THE DAILY EDGE: 28 APRIL 2020

• Global coronavirus death toll could be 60% higher than reported Mortality statistics show 122,000 deaths in excess of normal levels across 14 countries analysed by the FT
• The number of new coronavirus cases in Germany fell below 1,000 for the first time in more than five weeks while the daily death toll picked up slightly, as the nation considers a further cautious easing of restrictions on public life.
• England and Wales reported 22,351 deaths in the week ending April 17, the highest number since comparable figures began in 1993, as the number of deaths in care homes soars. The number of registered deaths rose 21% from the previous week, the Office for National Statistics said on Tuesday. The figure was 113% higher than the average figure for the previous five years.
• Confirmed cases rose by 6,411 to 93,558. Russia now has more cases than Iran, which is the worst-hit country in the Middle East. The number of new daily cases was up slightly from 6,198 on Monday when Russia passed China in total registered cases.
• Antibody test results are emerging in Wuhan, the Chinese city where the pandemic is thought to have started in late 2019. A hospital in the city’s Qingshan district tested more than 1,400 people not known to have been infected with the coronavirus for the immune proteins that indicate past exposure to the pathogen. Almost 10% of results were positive in tests conducted from April 3 to 15, indicating individuals who probably recovered from an asymptomatic SARS-CoV-2 infection.
• (…) one survey in New York City found that 21 percent of residents may have COVID-19 antibodies already, making the city not just the deadliest community in the deadliest country in a world during the deadliest pandemic since AIDS, but also the most infected (and, by corollary, the farthest along to herd immunity). A study in Chelsea, Massachusetts, found an even higher and therefore more encouraging figure: 32 percent of those tested were found to have antibodies, which would mean, at least in that area, the disease was only a fraction as severe as it might’ve seemed at first glance, and that the community as a whole could be as much as halfway along to herd immunity. In most of the rest of the country, the picture of exposure we now have is much more dire, with much more infection almost inevitably to come. (NewYorker)
• In a fantastic survey published April 17 (“How does coronavirus kill? Clinicians trace a ferocious rampage through the body, from brain to toes,” by Meredith Wadman, Jennifer Couzin-Frankel, Jocelyn Kaiser, and Catherine Matacic), Science magazine took a thorough, detailed tour of the ever-evolving state of understanding of the disease. “Despite the more than 1,000 papers now spilling into journals and onto preprint servers every week,” Science concluded, “a clear picture is elusive, as the virus acts like no pathogen humanity has ever seen.” (NewYorker)

Trump Administration Has Enough Tests for 2% of State Populations The Trump administration is prepared to send all 50 states enough tests to screen at least 2% of residents for the new coronavirus, a senior official said, with the aim of rapidly expanding supplies in the coming weeks.

(…) In separate statements on Monday, CVS said it will expand its coronavirus testing operations, offering self-swab tests at as many as 1,000 of its pharmacy parking lots and drive-thru windows by the end of May, with the goal of processing up to 1.5 million tests a month. Rival Walgreen Boots Alliance Inc. also said it is ramping up testing capacity. Walmart is supporting 20 self-swab test sites in 12 states and expects by the end of May to be operating over 100, the company said. (…)

About 5.4 million Americans have been tested for the virus so far, according to the COVID Tracking Project, or about 1.6% of the population. Laboratories across the U.S. are currently processing about one million tests per week, but public health experts say that testing still needs to be greatly expanded in most communities in order to quickly identify and isolate cases and move out of lockdowns safely.

The administration official said that testing 2% of each state’s population was the minimum needed to maintain public health, but experts who have studied the matter say that level is short of what is needed.

“It’s about 6 to 7 million, and if that’s one-time, that doesn’t do anything,” said Ashish Jha, director of the Harvard Global Health Institute.

Experts would like four million or more people tested per week nationwide, in order to cast a wide net and cover a significant percentage of the population not already known to be sick, or even to have symptoms. (…)

Positive Covid-19 Test Results Can Linger, Prevent Plasma Donation Swab tests reveal unsettling news for some recovered coronavirus patients long after they are symptom-free

Close to four weeks after recovering from a Covid-19 infection, Jennie Novakovic went to her local hospital hoping to donate blood plasma to help severely ill patients.

Instead, she learned she wasn’t eligible to donate. She tested positive again for the disease. (…)

But some people who want to donate find out they can’t because they are still testing Covid-positive. They are symptom-free, have come out of self-quarantine or isolation and more or less resumed their regular lives. Learning they remain Covid-positive is unsettling and confusing, both for the prospective donors and for the doctors and scientists trying to understand what it means and advise them on what to do.

Doctors in South Korea reported that some people who recovered from Covid-19 and tested negative for the infection became sick again. Researchers testing blood from Covid-19 patients found the immune system produces protective antibodies to the infection, but don’t know how long they are protective. (…)

At University Hospital in Madison, Wis., part of UW Health, 16% of potential donors swabbed between 14 and 28 days post-symptoms still tested positive, said William Hartman, an anesthesiologist and investigator on a national convalescent-plasma study there. The furthest-out positive test was 24 days after symptoms resolved, he said. )…)

But current evidence indicates that positive test results in recovered patients are likely because of “fragments of dead virus” that won’t cause infections but are picked up by the test, which involves inserting a swab into the cavity between the nose and the mouth, Dr. Aberg said. (…)

“We really don’t think you are contagious anymore to the best of our knowledge, but it is a very hard uncertainty, like many things with this disease.” (…)

Last Friday, April 24, Ms. Novakovic returned to the blood center, got swabbed again and waited in trepidation for the results. The test was negative. That afternoon, Ms. Novakovic donated plasma.

Virus Likely to Keep Coming Back Each Year, Say Top Chinese Scientists

It’s unlikely the new virus will disappear the way its close cousin SARS did 17 years ago, as it infects some people without causing obvious symptoms like fever. This group of so-called asymptomatic carriers makes it hard to fully contain transmission as they can spread the virus undetected, a group of Chinese viral and medical researchers told reporters in Beijing at a briefing Monday. (…)

While some, including U.S. President Donald Trump, have expressed hope that the virus’s spread will slow as the temperature in northern hemisphere countries rises in the summer, Chinese experts on Monday said that they found no evidence for this. (…)

• Illinois Judge Rules Against State’s Stay-at-Home Order An Illinois judge ruled that Governor J.B. Pritzker’s stay-at-home order violated the liberty of a state lawmaker who sued to block the measure, signaling potential legal hurdles for extended periods of social distancing during the coronavirus outbreak.

Vaccine Could Potentially Be Available Later This Year, Coalition Says

The Coalition for Epidemic Preparedness Innovations, which is funding nine different coronavirus vaccine projects, has previously suggested a shot could be ready within 12 to 18 months, an already ambitious target. That assessment didn’t account for the possibility of companies working closely together to accelerate the process, faster enrollment in human trials and other factors, according to Richard Hatchett, the head of the Oslo-based organization.

“These are all things we are looking at now as potential opportunities to perhaps deliver vaccines even faster than the 12 to 18 months we were discussing,” he said on a call Monday. (…)

Some experts have called for caution, noting that most vaccines go through years of tests before they hit the market, and that 12 to 18 months would be extraordinarily fast. The coronavirus shots moving most rapidly are made with new technologies that have never proven useful in humans. (…)

• And for the record, we have 10,000 people producing over a billion doses right now of our own vaccine portfolio. This is not easy to do.” – (SNY) CEO Paul Hudson

The Secret Group of Scientists and Billionaires Pushing a Manhattan Project for Covid-19 They are working to cull the world’s most promising research on the pandemic, passing on their findings to policy makers and the White House

(…) The group has compiled a confidential 17-page report that calls for a number of unorthodox methods against the virus. One big idea is treating patients with powerful drugs previously used against Ebola, with far heftier dosages than have been tried in the past. (…)

• The fight against the coronavirus pandemic will yield the fastest-developed and most rapidly distributed vaccine in human history, the head of the Bill & Melinda Gates Foundation said, adding that research into the treatment could bear fruit in as little as 12 months. (Caixin)

PANDENOMICS

• For Wednesday’s advance estimates, we forecast a 4.8% annualized decline that features a 3.5% drop in consumption (consensus is -3.8% for GDP and -3.5% for consumption). We also expect double-digit annualized declines in structures investment (-15%) and equipment investment (-13%). But while we expect the reported decline to be large, we believe economic reality during the quarter was even worse, with a first-print bias of 3-4pp concealing a “true” GDP decline closer to -8¼% (and a consumption decline of -7%). (Goldman Sachs)

APRIL SALES MANAGERS SURVEY DATA SUGGEST GLOBAL RECESSION ON A PAR WITH 1929

(…) Whilst the USA has a far greater percentage of economic activity in the services area than China (80% to 52% respectively) where the possibility to continue working from home can allow economic activity to continue despite the lockdown, in practice, activity has slowed in many sectors to levels not seen since the Great Depression of 1929. (…)

CHINA: SALES MANAGERS ALL-SECTOR MARKET GROWTH INDEX

USA: HEADLINE SALES MANAGERS INDEX (EXCL. PRICES)

GLOBAL: HEADLINE SALES MANAGERS INDEX (SMI)

• Chinese tourist trips during Labour Day weekend to drop by half Overseas holidays are out but car travel and upscale hotels and resorts in China are main choices for those who do intend to take a break.
• Waves of people flock to beaches in southern California despite coronavirus concerns
• Detroit Car Makers Target May 18 U.S. Restart Date
• Scheduled airline capacity rose for the first time in almost 10 weeks as some countries begin to ease lockdowns, with a 2% increase in seats this week, according to OAG Aviation Worldwide. “Whisper it quietly but we may have reached the bottom,” senior analyst John Grant wrote in a weekly blog. “Reassuringly those green shoots of recovery are in more than one market.”
• Scandinavia’s main airline SAS AB is cutting as many as 5,000 jobs or about 40% of its workforce, becoming the first major European airline to permanently slash staff numbers as travel demand collapses. The Stockholm-based carrier said on Tuesday it’s initiating redundancies now because employees have an average notice period of six months and the carrier needs to prepare for what may be years of sluggish demand.
• Harvard Fall Semester Might Take Place Online Harvard University announced that, given the uncertainty caused by the coronavirus pandemic, it is leaving the door open for a fall semester without students on campus.
• Consumers have suddenly become far more comfortable with robots and other types of artificial intelligence performing jobs traditionally done by humans. (…) The pandemic has fueled consumer demand for more local brands and products, Euromonitor says. Overnight, international travel and supply chains closed. Meanwhile, the virus has created a feeling of “getting through this together” and wanting to support local businesses and communities to keep them going, Ms. Angus says. Even after the lockdowns, consumers will continue to buy locally produced goods because of safety concerns, Euromonitor predicts. “The products haven’t traveled far or been through too many people’s hands,” Ms. Angus says. (…) concerns over health and touching products that have previously been used have led consumers to again embrace disposable products, Ms. Angus says. “Clean comes before green,” she says. (WSJ)

SENTIMENT WATCH

U.S. Stocks Don’t Need to Fall on Economic Damage, Goldman Says The bank thinks stock investors will look through awful economic data.

(…) As long as projections are — as they indeed are now — for the economy to rebound after the current and coming period of pain, then stocks don’t need to fall, the Wall Street bank concluded.

“Investors usually discount at least the next two years of macroeconomic performance, suggesting markets may continue to look through bad news over the near term if it can reasonably be expected to reverse in the coming quarters,” Zach Pandl, co-head of global FX and EM strategy, wrote in a research note Monday. (…)

“Metrics that focus only on growth over the next one year (e.g., multiples based on next-12-month earnings expectations) will overstate current valuations, given the large rebound expected beyond this year,” Pandl wrote. “For similar reasons, more disappointing data over the near-term may not affect market pricing if activity is expected to snap back relatively quickly.”

So, GS informs us that “Investors usually discount at least the next two years of macroeconomic performance”. In other words, what you see is what you get. Hmmm…”As long as projections are…”. Good luck with that.

I have charted the S&P 500 Index with the Rule of 20 Fair Value [(20-inflation) x trailing EPS]. For what it is worth, since 1957, the correlation between the S&P 500 Index and the Rule of 20 Fair Value is 97.9%. On the 2 year forward Fair Value, the correlation drops to 26.9%. But that takes no account of projection changes…

Meanwhile, we have a market of stocks, not a stock market, with 5 stocks accounting for 20% of the market cap and Tech and Health Care making up 41% of the S&P 500 Index.

FYI, courtesy of Barron’s:

EARNINGS WATCH

We have 123 reports in, a 65% beat rate and a -3.6% surprise factor with Energy (-10.9%) and Financials (-28.1%) the only 2 sectors with negative surprises. The aggregate earnings of these 123 companies are down 19.7% in Q1 on revenue growth of 2.0%.

Q1’20 EPS are now seen down 15.0% (-13.1% ex-Energy), worsening to -34.3% (-28.8%) in Q2, only turning positive YoY in Q1’21.

Trailing EPS are now $158.14, down 3.9% for Q4’19. Forward 12-m EPS are forecast at $138.16.

• PPG Expects Sales Volume to Drop by One-Third in Second Quarter The maker of paints and coatings also withdrew its guidance for the year amid the coronavirus pandemic
• HSBC Sets Aside $3 Billion for Loan Losses as Profit Dives The U.K.-based, Asia-focused bank said its net profit for the first quarter sank as it significantly raised provisions against losses from borrowers hit by the coronavirus.
• Separately, Germany is preparing to take a stake in Deutsche Lufthansa AG as part of a rescue package, according to people familiar with the matter.

Here’s an unusual tribute:

“I’ve been so impressed with the Disney+ execution. Over 20 years of watching different businesses, incumbents, like Blockbuster and Walmart and all these companies, I’ve never seen such a good execution of the incumbent learning the new way and mastering it. And then to have them achieve over 50 million in six months, it’s stunning. So to see both the execution and the numbers line up, my hats off to them.” – (NFLX) CEO Reed Hastings