Green Shoot?

I practiced all kinds of anesthesia from total intravenous, to narcotic based, high potency volatile anesthetics +- N2O to weird stuff like pentothal/lidocaine/N2O/02. Even done some cases using heliox. The thing about general anesthesia except of the narcotics based anesthetics is they are second order control loops. You have to dump in a big dose into an empty tank and eventually the tank fills up enough that you gain control over a second order equation. Dosing is not linear but exponential. The devices we use like vaporizers make it feel like its linear but if you do an actual closed loop anesthetic where the mv uptake of O2 is static and the CO2 is absorbed the dosing if the anesthetic is over an increasingly longer time sequences say 1 2 4 8 16 32 minute intervals. If the anesthetic was dosed in cc what you would find as you got about half an hour into the case , your 16 minute does would be a relative overdose at the beginning of the period followed by a relative under dose beginning half way through the period. I would split my doses into 1/4 doses and give them along the interval to smooth out the relative peaks and troughs. I generally ran these kinds of anesthetics under spontaneous ventilation since the nature of the ventilation was a exquisite measure of anesthetic depth in a closed system better than HR or BP. If you had your hand on the bag and your ear piece on the chest you could feel and hear changes in anesthetic depth. Closed circuit anesthesia was total dog lab and I learned a ton about normal physiology and pathophysiology from it.

I’ve been following the virus on the Johns Hopkins site and the growth curves. The virus initially is like dumping anesthetic into an empty tank as the tank fills you start to apply measures meant to quell not the spread but the rate of spread in an attempt to reduce spread. That’s what shutting everything down is all about. It’s a means to normalize rate of spread. Spread is inevitable but rate of spread is controllable, and it works just like a closed circuit anesthetic.

Yesterday the US new case plot looked like this

See that little bar at the end is a bit lower than the previous bar. The other bars have been virtually relentlessly up BUT the log of the growth curve looks like this

See how the graph by the arrow seems like it’s starting to curve down slightly? Exponential growth would look like a straight line.

This is Italy. Note how the growth curve is almost horizontal, This means Italy is almost linear in it’s growth. This means R0 in Italy under its present quarantine regimen is approaching 1. Here is Italy’s new cases graph

If yesterday represents our first down day in 18 days we may be where Italy is today which is approaching an R0 of 1. I don’t want to overstate the data, we are in a hell of a mess. But the first sign of resolution is the change in sign from + to -.

Notice Italy is still under severe quarantine but the back of the virus seems to be approaching broke. If they just quit the quarantine exponential growth would resume, but by judicious relaxation of quarantine and spot case tracking and re-quarantine of local outbreaks things could well be looking up in Italy and we might be 18 days behind, at least that’s how I read the data. If you let off the controls too fast you will simply go exponential again.

This to me is good news since it seems a sign we have a modicum of control now, but it doesn’t jibe at all with media expectations. It exactly jibes with what I hear underlying Fauci ‘s expectation. To me this is very good news and I consider it a green shoot. We face a long and terrible recovery but the first step to recovery is the door step. You have to cross the door step to get out of hell.

So what does that mean to markets? What I see is a very slow and choppy restart to living. You may open up the Wendy’s or the Denny’s and COVID may reappear and contacts must be traced and quarantined until declared all clear. Those with immunity will be immune and will be able to resume economic activity and the nation in fits and starts will begin to recover economically. What that kind of time frame means to levered companies may be another story. What that means to company outputs, may mean companies are working at 50% or some other number. I would expect recovery growth to take a long time to become exponential and then normalize to some new normal steady state. How long does that take? Who knows but it certainly seems to me it will be many months to years.

I have no idea what all the screwing around with money velocity and money supply will produce except I don’t think it’s going to be anything good. I decided to buy some GLD at the present price as a hedge because I feel entirely naked being in cash. At least GLD will pay 0% interest because the 3 month treasury has been going negative. I’m not sure what it means to own government bonds that you have to pay to own, instead of having them pay you. I hear arguments like “well you pay a nickle to get your money back” Screw it I’ll just keep my money. and pay myself the nickle. I’m also thinking about getting back into BRK.B. Apparently it’s at book value around $167. I’m also looking at KOL which is taking a permanent option on energy and steel, and has a 17% yield. Buying this is a bit like buying a penny stock so unless you understand penny stocks be careful.

The whole world us up today so I’ll probably buy some SPY on a day trade and set a stop loss as it moves up. I much prefer buy and hold and don’t like this trading stuff but since trades are free and I can go short and long if I can make a few hundred a day, I pay for my hamburgers at very low risk, till things become clearer.

Today I didn’t even have to use my AK
I gotta say, it was a good day”

11 Replies to “Green Shoot?”

  1. It’s interesting to see how quickly the outlook can change. I’m curious to see if this rally will hold through earnings reports in the coming weeks?

    1. I don’t think anything changed. Businesses are shut down and will be for months. That’s bad. Chasing stocks when things are bad doesn’t make sense unless you are day trading. The market hit its peak in the last few minutes meaning it wasn’t day traders that were buying. Day traders were selling and booking profits so who was buying when things are bad? This article was about a ray of hope in a sea of ongoing pain. I’ll make some more money shorting tomorrow

  2. GASEM
    Interesting information in your post. Your thoughts about whether our population will comply with the tracking and testing requirements to make this work correctly? I believe that Dr. Gottlieb and his associates are suggesting that we use technology (GPS enabled cell phones or other similiar technology) to be able to track those who may test positive to in coming months, in order to be able to isolate them, and to test others that they have been in contact with. Seems like we need a national focused effort to manufacture a LOT more testing equipment. And we will need the likes of Google (Alphabet) and possibly some of our intelligence agencies to focus on the tracking. I am hoping that there is a lot of work on this going on “behind the scenes”, because I am just not getting a good vibe from the daily WH briefings that there is enough focus and coordination.

    BTW – I agree that it is highly likely that the market will drop a bit in the coming months – until a vaccine is identified, approved, and manufacturing is scaled up. There will be a lot volatility – especially as the unemployment numbers keep accelerating, and mortgage and other personal and business defaults start rolling in, and Corporations announce big losses in Q2. I wish there was a different future in the cards, but I just don’t think it will happen. Cash and Gold are Queen for a while.

  3. I have no idea what the civil disobedience reality will be. Hungry people and 300M guns = not much reality for ankle bracelets and the fascist pipe dream. The cops already don’t arrest people why would they bother getting the virus from someone infected?

    The market has 2 aspects I think. One is a reality linked time frame. Let’s say you sell lettuce to restaurants and restaurants are closed through the summer. What’s the state of your production? If you sell to Denny’s what are the chances all 1100 stores even reopen? What are the chances of people going to restaurants to eat your lettuce? They probably already spent the $1200 bux and are now getting food from food lines. All your contracts with Denny’s are kaput and your lettuce is going to food lines for 25 cents on the dollar. That’s an example of one kind of time line.

    The other example is the video game we call investing. It happens every day at an accelerated pace based on presumption and assumption and momentum. In the old days you’d buy the dip. I subscribe to a forum and the buzz is “was 18,000 the market bottom?” Try to reconcile that question with the above scenario. YTD the market is down 18%. Over 5 days the market is up 3%. What’s any of that got to do with the price of lettuce? The availability of lettuce? The demand for lettuce? The ability of the lettuce farmer to stay solvent?

    I played the video game today. I went into the open short and the market spiked. After it peaked I went further short and I went long treasuries and made enough money to pay for my cost of living for today. I’m still short and we will see what tomorrow brings. The upside to down side is still asymmetric with a greater likelihood of downside compared to upside. The economic future is unknowable. I sure as hell ain’t buying me any Denny’s right now, so I play the video game instead.

  4. People are already acting like this market correction is over. Suck in as many people then lower the boom on them. We have not seen the bottom IMO. And recessions/bear markets do not end in one or two months. We will be lucky if one to two years !

  5. If we don’t have herd immunity and do not have a vaccine, how is this not going to last at least one year ?

    1. Pandemics typically last 2 years The pattern varies. The virus mixes with the population like swirling a drop of color in a liquid. It goes left right, left right and soon becomes a uniform color, aka herd immunity. In this case I think “left right” will be north south, north south. Wuhan is the same latitude as Atlanta. Now China has locked down the province that borders Russia on the same latitude as NYC. If you think it’s over in China you’d be wrong. The concentration of the drop decreases as it mixes so I expect the virus will tail off in the summer in the north, as south america/africa/australia gets ravaged then will return in late fall, but probably with a lower peak infection rate but since we will have relaxed quarantine it will have another explosive initial rate of infection. The recency bias will completely freak people out and the market will crash again so the virus may not be quite as bad the second round, but the economic carnage will likely be worse. All the buy the dippers and buy and holders will get creamed. You may stand there and let the freight train run you over the first year. The second year when you are still 25% down and the train blows it’s horn you will say screw this and bail. The problem is risk management and the notion “it will always come back”. I bet you read that on a blog. In 100 years it may come back, in the mean time you’ll be dead.

      If it ravages north south 4 times in 2 years, and unemployment is 20% and GDP is down 25%, THIS TIME ITS DIFFERENT! This time it isn’t coming back in any shape that looks like history. Most people look back to 1929 as sort of the “start” of history. That one was “the worst” and everything was up from there. 1929 happened 11 years after 1918. It takes a long time for shit to unwind. In 2020 it’s going to take a long time for shit to unwind as well, BUT we are now living not only in “the real world” where things will unwind in “real time” but we are living in a video game world with a 24 hour news cycle and 2000 point swings on the Dow every day. Those swings are completely controlled by robots, and trading in that environment is like trading in a dog fight with F-15’s. F-15’s have certain flight characteristics and so the only time you have is to set your self up to be in a position to kill your opponent an instant before he comes around to kill you. This is called an OODA loop Observe Orient Decide Act. This is how the market works. This 4 x 25 nonsense is a fantasy.

      This is my take so don’t take it to the bank but its how I’m positioning

      17M people have lost their jobs

  6. Buy and hold with dollar cost averaging is fine if you are 10 years old, not when retired like me. I don’t believe anything that comes out of China. Even if I was over there and saw it with my own eyes, I would believe I was seeing actors. That’s how much I trust China.

  7. You think you know an old friend, only to discover belatedly he is Ice Cube fan!

    Was reading a fascinating article on how the plague was the start of the labor empowerment movement in the sense that the aristocracy and land-owners needed labor to tend the fields, the plague decimated the labor force, and the survivors demanded market wages and resisted royal decrees insisting they resume work at prior wage levels.

    Eastern Europe enforced continued serfdom, with accompanying decelerated growth. Western Europe relented and paid market wages, and the reduced inequality raised consumption and further developed the economy of the West at an accelerated pace.

    The economic impact of a plague (unemployment, reduced consumption, decimated workforce – including, as you have pointed out, loss of keystone talent with irreplaceable institutional knowledge) will make this different than what our lifetimes can recall.

    I’d read Bernstein’s “Birth of Plenty,” a year ago, and fear we’re about to undergo a Birth of Scarcity transformation for the foreseeable future.

    That green shoot has an enormous pile of manure to tunnel through before reaching sunlight.

    Enjoy your insights as always,

    CD

    1. In midevil Europe the Catholic Church held the empire together. Monasteries were the social welfare for peasants continent wide. There was no real countries per se’ but estates of strong men who would war against other strong men to acquire each other’s property. The Church had a passel of monasteries, which had land and peasants worked monastery land. Half went to the peasant and half went to the monastery. So farming for a monastery was a way to feed your family. The Church dealt with the local strong men, but given the population made their living farming Church land a strong man wouldn’t stay strong if he pissed off too many peasants so he was free to go and conquest other rich people and not mess with the folks’ livelihood namely the Church and her lands. Come the black plague a ton of people died and the peasant population was hollowed out which meant the Church was hollowed out. Volatility entered the picture. The Church had laws against Usury so the deal held, but this meant the output of the monasteries was drastically reduced and reduced output = reduced Church power. The population took decades to recover. Then came the printing press and the advent of media. Even though people couldn’t read some could and tell what they read. Henry the 8th wanted a divorce and named himself as pope of England. As pope he took over the monasteries and their wealth. He handed out monastic Bishoprics to his cronies, who were not under Usury law and suddenly a peasant instead of making 50/50 was making 25% while Henry’s Bishops were racking in 75% and cutting him in on the take. The rest of Europe caught wind of how to cheat the people and the reformation was born. It was all about “religion” with theses and theologies and God! and the printed propaganda like Luther’s catechism but mostly it was about the money and who controlled the monastic lands and who held the power. With more money and graft things like Guilds popped up when monarchs wanted to build big cribs and so middle class. If the plague hadn’t happened the reformation likely would not have happened at least not in the way it happened. With the advent of media, factions formed and separated and states began to form. With the advent of Calvin’s eternal election theology Usury was no longer a problem since salvation was assured and so city states felt empowered to loot at will especially the land masses of Africa and America. Guilds felt empowered to “negotiate” under force of threat. If you got a free card into heaven stealing didn’t matter. Of course this “history” is not the “official” history but most history is bullshit. I wrote it with some hyperbole since I’m not interested in a 50 page treatise, but there is enough color that one can tease out the truth. The reformation was all about the money and could only have happened because of the black plague.

      Florida was settled in 1565. Cuba was discovered in 1492 a century before Plymouth. The Jesuits were in Louisianan and at the Chesapeake bay in mid 1500’s but our “history” is the story of Plymouth rock and all that nonsense in the early 1600’s. The colony of St Augustine extended all the way up into South Carolina, a massive settlement but it was the Mayflower, wasn’t it. I’ve been to the northern boarder of the St Augustine colony. The power elite in America were protestant and so the protestant story became the myth of the nation. It just goes to show what a wrinkle like a severe pandemic can cause to the fabric of time. Here’s a question for you to point out the prejudice of history, why was Mary “BLOODY MARY”, but Elizabeth “GOOD QUEEN BESS”? Many were slaughtered in either woman’s name. Could it be if Mary won, the prots would need to return the monasteries back to Rome?

      I hope our own little pandemic isn’t as consequential but who knows? I’ll be dead a couple centuries and my name will be remembered no more, before that tale is written.

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