Because the government (once again) threw money at people who didn’t need it, Wall Street is great again.
Anything that works, the growth stocks and the big retailers, is overpriced. People are even throwing money at things that don’t work, like airlines, cruise lines and casinos.
But this is a false dawn.
Opening too early puts us on track for what the underwriters at Willis, Towers & Watson call their “limited success” scenario. In this case, deaths continue through the summer, but the fall brings a new, even more-severe outbreak than before.
This is precisely what happened in the 1918 flu pandemic. There were three outbreaks. It was the second one, in the fall of that year, that was the killer.
People think this thing is licked because, as restaurants open and idiots demand haircuts now, there has been no spike in cases. That’s only because most people aren’t going to those restaurants or running out for haircuts. If no one around you has the virus, you’re safe. If one does, and you’re around them for about an hour, then you and dozens of other people get sick at once.
On top of that, we have outright lying about how many people are sick and dying. Georgia, where I live, transposed dates so it seemed case loads were declining. Florida fired a woman who refused to fudge the numbers.
The virus doesn’t care about any of this.
The key number here is one, as in R<1. If each person with the virus infects .5 people, 100 infections become 50, then 25, then 12. The virus dies away. If each person with the virus infects even 1.1 more people, 100 infections become 110, 110 become 121, 121 become 133 and so on. Worse, the more people who are getting infected, the more danger there is for people who try to stay isolated. The current R number in the U.S. is 1.08.
There’s one other number you should know here, k. K is the virus’ dispersion factor, which can lead to clusters of infection. l The k value for COVID-19 is very low, much lower than it was for the 1918 flu. Studying so-called “super-spreader” events, and preventing them, is another key to stopping this virus.
Math should never become a political issue. Math always wins. We’re raising the R number, keeping the virus going, so that when we all go back inside in September it’s going to explode with every k.
Science also doesn’t care about what Wall Street wants. Science requires time to do its work. Even with the virus’ chemical structure immediately apparent, and dozens of candidates for cures and vaccines in the pipeline, it will take many months to conduct human trials showing even one to be safe and effective. It takes months more to scale production for the winning formula. This pandemic won’t be over until it’s over.
Here’s the truth. There will be no 2020 NFL season. There will be no college football. There will be no baseball or soccer or NBA. That’s OK. Sports stopped during the 1918 pandemic. Where it didn’t, people died in droves, and learned the lesson we’ve forgotten, because almost everyone from that time is dead now.
It’s one thing for politicians to spout happy talk and for Covidiots to buy it. But people with money have become Covidiots, and they’re going to lose that money the government just gave them. Airlines and restaurants and cruise lines are in for a second round of quarantine, and they’re not in financial shape to weather it. The political atmosphere is too poisoned to get them more aid, so the old aid was wasted. These losses will cause investors to pull money out of stocks that are working, which will return to more rational levels.
I’m doing fine, but most people aren’t. The phony prosperity of the last decade, the “gig economy” that left millions with no safety net, has been exposed. There’s now a big appetite for extreme measures and unless Democrats realize that they could still lose this thing. At a minimum, public health requires health care be offered to everyone, without discrimination based on income. It requires that so-called “low-wage” workers be able to raise families on what they make.
My hoped-for result is that the next relief bill (and it is relief not stimulus) bypasses people who don’t need the money. The result then would be greater economic activity, less money chasing after it, and a rational value for stocks and other assets. But the timing on all this is tricky. If, as I expect, the next wave peaks during the election season, everything’s up for grabs. Republicans will demand pie, Democrats will be up against starving people, and money will once again be wasted on pie. Worse, this wasted money will then go toward supporting Republicans, because that’s how Wall Street rolls.
Whether or not I survive this crisis, the next one is just around the corner. Climate change is real. Hurricanes are getting worse, droughts are getting worse, food riots are coming. Oceans rise, empires fall, and thanks to Trump it’s our empire that’s going to fall.
Democracy has only a limited power to fight disasters on this scale. They lead naturally to extremism. For democracy to stand a chance, leaders must deliver at least the appearance of progress, and the feeling that we’re all in this together. That may require a farther leftward lurch than the present Democratic Party is capable of.
We’re starting to see this dawn on elites. Warren Buffett, Bill Gates, and Jack Dorsey (of Twitter and Square) have all called for a basic universal income. (It first entered the political discussion through Andrew Yang, left.) They all want more money placed in the hands of spenders, less in the hands of investors. I would like to think they can lead the investment community along that path, but there are no guarantees.
In a crisis, there are no guarantees of anything. You can see trends, and know where things should go, but in a crisis, with its fierce urgency of now, you can’t be sure people will choose the right direction.
That’s something you learn, reading history. We know what happened. They didn’t. Every past crisis in our nation’s history was seen to be a life-or-death struggle by the people who lived through it. Even the deaths of William Henry Harrison and James Garfield caused havoc and hopelessness among reformers who were their supporters. Other events now seen as minor hiccups, like the labor riots of the 1890s, the Bonus Army and pro-communist agitation of the early 30s, and the anti-Vietnam movement of the 1960s, are now seen as minor irritants. They weren’t, for the people who lived through it.
What happens when something truly massive happens?
COVID-19 is a warning. There is no place to escape from the changes now overtaking all of us. This is truly a time like no other. We’re all in one boat now, and we either start rowing together or civilization, as we knew it, is going down.
