The Chinese Bat Virus
1,770 deaths worldwide
70,000 confirmed cases in China
From Jim Rickards’ Strategic Intelligence
posted this morning - Monday, February 17, 2020
CORONAVIRUS CURVE GOES VERTICAL. WALL STREET COMPLACENCY EVAPORATES
Markets have been following the spread of the coronavirus (CoVid-19) closely for good reason. The Chinese economy, second largest in the world, is shutting down in stages. In affected areas, streets are empty, stores are closed, planes and trains are not running. Over 60 million people are “locked-down,” which means they are confined to their homes and can only leave once every three days to buy groceries (if they can find any due to hoarding).
The effects go far beyond China because of global supply chains. If Chinese factories are closed, they are not buying components from South Korea, Japan and Germany. Likewise, if Chinese factories are closed, they cannot supply finished goods to U.S. buyers. The result is that factories and sales are also slowing in developed economies.
Still, markets are taking a measured view. Some epidemic models showed the disease would peak in April 2020 and tail off quickly from there. The other assumption was that any dip in the Chinese economy would be made up later in the year so that the total impact would be minimal when viewed on an annual basis. All of those assumptions were blown-up in a matter of minutes in the late evening of Wednesday, February 12.
As described in THIS ARTICLE, 14,840 new infections were reported in a single update, moving the total from 45,000 to about 60,000 cases. This did not mean that 14,840 people were infected in one day. It meant that China suddenly became more transparent and decided to include existing cases using more valid diagnostic criteria. But, the change did move the official statistics closer to the amount shown in a leak on Tencent (that showed about 150,000 infections) and a Lancet (a preeminent medical journal) model-based inputs that also estimated about 150,000 cases.
The bottom line is that the disease is worse than Wall Street believed, the economic damage is greater, and it will take longer to get the disease under control. Stock prices fell after the news was reported. As more bad news dribbles out, that stock price adjustment has further to fall.
