by j_kouzmanoff
The latest headlines have been all about how COVID-19 is peaking in NYC and will soon be peaking in the US as a whole. This is the model cited by the White House and is also the one most often mentioned by the media. It’s been continuously revised down over the past weeks, from over 100k deaths, to 90k last week, to 80k Monday and now 60k today.
I won’t go into its flaws (the most obvious one being the assumption that there will be no deaths post-June). Instead, I’ll elaborate on one of its main assumptions: “COVID-19 projections assuming full social distancing through May 2020“. Is America applying full social distancing right now?
Exhibit #1: Google’s Mobility Report
Google recently released a fascinating report on the mobility behavior of various countries (based on anonymized tracking data as of March 29th). These reports compare how much time people are spending in different types of locations (retail stores, grocery stores, parks, transit stations, workplaces and their homes) compared to usual.
Here are the reports for Italy and Spain. They look pretty similar, about a 85-90% decrease in traffic to retail, groceries, parks and transit stations.
Meanwhile, this is what New York looks like: -60% retail and transit, -30% groceries, -50% parks. And keep in mind, this is the hardest-hit state in America; states like Florida have even worse numbers.
My point here is that as of a week ago, America as a whole was not even close to enacting social distancing measures on the levels of Spain or Italy. And even if such measures were implemented now, it would take at least 2 weeks for their effect to be felt on the charts (look at how long Spain and Italy have been at -90% on their traffic before their numbers leveled off).
Exhibit #2: Flight Radar
Not only is the US not doing social distancing right, it also hasn’t done much to restrict interstate travel. Here’s a very telling stat: 2/3rds of global flights on March 28th were above North America. Think that has changed since then? Think again: here’s Europe + Asia + North Africa now (1200 flights total, top-left corner), here’s just the eastern states (1500 flights, which is the maximum Flightradar can show on one screen).
What does this mean? It means that even the states which are implementing lockdowns and bending the curve now will have fresh new outbreaks as soon as they lift their measures. Air travel is the easiest way for the virus to spread via asymptomatic carriers and the only way to prevent this is a domestic travel ban. That doesn’t look like it’s gonna happen anytime soon.
Conclusion
To me it seems very clear that a large majority of America’s population will be contracting this virus over the next month and a half. Italy and Spain made enormous social sacrifices to stop the outbreak and their success is just now becoming apparent. As of right now America is not doing nearly enough to follow in their steps, so exponential growth should continue unabated.
How does this relate to my SPX puts? How the market responds to this is a topic for another time, but let me just say this: my puts might be down now, but that doesn’t mean America is any less fucked.
Further Reading
Great overview of the coronavirus situation in America
A model that’s not nearly as optimistic as whatever the White House is peddling right now
Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence.