Coronavirus Update 5/19/2020

By Whitney Tilson

Tuesday, May 19, 2020
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1) In a recent email, I wrote: 

I got a lot feedback to my last email about the terrible failures of Mayor Ignore My Experts, Governor Political Games, and President Drink Bleach… 

… At least de Blasio and Cuomo eventually woke up and started doing the right things, as opposed to our bleach drinking Dear Leader… 

One reader responded:

Seriously. Trump has been far worse than Diblasio and Cuomo? How dumb do you have to be to make that assertion, Tilson? 

My response: Trump deserves every bit of the (incredibly restrained) criticism I’ve leveled at him… and a lot more. His and his administration’s botched handling of this crisis, which continues to this very day, will go down as one of the greatest failures in presidential history.

I feel free to say this because I’ve also been scathing in my criticism of two leading Democrats, Mayor Ignore My Experts and Governor Political Games (and see below for even more)… 

Some folks emailed me to take issue with my giving certain politicians pejorative nicknames, to which I reply: a) they’re rooted in genuine criticisms; b) I’m just having fun and venting a bit, so lighten up; and c) I deliberately aim to write things that make my readers spit up their coffee at least once a week. Heaven forbid I be boring – there’s way too much of that out there! 

Anyone who doesn’t like my political jabs or name calling… well, there’s a reason why I include an unsubscribe link at the beginning of every email… It makes no difference to me whether this email list shrinks a tad from the 4,486 people on it currently. (In my long experience, however, the more provocative I am, the larger and more engaged my readership…)

2) Speaking of which, here are comments from two readers:

I echo the sentiment on the amazing work you have been doing and sharing so selflessly. I’ve shared many of your articles with my wife, co-leader of the MSKCC COVID taskforce, who has in turn shared with many of her colleagues. While they are well informed they are still overwhelmed by the day-to-day and miss some news flow. They are opening up the hospital to some chemotherapies and surgeries that had been delayed. Your tracking of COVID cases is really helpful for her to think about how to proceed with the hospital’s opening, and how to prepare. Thank you!

On Cuomo vs. de Blasio, I don’t think we could have talked half as much about Cuomo and Newsom half as much as we do if there had been clear/decisive/inspiring/effective leadership from the President of the USA. Regardless, I think that a lot of the political jousting that happened between Cuomo and de Blasio was due to mistrust. If you remember, Bloomberg and Cuomo always worked well together, especially with Sandy, because they respected each other. You can see how much Cuomo and Bloomberg continue to work together as evidenced by the tracing program. Cuomo has every reason to be mistrustful of lazy, ideological and spineless de Blasio. As an example, remember how de Blasio left Cuomo out in the cold on the Amazon deal after AOC and the radicals starting complaining and lying about it. The list goes on…

If you go into battle, even making a tough stock-picking decision, you want to do it with the best people that do the best work and give you the best advice and ability to execute. When you can’t trust your team, your response will clearly be slower and less effective. That was the case between Cuomo and de Blasio. I am certain that we will witness new political friction as New York City opens up. De Blasio will want to raise taxes to get out of the hole, while Cuomo understands that additional taxes will drive people away and stifle a recovery. I’m picturing a few tough years for New York City, made worse by de Blasio.

And:

Thank you for sharing so many of your “reader responses” — I find it fascinating to see what other people are thinking about and how they are articulating their perspectives. Interestingly, I do see some merit in the idea that those who want to take more risk should be allowed to. It is unfortunate that many of the people who feel that way are ranting about liberal conspiracies and accusing you of bias. It makes their arguments less compelling to me and I fear it puts them at greater risk of committing confirmation bias types of mistakes. 

It is a shame that we are going through all of this pain as a country but we were never able to truly lock down properly in a way that could have all but stopped the virus. On March 15 if every single person had stayed in their home for 14 days the virus would have stopped infecting new people. At the time such a thing would have seemed unnecessarily extreme but in retrospect had we done so we likely would be back to nearly normal by now.  And of course now that it has become political the chances of us doing a proper lockdown have become fantastically slim.

3) (This and #5 are excerpts from my daily investing email, which I just sent out. If you’d like to be added to it, simply enter your email address here.) 

I think we’re going to see choppiness in the markets in the next few months before they head higher by the end of the year. I think a 10% pullback from here is likely, and wouldn’t be at all surprised by a 20% pullback – which would put the S&P 500 Index at 2,363. 

But I would be surprised if the S&P 500 declines 25.8% from yesterday’s close, at which point it would be below its intraday low of 2,191.86 on Monday, March 23 (a day, incidentally, in which the headline of my daily e-mail was: Why this is the best time to be an investor in more than a decade).

We are indeed in uncharted waters in so many ways – with the economy in another Great Depression, as much as a quarter of our workforce unemployed, and budget-busting spending to try to offset the massive hardships that millions of businesses and people are facing.

But I don’t expect such a severe pullback, given that we’re winning the war against the coronavirus. As you can see in this chart, both new cases and deaths per day have plateaued and started declining:

While this isn’t the sharp decline that many other countries are seeing, it’s clear that we are winning the war against the coronavirus. 

4) Europe is also winning the war, as the attached report from J.P. Morgan shows. Excerpt:

Over the weekend (May 14 – May 17), Germany, Spain and Italy’s active case

counts are falling strongly, and France’s active case count is now starting to

slowly decline. The UK’s active case count continues to rise as the UK does

not report patient recoveries. On daily new infections, despite Germany, Italy,

Spain and France relaxing their lockdowns there is no evidence of an increase

in the level of infections. Daily new infections are below1k in Germany,

France and Italy and the levels continue to fall each week. Spain’s infections

are falling too but more slowly and are now in the range 1.2k to 2.1k and the

UK is also slowly falling now in the range 3.1k to 3.6k. Overall there is no

evidence of an increase in cases related to the moves to reduce the severity

of the lockdowns so far.

5) Ah, but what about the much-feared “second wave” of infections, hospitalizations, and deaths as we reopen our economy? 

I can’t rule out this grim scenario altogether, but I don’t think it’s likely based on the early data my team and I have compiled from three states that are in the vanguard of reopening: Texas, Florida, and Georgia. As you can see in this chart, both the number of new cases and deaths are flat to down over the past month (with the exception of rising cases in Texas, but this is due to a big increase in testing):

This bodes well as the rest of America reopens – and it’s good news for the stock market…

(One reader notes, however: “The reason Georgia looks ok is most businesses resisted the open order. Most gyms and health clubs are STILL closed, most movie theaters did not open, and many other stores are still closed.”) 

6) While the national trends continue to look good, Dr. Scott Gottlieb highlights some states that are experiencing increased cases, hospitalizations and deaths in a series of tweets here. Here’s the first one:

He concludes:

In most states the number of cases are either declining, or flat. Only a handful of states are showing expanding cases based on common models. We expect cases to grow as mitigation is withdrawn; we need to watch closely to make sure the increases are manageable and containable. 

Nationwide, recent models suggest doubling time is about 45 days and Ro is around 1.10; evidence of an epidemic that slowed dramatically. While it’s still expanding, it’s doing so at much slower pace and hopefully there’ll be a seasonal effect in the Summer that slows it further. 

7) Some New Yorkers apparently have even shorter memories than I could have imagined: People flock to NYC-area bars, beaches as ‘quarantine fatigue’ intensifies. If we’re not careful, we’re going to get hammered again… Excerpt:

Lockdown-weary New Yorkers ditched the distancing to get social instead this weekend — transforming parts of the Big Apple into a raucous, late-season Mardi Gras.

Yet the city’s COVID-be-damned attitude was nothing compared with the scene in Belmar, NJ, a beach popular with Staten Islanders and Brooklynites.

Huge crowds waited shoulder-to-shoulder on the boardwalk for their turn to buy beach badges.

“The line for beach badges was like four non-socially distanced blocks long,” tweeted Jarrett Seidler, who described the boardwalk as “obscenely packed.” 

Outside popular bars on the Upper East Side, the Upper West Side, the East and West Villages and in Greenpoint, Brooklyn, The Post found booze hounds arriving for the takeout cocktails and then staying — and staying — to sip drinks on packed sidewalks and soak up the lively scenes.

While the risk for those under forty appears to be low based on recent studies, this a serious disease that leaves many with permanent lung damage.

8) Sadly, some folks are looking at the success we’ve had flattening the curve – if you call nearly 92,520 deaths (and still rising by ~1,000 per day) success! – and saying that we overreacted. This is what one reader wrote to me:

The lockdown is the worst mistake in the history of mankind. Your “cure” is exponentially worse than the “disease.” You are completely incorrect in your views. Stick to stock market advice.

This chart/meme shows better than I can the error in such thinking:

9) Shame on me for not being more focused on contact tracing, which is a critical tool in the fight against the coronavirus. Here’s an excellent article on it by ProPublica: You Don’t Need Invasive Tech for Successful Contact Tracing. Here’s How It Works. Excerpt:

Contact tracing is a public health strategy that has been used successfully to combat infectious disease outbreaks across the globe, from the 1930s, when it helped get rampant syphilis under control in the United States, to the 2014 Ebola epidemic in West Africa.

Fundamentally, contact tracing works by tracking down all the contacts of an infected person and then taking appropriate action to break the chain of transmission. In practice, that action will vary depending on the nature of the disease — obviously, you don’t need someone to self-isolate at home and have groceries delivered to them if a disease can only be transmitted sexually. 

The current coronavirus has been particularly tricky to contain because patients can be contagious a few days before they display symptoms, and some infected people may never show symptoms at all. Furthermore, the time between the onset of symptoms from one case to another is estimated to be quite short, around four days. All these characteristics have helped the virus spread rapidly — and that means that tracers have to move very quickly to reach patients and their contacts in order to cut off new branches of infection.

Experts tell me that contact tracing is the key to safely reopening the economy.

“This narrative has emerged that either we lift all our social distancing measures and let the virus burn through the population, or we hunker down at home forever and let the economy collapse, but that is a false choice,” said Dr. Crystal Watson, an assistant professor at Johns Hopkins Bloomberg School of Public Health and lead author of a white paper on how the United States can scale up its abilities to identify and trace COVID-19 cases. 

“We have this tool — contact tracing — and if we spend some effort and funding on actually building up our capacities, we can control transmission, get back to work much more safely and avoid unnecessary loss of thousands of lives.”

10) Governor Cuomo made a huge mistake here: New York Sent Recovering Coronavirus Patients to Nursing Homes: ‘It Was a Fatal Error’. Excerpt:

After mounting criticism and thousands of deaths in New York nursing homes—including several individual facilities that have lost more than 50 residents—the state on Sunday reversed the mandate, which said nursing homes couldn’t refuse to accept patients from hospitals who had been diagnosed with Covid-19. New York now says hospitals can send patients to nursing homes only if they have tested negative for the virus.

The policy before the U-turn is one of several decisions the state made that are now coming under fire, as New York’s death toll tied to nursing homes rises, to 5,398 presumed and confirmed fatalities as of May 12, more than any other state and a significant part of New York’s total deaths.

“The state has failed to protect the lives of the most vulnerable members of our community,” said Ron Kim, a Democratic member of the state Assembly whose Queens district has seen many nursing-home deaths. “The fact we maintained and pushed Covid-positive patients into facilities that were not equipped to handle them, it was a fatal error.”

11) Some things I am reading:

Best regards,

Whitney

Whitney Tilson

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About Whitney Tilson

Prior to creating Empire Financial Research, Whitney Tilson founded and ran Kase Capital Management, which managed three value-oriented hedge funds and two mutual funds. Starting out of his bedroom with only $1 million, Tilson grew assets under management to nearly $200 million.

Tilson graduated magna cum laude from Harvard College with a bachelor’s degree in government in 1989. After college, he helped Wendy Kopp launch Teach for America and then spent two years as a consultant at the Boston Consulting Group. He earned his MBA from Harvard Business School in 1994, where he graduated in the top 5% of his class and was named a Baker Scholar.

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