Bird Flu Redux Redux - Financial Only

[Craig]

I've reviewed prior posts on this subject, and note recent news from Turkey (yes, the irony ...) regarding another worrisome outbreak ... possibly signaling human-to-human transmission (see http://www.timesonline.co.uk/article...974978,00.html.

In a nutshell, commentators indicate this strain may have a 50% fatality rate, Vs. 10% for the 1918 pandemic.

Assuming for a moment that the risk could be very real and very serious, IF that is the case, what investments will do well?* [Let's avoid debate on this thread about the potential, the seriousness, etc. ... let's just brainstorm what investments, what if.]

[NOTE (especially for lurkers) ... we all recognize that should such an event take place, the human suffering, and likely personal losses all of us could suffer would greatly eclipse any, any economic considerations.* By the same token, everyone on this board decided long ago to take personal responsibility for the financial affairs and well-being of their families.* We do no one any good by ignoring the economic implications of such a disaster.]

In an earlier thread, Martha mentioned companies that sell air filters (such as 3M) could prosper, while the tourism industry migbt be better to short.

Focusing only upon the investment / economic implications, what does an investor do?

Brainstorming with you:

• Health care - would such a pandemic be the tide that lifts all health care boats ... what stocks would prosper.* Or, in such a catastrophe, would likely governmental involvement destroy the investment potential?
• Energy - fewer people traveling, general slowdown in economic activity would seem to depress energy prices, and provide perhaps temporary respite from the trend.
• Consumer goods - durables would seem to suffer
• Precious metals - perhaps further strengthening, with a general decline in currencies during a health crisis?
• REIT's - fewer transactions, depressed rents due to lower economic activity?
• Bonds - depressed economic actifity would likely strengthen bonds ... perhaps the big winners?

Just a few ideas to get some discussion going ... frankly, I'm sure some of you have already done the math, and are much more in tune with the alternatives.* I'm here to study.

Having said all of this, it is certainly possible, perhaps probable that this will go the way of Y2K, the coming currency collapse and so on ... and be similar to the prediction of 20 of the last 3 recessions.* We'll see.* Just interesting to noodle.

[sgeeeee]

Between mad cow and bird flu, maybe you need to find a way to invest in pork.

[Craig]

So, this would be the proverbial "when pigs fly ...", but these would be mad, flying pigs?

OK, I'll put you down for going long on pork bellies ...

[brewer12345]

Charles, I suspect that treasuries and precious metals would probably rally. Roche (maker of tamiflu) would probably do well. Gealthcare could go either way, as an awful lot of the patients showing up at the hospitals might well end up being charity cases/bad debt.

Personally, I think that if you are genuinely worried about bird flu, it probably makes a lot of sense to buy soem puts as insurance. QQQQ index puts probably aren't a bad idea, since I've no doubt that high flying equities would blow up in a pandemic. I personally own some puts on RGC, the largest US theatre chain. I think they have business issues, but I also note that they would be dead meat if there were a serious flu pandemic. Last time anything like this, the theatres were shut down by the gummint, not that people were especially eager to congregate in public places anyway.

[Craig]

Makes sense.* The challenge I always have with puts is their very time-sensitive nature.* How do you deal with the problem that you may be right, but you're off 6 months, and by then your puts have expired, out of the money?

Let me clarify ... I'm not sitting here worried, and I'm not boarding up the windows and doors. This is, hopefully, an intellectual exercise. That posture could change pretty fast depending upon the news, of course.

[Nords]

Quote:

Originally Posted by Charles The challenge I always have with puts is their very time-sensitive nature.

Yeah, I hate that time pressure too.

The other option is to go short and hope that your borrowed shares stay that way long enough to cover. RGC is about 10% off its high now and an American case of H5N1 would push them over the cliff even faster than Netflix.

The other entertainment industries would also get hammered-- for example hotel chains, cruise lines, and theme parks. The airlines wouldn't be very happy, either, and Hawaii's tourism industry would basically dry up & blow away. BTW one theory of H5N1 propagation is that it'd initially enter the U.S. through a tourism crossroads like these islands.

Finance companies are at risk if their clients are too busy trying to stay healthy to bother with trivialities like mortgage payments. I'm short First Fed Financial with its huge portfolio of interest-only mortgages.

I'm still trying to figure out how the medical-supply companies would benefit. And frankly, Brewer, no offense but I hope STON doesn't take off...

[Marshac]

Quote:

Originally Posted by brewer12345 Roche (maker of tamiflu) would probably do well.*

From what I have read about the existing neuraminidase inhibitors, oseltamivir (tamiflu) is particularly susceptible to the development of viral resistance whereas zanamivir (relenza made by GlaxoSmithKline) is not.

Here's a quote from a NEJM story-

Quote:

Why is resistance developing to oseltamivir? Several years ago,structural analysis predicted that aspects of the chemical structure of oseltamivir (not present in zanamivir) could facilitate the development of resistance mutations that would permit neuraminidase to function, allowing drug-resistant virus to survive and propagate. This prediction is now being validated by clinical data.

This would seem to sugest that perhaps a different drug will be needed (and stockpiled) if oseltamivir resistance becomes more widespread.

I have not done this yet, but it might be worth researching who the players are in vacceine prodiction research, and see if there is an investment opprotunity there. Once a new method is found, i'm sure it will quickly replace the current method of production (chicken eggs).

[brewer12345]

Quote:

Originally Posted by Charles Makes sense.* The challenge I always have with puts is their very time-sensitive nature.* How do you deal with the problem that you may be right, but you're off 6 months, and by then your puts have expired, out of the money? Let me clarify ... I'm not sitting here worried, and I'm not boarding up the windows and doors.* This is, hopefully, an intellectual exercise.* That posture could change pretty fast depending upon the news, of course.

I view a modest amount of cheap puts as insurance. If they go out worthless, my overall portfolio has done well enough that I don't care. If they expire in the money, they cushion some of the pain. With the big payout at RGC, I'd rather buy puts than be short and pay away dividends.