Written by The Investor
17 March, 2020
Many governments are not being transparent about what is going on as a result of COVID-19. There are enough unknowns without having to deal with ‘fake news’ and government cover ups.
At the time of writing the official number of COVID-19 cases worldwide reached 167,457; now larger outside of China. Total deaths are almost 6,500 and recoveries are estimated to be 76,045.
Our friends at Nucleus Wealth have analysed the available data and conclude that the numbers do not add up.
“A month ago, we focused on the difference between data from Hubei, the rest of China and the rest of the world. Our thesis was the Chinese data appeared to be manipulated, and so we would get much better information from the rest of the world. As more countries report data, the rest of world data is now also showing data quality issues (too). Iran, Italy and China have data issues.
“The chart below illustrates just one of the many reasons why we are skeptical of Chinese data. Multiple countries have far more cases per person than any individual province in China outside of Hubei:”
It seems that the country with the most reliable data is South Korea given the high case count and the vast number of tests performed.
If we were to adjust to the Korean standard it would suggest 250,000 cases in China, three times the official numbers. The issue with other countries like Iran and Italy is not just their lack of transparency but also their lack of resources, and their ability to test and treat patients. The Italian health system is completely overwhelmed.
According to The Lancet an international weekly general medical journal founded in 1823 by Thomas Wakley:
“There is now grave concern regarding the Italian national health system’s capacity to effectively respond to the needs of patients who are infected and require intensive care for SARS-CoV-2 pneumonia. The percentage of patients in intensive care reported daily in Italy between March 1 and March 11, 2020, has consistently been between 9% and 11% of patients who are actively infected. The number of patients infected since Feb 21 in Italy closely follows an exponential trend. If this trend continues for 1 more week, there will be 30 000 infected patients. Intensive care units will then be at maximum capacity.”
Unfortunately Australia seems to be following the Italian lackadaisical approach with people moving around freely and potentially infecting each other without knowledge. Schools remain open for the moment and infected people are self- isolating even if they “just got off a plane”… Some have been reported to have ‘gone shopping” when they should have been self-isolating!
More than 60 percent of the country could become infected with Coronavirus, with up to 150,000 deaths expected under the Morrison government’s worst-case scenario.
“This is an infectious disease,” said the PM. “The more we can do to separate people and stop the disease spreading, the better. The death rate is around 1 percent. You can do the maths.”
France recently went into lockdown. All gas, electricity and water bills, along with rent, are being suspended indefinitely. “If you want to aid us, you must stay at home and avoid contact,” AAP reported on the French President.
Can you imagine what property owners are thinking about free rent indefinitely!
Other countries who are putting people in ‘quarantine camps’ for fourteen days (Vietnam), are forensically tracking sources of infections (South Korea) and have locked down whole communities for months (China).
“The China approach has worked. It’s been a draconian clampdown and takes away quarterly growth,” (suggesting that it will only be a 3 month slowdown) says Philipp Carlsson-Szlezak, chief economist for Boston Consulting Group in New York. “The high frequency data in China, the proxies for movement for goods and people, all of those see a nice pick up (China is coming back online in terms of factory production), and the infection rate curve of new cases in South Korea has bent downward. (good job South Korea!)”
On the ground accounts in Beijing look like: school closures, no movies, no malls, no non-essential businesses open and most bank branches closed.
With all the talk of ‘flattening the curve’ by the Australian government there is little real action to date to stop people moving around and spreading the virus.
Australia’s hospitals are in a relatively poor position as are Italian and US hospitals. It seems that the Asian countries hit by the SARs virus in 2003 were better prepared for the COVID-19 pandemic… Once bitten?
The number of new cases is accelerating and will do for some time
The dramatic rise in numbers in Italy and Iran are well documented and are not surprising given the weak state of those countries. These are examples of countries that have not managed the situation well.
Iran in particular is covering up their true number of COVID-19 cases. Rumours of mass graves being prepared outside Qom are supported by satellite pictures of 300ft trenches just near the local cemetery.
What is most important is that the growth in new cases slows
There is a view that the virus is a cold climate phenomena with claims that COVID-19 cannot survive in warmer temperatures. The case data supports this view and suggests that Australia is less likely to experience an outbreak of the sorts of Italy, Iran and China.
Many are talking about COVID-19 being just another strain of the flu virus, but according to the New England Journal of Medicine it is much more dangerous for a range of reasons:
“There are two reasons that COVID-19 is such a threat. First, it can kill healthy adults in addition to elderly people with existing health problems. The data so far suggest that the virus has a case fatality risk around 1%; this rate would make it many times more severe than typical seasonal influenza, putting it somewhere between the 1957 influenza pandemic (0.6%) and the 1918 influenza pandemic (2%)… [this flu killed more than 20 million people]
“Second, COVID-19 is transmitted quite efficiently. The average infected person spreads the disease to two or three others — an exponential rate of increase… In fact, COVID-19 has already caused 10 times as many cases as SARS in a quarter of the time.”
China went from 1,000 patients to 80,000 in a matter of roughly six weeks, mostly all of it in a self-contained, quarantined state of Hubei.
Italy went from around 20 cases three weeks ago to over 25,000. What will define the significance of this virus will be the response by governments to contain COVID-19. The Spanish flu of 1918 infected one third of the world’s population. Should this be the case in 2020 there would be 2.5 billion cases and 25 million deaths assuming a 1% mortality rate.
While an unlikely number, it is a threat that governments are very focused on right now.
Please consult your advisor for specific recommendations. This general advice does not take into account the client’s objectives, financial situation or needs as we do not and cannot provide personal advice. Any views written about in this article are the views of the author who has no holdings in those companies or investments mentioned in this article.