Swan...

A black swan in markets is an event that has not occurred in the past, thus rendering useless risk management models based on historic data. Such a risk model would assume that all swans were white.

“First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility,” author Nassim Taleb wrote in his book "The Black Swan."

“Second, it carries an extreme impact.

Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable.”

In the case of the coronavirus, no one predicted a disease would cause more than 60 million people in China to be locked down during the Lunar New Year, the country’s busiest travel period, paralyzing the Chinese economy.

Horizon...

If the bear market that began in mid-February 2020 is average, the market will trade at a new all-time high in February 2023.

Whether you see this as good or bad news depends on your investment horizon. The prospect of three years without new highs will be disappointing if you’re a short-term trader who has been spoiled rotten in recent years by bull-market records being regularly broken.   

How long will it take for the market to recover from its bear-market losses and make it back to where it stood at its Feb. 19, 2020 high?

To find out what light history can shed on this question. Looking at the bear-market calendar maintained by Ned Davis Research, there have been 36 bear markets since 1900. In each case, measuring how long it took for the S&P 500 to subsequently claw its way back to where it stood when the bear market began.

The average across all 36 bear markets was just over three years. SO be prepared.

Epic-Center...

Europe has now become the epicentre of the pandemic," WHO chief Tedros Adhanom Ghebreyesus said in a virtual press conference on Friday.

"More cases are now being reported every day than were reported in China at the height of its epidemic."     

The virus, which first surfaced in China in December, has now killed more than 5,000 people, "a tragic milestone", according to Tedros. 

 The comments came as countries across the world tried to limit the infection's spread, tightening borders, closing schools and cancelling events.

Tedros said such measures could help, but stressed that countries needed to take "a comprehensive approach.

"Not testing alone. Not contact tracing alone. Not quarantine alone. Not social distancing alone. Do it all," he said.

Aggressive...

Canada has unveiled aggressive new measures to contain the coronavirus outbreak, shutting down parliament and advising against foreign travel, even as Justin Trudeau urged citizens to remain calm in a national address delivered from self-imposed quarantine.

“We have an outstanding public health authorities who are doing an outstanding job. We will get through this together,” said the prime minister, who has been in self-isolation after his wife, Sophie Grégoire Trudeau tested positive for Covid-19.

Officials announced a raft of new measures including closing parliament for five weeks and redirecting incoming international flights to a small number of airports as part of enhanced screening measures. The government also announced it will ban cruise ships with 500 people from docking in the country’s ports until 1 July – but stopped short of closing the borders.

Instead, the government has asked Canadians to avoid non-essential travel outside the country and to limit contact with crowds.

Sadness...

Balance...

As the U.S. battles to limit the spread of the contagious new coronavirus, the number of health care workers ordered to self-quarantine because of potential exposure to an infected patient is rising at a rapid pace. In Vacaville, Calif., alone, one case,  the first documented instance of community transmission in the U.S. ,left more than 200 hospital workers under quarantine and unable to work for weeks.

With the number of confirmed COVID-19 cases growing by the day, a continued quarantine response of this magnitude would quickly leave the health care system short-staffed and overwhelmed. The situation has prompted debate in the health care community about just what standards medical facilities should use before ordering workers quarantined  and what safety protocols need to become commonplace in clinics and emergency rooms.

Jennifer Nuzzo, a senior scholar at the Johns Hopkins Center for Health Security.

The correct response comes down to a careful balance of the evolving science with the need to maintain a functioning health care system.

While hospitals are supposed to be prepared for just such a situation, Nuzzo says, their plans often fall short. "Absent any imminent public health crisis, it may not be one of their priorities," she says.  

Outbreak...

A coronavirus is an invisible threat, and it is making vivid the shortcomings of our health care systems.

The world is a “a playground” for viruses like the novel coronavirus that causes Covid-19, infectious disease experts wrote last week in the New England Journal of Medicine. “We must realize that in our crowded world of 7.8 billion people, a combination of altered human behaviors, environmental changes, and inadequate global public health mechanisms now easily turn obscure animal viruses into existential human threats.”  

There is still a chance that the outbreak, which has now spread to six continents, will stall out. China’s willingness to impose draconian, unprecedented quarantines has bought everyone time.

But the outbreak should be a wake-up call one ignored with the less widespread outbreak of SARS in 2003 and the not-so-deadly flu pandemic of 2009 — about infectious threats that we face together and that exploit vulnerabilities associated with income inequality, health disparities, and our slowness to recognize threats.

Since the healthcare system can't absorb/treat a sizable sickness related to Covid, then the only alternative is to  shut down whatever we can. That itself will impact the  economics badly.   Just a thought. 

Sophie...

Sophie Grégoire Trudeau, wife of Canadian PM Justin Trudeau, has tested positive for coronavirus after returning from a trip to London, a statement from the PM's office says.

"She will remain in isolation for the time being. She is feeling well, is taking all the recommended precautions and her symptoms remain mild," it read.

The couple is now self-isolating.

Mr Trudeau is in good health and has no symptoms, according to his office, but will remain in isolation for 14 days.

There are no plans at present for Mr Trudeau to be tested for coronavirus.

"The prime minister will continue to fully assume his duties and will address Canadians]," his office said.

Cheering...

Many economists have tried to model the economic consequences of a pandemic. The CBO did a study in 2005 and 2006, modeling the impact of a 1918-sized flu pandemic on the economy. They found that a pandemic “could produce a short-run impact on the worldwide economy similar in depth and duration to that of an average postwar recession in the United States.” Specifically, a severe pandemic could reduce U.S. gross domestic product by about 4.5%, followed by a sharp rebound.

The CBO assumed, there would be demand-side effects, with an 80% decline in the arts and entertainment industries and a 67% decline in transportation. Retail and manufacturing would drop 10%.  The U.S. wasn’t prepared for a flu pandemic then, the CBO said, and it isn’t now.

“If a pandemic were to occur in the near term, the options for the United States would be limited to attempts to control the spread of the virus and judicious use of limited medical facilities, personnel, and supplies,” the bipartisan agency concluded. “In the longer term, more tools are potentially available, including an increased treatment capacity, greater use of vaccines and antiviral drug stockpiles, and possible advances in medical technology.”

Other simulations of the U.S. and non-U.S. economies have found similar economic impacts, although that research came at an earlier stage of globalization, when our economy was not quite so reliant on far-flung supply chains.  Just a thought.

Quarantines...

Much of the immediate economic impact of a pandemic can be traced to the efforts to contain it, rather than from the effects of the disease itself. As we attempt to quarantine those who might spread the disease, we shut down a lot of economic activity.

The quarantines might be the only way to slow the spread of COVID-19, but they could also hamper our response. Our health-care system also relies on vital inputs for medicines, supplies and equipment produced all over the world, including China and other hard-hit Asian economies. And of course we rely on the free flow of thousands of other goods and services.

The potential for disaster is sobering. The economies of the world are extraordinarily resilient, yet extraordinarily dependent upon each other in a crisis. Sadly, the things we need most to get us through this — wise leadership, global cooperation and clear thinking — are harder to find than a surgical mask.