Badger
Thinks s/he gets paid by the post
- Joined
- Nov 2, 2008
- Messages
- 3,424
This stuff is loose and spreading in Asia, Italy, Malaysia, possibly Africa, probably Hawaii, and I would guess in the lower 48. Sounds like a pandemic to me. The media and gubmint have done their best to keep the party going as long as possible ("just the flu, bro"), but I think the herd is starting to get the vague idea that all is not right. Pretty soon I think they are going to start to panic at real or imagined packs of wolves closing in. When that happens, the very overvalued market is going to have its reckoning.
As far as real world outcomes, there is a lot we really do not know. However, just with what we can see now, this new plague spreads very easily, consumes huge amounts of healthcare resources, and in the event that it becomes widely spread the death rate will rise a good bit because the healthcare system will quickly be overwhelmed. With that very definitely in the range of possible outcomes, how do we value equities? If quarantines and the cancellations of anything involving large groups of people become widespread, what will that mean for the economy? Exercises for the reader. I would suggest that merely including these possibilities in the range of outcomes should result in a materially lower price for risk assets.
I don't care to speculate on the truly awful outcomes (this mutates into something a lot worse). Just based on what we can see now, the valuation of the equity market mystifies me. I think cruise lines, hotels, airlines, movie theaters, restaurants, etc. and all at a huge risk if there are either enforced restrictions on gatherings of people or the populace (like me and many board members) simply starts avoiding these sorts of situations. If you don't see the world that way, I would welcome hearing your arguments why the sun will continue shining regardless of this new plague.
+1 but I would speculate that the virus would be able mutate into other strains. Happens with "flu" all the time. Also since there isn't a way to combat this effectively (yet) and the methods of transmission are not completely understood there is no telling how rampant this could be.
Cheers!