Stimulus, and Reconsidering Total Shutdown

It’s good news Wednesday.

Yesterday the Dow Jones Industrial Average rose 11.4%, its biggest gain since 1933.

Pessimists note the comparison date and point out the long slog of the Great Depression that followed the last such bear-market bounce, but time in the green provided investors with a nice break.

Then, last night, the Senate and White House agreed on terms for a $2T fiscal stimulus plan. It is the largest economic stimulus package in recent American history, and is expected to pass within days. It includes:

<> $1,200 checks to many citizens

<> $500B for industries and municipalities

<> $367B in loans for small businesses

<> $150B for state and local stimulus

<> $130B for hospitals

President Trump said he would like much of the American economy reopened by April 12, but received pushback from medical experts who say the still-rising case count makes such an aggressive schedule unwise.


On the virus front, The Kelly Letter has maintained through this pandemic that the key metric to watch was the death count, not case count. This is finally getting broader acknowledgment.

America is considering a shift from full shutdown to the targeted remedies that have worked well in Japan and South Korea.

Stanford University School of Medicine epidemiology professor John P.A. Ioannidis wrote in Stat on March 17 that we may be dealing not just with a once-in-a-century pandemic, but also “a once-in-a-century evidence fiasco … [which] creates tremendous uncertainty about the risk of dying from Covid-19.”

After running through various possibilities from the thin data set available, he conjectures:

“If we assume that case fatality rate among individuals infected by SARS-CoV-2 is 0.3% in the general population—a mid-range guess from my Diamond Princess analysis—and that 1% of the US population gets infected (about 3.3 million people), this would translate to about 10,000 deaths.

“This sounds like a huge number, but it is buried within the noise of the estimate of deaths from ‘influenza-like illness.’ If we had not known about a new virus out there, and had not checked individuals with PCR tests, the number of total deaths due to ‘influenza-like illness’ would not seem unusual this year.

“At most, we might have casually noted that flu this season seems to be a bit worse than average. The media coverage would have been less than for an NBA game between the two most indifferent teams.”

Making the rounds is a proposal by Dr. David Katz at the Yale-Griffin Prevention Research Center. In a New York Times op-ed last Friday, he cited South Korean data indicating that “as much as 99% of active cases in the general population are ‘mild’ and do not require specific medical treatment.”

He suggested that rather than snuff out every candle of our economy, “we could focus our resources on testing and protecting, in every way possible, all those people the data indicate are especially vulnerable to severe infection: the elderly, people with chronic diseases and the immunologically compromised. Those that test positive could be the first to receive the first approved antivirals.”

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  1. K. Lacey
    Posted March 26, 2020 at 6:02 pm | Permalink

    Jason, I have no medical expertise, but I do know that testing for infection was long delayed in the U.S. Therefore, we will get a large spike as testing is rolled out and as more people ask to be tested. The hope is that the graph of infected people will lessen it’s slope after the initial rush of testing is completed. I hope and pray that is so. Certainly our government could have done better, quicker and sooner – but that is all water over the dam. We all need to manage what we can and hope it is enough. In a few weeks that stats should be more informative – we just must wait.
    As for the Kelly Letter, you have been a calm voice in a chaotic world. Please continue and thanks.

  2. Doug Woollard
    Posted March 26, 2020 at 6:09 am | Permalink

    Hi Jason
    A few comments on your note this morning. There is a difference between the flu and COVID-19. None of us have immunity and there is no vaccine. As a 67 year old l I have generations of immunity to the various flu viruses built up augmented by annual flu vaccine. With Covid-19 I have none of that making my risk of serious infection somewhere in the 15% range. Luckily I don’t have an underlying condition which could exacerbate my situation, but many do. So different from the flu, which attacks the very elderly and causes significant loss of life in that age group often in care homes, COVID-19 has serious consequences for a broader age group of 55-65 plus. The age of many of your readers I would guess.

    It is my view that it is not the virus that is the primary concern, it is our various governments’ response to it that is the issue. Citing the NY Times article below describing the approach South Korea took

    I cannot imagine the US public or many politicians accepting these measures, e.g. electronic monitoring in peoples homes, until it is too late for them to be effective. The real risk of the virus is what is happening in Italy where they acted too late and the population, unlike S. Korea ignored the restrictions. Now the hospitals in Italy are overwhelmed and people are dying at a much higher rate than the virus would have caused if the number of cases were low. The same occurred in Wuhan.

    So in the US with a mix of responses between states and delayed action federally along with millions with no health care the response from government will determine how bad it is for the economy. Lack of or delayed response will exacerbate the virus impact and the resulting economic impact.

    Where I live in British Columbia the government has adopted many of the measures described in the article about S. Korea with some variations for circumstances. In 2-3 weeks we will know whether they have worked.

    In Canada we are the proverbial mouse with our neighbours to the south being the elephant. What our neighbour does has a huge impact on us. Our provincial government was demanding the closure of the US border for days after we went into an essential service response to the virus because of what was happening in Washington state. In my town we are a tourist destination for Americans as we are only a ferry ride away. When we were all being asked to work from home, Self-isolate if ill and not travel we were still seeing US tourists visiting. But our federal government had to negotiate for days with the US to reach an agreement to close the border to non-essential travel while maintaining essential trade.

    If Canada’s provincial and federal governments are successful in their common strategy for combatting the virus we may come out like S. Korea, but if the US has an uncontrolled outbreak our economy will be severely damaged as will the US.

    As an opinion leader I would encourage you to not downplay the viral risks. They are high for some groups and reading your piece today some could decide they don’t need to follow the medical advice which was so crucial to success in S. Korea.

    Doug Woollard

  3. Justin
    Posted March 26, 2020 at 3:15 am | Permalink

    Jason, this needs to stop.

    The commonly reported statistic is the Case Fatality Rate (CFR) which measures deaths / total reported cases. The CDC notes that, based on this formula, the CFR will be significantly lower than the actual mortality rate because a high percentage of the cases are not yet resolved. If we look at the numbers overall as of today (2 PM EST, 3/25/2020), there are 453,000 confirmed cases, 133,000 of them being resolved (320,000 still active), and 20,500 deaths.

    When you’re skydiving, you don’t check off “parachute worked” until it’s actually opened. For those 133,000 people who have reached an outcome, 15% of them are dead. That’s the current mortality rate.

    There are likely many others who have been infected, never tested, and have recovered. If we go ahead and triple the cases of “recovered” patients, that still puts the death rate at 5.7%.

    Further, China actually responded well and built hospitals for the dramatically increased demand. Their mortality rate dropped accordingly. Italy did not have this response and their numbers are far more dire: 9,462 recovered vs. 7,503 dead, for an unbelievable 44% mortality rate. Even if ALL of their currently infected patients recover and none die, they’ll have an 11% mortality rate.

    Currently, the US has a 68% mortality rate, though reporting of recoveries is slow due to the incredible lag in processing of the tests.

    Those are the facts. The only positive in your article is the speculation that only 1% of the population will be infected. That’s 3,310,000 people in the US. If we use that optimistic mortality rate of 5.7%, that’s 165,000 dead. That’s a number using an optimistic spread rate and an optimistic mortality rate.

    Please stop sending speculation to your readers. Present facts.

    • Posted March 27, 2020 at 5:29 pm | Permalink

      People suggesting a lower mortality rate are no more engaged in speculation than people suggesting a higher one. The high number of undiagnosed cases are what gives the Oxford team a more optimistic outlook.

      From Wednesday’s Financial Times:

      Oxford epidemiologist Sunetra Gupta lead a team of researchers at Oxford University in a modeling study which suggests that the virus has been invisibly spreading for at least a month earlier than suspected, concluding that as many as half of the people in the United Kingdom have already been infected by COVID-19.

      If this is the case, fewer than one in a thousand who’ve been infected with COVID-19 become sick enough to need hospitalization, leaving the vast majority with mild cases or free of symptoms.

      With so many in the U.K. (and potentially the United States) presumably infected, so-called “herd immunity” could kick into effect, dramatically limiting the number of deaths modeled by Ferguson and company.

  4. Ronald Schindeler
    Posted March 26, 2020 at 2:40 am | Permalink

    The fearmongers are still at it even in this thread. It’s over folks. HYDROXYCHLOROQUINE is taking the lead in affecting an end to this pandemic. Praise the Lord.

    I have been buying the bottom since I heard the news over a week ago. Thank you Mr. Kelly for comforting me in my purchase of URTY. I believe you made a reference to a lateral move after I made my purchase 3-13-20.

    Happy trading all. And thank you Mr. Kelly for your hard work keeping us mindful in these chaotic times.

  5. D Ball
    Posted March 26, 2020 at 1:24 am | Permalink

    Doctor in NYC is seeing miracle healings using chloroquine, 500 patients have now had their symptoms reversed! FDA just gave off-label approval for chloroquine which has been used since 1947 for malaria. TEVA has promised to donate 10 million chloroquine tablets as fast as possible. In the meantime, where I live there is a major uptick in suicide calls to our crisis lines. With chloroquine we are on the mend. My grandkids are returning to Liberty University which is opening this week. We all need to get back to work, your suggestions are perfect, and the media needs to stop weaponizing this crisis.

  6. He Who
    Posted March 26, 2020 at 12:35 am | Permalink

    I support Warren’s comments. While there is a temptation to see this as a debate re: “half full/half empty”, the “empties” have a reason to prevail. The occurrence of ‘ground glass’ in lung mri’s and the speed and severity of the progression to fatalities still far too unknown/unexplained to simply leave this as an exercise in statistics. Consider further the mutation potential from 99% mild to 95% mild. The statistical analysis fails in the face of the unknown paths forward. There are multiple “states” (think crosstabs) for every individual: Uninfected, Uninfected but exposed, Infected without unknown accelerators, Infected with known accelerators but in a low percentage class (age), etc etc etc. We are still compiling the “known unknowns” and it is – from a health management perspective – extremely narrowminded/shortsighted to compare the known economics against the “unknown unknowns”. On a planet of fiat currencies and unbounded debt, the marginal damage from managing the economic knowns with further liquidity injections pales against the potential from ignoring a burning fuse for what could be a decimation bomb.

  7. Warren Licht
    Posted March 25, 2020 at 9:06 pm | Permalink

    For full disclosure, I am a physician – primary care doctor on the “frontlines”. We as a profession are ill-equipped more than any military that went into a “real” war. Our “war” is far worse than any other war as the enemy COVID-19 is truly invisible and we have been given inadequate equipment to protect ourselves and our patients. This government has failed us so greatly that I am not so sure I would trust anything they say going forward relating to this pandemic whether it be healthcare or financial information that they are talking about. Our president clearly values money over human lives.

    I am not sure we should make any conclusions about this pandemic until we are on the other side of the curve of cases. Our response as a country will go down as one of the worst public health disasters in our history. The cases per capita will be very high compared to the rest of the world. Our total deaths will be higher than the rest of the world. Our decisions to let people die based on age and comorbidities will surpass what Italy had to do (in cities like New York and New Orleans) as critically ill patients’ needs will surpass the available resources. I think that Dr. David Katz’s theories are interesting but I believe it is way too soon to make such conclusions. The fatality rate of COVID-19 is 10-20x the rate of the average so though his ideas may be reassuring, I am not so reassured by the much higher fatality rate that we are seeing.

    I am happy to keep you informed as time goes on over the next several months.


  8. Posted March 25, 2020 at 8:57 pm | Permalink

    Tell that to the Italians 6820 deaths so far and counting

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