Bronte Capital

Coronavirus – getting angry

Posted: 19 Mar 2020 02:51 AM PDT

I am going to give you a few stylised facts about severe acute respiratory
syndrome coronavirus 2 and the data.
First – no matter what you say about the Chinese data – and the Chinese
data was full of lies at first – China has controlled the outbreak. Shanghai,
Beijing, Chongqing are all functional mega-cities with no obvious health
catastrophes.
The virus has been managed to very low infection rates in Singapore and
Taiwan. The numbers (completely real) in Korea show a dramatic slowdown
in infection.
Korea has not shut restaurants and the like. The place is functioning. But it
has had rigorous quarantine of the infected and very widespread testing. It
has complete social buy-in.
China tests your temperature when you get on a bus or a train. It tests you
when you go into a classroom, it tests you when you enter a building. There
is rigorous and enforced quarantine.
But life goes on – and only a few are dying.
In Singapore nobody has died (yet) though I expect a handful to do so
before this over. This is sad (especially for the affected families) but it is not
a mega-catastrophe.
There is a story in the Financial Times about a town in the middle of the
hot-zone in Italy where they have enforced quarantine and tested everyone
in the town twice. They have no cases.
The second stylized fact – mortality differs by availability of hospital beds
A. Coronavirus provided you do not run out of hospital beds probably
has a mortality of about 1 percent. In a population that is very old
(such as some areas in Italy) the mortality will be higher. In a
population that is very young base mortality should be lower. Also co-
morbidities such as smoking matter.
B. If you run out of ICU beds (ventilators/forced oxygen) every
incremental person who needs a ventilator dies. This probably takes
 your mortality to two percent.
C. Beyond that a lot of people get a pneumonia that would benefit
from supplemental oxygen. If you run out of hospital beds many of
these people also die. Your mortality edges higher - but the only
working case we have is Iran and you can't trust their data. That said
a lot of young people require supplementary oxygen and will die. If
you are 40 and you think this does not apply to you then you are
wrong. Mass infection may kill you. Iran has said that 15 percent of
their dead are below 40.
I will put this in an American perspective with a 70 percent strike rate by the
end.
Option A: 2 million dead
Option B: 4 million dead
Option C: maybe 6 million dead.
By contrast, Singapore: a handful of dead.
China has demonstrated this virus can be controlled. The town in Italy has
demonstrated it can be controlled even where it is rife.
Life goes on in Singapore. Schools are open. Restaurants are open in
Korea.
The right policy is not “herd immunity” or even “flattening the curve”. The
right policy is to try to eliminate as many cases as possible and to strictly
control and test to keep cases to a bare minimum for maybe 18 months
while a vaccine is produced.
The alternative is literally millions of people dying completely unnecessarily.
What is required is a very sharp lockdown to get Ro well below one – and
put the virus into exponential decay.
When the numbers are low enough – say six weeks – you let the quarantine
off – but with Asian style monitoring. Everyone has their temperature
measured regularly. Quarantine is rigid and enforced. You hand your phone
over if you are infected and your travel routes and your contacts are
bureaucratically reconstructed (as is done in Singapore). And we get
through.
And in a while the scientists save us with a vaccine.
The economic costs will be much lower. Indeed life in three months will be
approximately normal.
The social costs will be much lower.
Every crisis has its underlying source. And you want to throw as much
resources (and then some) close to the source. Everything else is
peripheral.
The last crisis was a monetary crisis and it had a monetary solution.
This is a virus crisis and it has a virology solution.
Asian Governments are not inherently superior to ours – but they have done
a much better job of it than ours. The end death toll in China (probably much
higher than stated) will wind up much smaller than the Western death tolls. I
do not understand our idiocy.

John

PS. Longtime followers of this blog will know that I have rarely publicly
agreed with Bill Ackman. I do here. This minimises economic and social
cost of the virus. I am not sure the stock market bounces hard with a
rational policy, only that it minimises the damage.

I regard the current course of English speaking democracies (other than

New Zealand) as mass murder by the political elite. I think history will regard
it that way too.

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