Travelling to work on a bicycle through London’s West End is surreal. The sun shines down; shops and restaurants are closed, buses overtake empty, pavements deserted. The weather may be beautiful, but the economy is not.
We have had plagues before. In the middle ages, Samuel Pepys noted that it took eight months for the plague to move from Amsterdam to London. We move faster now; so much faster, that Coronavirus, SARS2, Sars-CoV-2 and Covid-19 seem to have multiple names (we will use Sars-CoV‑2 for the virus and Covid-19 for the disease).
We are not epidemiologists; we have no particular influence or insight on Government decisions; we are just analysts. Gerard Stern quoting Mark Twain left a strong impression on a younger Jérôme. Fools are exceedingly good at answering all the questions of the world. The wise admit they just do not know.
That admission does not prevent us analysing the pandemic. We have listened and discussed the pandemic with public health authorities, epidemiologists, economists, companies and other market participants – experts all. Our objective has been to assess the impact of Sars-Cov-2 on the global economy and the companies we invest in.
The Seven Variables
From our analysis, we believe there are seven key variables. These seven variables are not necessarily independent of each other, but they can combine in different ways to create different scenarios.
Variable 1 – Severity of the Disease
Just how bad are Sars-CoV-2 and Covid-19? Sars-CoV-2 seems to be more infectious than normal flu; but how much more varies widely in the data to date. The same data also suggests a higher mortality rate from Covid-19 (up to 4% vs 0.1% for the yearly flu), but this must also vary as not every area, let alone country, is testing in the same way. But what does seem to be true is that many people show no symptoms at all; in Vò (in Veneto in Italy), everyone was tested, and a majority of the positive cases were asymptomatic.
We look at this variable as having three main outcomes. The first, now perhaps very unlikely, implies Covid-19 is just a bad flu; from those who die, very few would have survived for long in any event when looked at statistically. The second assumes it has a high mortality rate amongst elderly and vulnerable people, but across the whole population has a very low mortality rate. The third asserts Covid-19 has a high mortality rate, skewed to the elderly and vulnerable, and a high hospitalisation rate.
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