Other organs are needed to sustain your and the President’s ability to continue demonstrating the Dunning Kruger effect in full force. We must protect those too.

        1. Apparently, you don’t know much statistics either, so let me explain:

          The 30 patients were very sick, so they had a much higher than 1% expected fatality rate.
          Even in a sample of 30 patients one can prove very significant results if all patients rapidly get better, while 50+% of all other patients died. That would be overwhelming statistical evidence.
          Of course: it would be best to get some additional tests with a larger sample size.
          But it would be a shame if we were to hold back the use of the drug until some Master of Pulib Health folks with a C-minus in their statistics class come to a conclusion.

          1. And yet another study with a similar n just recently (3 days ago) showed no statistical improvement. I don’t think the C- crack at a legit healthcare professional is good form right now or even accurate. They are literally on the front lines.

                1. The study was performed on less-than-severe cases. So, I will let the doctors/experts decide what this study means. But it appears that the Malaria drugs ought to be given only to the patients in critical condition!

                  But keep in mind one thing: The reason doctors became aware of this drug appears to be that Lupus patients in a Wuhan hospital did not contract COVID, so the stuff may even prevent COVID.

                  “Wuhan doctors observed that patients with lupus—a disease for which HC is a common treatment—did not seem to develop Covid-19. Of 178 hospital patients who tested positive, none had lupus and none were on HC. None of this Wuhan hospital’s dermatology department’s 80 lupus patients were infected with the novel coronavirus. The Wuhan doctors hypothesized that this may be due to long-term use of HC.”

              1. The study from France was a mess. Raoult in his first study of HC actually removed patients that left the hospital (1), got worse and went to the ICU (3), died (1) or couldn’t handle the drug (1). So almost 1/4 of his subjects were removed and not included. What people talked about, including medical luminaries like Hanity ;), was his 100% success rate which didn’t include those that got sicker, left or died! His second study of 80 was also highly flawed since they only had mild infections with only 15% having a fever. It had no control group. Now maybe HC still helped because there is some science behind the use of HC and SARS, but those with mild infections often recover without any treatment so who knows what this second poor study from the same researcher means. Stats don’t fix a poorly run trial by someone that has no problem removing inconvenient data. So maybe it helps, maybe it doesn’t. What we do know is that HC can be dangerous and cause a bunch of long term health issues. Scary that our President with all his access to solid data would listen to Dr. Oz on Hanity. Again, maybe it helps (would be awesome) and if you are dying, doctors I’m sure are trying a whole bunch of anti-virals off label…why not if the option is death. Giving to prophylactically or to those with mild symptoms looks like malpractice until we know more and should be talked about more responsibly.

                1. But that’s what’s already happnening. It’s used to treat very sick patients. Let’s all hope it works.
                  I have the impression that some MDs here want it not to work because Trump likes it. Sounds despicable to me.

      2. I’m getting the impression that some people now want the drug to not work because Trump tweeted about it. That’s sick and Machiavellian. Are people contracting COVID in the brain now?

        1. This is absolutely and universally untrue. Doctors are widely prescribing it, as they have been for weeks, praying that it works. But it isn’t working for many patients, and we look forward to having more data. Trying to navigate this in the absence of ANY proven effective treatments is one of the hardest aspects of the crisis, and it is breaking the hearts of your medical community, myself included. You need to do some soul-searching if you really feel this way, because i’m diagnosing you with some deep deep loss of perspective if you feel really this way.

            1. There is no conspiracy. Everyone generally frowns on people with no medical training giving advice on prescription medications. The tweet caused a shortage so now the drug is less of an option. Furthermore despite our hopes/dreams/wishes it is exceedingly unlikely that it will work anyway regardless of who may be touting whatever agenda. That does not mean it will not be continued to be used in the same way it was before
              You guys just sound really really obnoxious when you talk about things you have limited knowledge or experience with. I am sure I sound that way talking about economics. It’s really really hard not to point out when someone is wrong on the internet. Especially when they make it a conspiracy involving public health majors, president haters or unknown unseen forces that prevent the miracle cure that frankly in clinical practice are a non existent concern. Cause you know the whole we are actively watching people die thing.

              1. Jason —

                When you mention that the drug combination (hydroxychloroquine + azithromycin) is exceedingly unlikely to work, is that something you’ve observed in practice, or is that a more general statement about the large proportion of drugs that enter clinical study but don’t work?

                I think we’d all be very curious to hear first-hand accounts of physicians’ results using this drug combination.



                1. Hi Greg
                  Thanks for the question sorry for the late reply. I would not take what I generally observe in practice to be consistent fully with reality. Typically the magnitude of impact of medication is difficult to measure in 1 off instances An/or even over several/many. It is also very difficult to say individually because obviously a number of people will die or get better no matter what you do. I have given appropriate antibiotics to plenty of people who have died irregardless.
                  I made my comment based on historical and persistent difficulties in the development of antiviral medications. Medicine is not as good at antiviral therapy as other therapies (After viral infection) due to fundamental nature of viruses. We have some successes but a long line of difficulties. Also generally based on the large proportion of dugs that we try that are either no better than placebo, cause harm, or have smaller than expected magnitude of effect.
                  One of the billion dollar Revenue drugs that I often use only actually helps 35 percent of patients as an example. The TV commercials would not give you this impression. And honestly it revolutionized the field, but that has more to do with the general lack of effectiveness of medical science to begin with. We are early stage in knowledge at best. Generally there is a wide gap between patient expectations and reality in the space of medical therapy, medical research, and drug development.

              2. So, you propose going on with business as usual, where every doctor has to wiggle through and now even has to deal with shortgages of the drug? Since no word has come from our idiot-bureaucrats at the FDA and CDC with any guidance or recommendation to use this drug, there is no big urge to ramp up production either. Prepare for the drug to run out and people will die.

                All I’m saying is this: In light of the economic+health crisis, we reverse the burden of proof. The FDA recommends the malaria drug for now in light of the study from France. And gives guidance/protocols or whatever is necessary. As other countries have already done.
                And we encourage more production.
                The FDA is encouraged to do a large test parallel to that. But the burden of proof is reversed: if they can prove beyond doubt that this is ineffective we’ll discontinue.

                Desperate situations call for desparate measures.

                1. That would be reasonable if the study was done well. It was not.
                  All I’m saying is If I get sick I don’t want you to be the one making treatment decisions.

              3. Explain to me how the tweet caused the shortage? Are you telling me the that Billy-Bob Bubba with his pickup truck, right after cleaning out the toilet paper aisle at Walmart, went to the pharmacy and bought all the Malaria medicine there because he follows Trump on Twitter? I always thought that this medicine required a prescription!?
                Isn’t it much more likely that the FDA which is dragging its feet has an effect on drug makers? Why produce more when the FDA is so slow and might even prohibit the use? Nevada already outlawed the use.
                So, now you have the worst all worlds: doctors are desperately looking for the drug because they already use it, but drug makers have very little incentive to make more of the drug. Thanks, FDA!
                But it’s all the fault of the Big Bad Orange Man tweeting?

                1. At the time I think I was referring to India which was going to halt the export of the drug. I think this has subsequently been sorted out. I don’t remember the timeline here.
                  I don’t really have a problem with Trump in a broad sense.
                  I think he should be assigned appropriate responsibility for things he did well and things he did poorly.
                  His tweet on this drug was not helpful or needed.
                  He has done some things well in response.
                  He has done things poorly in response.
                  I do think its ridiculous that people blindly support or hate him. (Or take his tweets for gospel)

                  I do think that the current state of our country speaks to the overall adequacy of our response.
                  There are islands of excellent healthcare in the US among a sea of inadequacy, both now and before the crisis.

    2. That’s my point. The drug is already used by the experts in the field. Not only for COVID but also other diseases. But it would be nice to get some better uniform recommendations to send out to the doctors in the field, so they don’t all have to reinvent the wheel individually.
      Don’t ever tell me what lane I should stay in! I’m entitled to my opinion on medicine the same way medical doctors are entitled to their opinion on their personal finance blogs. And Trump is entitled to his opinion on medicine the same way you’re entitled to your opinion on politics.

      1. There’s a reason it takes a 4 year degree and a residency to become a doctor. It’s not equivalent to personal finance. Sorry if that ruffles your feathers, but medical opinions should be left to experts.

        1. There’s a reason I used to work for EIGHT years after my PhD to write and publish peer-reviewed academic papers, either alone or as the lead-author. In some of the world’s leading journals. It’s not equivalent to being a [redacted out of respect for the hard-working medical profession]. Sorry if that ruffles your feathers but economic opinions on wide-ranging trillion-dollar issues should be left to the experts. Not the people with the C-minus in statistics.

          Of course, I’m just kidding. As I said before, the big picture has to be decided and designed by experts from multiple fields. medicine, economics, business, engineering, etc. There’s no one field that knows it all.

          1. Your post is titled “Some Random Thoughts.” Let me interpret that for people: Panic. You wrote a poorly thought out, uncharacteristically so, article that went outside of your area of expertise. What you said in the article was so inappropriate that I felt compelled to call it out.

            That is what tweets like the Presidents and articles like yours are. They go against decades of disciplined research and protocols. We have a plan for this. We have a plan for novel and experimental therapies. But people are panicking and calling audibles, and it’s going to take more of us down.

            I remember the lectures in medical school about pandemics, past and predicted. There is a plan. Leave it to the experts.

            1. Let me point out that I know countless MDs that are upset with the U.S. bureaucrats’ handling of this crisis:
              1: not allowing existing tests earlier, but demanding we develop our own tests, losing valuable time
              2: doing the same slow-walking bureaucrat insanity with the Malaria drug, calling the scientific research out of France “anecdotal evidence” and insisting on the same idiotic delay tactics, this time probably causing even longer delays than with the tests. Other countries have already adopted general protocols of the off-label use of Malaria drugs. In the U.S., the bureaucrats are willing to let people die with this turf war mentality.
              You are the first MD who seems to embrace this insanity. And this insanity has been around for a long time (e.g., countless examples of slow-walking or not approving at all experimental drugs for terminal diseases). I’m sorry for you!
              So, again, given your limited knowledge of statistics (insisting that 30 or 80 patient studies cannot generate statistically significant results – they can, and they did) let me tell you that analyzing the current crisis is above your paygrade. It takes a joint effort of (true) medical professionals, economists, business leaders, labor leaders, engineers, etc. to make informed decisions.

              It is this exact turf war mentality that you display here (“you’re not an MD, so shut up”), that’s plagued U.S. health policy and the drug approval process for a long time and that’s now killing people in droves. It’s criminal incompetence.

            2. IndieDocs – Louis Pasteur was effectively told to “stay in his lane” as he was a chemist, after all; not a trained MD. Do you know history? Would you deny your patients rabies and/or anthrax vaccines because it was invented and promulgated by that awful “chemist-deplorable”.

              You likely have a C- in history, too. And by the way, yes; there is opposition to the Chrolorquine-based drugs due to spite against “Orange Man Bad”. In Nevada, as well here in Michigan, the respective governors have issued edicts against doctors prescribing Chloroquines for Covid-19. And what of the doctor/patient relationship? And privacy? Don’t lecture to us that Trump and other non-MD experts are the problem here. “We The People” has never before been construed to be “We the Experts”, or the “Dictatorship of the arrogant MDs”.

        2. Actually, it takes that long because the AMA has a stranglehold on medical licensing. Are doctor shortages born of a lack of willing candidates or the regulations that impede, say, immigrant doctors from getting licenses? Let the patient decide how valuable your services are, not a faceless organization backed by the government.

          People’s hubris during this “crisis” reveals itself faster than the results of a COVID test (also limited initially because only government medical “experts” should be involved with that–good call).

          Does one need a four-year degree and residency to know that vitamin D3 (like from the sun, which is hard to get inside a house or quarantined building) bolsters the immune system? Do we need MDs to know that hand washing is probably a good thing?

          Do you have any opinions about education? How about roads? The military? Is your degree in those areas? Then shut up. Right? Or should you have an opinion because those are areas that affect you whether you like them or not (and areas for which your dollars are taken from you, much like during this issue)?

          I am always in favor of open debate and never stifling opinions, but I know that stance is less popular every day as the “experts” continue their power grabs and the sheeple nod in assent.

          It’s a shame that some feel entitled to take others’ money and livelihoods because they have college degrees.

          1. Also, any reason you have not expressed the same vehemence towards Bill Gates’s comments? He is not a medical doctor.

            1. Bill Gates is one of the leading philanthropists of altruistic health interventions in the world. His foundation requires the most rigorous research for evidenced based therapies in the world. His money is where his mouth is, and he is backed by armies of scientists, including doctors on the ground actually doing the hard work.

            2. Because Bill’s comments were intelligent and well supported by medical doctors and researchers. It is shocking to see such venom for a healthcare worker during a pandemic.

        3. Like this expert?

          “[Dr.] Fauci is a stalwart enthusiast of ‘patentable’ vaccines, skilled in attracting massive government funding for vaccines that either never materialize or are spectacularly ineffective or unsafe.

          For example, Fauci once shilled for the fast-tracked H1N1 influenza (“swine flu”) vaccine on YouTube, reassuring viewers in 2009 that serious adverse events were ‘very, very, very rare.’ Shortly thereafter, the vaccine went on to wreak havoc in multiple countries, increasing miscarriage risks in pregnant women in the U.S., provoking a spike in adolescent narcolepsy in Scandinavia and causing febrile convulsions in one in every 110 vaccinated children in Australia—prompting the latter to suspend its influenza vaccination program in under-fives.”

  14. You cannot have healthy people all going back to work unless they’ve had blood tests and therefore you know they have immunity, will not fall ill, will not need a ventilator. Please stick to commenting on subjects which you know about. MANY young healthy people here in NYC where I live are falling ill and dying. Our hospitals are full, they have trailer morgues parked outside, not enough ventilators, and some health care workers have resorted to trash bags and bandanas because there is not enough protective gear. I live in a small building in Brooklyn – only 27 people in these 8 apartments – and there is one doorknob on that front door. Read Nassim Taleb’s co-authored January article on this topic and take to heart the precautionary principle. That is what got me to start working from home 3 weeks ago (when my company’s stance was “the office is OPEN”) and who knows, maybe it saved my life.

    1. And I would also like to add that for anyone who feels useless and wants to help, the food pantries in NYC, such as City Harvest and City Meals on Wheels, are working to deliver food and would be so grateful for your donations. The need here is dire. As long as I keep getting a paycheck, every two weeks I am giving 10% to food pantries. Thank you for considering this – to have a spirit of generosity and desire to help in a time of need.

    2. Agree. I would explicitly exempt NYC from the recommendation I made. I was talking about Clark County, WA with very few cases. Everybody was scared about COVID since January and acted very cautiously. So, I think the slow opening of the economy would work here.

      Not so in NYC. In NYC, only 3 weeks ago your moronic mayor still urged people to go to movie theaters. And you’re paying the price now!

  15. We absolutely cannot restart the economy before breaking the COVID-19 curve. Yes, the harm currently happening to the economy is severe, but it’s unavoidable at this point. The only choice we have is: do we want mass death, mass panic, and a destroyed economy, or some level of stability and a destroyed economy?

    Here is what happens if we attempt to re-open the country before getting a handle on the pandemic:

    *) Hospitalizations and deaths from the pandemic continue to grow exponentially. More and more people who are currently still willing to go to work or to other public venues start staying in. Many get sick with the virus for weeks, and while they will survive on their own, they will not be able to perform their job duties or leave their house. Levels of absenteeism across all essential industries will rise dramatically as people prioritize their health rather than their bank accounts. As Bill Gates said: “It’s tough to tell people ‘keep going to restaurants, go buy new houses, ignore that pile of bodies over in the corner’”.
    *) The health care system will collapse. Not only will this lead to much higher death levels among all hospitalized groups, but as we run out of PPE and overwork medical staff, there is a risk that medical staff start refusing to go to work and the problem gets even worse.

    Here is a description of what happened during the Spanish Flu in Philadelphia, from the Smithsonian Mag:

    In Philadelphia, the head of Emergency Aid pleaded, “All who are free from the care of the sick at home… report as early as possible…on emergency work.” But volunteers did not come. The Bureau of Child Hygiene begged people to take in—just temporarily—children whose parents were dying or dead; few replied. Emergency Aid again pleaded, “We simply must have more volunteer helpers….These people are almost all at the point of death. Won’t you…come to our help?” Still nothing. Finally, Emergency Aid’s director turned bitter and contemptuous: “Hundreds of women…had delightful dreams of themselves in the roles of angels of mercy…Nothing seems to rouse them now…There are families in which the children are actually starving because there is no one to give them food. The death rate is so high and they still hold back.”

    It is absolutely unreasonable to think we can restart the economy while all of this is happening. We *MUST* control the virus before we can possibly start fixing the economic damage. That will become obvious as the problem continues worsening. The longer we wait to do the lock down, the worse we will be.

    1. OK, understand your concern. But this is a strawman argument. There is a middle ground between a complete shutdown and business as usual. A restricted opening of the eoncomy in low-impact areas, and letting people out who have tested negative and have no symptoms and no fever. I think that will still keep the R0<1. And it saves the economy.

      1. In Italy, and Spain, etc. they tried this “limited shut down” approach. And in every single case it failed to get R0 below 1, and they were forced to enact more and more strict measures. The epidemiologists seem to be in agreement that we need a full shutdown to break the curve. Do you really think that your supposition about what will work to break the curve is of equal weight as to what people who study this for a living have to say?

        If we could test everyone, we could do what you are suggesting. As you know, we are nowhere near having that capacity. It isn’t a strawman because “test everyone and then let them go back to work” isn’t an option that we have right now.

        Once we break the curve, hopefully we can start to reopen in a controlled fashion sooner rather than later. But breaking the curve isn’t something that just happens as time goes on, it’s something that happens when a country takes drastic enough measures to stop the spread. The sooner we take those measures, the sooner we can start reopening. Suggesting we can start reopening before we have even broken the curve is completely ignoring the reality of the situation.

        1. Yeah, good point.
          I’m not saying we shoud reopen the economy indiscriminately. NYC is certainly best with a complete shutdown now. But carefully picked areas plus strict guidelines, e.g., regular tempurature/fever checks. Essentilly how non-Wuhan-China is running right now.

  16. Thanks for the visual analyzes Prof. ERN. Keep in mind that we really don’t know what the denominator (numbers tested) is but hopefully that will soon be established once we get enough widespread testing in the US. Hopefully the real rate of infection and deaths can be more accurately determined; and moreover, will reveal a lower rate. Also keep in mind that nearly 3,000 US citizens die daily from heart disease, cancer, and medical errors which annually accounts for 615k, 592k, 250k respectively. My final job before I retired in 2018 I was a CEO of a fledgling software company where we attempted to develop a software to minimized medical errors. Johns Hopkins study that was published in the British Medical Journal in 2016 determined that anywhere from 250k-400k die in the US alone from medical errors. Many other countries suffer a higher rate. If this was widely known, the country would be up in arms and demand a fix. As a former healthcare administrator, I feel for the front-line healthcare workers fighting this bad virus and may have to decide who lives and who dies due to a lack of life saving medical devices. We will get through this. Here are some more stats to hopefully give you pause. We lost 3,000 citizen souls on 9-11. During the American Civil War, we had a 9-11 every six hours for four years. During WWII there was a 9-11 every three hours for six years. Also, during WWII, the US had a 9-11 every other week for four years.

    Sorry about the Freak Economics like stats, just trying to make a point to calm some fears.

    1. 3000 x 4 x 365 x 4 = 17.5M. High estimates are under 1M deaths in Civil War. But your point would still be arguable with the lower numbers. This virus clearly doesn’t provide an existential threat to the world.

      The real problem here, as touched on in various posts above (including yours), is there are two scenarios where deaths from CV get into a very unacceptable range: 1) total infections overwhelm healthcare, driving up fatality rates and 2) very widespread infection rates over a prolonged period at a lower (but still 1% or so?) fatality rate.

      Is there a middle ground that balances the economy with negating the risk of the true downside scenarios? If you assume Trump will call for a national lockdown when/if the current piecemeal system fails, then I guess that could be it. I hope he’s ready to make that call soon if needed (which I think it will be).

      1. Good points Kimber. The newest acceptable deaths from the CW is 750k from SUNY Binghamton which should have been a 9-11 every six days not six hours. I stand corrected.

    2. Yeah, these are mind-blowing numbers! Not sure if the (preventable) infections caught in hospitals are already counted in there, too. That’s also in the sis-figures.

      Yeah, we will get through this! We’ve dealt with a lot bigger disasters! Thanks for putting this in context!!!

    1. Interesting, as I write this from my living room condo in Tampa 11 stories up I see Jeff Vinik (Tampa Bay Lightning NHL owner and Bill Gates’ JV $3 billion Waterstreet project proceeding unabated with 12 cranes hoisting half a dozen towers. Even billionaires want to protect their investments despite what they say.

      1. I still see construction sites going on here without slowdown. I guess it’s an essential industry. Essential because the construstion/real-estate lobby is probably one of the most powerful. 🙂

  17. Good thing you’re an economist and not a doctor/epidemiologist spouting this “get back to work” nonsense!

  18. Love your site, ERN, but re: the epidemiology and treatment questions I think we have to be cautious. I am a PhD in drug development and by no means a public health expert, agree with some of the earlier comments that it’s best to stick to assessments and recommendations by the folks who do this stuff for a living. Some of the ideas out there in the popular media sound good on paper but are outright unethical or not practical in a public health context.

    As others have mentioned key threat I see called out is the case load for hospitalization/ ICUs given that a relatively large proportion of those infected requires treatment across age groups; hence need to maintain control measures to not widely exceed limited capacity.

    Re: predictions a good study was published by Imperial College London I believe, good overview on modeling studies in Science:

    On the finance side of things I have planned for financial crisis by having the bond portion of the portfolio in medium-duration Treasuries. Those are not intended to optimize return as you might have guessed but to provide downside insurance in a scenario like this. Has worked out reasonably well so far, losses are painful but I don’t lose sleep over them.

    Take care.

    1. I’d caution about letting only the health science folks make the decisions. It has to be a multi-disciplinary effort because – sorry – MDs and health policy PhDs know nothing about economics. The repercussions on the 20-trillion-dollar U.S. economy are too large to let just one single group of experts make the decisions.
      As I said before: if there’s a local cholera outbreak or a global toenail fungus pandemic, sure be my guest, don’t consult the economic experts.

      1. Totally agree about the need to be multi-disciplinary, absolutely no question. I think what some of us were reacting to was the suggestion that there are trivial solutions out there to address the health policy and drug efficacy questions (send people back to work in masks; run a meaningful clinical trial in a week) that aren’t being pursued because of red tape or because people can’t think outside the box. That does not strike me as an accurate reflection of reality and it tends to breed cynicism, which isn’t a productive reaction to the situation. And to the question you raised in your post: yes, it seems you are getting a little antsy….;-)

        Keep up the good work and take care.

        1. Never claimed there were trivial solutions. That malaria drug is only one single measure that should be explored.
          Also, the reason why people are antsy is that – with all due respect – some in the medical profession are stuck in their normal behavior patterns: “if you’re not an MD, just shut up”, “clinical tests take time” etc. That’s OK in normal times, not OK right now.
          If the Federal Reserve had acted that way in 2008/9:
          “let’s all do some extensive research, run some conferences and publish studies first and we’ll get back to you in 1 year”
          “all you non-economists shut up, you don’t know what you’re talking about”
          “there are no trivial solution” etc.
          … then the economy would have fallen into a Great Depression 2.0 or worse. In fact, the Fed followed the “trivial solution” of opening the floodgates. And they did it again in 2020.
          And by the way, a lot of people complained in 2008 about the Fed being too slow. Remember Jim Cramer’s rant? But the economists did their job by being flexible and listening to non-economists about how bad things could get if we don’t take extraordinary measures. The burden of proof was reversed: try this now and see if it works, we can always take it back later.
          I wish the FDA would come off its high horse the way the economists did in 2008.

  19. ERN, I have a theory on the toilet paper shortage. I think this shortage is caused by hoarding of all products (not only toilet paper), but stores have less supply of toilet paper, so it’s the first thing to run out when people stock up on everything. Takeaway here – you should be stocking up now if you want to avoid grocery stores later. Similar timeline happened in my county (~1 hour drive from major cities).

    I agree with many commentators here, and it’s surprising to see that a few Trumpists in denial read your blog.

  20. US data is heavily skewed because of NY, even more so NY city. Which brings up my long held concern about high density housing. I dislike apartments/condos and this situation shows the folly of HDH. I have been watching the US numbers closely every day on and as of today, 45% of US cases are in NY. Damn the apartments/condos.

    1. NYC is the perfect storm:
      High density
      lots of people using public transport (which I generally love – I’m European – so don’t get me wrong)
      3 weeks ago local politicians still urged people to go out and about (mayor Bill endorsed people go watch movies)
      unprepared health systems

      I hope though that the curve there is close to bending now. Cross your fingers.

      1. Public transport is another mess. I have had so much headache in London, both Tube, Heathrow Express, I say it is the work of Satan 🙂 except for long distance public transport, i.e. air travel. That I do love. But even there, economy is the pure evil.

        I believe the combination of bicycles/e-bikes + personal EV cars for local travel is much safer and reliable than public transport any day. Carry a folding bike or 2 in the car and make it even more health and env. friendly. Skip the stupid bus and commuter train.

  21. Ern, I have a new post request. Could you compare the USA vs Japan in regards to how each has become increasingly dependent on government stimulus to prop up various areas of their respective economies? I’d like to see how the USA’s current stimulus of $6T plus, and thus government debt approaching $28T, will affect our growth going forward in both economic and stock market aspects. I’m guessing the final stop to complete Japanification will be when the Fed is authorized and starts buying actual securities in the stock market. Have we crossed the event horizon already?

    I guess what is most disappointing about our government response so far is that it’s almost exclusively geared toward propping up industries that spent almost $5T on stock buybacks in the past 8 years instead of developing and funding an aggressive plan against the virus (ie. South Korean response). However, we continue to drag our collective feet and conjecture about reducing restrictions so the country can open back up like everything is normal. We need to endure a complete shutdown for a month or we will be living with this for a year or more and dealing with the consequences of that for much longer than we otherwise would have needed.

    1. Yeah, I hope this current episode doesn’t push us into a Japanese lost decade (or lost decadeS).
      The government can’t spend us out of a recession. I hope that the crisis is short enough that we don’t go much deeper into debt.

      I personally have no problem with stock buybacks. Buyback or dividend or internal investment, who cares what the company does with its money?

      1. Buybacks are questionable at best and most likely should be made illegal again given the huge and obvious conflict of interest of executive pay being tied to stock options. As this crisis has shown, they wasted $4.5T on stock buybacks at high prices and obscene executive salaries/benefits instead of investing in their people, research and development, capex, cash buffer for times just like this, etc. That money would come to good use now instead of constantly chasing higher stock prices and begging for taxpayer money in bad times. These buybacks are probably the #1 reason US productivity is stagnant – the money is never spent efficiently.

        Unfortunately, the Fed/Government has shown they will bail any and all large businesses out of their poor management and throw miniscule help to all the workers even when these same bailed out companies lay millions off. How a large multi-million dollar company can’t survive at least six months without a bailout is poor management and should proceed to a proper bankruptcy to get rid of bad management, poor use of capital and let someone else pick up the pieces and run it better.

        The other sad thing is the US Government condones and in essence encourages these layoffs by not helping anyone until they are officially laid off from their job. Could this process be any more inefficient? So here’s the current process: force millions to lose their job, have them all file for unemployment (if possible – gig/small business owners/self-employeed can’t), search for other jobs, apply for new jobs, have companies go through new hire processing and finally have on-the-job training/come up to speed in their new position. Instead, we should be following European/UK processes – the government pays for most (ie. 80-90%) of all worker salaries during the crisis so everyone goes back to their old position as soon as it’s safe to do so. Who do you think will be back to normal sooner?

        What this crisis makes painfully obvious is our government socializes risk for big companies and Wall Street, but yells for capitalism for profits. Crony capitalism in full force with so many programs being rolled out to pick the winners and losers using our taxpayer money.

        Sorry for the rant…

        1. Seems like a pretty loose logical connection between stock buybacks and low productivity.
          I think there’s a very strong connection and correlation and causation between ever more financial regulation and low productivity. Hence, I believe corporations ought to do whatever they want with their money.

          1. I understand the doubt, but what is the ROI for those buybacks? Buyback money is just vaporized; is doesn’t increase productivity by companies building better/more plants, buying better computer systems for their employees, developing the next greatest product on earth, improve the training of employees, improving existing products to the point others want to buy them…there is no investment for the future. Boeing is the epitome of this whole failure – buybacks instead of investing in engineering.

            That $4.6 Trillion was simply wasted on a gigantic party and now we deal with the hangover…

            1. That’s a fallacy. The buyback money is not pulverized. It reduces the # of shares outstanding and thus increases the stake in the business for each existing shareholder. So, the ROI is the same ROI as the current equity itself.
              But I agree with you: there are many examples where the share buybacks were badly timed. There were also many examples where new products and new investments and mergers and acquisitions were badly timed. Ever heard of GE? Maybe they SHOULD have done buybacks or dividends instead of their acquisitions…

              Also, don’t fall for a straw man argument. It’s never EITHER product development OR share buybacks. They do both. If they have cash left over they pay a dividend or do share buybacks. Do you want to outlaw dividends, too? buybacks and dividends have the same effect on the average shareholder but the buyback is more tax efficient.

  22. I’ve seen so many covid-19 graphs recently with meaningless or suspect interpretation of the available data. It’s great to see an analysis that compares the country data on a like basis. Thanks for the rigor – we expect nothing less!

  23. When a tree in my yard falls down and crashes into my neighbors house, even though it was an accident, I’m fully responsible for the damage.

    China’s tree just fell on America’s house. Are we still $1.07 trillion dollars in debt to China? By my math, they owe us over a trillion dollars in damage, and counting.

  24. ERN,

    I enjoy your posts as always. May I share some thoughts on the medical portions?

    -Surge capacity to handle increased cases is a huge consideration for enveryone in the medical field right now. Without the capacity (regular beds, ICU beds, vents, necessary staff) we can only hope to delay the development of cases. The social distancing and shutting down movement buys time.
    -Many places don’t have enough PPE (protective equipment) to safely do the testing. So yes, testing and PPE are drastically missing.
    -studies need to be powered large enough to see a meanigful difference. The small studies that are mentioned are just not large enough to draw conclusions. Chance can be misleading, and “clinically meaningful” is different than “statisitically significant.”
    -Side effects may take time to develop and as noted, the study must be large enough to capture these findings if they exist.
    -in a critical situation (ie dying patient in ICU), clincians often try everything available for the patient, but in these situations it’s difficult to know what actually worked. Hence the need for controlled studies large enough and long enough to see differences.
    -Anecdotes and case reports are probably not going to be helpful for nationwide treatment, as we just don’t know if effects are real and what true side effects are

    -My flexibility is to keep working, I hear clinicians are in demand right now. It is good and bad.

    Well wishes to you and your readers.

    1. Thanks for sharing that.

      Yeah, agree: until we can do more testing that opening of the economy seems hard to accomplish.

      30 patients in a study can create very highly significant results. If 50% if the other patients dies and 30 patients with the drug all got well then the drug’s effect is highly statistically significant.

      Good luck and thanks for your service working in your field right now!

  25. Like ERN says, if you plan properly and have flexibility, your basic living expenses can get quite low. If you’ve paid off your mortgage, eat at home and don’t go anywhere, your monthly expenses are quite low. And for an extended disaster time period, I suspect some of these essential expenses like utilities and property taxes may be deferred as well if you really need it. For good planners, your dry powder cash can last quite while.

  26. Big ERN, Thank you for your thoughts this week.

    Your unemployment report chart brings up some questions…

    When news of unemployment reports is almost 5 times higher than in 1982 and 2009 (the depths of the last recession), and the result is the markets to go higher, what can we really use to determine the driver for the equities market?

    By that I mean, can we shutter the doors on 10-20-30% of the companies in America and still (through the intervention of the FED) go up? Can we stop paying mortgages en masse, and still (through the intervention of the FED) go up? Can we hit 10 million unemployment claims for the month, and still go up?

    I ask these because it may not be necessary to consider business fundamentals, or pour over balance sheets, or even trade technicals anymore, as these do not seem to be deterministic as to whether or not the equity markets go up. The real driver of American equity markets appears to be much more attributable to the FEDs policy rather anything to do with business acumen or sound business policy. It appears that even though it is not sustainable to keep spending, the ‘smart’ money keeps counting on exactly that (and getting it) to prop up every twist and turn in this economy. I used to think there would be a limit to this, but I am now considering there may be no limit in my lifetime. I do not ever think we will actually have an economic depression in my lifetime as the FED will keep printing as long as there is paper in the printers. Truly.

    If this is indeed the case, how would one capitalize on this for the benefit of their retirement?

    Thank you…

  27. ERN, I agree with much of what you’ve posted, especially the blended “work if you can with caution”. It seems people are focused solely on the physical health aspects and completely ignoring financial epidemic. This isn’t about stocks going down. This is about businesses being too devastated to recover. This could potentially wipe out most of the middle class. We as a society can’t exist without an economy.

    1. Exactly. Has someone calculated how many people will die in the future due to less wealth/GDP/productivity if we’re not healthy? That’s why the policy decisions should be made by a large group of experts from different fields, including health, economics, business, etc.!

  28. ERN, I see your are skeptical on the lockdown because of the few cases. I urge you to consider that the reported case are severely undercounted. The reported cases only contain those that tested positive, meaning

    1) They have developed symptoms
    2) Their symptoms were severe enough for them to seek care
    3) They were actually tested (this step has been basically impossible for regular people who don’t need hospitalization)

    Now, take this nice round number of 100,000 reported cases we crossed sometime today. How many actual cases are there? Taking the guesstimate that 20% of cases are severe, adjusting for hospital workers and celebs, let’s say 25% of all cases actually got tested. That would mean 400,000 are infected. But, wait! The lag time between infection and reporting is at least 12 days (5 days for symptoms to appear, 5 day testing turnaround, 2 day lag in aggregating the information to the CDC). So, that 400,000 infected was 12 days ago!!

    How about now? Again, taking the conservative growth rate of 1.3, we can estimate 400,000 x 1.3^12 = 9 million infected currently. Any window of opportunity to control this virus is long gone. It’s just math.

    Have you see the two excellent articles below?

    1. Yeah. that’s all really good. Thanks for the links.
      I still propose opening businesses and people come to work if:
      a) they are asymptomatic
      b) they all wear masks
      c) they have their temperture checked every day
      d) they have no consumer foot traffic
      e) they commute in their own car
      f) they use distancing at the office as well
      So, this would work for manufacturing, construction sites, most office workers, etc.

      And again: it’s mandated. If people dial in from home and work that way, continue to do so.
      But the complete shutdown is not productive.

  29. Yes. This exactly. You are data fitting. You are purposely excluding an outlier based on personal bias. I disagree with your denominator based on the fundamental way disease works. This is smoothing the data and painting a much rosier picture than other data points many of which can be found on the link posted by the other commenter. Scaling for population will be very useful retrospectively but not prospectively.
    I agree with your thesis about thinking about the economy, multidisciplinary involvement and testing everyone. But the part where you try to draw health conclusions is just wrong.

    1. What outlier am I excluding?
      How can you NOT use the population size denominator? You’re saying that 100k cases in a country with 1 million residets is not as bad 110k cases in the U.S.?
      From the calculations, I’m not drawing any conclusions. I just present the data in a completely positive, nor normative way. Not sure what made you think otherwise.

      1. This was a reply to you elsewhere but got posted out of context. So it doesn’t make sense out of chain.
        Obviously this is not that important.
        But At the beginning of an outbreak the virus doesn’t care about the population size it acts on population density and the rate of infectivity. The virus does not affect an entire population simulatneously, and early in a disease process is the equivalent of dividing by infinity so it will normalize everything to look the same when its not.
        It is much more useful retrospectively. We are still prospective in this situation. And the number of affected world wide or in any country is still small relative to population.

  30. It is an unfortunate reality of our social-media saturated world that now everyone with an opinion or agenda can find an outlet and “experts” to back up their particular ax to grind (including me!)

    Anti-capitalist, anti-immigration, fanatical environmentalism, anti-Trump, and many more agendas can and will use this corona virus to advance their world view.

    My guess is that most online commenters have jobs or resources that allow them to stay home relatively pain-free. It is the folks living paycheck-to-paycheck and the small businesses that employ many of them that I worry about. They aren’t online posting links to their “experts” or advocating single-factor tests for how long the social isolation should last, they are trying to figure out how to put food on the table and not be evicted.

    And that, in my view, is why we need to balance the risks of this corona virus with real economic impacts to people — just as we do with hundreds of other risks in daily life (e.g., the 40,000 annual motor vehicle deaths we accept in this country in order to have the benefits that transportation enables).

  31. To be clear, I do not dispute Gates’s ideas, but let’s not pretend that confirmation bias is not at work here. You agree with his sentiments, so he is accurate. You disagree with some of ERN’s statements, so he must be wrong.

    Also, I saw nothing in either reply that addresses the issue of a four-year degree somehow imbuing the holder with magical powers not available to us poor rubes. If people outside of medicine cannot make medical choices accurately or identify medical information or have medical opinions, then how can those same people be trusted to choose doctors or to know which “experts” to follow?

    This insidious paternalism of expert-neophyte is just as dangerous as those who never seek out new information and rely too much on others.

    Finally, I am sorry you saw any venom in my comments. I see nothing that rises to any ad hominem attacks, so I am unsure what was venomous towards the other poster. I apologize for any attack that he/she saw as personal.

    I am unclear why I should be unflinchingly deferential to a healthcare worker now. Did this person choose his/her profession? If so, then are infectious diseases beyond the possibility for someone in such a profession? I wish no healthcare workers any ill, but the reality is they chose a profession in which they have a likelihood of coming into contact with infectious diseases. I do not see how such a choice leads to obeisance from everyone else.

    If a healthcare worker is dissatisfied with the risks, then he/she is free to switch occupations. I am glad that people have chosen to work in the healthcare industry, but I do not pretend to know that some jobs are much more important than others are. For example, should I also show fealty to my local waste collectors? Garbage in the streets is a public health hazard as well. I much prefer to respect people’s actual contribution to society while still keeping my mind open and free.

    1. I do not accept this binary framework. It is not a simple choice between health and the economy, any more than it is a choice between life and death each time we book a journey by airplane.

      We can choose to manage the risks. Hamilton County, NY, with zero Covid-19 cases to-date, need not be governed by the same strictures as applied to NYC. Ditto for numerous counties across this country. We can incorporate a regimen where persons in low risk areas and persons who are of a low risk susceptibility profile in higher risk regions may return to work, while other groups remain in quarantine (all groups would be expected to practice social distancing and careful hygiene).

      Very few parts of our lives are binary. We permit construction of skyscrapers, knowing that some construction workers will die. Ditto for mining, commercial fishing, the military. Rewards do not arrive without risk. I think so much of society has become so puerile and so divorced from its history that our basic freedoms, health, and prosperity is threatened by this more-so than by the virus itself.

      1. Agree with your appraisal, Erics. It is disheartening (but unsurprising to me after 9/11 and the rubber stamping thereafter) that so many people are willing to abdicate their freedoms and force others to do the same in the name of “safety.” For whom? Is a healthy 30-year-old who runs a local business a risk to society if she keeps her business open? Cannot customers decide for themselves if they want to risk shopping there?

        One-size-fits-all is one-size-hurts-all in some way.

    2. Look, that’s a stupid headline from a stupid journalist. It’s the crystal clear definition of a strawman argument. I never argued for completely opening the economy completely, but very selectively and under under strict guidelines.

      1. I completely agree that we need to relax restrictions in places without spread. Unfortunately, the gap between level of testing needed and provided has only grown. Locally, one of the counties in my state has stopped reporting numbers because they don’t have any tests. It’s not they don’t have sick people, they just don’t have the tests to count them. So rather to report an extremely misleading number, they chose to report nothing.

        This will get much worse even with the current restrictions in place, simple because we waited too long. Community spread must have happened in every metro. Just because we don’t test enough to confirm that, doesn’t mean it doesn’t exist.

  32. I would like to share this link

    It is a paper by the St. Louis fed on the economic impact of the 1918 Spanish flu pandemic. I know history is not a guaranty guide for the future … but we do like to use data from 1871 to feel good about FIRE decisions…
    I think it is interesting to read that though health and economic impacts were dire, they did not last. The world and the US economies are more complex now than in 1918 and fixing them may be a more complicated undertaking. However, the US and other world economies did not have the ability or political will in 1918 to print >$3T and they did ok. The world feds have infinite amounts of money they can pull from the future into now at negative cost and they don’t seem to be afraid to do it either. Time will tell if it works. I believe that in the long run greed will always win over fear.

    On the lighter note … I think this is a great time to get rid of those “bad” investment decisions you made a while ago and had been holding onto because of the huge capital gains. Roll them over into your ideal allocation at no or little cost. This is also a great stress test for your FIRE strategy and your chosen asset allocation.

    1. Very good point. I think we ought to compare today’s situation to the 1918 and also 1957 and 1968 flu cases.
      Amazingly, even with limited resources (i.e., zero ICU beds back then) and much worse hygiene, the U.S. death toll stood at 675k. Admittedly in a smaller population. So, I doubt the 1 million and higher death toll estimates out there for COVID.

      And good point about the portfolio rebalance. Shift out of the high-cost mutual funds now, do tax-loss harvesting, etc. while prices are low!

  33. Karsten,
    How is your Put selling strategy working in the current equity environment? Any ways that you have adapted /changed it given the current market conditions? Do you have more specifics to add over/above your recent post on the strategy? I am a real fan of the strategy but want to continue to learn from the expert!


    1. The put selling alone is actually up for the year. After a mediumsize loss on 2/24 I made all my max profits since then and recovered everthing for a small gain YTD (slightly over 1%+).
      But, alas, since I got a little bit aggressive with how I invest the margin cash (Muni bonds, Preferred shares, etc.) I lost a few % there. Still much much better than the stock market, of course.

  34. As Big ERN, says: It takes a model to beat a model.
    And right now what we need as country(s) is (are) solid, data-driven plans. The US does not currently have one. Here is the plan of David L. Katz, MD which appears to be a good one (and incorporates a lot of ongoing data analysis to adjust the plan to better optimize it). And in the link is the model from University of Pittsburgh/Carnegie Mellon. It is an extremely clear and well written paper with lots of sensitivity analysis to check to see if the model conclusions are robust.
    Another plan and model is the (famous) one from Tomas Pueyo The Hammer and the Dance It is very well argued and presented (like a ERN article 😊 )
    Some combination of the above is probably pretty close to optimal.
    So if any reader knows of another strong plan or strong model, please give us the link since “It takes a model to beat a model.” And it takes a plan to beat a plan.

    1. I really like the Hammer and Dance article.
      That’s consistent with what I said: It looks like we’re close to R0=1 and we can probably start thinking about sloooowwwly opening up the economy.

  35. my 2 cents on chloroquine/hydroxychloriquine. They are both used for malaria. Chloroquine and its analogue are not trivial drugs. Drugs have a therapeutic window and some have a very narrow window between positive effect and morbidity or death. Chloroquine affects the heart conduction system and lengthens the repolarization cycle. This opens the heart to the possibility of deadly arrhythmia. In addition the drug zithromax which was paired with hydroxychloroquine causes prolongation so its one on top of the other. Were you my patient you’d need a EKG before I’d pull the trigger. Cardiac arrest will kill you just as dead as COVID. Properly dosed and used hydrxychloroquien is relatively safe but some research as to what’s safe is warranted. Malaria doses may not be like COVID doses.

    As to the epidemiology I think the virus has a signature curve of penetration into human populations and I call this the Wuhan Fractal. Fractal geometry predicts repeating sets across all populations of sets as you zoom in and out. So in the end the penetrance into human populations on the way to herd immunity will look the same. China data is nonsense as is Iran. The Asian countries like Singapore or Korea had SRS experience 17 years ago and were prepared with adequate personal protection and distancing and were able to modify their fractal curves. Unencumbered pandemics last 2 years. The have a mixing pattern like a drop of food dye in a beaker of H2O high concentrations give way to uniformity as the solution swirls. We are in the high concentration phase now with maximum infectivity as the word becomes infected the second derivative of growth will go negative and growth will continue but slow and eventually dip under R0=1

    I’m to saying we will have 2 years of terror but we won’t go back to the way it was any time soon if ever. This is way too disruptive There are 21M missing cell phone signals in China implying possibly 21M dead. Regardless the virus will do what viruses do and the media and spin won’t affect it. I think the market has another 30 points to drop or more. I’ve been making money day trading the bear traps using SPY on the bounce and SH on the crash in my Roth account. I also made a bunch on the GLD bounce from 1495 to 1650. I did sell out of that position as I think it will go down again over the next 30% decline, and I made enough to live on for 6 months. Otherwise I’m in cash. I am worried about inflation but it’s not quite time to buy protection

    Thanks ERN always a great read on a brilliant analysis

      1. It’s a country that made 1m Uighurs “disappear” so I wouldn’t be surprised about anything. 21m will be hard to hide. But 10k or even 100k people could have easily disappeared to make the numbers look better.

    1. Thanks Gasem. Very insightful. I also stress that I never proposed giving out that malaria drug willy-nilly. It has to be done with the extreme caution as you describe. I’d be in good hands if you were my Dr.!!! 🙂

      As I’ve said before, I’m a bit more hopeful about the situation. We might be reaching the R0<1 in the U.S. soon. But I'm not sure either because I completely agree with you that the Chinese are cooking the books and maybe a second wave could come soon.
      I wouldn't be surprised if the Chinese make some people with symptoms simply "disappear". I've seen videos of people being tested positive with the temperature gun and then dragged away kicking and screaming. I think people there know that not all sick people are being treated in the nice clean hospitals, but some are likely taken away and never seen again. Not by their friends/relatives and certainly not in the COVID-19 statistics. I wouldn't think that a full 21m people disappeared that way, but the number will be substantial.

      As always, thanks for stopping by and your your awesome comments! 🙂

  36. Agree with the chloroquine assessment. Some of the skepticism comes from the scientific history of this drug, it’s been around for decades and has had some very promising in-vitro data on a number of RNA viruses. It never worked out in people, however, and has at times also shown to have detrimental effects in vivo.

    The dose response is such that the efficacious concentrations needed are too high in humans. Also, mechanistically SARS-Cov-2 attaches to cells via ACE-2, chloroquine works via de-acidifying endosomes which is a different pathway, hence mechanism of action unclear.

    Well-designed clinical trials will tell, see an overview of some key ones for several drug candidates here if interested:

    Current guidelines here, mostly clinically focused but also useful summary of evidence on some of the drugs currently under investigation:

    1. what I read is chloroquine opens a zinc ionophore allowing an increase in intracellular Zn which interferes with transcription. I also read the Chinese experience included the addition of zinc as a supplement. I did a little more research and apparently hydroxychloroquine has a very low incidence of EKG changes consistent with arrhythmia, but again we don’t know it’s relationship with the heart in the face of an infected patient.

  37. ERN, this may be a topic for another post on the state of the world, but would be interested in your opinion from the Economics perspective.

    It seems one of the things that work against us in the U.S. currently is the thin social safety net. Lots of people do not have paid sick leave, lack health insurance or meaningful unemployment benefits. Hence this situation hits many especially hard and makes us more susceptible to health risks as a society. Lots of employees still go to work sick and infect others each and every flu season because they can’t afford to stay home if sick, lose their jobs or are not receiving appropriate medical care etc.

    Compared with other countries whose social systems are less Darwinian, it seems we are at a disadvantage in this pandemic. It seems beyond the obvious business benefit to reduced social services there also a very clear cost to society.

    What is the consensus opinion in cold economics terms among social scientists on this topic and is there an economical case to be made for increasing social services in the U.S.?

    1. Interesting idea!
      The worker protection is a two-edged sword. The U.S. economy has always been one of the most dynamic. People may lose their jobs but more companies will survive and will hire everyone back before too long. In Europe you might see a lot of companies be forever harmed by not being able to cut costs. “Euro-sclerosis”

      Also, I’ve been noticing, with horror, that the famous worker protection laws in Europe are being eroded, certainly in Germany. You’d be surprised about the emergence of a new “working poor” class there.

  38. I saw an article today that the UK scientists suggest China may have under reported severity by 15 to 40 times. If so, reminds me of the lessons from Valery Legasov on Chernobyl.

    “To be a scientist is to be naïve.
    We are so focused on our search for the truth,
    We fail to consider how few actually want us to find it.
    But it is always there, whether we see it or not.
    Whether we choose to or not.
    The truth doesn’t care about our needs or wants.
    It doesn’t care about our governments, our ideologies, our religions.
    It will lie in wait for all time.
    And this, at last, is the gift of Chernobyl –
    Where I once would fear for the cost of truth,
    Now I only ask; what is the cost of lies? ”
    – – – –
    “Every lie we tell incurs a debt to the truth. Sooner or later, that debt is
    paid. That is how an RBMK reactor core explodes. Lies.”

    Valery Legasov (1936 – 1988)

  39. We hit a perfect storm in South Africa with this virus. 21 day lockdown, with the army and police implementing martial law. No going outside except for groceries and medical.
    Economy weak already, this will destroy whats left.

    No money to support unemployed or closed businesses. Unemployment was 25% pre virus, will reach 40% by next month.

    On top of that, currency devalued by 30% in a week, and a rating downgrade to junk by Moodys.

    I suspect a full collapse, probably famine/civil war soon. Tricky to flee when all the planes are down and the borders are closed.

    Yeah SWR at 3% or 4% is kind of pointless when you die in a country collapse.

    Ironically, we did a full economic shutdown at 300 cases. Guess how much impact the actual virus has had? We’ve just recorded a 2nd,
    Yes 2!! death in a critically ill 75 year old cancer patient.
    I’m not being cruel when I’ve already buried 3 people below 40 in the past 12 months from cancer, but in a country where millions die annually from Aids and TB already, this virus shutdown that collapses an economy is a complete overreaction to the natural order of things and government will cause collateral damage way beyond what the virus ever could.

    1. Wow, I hadn’t heard that. Sorry to hear about the situation in SA. Beautiful country, awesome people: I visited once and definitely want to come again.
      Let’s hope that the 21d shutdown is all you need and you can restart the economy soon!

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