As Chart #1 shows, the peak of financial panic was indeed March 18th, and the bottom of the stock market came just a few days later, on March 23rd. Since then the Vix index has subsided from the mid-80s to now 45, and stock prices have rallied almost 20%. The market is looking across the valley of despair, and seeing lots of lights at the end of this tunnel: 1) the end of the seasonal flu season, 2) the emergence of very effective therapeutic drugs (e.g., hydroxycloroquine, Azithromycin, zinc), 3) the rapid development of multiple vaccines, 4) declining new daily cases and new daily deaths in most of Europe, and 5) declining rates of feverish illness throughout the US (see below). Furthermore, increasing numbers of analysts are looking at the covid-19 data and realizing that the lethality of the virus is far less than originally feared; in that regard, Dr. Fauci’s guess a few weeks ago that it is about 0.2% (as compared to 0.1% for average flu and original estimates of 4-5%) seems better and better.
The “experts” who in February were predicting millions of deaths in the US and Europe accomplished only one thing: they scared the bejeezus out of presidents, governors, and local health officials, who then found it easy to persuade the public to surrender their liberties. We must pray that this process reverses quickly.
Chart #2 comes from Kinsa smart thermometers around the country. I highly recommend looking at your own county using this map (healthweather.us) and its many different views. In this particular view, we see that the northeast is no longer a hot spot, and neither is Washington nor California. Spreading rates of illness are largely confined to the Rocky Mountain states. Most of the country is seeing a decreasing number of people with fevers. This doesn’t necessarily correlate to cases of covid-19, but it’s likely pretty close. Where there are a lot of people with fevers these days (flu season), it’s quite likely that a lot of people have the flu or novel coronavirus. I highly recommend exploring this website and its many charts.
Chart #3 shows the data from Richmond County, NY, formerly one of the nation’s “hot spots,” with by far the greatest number of covid-19 cases of any region. The observed (orange) line plots the percentage of people in the county with fevers, while the blue dots represent the expected number of people with fevers given the experience of past years. Illness rates normally decline at this time of the year as flu season slowly wears off. Note that the number of people with flus started to (atypically) increase in early March (shortly after De Blasio in late February encouraged New Yorkers to enjoy themselves outdoors), but then started to decline beginning in March 21st, and is almost back to “normal” levels. This strikes me as good evidence that telling people to stay home has dramatically reduced the number of people catching the virus. Extrapolating from this, we should probably soon see a topping out of new cases in the NY area (indeed there are already preliminary signs that this is occurring), followed in a week or so by a sustained daily reduction in new deaths. In other words, this chart might well be the best leading indicator we have that quarantines are producing results, and that they are in fact “flattening the curve.”
Meanwhile, as Chart #5 shows, the Fed’s aggressive efforts to add liquidity to the financial system—in response to a sudden and dramatic increase in the demand for money and liquidity—almost immediately resulted in a $800 billion increase in the M2 money supply, most of which went to bank savings deposits and demand deposits. The abundance of liquidity will go a long way towards easing the pain of the sudden onset of depression-like conditions.
Yet the market overall is still extremely risk-averse, as seen in Chart #6. Treasury yields have almost never been so far below the prevailing rate of inflation. The world is so desperate for security that investors are willing to accept deeply negative real yields on Treasuries (which now guarantee that investors will lose purchasing power) in exchange for their safety and liquidity.
I am very hopeful that local authorities begin to lift their lockdown orders as soon as possible. I think the covid-19 stats are going to support that, and I think the public will soon grow increasingly restless as it become obvious that deaths from this virus turn out to be far, far less than they were told. The only sensible policy at this point is to keep vulnerable citizens (the elderly and infirm) under lockdown while allowing most other people to resume their normal lives while—of course—continuing to observe some level of social distancing and frequent hand-washing. I suggest you watch the first 8 minutes of this video, in which Professor Knut Wittkowski says the pandemic is already over. Parents (and those who are easily “triggered”) take note: he is adamant that closing our schools is a bad idea.
UPDATE, from my comment yesterday on this post. I think it’s important to give this more visibility:
My prediction: in the fullness of time, we will come to realize that the shutdown of the US economy was the most expensive self-inflicted wound in the history of mankind.
UPDATE: Here’s a bit more from Prof. Wittkowski. He is truly an expert at epidemics, and it’s a shame his voice was not heard until recently. If you haven’t seen the video I linked to above, at least read this summary. If we don’t reopen schools soon, we will miss the chance for the US to develop herd immunity, and that will expose us to another wave of the virus in the Fall, with yet more deaths of the elderly and infirm predominating.
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