The WHO has a dedicated page for everything you want to know about Corona Virus, including daily updated Situation Reports:
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A Viral Market Meltdown: Fear or Fundamentals?
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Nice articleā¦
How will the coronavirus outbreak end?
(1)At this point, itās very unlikely that the outbreak will be contained to a few locationsā¦
(2)Pandemics end when the virus doesnāt have enough susceptible people to infect (when herd immunity becomes strong.)
(3) A vaccine for eradication
(4) Itās unlikely that this coronavirus will disappear completely. It may become seasonal, or lives in reservoirs, or mutate in futureā¦who knows? Life goes onā¦
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#Coronavirus: 106 quarantined in Maharashtra since January this year, says state health department
Will Govt. open the can of worms now in the form of coronavirus news, given the Trump visit is done with?
So, good news that people are being checked and safely isolated as precaution. Zero positves so far! Business as normal. These Karnataka figure are worse!
Reply to the above tweet:
There are two reasons that COVID-19 is such a threat. First, it can kill healthy adults in addition to elderly people with existing health problems. The data so far suggests that the virus has a case fatality risk around 1%; this rate would make it several times more severe than typical seasonal influenza and would put it somewhere between the 1957 influenza pandemic (0.6%) and the 1918 influenza pandemic (2%).
Second, COVID-19 is transmitted quite efficiently. The average infected person spreads the disease to two or three others. Thatās an exponential rate of increase. There is also strong evidence that it can be transmitted by people who are just mildly ill or not even showing symptoms yet. This means COVID-19 will be much harder to contain than Middle East Respiratory Syndrome or Severe Acute Respiratory Syndrome (SARS), which were only spread by those showing symptoms and were much less efficiently transmitted. In fact, COVID-19 has already caused 10 times as many cases as SARS in just a quarter of the time.
Then there is the question of funding. Budgets for these efforts need to be expanded several times over. Billions more dollars are needed to complete Phase III trials and secure regulatory approval for coronavirus vaccines, and still more funding will be needed to improve disease surveillance and response.
https://www.fda.gov/news-events/press-announcements/coronavirus-covid-19-supply-chain-update
Coronavirus (COVID-19) Supply Chain Update
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Going by the statistics in public media - number of recovered cases are more than 15X the number of deaths reported, even if you beef up the number of deaths by 10X, the recoveries are still way higher. As of date we do not have a vaccine/antidote for the same, the mortality rate is lower than other similar episodes seen in the past.
Let us take the statistics for AIDS - globally 38 million people have AIDS and the mortality rate here is much much higher, we still do not have a cure for this but this hardly worries the market. AIDS is going to kill and affect more people than the coronavirus as of today
Number of road fatalities in the world - number works out to 3000+ per day. Once again this does not worry the markets much
Then what exactly are the markets worried about?
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The equity market run in the developed countries has extended for a long period of time, especially in the US. On the back of such a run, people are just riding it out and look for a reason to sell once a respectable correction sets in. Self fulfilling loop plays out
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The rate of spread of the coronavirus (or any respiratory syndrome) is much higher, hence a large number of people can potentially get affected. To a good extent the reaction is justified but to what extent? Nobody knows
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Economic activity contraction - A couple of quarters but the recovery will be very swift when that materializes. The purchasing power or the desire to spend/produce has not gone down, it is just getting postponed to a later date. This is neither a balance sheet crisis nor a demand crisis.
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Out of the normal bounds of central bank activity - Every time the markets have had concerns since 2008, central banks have come in announcing liquidity lines and have stabilized markets. The current problem is not related to debt, credit or balance sheets. Markets know that another round of QE or lower interest rates may not change the ground reality since the trigger is non economic, this falls outside of the usual template. Which kind of explains why central banks have been silent so far
Long story short - based on pure numbers the market reaction looks unjustified. However when behavioral factors are at play seeing things purely through the lens of logic is illogical 
From a behavioral and game theory point of view this has become a self fulfilling prophecy, so it makes sense to have an allocation plan and stick to it. At some point of time investors by the sidelines may start jumping in, you would not want to be the first person jumping in for obvious reasons. By next week we will know if the panic is set to continue, if the markets get off to a bad start next week - this can get uglier before it gets better.
But once things get better, we are possibly looking at bond yields that are much lower than they have ever been for the past 10 years, a normalization of consumption & production to pre coronavirus levels. The carry trade and lower interest rates hypothesis that was missing in the US for the past 2 years will start playing out again. Home owners become very happy when interest rates are low, a 30 year mortgage might turn out to be only slightly more expensive than renting a place out.
If one can ride this frenzy out, possibilities look very interesting.
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Canāt compare HIV with corona virusā¦
The reason why people are panicking for corona virus is not for mortalityā¦ But fear of infection spreadingā¦ Nobody wants to get infected with the dreaded virusā¦ Itās like a stigmaā¦
And the big problem here is the infectivity rateā¦
HIV doesnāt spread by faeco oral routeā¦ Where as corona doesā¦
So itās like comparing orange with applesā¦
Also when u talk of AIDS U R talking only about the full blown diseasesā¦ What about the people who are plain infected and not in AIDSā¦ ie HIV +veā¦
Anyways my plain vanilla point here why corona is causing panicā¦
- itās become a pandemic.
- still no definitive cure for itā¦ All said cure as of now has not stood the test of trial.
- mode of spread which itself becomes impossible to control cause route is faeco oral routeā¦
- stigma attached to the nameā¦
- fear mongering that is happening in social mediaā¦
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After the initial panic and frenzy, people will take it in their stride and learn to live with the coronavirus. The mortality rate is not alarming. The questions in my mind are how deep is going to be the cut in the market or are we done with the correction, will it be a U or V shaped recovery. Waiting on the sidelines for the market to stabilize to deploy some funds. Do not expect this virus outbreak to cause any structural downturn in world economy.
We need to see this as yet another correction, if we focus too much on the reasons for the correction we will be missing the forest for the trees (yet again). I would encourage you to extend the thought process and drill down into what possibilities it could result into for economies, markets and investors. Think economics, behavioral finance and game theory - not just why this virus is unique and scary.
VP is an investing forum where the end goal is to optimize the return we make from our investments.
As a practical investor you can compare anything and everything, opportunity cost does not distinguish between the source of the cost/loss - whether it be economic or health. Cannot compare apples and oranges is textbook microeconomics stuff where one starts with the basis that apples and oranges have different utility functions. Most investment decisions one makes have the same target utility - to optimize return. During corrections only one question is asked - how much has my portfolio gotten hammered? The reason for the corrections can be the coronavirus, the GFC, a currency crisis or the US bombing the hell out of some middle east nation.
As an investment professional I am many a time surprised by the ability of highly intellectual and successful CEOās to revert to their most primal emotional state during corrections, all textbook constructs get kicked to the curb when the going gets tough. When these highly educated and otherwise smart people see a negative return in their portfolio the predictable reaction is - I would have made 6.5% in FD. So much for asset classes, utility functions and modern portfolio theory They donāt matter when they are supposed to matter the most
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There are always good and bad news/indicators in the economy, but Mr. market treatment to them varies from time to time, depending upon underlying and upcoming catalysts. Catalysts are broadly unknown in nature and once unveiled are quickly discounted by markets.
When govts compromises budgets to stimulate economies, markets respond fairly in anticipation of earnings recovery and pickup in demand.
Good News: Govt support
Bad News: Compromising budgets
Positive catalyst: Earnings hope
However, if earnings does not catch-up due to emergence of some other negative developments in parallel i.e. banks, corporate collapses, scams, frauds etc. then markets reaction would be negative.
Negative Catalyst: Scam, fraud, corporate collapses etc.
Therefore, markets generally soars/tumbles not due to known positives/negatives but unknown elements of these developments or new unknown developments.
Coronavirus impact:
Initially, when the disease broke out, markets skipped it as they were rejoicing on central banks liquidity push, rebound in high frequency indicators, strong earnings in US etc (positive catalysts), but off late the big unknown of coronavirus unfolded (negative catalyst) - a global contagion from local - ensuing meltdown in global markets.
Recently , a biotech company in US (Moderna biotech) claimed to have made trial version of vaccine (potential positive catalyst) but concurrently European widespread occurred (negative catalyst) weighing more than vaccine news.
The virus outbreak could go either way, may or may not settle by summers, a tested vaccine might or might not be created in near future, other negative (middle-east tensions escalation, poor economic indicators, business collapses etc.) or positive (less-than-anticipated economic impact) catalysts could prop up.
One negative catalyst emerged todayā¦Chinaās manufacturing and services PMIs slumped to record lows. However, it is partially known to markets, given factories are temporarily shut due to the virus. Future unknowns are more negative economic datum.
Most important thing here to note is to avoid discourse from investment policy and maintain variant perception.
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Let me some insight into why health establishment across are worried.
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Case fatality: Having a low case fatality is both a good and a bad thing. Itās good that in way that mostly children, people with low immunity, old age etc would be having a potentially fatal illness. But infections which have low fatality are also notoriously difficult to prevent spread as a person who has a mild illness will keep on spreading the disease. Infections which are highly fatal are usually self limiting as before the index case spreads the person may actually die. You might have heard of cases where people with milder disease have spread infections to 10-15 people before they are cured this doesnāt happen with highly fatal disease. Also this viral infection is behaving differently in different people. Itās seems to be killing people who are not necessarily immunosuppressed ,so we still do not know full pathogenecity of this infection.
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Modes of spread. Doctors are still not sure about modes of spread . It may be air borne( In which case face masks would be effective). Fomites spread ,(Through clothes, hands ,items of daily use) . Reports also suggest that the virus is alive in non living objects for 7-10 days. This probably is the most worrying aspect. Most viruses die within minutes or hours when outside a non living host. Thatās why you hear reports of China sanitizing their currency notes.
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Initially it was believed that this spread of infection would be curtailed once summer season starts (probably by March or April) as corona virus group of viruses usually spread in cold conditions only. Thatās the reason why India is naturally protected. But spread of infections to European countries is worrisome as most have cold conditions throughout the year so they may start becoming resorvior of infection. So with the start of new winter season countries like China may be infected again in a reverse manner from European countries. Thatās the reason why you hear that China has also started quarantining visitors from European countries.
So whatās the way forward
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More rigid quarantine practices throughout the world may be needed . The cost implications from such practices would be huge.
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Wait for herd immunity to develop. That will definitely take time.
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Wait for some vaccine to develop. Again will take lot of time. And ofcourse cost implications of providing vaccine to almost everyone accross the world or in technical terms till both herd immunity and vaccine work together to prevent spread.
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Lastly now the world knows it was anyway a bad idea to have just 1 factory (China ) in the world so the cost implications of shifting some part of manufacturing outside China to countries like like India, Vietnam, Thailand etc may be huge. Not sure how many of these countries would be a good replacement.
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Assuming that the market enters into deep bearish phase due to the effect of Corona virus and results in global economy slowdown, what are the companies with solid business one can look at? A watchlist is appreciated which furthers way for research
Industries I donāt think will be impacted are
- Apparel
- Asset management
- Banks
- Broadcasting
- Cement - not sure
- Sugar
- Credit services
- Retail
- Capital markets
- FMCG
- Insurance- general not life
- Internet content
- Mortgage finance
- Package food
- Telecom
- Tobacco and beverages
- Utilities
Preferably market leader or runner up
Avoid MNC in these industries
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Ideally, watch lists are prepared during bull markets not during market corrections. Corrections are time for action i.e what to and how much to add. Further, to be a successful investor, it is better to cherry pick companies that are structural growth stories and not event-driven plays.
Nothing last forever. This too shall pass. One should maintain equanimity in the markets.
I was looking at meat , seafood and shrimp related companies. Venkys waterbase and Avanti feeds come to our mind. Chicken consumption has drastically reduced in our country cause of the virus scare. On preliminary look venkys looks like a good opportunistic bet. The company has decent sales growth with retiring debt. Chicken is the most famous and common meat consumed in our country. Second is Avanti feeds where the shrimp prices and export volumes both have contracted. China is the main importer and their new year is the time when most of the consumption happens. So their is a double whammy of a poor festival season along with low prices along with a dull season ahead. Personally I think after few months normal pattern of meat and shrimp consumption should resume maybe with little more regulation. Personally me being a animal friendly person and a vegetarian, I will not invest in them. But those who donāt have such limitations might dig a bit deeper.
Regards
Divyansh
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https://www.accessdata.fda.gov/scripts/drugshortages/
Drug shortages newly reported by the US FDA might be an good source of information to track and potentially identify opportunities.
Any reasons why we have not had any interest among members for Venky;s, we never had detailed discussions nor do i see it in anyoneās portfolio. They have decent return ratios, decent growth, positive FCF and i see their FMCG kind of products( chicken sausages in BB). One issue that i remember when going through this company some time back was the large number of related party transactions.