Life goes on, amid news reports of panic buying and hoarding, as reporting of the coronavirus (COVID-19) continues to terrify the masses. We have seen manifestations of this terror in the past fortnight with an (ongoing) share market correction, led by the US and blindly followed by investors in Australia and elsewhere. So far it is no more dire than the corrections during the GFC. The popular theory is that global share market investors fear the effect the coronavirus could have on business, imports and exports and the ever-valuable tourism market.
The seven-day share market correction was followed at home by reports of panic buying of non-perishable groceries. Shelves were cleared in supermarkets, amid assurances by retailers that their supply chains were solid. Hand sanitiser is at the top of a curious list.
Toilet paper was one of the items bought in bulk, prompting one Australian supermarket chain to limit sales of dunny rolls to one four-pack per person. Social media gurus have been busy making memes of Aussies swathed in dunny paper, speculating about what sorts of things one needs to hoard, assuming the worst (global contagion, financial mayhem, collapse of law and order).
I looked but could not find references to food or toilet paper in this list from a survivalist website. There are lots of solid tips about water filtration, fire-lighting, charging batteries (with solar), emergency lighting, fishing equipment and a multi-use gadget called a Spork. Oh, and they list a variety of weapons for hunting and self-defence including a crossbow.
By happenstance, last week I picked up a battered copy of The First Horseman by John Case from a public library sale.
The plot involves a virologist (and a journalist), who is trying to locate and exhume five miners who died of Spanish Flu in 1918 while working in the Arctic. The bodies are buried in ice, so the plan is to harvest the hopefully preserved Spanish Flu virus and develop a vaccine. You guessed it, there’s a bad guy; a megalomaniacal cult leader who thinks there are too many people in the world.
As I continued to read The First Horseman, cases of coronavirus increased world-wide. As of 1st of March, there were just fewer than 80,000 cases in China (3.5% death rate) and some 7,000 cases in other countries, with a death rate of 1.4%). In Australia, the number of reported cases rose to 41. The World Health Organisation (WHO) has previously said the mortality rate of coronavirus varies from 0.7% to 4%, depending on the quality of healthcare and the urgency of the response in affected countries. This week the WHO upgraded the mortality rate to 3.4%, which brings us back to comparisons with the Spanish Flu which had a mortality rate of 2% to 3%, although it afflicted some 500 million people around the world. Author John M Barry put it in perspective when he said in his book The Great Influenza that the flu killed more people in 24 weeks than HIV/AIDS did in 24 years.
A major study done by Chinese researchers said that 80.9% of people diagnosed with Coronavirus exhibited mild symptoms and recovered. Only 13.8% of cases were described as severe and only 4.7% as critical. The highest fatality rate is for people aged 80 and older, at 14.8%. The majority of people who died suffered pneumonia-like symptoms.
Pneumonia is a lung inflammation caused by bacterial or viral infection. (Have you had lunch yet?).The air sacs fill with pus and may become solid. Inflammation can affect both lungs.
Patients usually spend a few days in hospital hooked up to intravenous antibiotics and oxygen/nebulisers to help them breathe. Some forms of pneumonia are contagious. You didn’t know that? Yes, it spreads the same way as the common cold and other viruses.
Pneumonia in the elderly happens fast and the prognosis is poor. The elderly are more susceptible to severe pneumonia, which has a mortality rate as high as 20%. Of the 2.6 million pneumonia deaths in 2017, 1.13 million were aged 70 or older.
Egad! Now where did I file that letter from the medical centre – the one offering (free) immunization for pneumonia? Yes, it’s true; there are advantages to crawling over the peak of the hill, past the 69 sign. I am eligible for a bone density scan ($125), a shingles vaccine ($217) and a vaccine against catching pneumonia ($133), free of charge.
I recommend this reliable website to track the escalation of coronavirus. Of the 52 Australians diagnosed with the virus, 22 have recovered, two have died and six (including health workers in aged care facilities), are the only patients who did not have a recent history of travel to high-risk countries.
It’s not so easy tracking the health of the global share market.Global investors are second-guessing themselves, ignoring Tuesday’s rally (after a seven-day selloff which hacked 11% off the value of the market). On Wednesday, the all ordinaries index was down 113 points after Tuesday’s Reserve Bank interest rate cut. It bounced back again on Thursday by a similar amount and yes, down 111 points on Friday morning.
The volatility is a finger in the air to the world’s central banks, which seemingly colluded in a co-ordinated campaign to cut rates. The conundrum for investors is this: invest in term deposits or bonds and let inflation erode your capital, or trust the share market to claw back value, restore confidence and keep paying dividends.
Despite the clear fact that losses on a share portfolio are paper losses unless physically sold, a major market correction triggers certain events.
The young and brave who hold ‘geared’ share portfolios probably faced a ‘margin call’ last week. Gearing means borrowing money from a financial institution to buy listed shares.
The main catch with borrowing money to buy shares is this: if your portfolio (valued say at $100k), drops in value to $85k, you, the borrower will have to find $15,000 in cash to cover the lender’s risk.
A major study of investors carried out by the Australian Stock Exchange concluded, inter alia, that only 5% borrow to buy shares. Nonetheless, in a survey asking investors this very question, up to 60% of those aged between 25 and 44 seemed keen on the idea.
The other event triggered by a share market collapse is that those retirees receiving part pensions from the government have to report what Centrelink describes as a ‘change in your circumstances’.
So if your part-pension is calculated on assets, you duly report a 10%-12% decrease in the (paper) value of your share portfolio. This should increase your part-pension proportionately. As usual, if you don’t sell, nothing changes apart from the balance on a spreadsheet.
So, of these two global contagions, which will first be healed?
As the ABC’s Alan Kohler pointed out, despite the correction, Australian shares are still over-valued. My take on the share market volatility is to say that when a market is down 200 one day and up 120 the next, day traders are making a killing.
But market volatility is a risk in itself as the fear contagion wafts down to Mums and Dads investors, who all may decide to hide it under the mattress.
As for the coronavirus, senior citizens’ organisations are taking modest steps to ensure their constituents (the age group most at risk) follow simple but effective rules to avoid spreading viruses.
I actually think this set of rules ought to apply in general, adding: “If you are sick, stay home until you are not.” (To which the bolshie Ed aka SWPT adds, that’s one of the many problems of a casualised workforce- even if you’re sick, you can’t afford to stay home – ‘do you want germs with that?’)