My daughter is enjoying a semester abroad in Rome, a metropolitan area of 4.3 million people with virtually no coronavirus cases and a sponsoring college which has urged but not required students to leave.
Only 350 miles away, in the area around Milan, cases have increased 10X in the past week – with 2,036 cases, 52 deaths (2.6%) and 149 recoveries (7.3%) as of last night. The markets have decided the coronavirus isn’t that big a deal. But, think about it.
That 2.6% mortality rate is important. But, what about the fact that one person has died for every three who recovered? Shouldn’t we be concerned? I sure as hell would be.
If 2-3 of the students at your kid’s high school died, would you shrug it off? If one died for every three who recovered, would you feel any better about it? Would you send your kid to school tomorrow? What if 2-3 coworkers died? Would you be eager to return to the office, hold meetings there, frequent the local sandwich shop or pub?
Over 20,000 people ride the train every day from Milan to Rome. What are the chances that no one who was infected traveled back to Rome, not realizing they were infected and contagious? Remember, you can be infected and contagious for weeks without even showing symptoms.
I think about these things as more and more cases are being discovered and schools shut down in the US, even though testing has been laughably inadequate. The latest occurred in metro New York, where 21 million people are suddenly very nervous.
The market has totally missed the boat on the seriousness of the coronavirus, egged on by politicians who think their primary duty is to keep optimism and stock prices elevated. It is not. Their primary duty is to do everything in their power to help protect those whom they represent. Period. Full stop.
The market has not grasped the reality that neither the Fed nor its counterparts can cut interest rates low enough to make the coronavirus go away. This won’t necessarily stop them from trying, which means the algos could continue to rally enthusiastically – even as doubts increase among carbon-based investors.
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