Sunday, March 22, 2020 10:33 AM
Starting the first blog off with thoughts regarding a recently finished book, before getting into a more complex topic.
Dutch Girl: Audrey Hepburn and Word War II by Robert Matzen contained some amazing stories regarding how the war played out in general population in Arnhem, Netherlands and other towns in the area. The details brought it to life, including the resistance and family members who supported the Nazis. Interesting was how Hepburn would not portray Anne Frank because it was too close to home for her. They were they same age during the war and Hepburn felt Anne’s diary deep down.
In the final parts of the book Matzen writes about how Hepburn was involved in relief efforts in Somalia in the early 90s. The experience shook her deep enough it may have impacted her health. Hepburn had been involved with UNICEF for awhile, after going to several countries supporting relief efforts she said Somalia was the worst she had seen. Her involvement with UNICEF was due to her experiences in WWII. The details in the book made me rethink when I blowoff celebrities involved in charitable causes. Many, or most may not be for their public relations, but actual concern.
As always a short commentary on a book cannot get across what the book itself does. I highly recommend this book. The Audible pdf contains some maps and photos. The map helps and the photos let you see the actual people but the book gets top marks without them.
Please note when I say ‘book’ now and in the future they are unabridged audiobooks, unless noted.
Reading a bunch of historical books it is impossible to miss the sometimes sporadic impacts on historical figures of diseases, and sometimes not sporadic. Some you know about going into the book, like those covering President Wilson and WWI. Others were a bit of a surprise like the pandemic during President Eisenhower’s administration. Some impacts of the diseases hit cities or towns or just a few members of the family. From Ben Franklin and Thomas Jefferson through current time. Going through a lot of history I could not help but see the impacts of inoculation, immunization and vaccinations. The early practice of inoculation was much riskier than modern vaccines by a cosmic amount. However I will stop here because this posting is not about that topic which was involved in the recent Maine referendum…back on track…
Going through history the current COVID-19 pandemic is of no surprise. In many ways it appears that as deadly as this is, a fatality rate under 5% is better than the 90% fatality rate of the Marburg virus outbreak in 2004-05. Some basic math out of the way:
Basic Flu fatality rate is 0.001%
If you worked in a factory with 350 employees and everybody got the flu this year. Nobody would die (statistically speaking). If it happened next season the odds increase. If in the third straight years all 350 people got the flu, there would be one death. (0.001x1,050= 1.05)
COVID-19 at 3.4%
Same factory but just ONE year is 12 deaths. (0.034x350=11.9)
Same example as basic flu over 3 seasons (0.034= 35.7)
COVID-19 at 1% is 3-4 deaths in first year versus none with the flu.
The infection rate is a very crucial part of the math. This is why the shutdowns in society and social distancing are of utmost importance.
You have seen the math and can Google population data to apply it around to understand the practices being currently put into place. Not that they could have in WW1, but if in the Spanish Flu pandemic (which looks like it actually started in Kansas) or in the 1957-58 Asian Flu pandemic, had these practices been in place, hundreds of thousands to millions of deaths would have been avoided.
I wish people would stop treating math like they are beinbg graded on a final exam in high school. As a tool it helps in understanding things happening around you.
The volatility in stocks and bond markets
If the current situation where to happen under any administration the markets would dive. Volatility would be on the extreme side. I am sure in the future there will be papers and books written by economists studying the causes before, during and after this crisis. These are some items I am pretty sure will addressed: corporate debt and government credibility.
Corporate debt was setting records in the year leading up to the crisis. There are many reasons for this. One is cheap money, when combined with the corporate tax cut led to many companies rebuying their stock which would push up share prices. However the debt is on their books, which looks bigger when the stock prices took a dive.
Another item that added to the corporate debt pile was U.S. oil production. Oil had not broken out of the $40-60 range it had mostly hung in for several years, the marginal companies who had taken on a lot of debt to survive the drop in oil prices 4-5 years ago were under pressure from investors to show some returns before they put more money into the mix. Add in the Saudi-Russian price war began around the same time as the spread of the virus the impact was magnified. Marginal oil companies had no place to go for cash because investors were watching and reacting the impacts showing in South Korea and northern Italy. So the fall in oil companies values, amplified the initial stock index tumble. Expect some bankruptcies and mergers in the oil industry.
A small point of wonder was over how the market had not really reactd to China shutting down their industry for weeks. As the data has rolled out, it is what I expected. Was amazed that U.S. markets were barely reacting to it. I think this data stirred up some of the selling in the middle of the U.S. market rout.
I need to give these a more in depth dive, but pretty sure it is a topic I will get back to in future posts.
The final item, while more abstract is probably the most important: credibility.
On the corporate side we saw similar impacts in 2008 in the banking industry when the market started to see how leveraged the banks were in their holdings. This time it is a different group: the government.
The importance of the word itself. Any market economy at the base depends on credibility. Without it every transaction is suspicious, sometimes to the point where they almost cease to happen. The top insurance holder on the market and societal credibility is the government. Those that regulate laws (human behavior) backstop society from constant fear of …almost everything. This administration has over the last three years shredded credibility in more ways than an internet blog can address. However with that already in play, how they acted in the opening weeks of this crisis amplified it to the markets even more. When members of the same political party are contradicting each other, there is no sign of a steady reliable hand steering the ship. When they are also contradicting scientists working for the government it is amplified even more.
Do not be distracted by the war of rhetoric between the U.S. and China. Simply look at how this administration acted once everybody knew what was happening in China.
I can go on about this much longer, but I am not an economist and the dust has not settled yet. Remember this in a decade when the books are out to look for who mentions credibility and see how they explain it.
However people barely read business news and even fewer read books from economists.
A Recent Personal Event
I was the motorist who drove to up the hit and run victim on Rte 220 in the early morning hours of March 12. I will write about this in the future when enough time has passed.
Proofreading this has me wondering if I will post often with less topics in each post but a deeper delve into them, or simply see what happens at each time. My big hope is to post often will resharpen my writing skills.
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