Market Lab Report / Dr. K's Crypto-Corner
by Dr. Chris Kacher
The (R)Evolution Will Not Be Centralized™
Corona - Major Points:
1) HERD IMMUNITY: It has been cited by one of the leading medical research institutions University of California, San Francisco that at least 60% of the population is required to achieve herd immunity. This can occur via infection and/or immunization via vaccine. A vaccine to COVID-19 is still potentially several months or more away though all the capital-intensive AI-based technologies are being thrown at the creation of a vaccine, so a vaccine could come sooner than expected.
2) CASE FATALITY RATE (CRF): Much of the world is being quarantined which will prevent herd immunity via infection. The low end of the CFR could be even lower if the number of people who had it got well but were never tested. The high end of the CFR could be above 3-4% if the rate of infection is much greater than expected. A high rate of infection would overwhelm hospitals thus would greatly boost the CFR.
3) HOW INFECTIOUS: A critical finding by Princeton University and UCLA say that the virus can remain infectious in the air for up to 3 hours. The finding is awaiting peer review. This is critical. Should this be the case, some researchers have suggested that without a vaccine, we would reach herd immunity through infection. German Chancellor Angela Merkel explained that 70 percent of Germany’s population could become infected. From a US perspective, concerning 327 million residents, many predict that as many as 50% (or more) of Americans could be infected over the next 18 months.
3) LIKELY: The counterargument is that the number of new cases have leveled off in China due to proactive measures taken. The same should occur for the rest of the world. The EU just went into lockdown. Then in the coming weeks or months as the rate of infection is slowed or ended, a vaccine is created.
Global Economy - Major Points:
1) The massive amount of liquidity in all its forms through historically low interest rates with restrictions lifted on further buying of bonds by central banks, lower oil prices, tax relief, and potential helicopter money where a large percentage of families are given actual cash may prevent a lengthy recession. Normally, the rate of unemployment spikes off lows at the start of a recession.
2) With all the stimulative measures being taken for companies and individuals, the unemployment rate may not spike. Instead, it may drift higher then roll back over. The counterargument is that after we contain the coronavirus, this period of super easy money will have to be removed. While that, in itself, could be painful for companies, individuals, and the stock and bond markets, a resurgence in growth due to such stimulus could absorb rising interest rates. It will be a careful balancing act of continuing to provide sufficient liquidity without sparking hyperinflation to create a potential Goldilocks scenario of rising growth while containing unemployment.
3) A second wave of panic selling could occur as dire economic reports are released. So far, the few reports that have been released such as Monday's New York Empire State Index and Tuesday's Germany's ZEW showed record declines. If so, additional profit opportunities will present themselves as new and existing industry groups are further sold off.
4) Markets which are forward looking may therefore reach a major bottom sooner than later.
See our prior report for a deeper background on the situation.
===To be updated as news warrants.===