Coronavirus, what we know so far and markets

Posted: June 18, 2020 in Uncategorized

What we know so far is that Coronavirus started in China, but in reality in September/ October 2019.

There are several facts that point to this theory.

In September /October the hospital traffic in Wuhan increased by over 100% year on year (383 cars/day October 2018 versus 714 October 2019, satellite images).

Probably it escaped from the Wuhan Institute of virology that was studying SARS and Coronavirus. The prove in that it is that in October that institute had an emergency closure in early October 2019. In a facility with 300 person all phone communication went dark (disappeared ) for 2 weeks. It is not a confirmation, but no mobile activity between 7 October and 24 October in a place with over 300 people indicates an issue to me.

Why they were playing with the virus (the Americans were doing the same until 2014 as a bioweapon until President Obama closed the studies)s as deemed too dangerous) it is not known.

The main theory is that China wanted to catch up in the vaccine development with the US and trying to create an HIV vaccine. This is supported by the fact that some anti HIV treatment are partially effective against Covid-19.

Another theory that it was a weapon development – this is supported by the fact that mainly the virus seems to cripple the system and not a pure killer like Ebola. A warfare doctrine shows that for any “wounded” you take away 3 combatants – so much more important to cripple than to kill.

China knew, but adopted a “if we go down you go down with us” – this is proven by the fact that China closed the internal flights from Wuhan 2 weeks before closing international flights.

Western governments reacted late and then got taken over by panic.

They did reacted late as from early January everybody knew of a pandemic and the incoming Chinese holidays.

They panicked as the Coronavirus modelling was wrong (they did assume no change in habit) and the model produced different outcome if run on different computers (yes for real!). Even in Australia the lowest ICU bed prediction was 5,000 – the max ICU bed occupancy has been 23 April at 98. Even in UK, Italy and US the predictions were off by 90% (UK death prediction 500,000 vs real 36,793 at 25th May). There are some studies that compulsory mask wearing and better management of old people facility would have been as effective as lockdown.

The virus is losing potency – probably it will transform into an annual flue -like event (and flue kills almost as Covid-19). Vaccine will be found as too many AI – pharmaceutical companies are studying it. SARS vaccine was never found as SARS disappeared and so the research funding.

The market – as I told my clients the March 2020 as striking resemblance to the 2008 crisis, but in a superfast move (practically the Nov 2007 – Mar 2009 in a single month.

Following that script we should be in the June -July 2009 period where the market went sideways (with violence) and then powered up into Christmas.

So practically this period will stay from a Fed hard put around 2,900 – 2,950 and a roof 3,250/3,300 until the end of July.

Then bold prediction – in 2009 the market powered up 11% which would bring us to SP500 close to 3,600.

Fabio Ferro

Scala Private Wealth

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