What Trump Is Doing WILL Fail
The Market Ticker - Commentary on The Capital Markets
Logging in or registering will improve your experience here
Main Navigation
Full-Text Search & Archives
Legal Disclaimer

The content on this site is provided without any warranty, express or implied. All opinions expressed on this site are those of the author and may contain errors or omissions.


The author may have a position in any company or security mentioned herein. Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility.

Market charts, when present, used with permission of TD Ameritrade/ThinkOrSwim Inc. Neither TD Ameritrade or ThinkOrSwim have reviewed, approved or disapproved any content herein.

The Market Ticker content may be sent unmodified to lawmakers via print or electronic means or excerpted online for non-commercial purposes provided full attribution is given and the original article source is linked to. Please contact Karl Denninger for reprint permission in other media, to republish full articles, or for any commercial use (which includes any site where advertising is displayed.)

Submissions or tips on matters of economic or political interest may be sent "over the transom" to The Editor at any time. To be considered for publication your submission must include full and correct contact information and be related to an economic or political matter of the day. All submissions become the property of The Market Ticker.

Considering sending spam? Read this first.

2020-03-17 09:11 by Karl Denninger
in Covid-19 , 994 references Ignore this thread
What Trump Is Doing WILL Fail*
[Comments enabled]

It's the math, stupid.

Look folks -- here is reality, as I've maintained since this began in January: You are going to get this bug.  That's odds-on.  70%+ between now and when we have an effective vaccine that can be mass-administered if that ever happens, which it might not.

There's simply no way around this.

Lots of people are going to die.  But lots of people die anyway; they die of the flu, they die of smoking, they die of cancer, they die in car accidents.  We all die.

Individual people can modify, a fair bit, the odds of getting the virus at any given time.  But they probably can't modify their risk of getting it at all.

There is only one thing that will make you not get the virus at all:

When the number of people who have gotten it or are vaccinated rises sufficiently so that for each person with it the R0 drops below 1.0, or the population density as your body experiences it drops low enough to make transmission to you not happen on a permanent basis.  This is when the virus dies out; you still have cases here and there but no exponential expansion because for each person who gets it they infect less than one on average.

So-called "social distancing" can delay but not avoid transmission.  We can basically shut down our economy and slow the transmission rate but this both does not change the individual outcome other than in terms of time, and it does so at the cost of permanent damage to the economy.

There is a wildly false load of bull**** flying around about our medical system in the United States and, indeed, in nearly all nations.  It's this: We have effective medical means of treating these sorts of diseases that materially change death rates; that is, if you have a hospital bed available you live and if you do not you die.


If you're having a heart attack and splicing a piece of artery into your heart from your leg will resolve the blood flow issue, hospital medical treatment radically changes outcomes.  If you're shot then surgery to remove the bullet and sew up the hole radically changes outcomes.  If you're in a nasty car accident and are hemorrhaging then a blood transfusion and closing up the damaged arteries and veins changes outcomes.

Viruses have no antibiotics available to fight them (such as sepsis) and there are no holes to be sewed up, bones to be set and growths to be cut out of you by a skilled surgeon wielding a knife.  Your body either fights it off or, ultimately, you die.  Supporting your body systems is all medical intervention can do and the margins it can provide are small, not large

In addition being in a high-density medical facility is inherently dangerous; the CDC states that over 1.7 million people acquire an infection from a hospital every year and 100,000 people die from it EACH AND EVERY YEAR.  Some of the most-serious are blood-related infections acquired when hospital workers place central lines and other IVs.  If you are one of those people while severely weakened by this virus your mortality rate is going to skyrocket.


Further, many of those interventions, such as ventilators, come with serious mortality risk all on their own.  When it comes to a virus that attacks the cardio-pulmonary system we must deal with the fact that medical science has no answer that can replace your lungs and heart if yours are unable to perform their function.  We have never had that answer and we likely never will.

We need to face reality on our medical system: We can provide bottled oxygen with a bleed valve or a demand mask to huge numbers of people -- millions at once.  You can toss one of those in your car or someone can bring a new bottle to your house, and you can be taught how to change said bottle in a few minutes on your own with reasonable safety.  There is a very large, existing infrastructure to refill those bottles too; even smaller towns probably have one (e.g. an Airgas terminal.)  There are also available powered concentrators; people with COPD and similar have them in their homes now.  But if supplemental oxygen at a relatively low concentration is not sufficient -- if you need powered ventilation -- you are odds-on to die in any circumstance, not even including this virus, and this virus makes it much worse since it is attacking your lungs.

These are facts.  No amount of screaming, hollering, prancing with white lab coats or playing President will change it.  Nor will the time line on getting a vaccine developed and produced change the outcome either and this assumes that's successful, which it is unlikely to be.

What cities and states are doing now will do permanent and critical damage to the economy.  80% of the small businesses forced to close or "restrict" operations -- such as restaurants forced to "delivery or take-out only" will not survive.

We have built a levered economy and cheered it on for the last 30 years.  I think it sucks and have said so for over a decade in these pages.  That a family cannot have one wage-earner and one person raising kids at home for 90% of the families is bull****.  But it is what it is, and we cannot change it now in a few month's time.  We are thus stuck with the consequences of an economic system that we cheered on, advocated for and supported through our political, business and personal decisions.

Our choice now is whether we destroy our economy at the same time we take the hit from this virus.

For a person at high risk there are protocols you can follow that might reduce your risk.  Some of them, specifically the use of the anti-malarials used in China and Korea, are quite safe.  They might down-regulate the viral activity enough to keep you from getting seriously ill and if you are at high risk they may be worth it.  In other words they attack the problem at it's root -- not by preventing you from getting the virus but, if you're at high risk, by materially reducing the probability of that hospital stay.  It is that, and only that, which will materially change the death rate over time.

For the ordinary person there is no apparent risk:reward benefit to prophylaxis (since it does not stop transmission) until and unless you get sick.  But for someone with a 10% risk of death if they get the virus that's a very different calculation.

get it that the so-called "professionals" all claim that we must "bend the curve" so the medical system doesn't get overloaded.  The problem is that they're lying; if you don't need intensive intervention you're better off not being in the hospital at all and if you do have a severe enough case to need a vent the odds of your one year survival are approximately 30% and that is for all vent cases.  The one year survival for this situation is almost-certainly much worse, maybe as little as 10% one year survival because the reason you need the vent in the first place is that your lungs are under direct attack.

That is, I'm willing to bet if you need to put someone on powered ventilation for this disease 90% or more of those people die anyway.

If the "much-vaunted" medical system could save most of these people we would be hearing every one of these white-coated liars citing percentages.  None of them are.  Nobody hides good news, ever, which means the news is very bad.

Like you're ****ed and done -- just order the casket now -- if you wind up on a vent bad.

That's what you're destroying the economy for -- instead of attempting prophylaxis so you don't need the ****ing vent in the first place.

I know, you think I'm making this up.  I hate doctors, I hate hospitals.  I've written screeds about the medical system in this country since The Ticker began publication.  I don't expect you to believe me; after all, I can't cite numbers for this outbreak and vent outcomes because they're being intentionally concealed.  But I can cite studies that were done before this virus showed up written by these very same white-coat liars that are prancing around behind the lectern now advocating destruction of the American economy.

In other words you should believe the same ****ing experts who are screaming at you right now that we must destroy our economy to save Gramps:

We reviewed a 5-year experience with mechanical ventilation in 383 men with acute respiratory failure and studied the impact of patient age, cause of acute respiratory failure, and duration of mechanical ventilation on survival. Survival rates were 66.6 percent to weaning, 61.1 percent to ICU discharge, 49.6 percent to hospital discharge, and 30.1 percent to 1 year after hospital discharge. 

Got it *******s?

You have less than a 50% chance of getting out of the ******ned hospital and less than a 1 in 3 chance of surviving one year and this is for all-cause need for a ventilator.  Now what's the penalty on those odds when the reason you need it is that your lungs are under direct attack by a virus?


This much is clear: There is exactly one thing we must focus on -- you not having a severe or critical case initially.

It matters very little when you have the critical case.  If you have it and there is no vent, you die.  If you have it and there is a vent, at least 70% and probably 90% or more of the time you still die.

Dead is dead.

The only way to prevent getting the virus entirely is either (1) bug-in permanently until you know that the people who would want to be around you are all carrying antibodies and thus can't infect you or (2) you get it and thus are no longer at risk or (3) there is a vaccine and the critical rate of vaccination + antibody presence exceeds the R0 suppression threshold or you personally have been vaccinated.

You are not odds-on to get to #3.  The vaccine may never exist, or may never be effective enough to matter.  By the time we can vaccinate enough people to drop R0 below 1.0 many years will have passed.  You will either have had the virus or be dead.

Go ahead and run the simulation on coverage to get R0 below 1.0.  It does not require computers or complicated math.  Here's the basic rule that's close enough when you reduce all the complex math: It's the remainder of the inverse of the disease's R0.

So for polio, which has a R0 of about 5, you need 80% (the remainder of 1/5, or 20%) to be effective.  For measles you need 90-95% because measles has a stunning R0 of somewhere around 13!

This bug has a claimed R0 of 3.  So you need roughly 70% vaccine or infected (and recovered) coverage to drop the R0 below 1.0.

There are ~330 million people in the US.  You cannot vaccinate 200 million of them in a year even if you had the vaccine now, which you don't.  You will not be able to vaccinate 200 million Americans inside of two years post distribution ramp being achieved.

We are talking three to five years from now before that happens and this assumes a vaccine is developed and works.

So what are you going to do, *******s?  Shut down the economy for three to five years?  No you're not.  There will be a ******ned revolution before then and everyone knows it.  Not because the people will go stir-crazy but because every single pension fund will fail, the government's revenue stream will fail, the bond market will detonate no matter what The Fed does and the government will collapse.

There are very few firms, even large firms, that can survive an effective zeroing of their revenue for even one month.  Your local mall will default on its debt covenants -- at which point it's gone.  The big "mavens of industry" all levered themselves up buying back stock with debt, and that debt has an interest payment.  No revenue, no money to pay the interest. BOOM!  Your local and state government relies on the property and sales tax revenues from those levered firms, along with the spending their employees do (which also generates property and sales tax revenues.)  No spending, no revenue, BOOM!

You can't declare a "holiday" on such things at the government level because every bit of that cash flow is someone else's ability to survive.  You can demand under the gun of government that foreclosures and evictions not happen, for instance, but the people who were supposed to get the cash flow and can't recover on the default get ****ed instead.

THIS IS WHAT LEVERING UP AN ECONOMY DOES AND WHY WE SHOULD HAVE NEVER DONE IT.  But we did, and now we have to live with it because there's no possible way to unwind it in a short period of time and, if you notice, there's no desire or intent to unwind it at all by our so-called "leaders"; instead they're trying to pretend we can maintain it.

So-called "social distancing" assumes you can maintain that state until the threat has passed, that is, the R0 is below 1.0.

This will take years, not weeks or even a couple of months.

If you drop the "social distancing" before then the virus comes roaring back and you've accomplished nothing.

We cannot lock the American economy down for well over a year and no honest person who has thought about this for even 30 seconds actually believes we can.

We have built an economic "system" that is entirely reliant on "Mommy Government" feeding more than four trillion dollars into the economy annually with one and a half trillion being for Medicare and Medicaid (at 500% rip-off, feloniously-so pricing) and another $700 billion in "defense", the vast majority of which is showered on other nations yet is all part of our GDP.  If that goes away, and it will when tax collections collapse, the EBT cards stop working and so do the Medicare and Medicaid payments.  Further, the collapse of market returns along with Treasury yields will destroy every pension system remaining -- CALPERS, Arizona's PRS, Illinois system and countless others.

It all goes to crap immediately thereafter and therefore these sorts of "mitigating steps" cannot be maintained for more than a few weeks, and can only be employed once.  We've already likely triggered the collapse of most so-called "private" (not really, State-run) pension systems and, with these state-based shutdowns of virtually all discretionary business, most of the lower-paid service economy as well; what's left is whether we wish to destroy the FEDERAL GOVERNMENT'S funding capacity on top of it.

It will not come roaring back if we don't cut this crap out because there will be nothing to come back to.  The local restaurant has already defaulted on its lease and is done.  There is no job to return to because there is no restaurant to reopen.  The people formerly employed there defaulted on their apartment leases and are now homeless.  They also defaulted on their car payments and thus have no transportation.

This is what layering leverage upon leverage through the economy does and we cannot do a damned thing about it at this point other than not set off the chain of cross-defaults.  Over time we can change this in our economy but it cannot be done in a week, a month or a year, and the price of changing it is that the stock market gets massively chopped down to size.

The strategies as announced by governments at all levels in the US are all a bunch of bull**** and everyone advocating and demanding them, some at gunpoint (e.g. San Francisco) know it.

The only strategy that can and will actually work is for at-risk people to bug in until they can individually mitigate, take those steps, and then it is what it is and the outcomes are what they are.  The medical system cannot save nearly all of the critical cases no matter what we do so we are talking about trading off a serious minority of those cases for a destroyed economy.

Leadership is about leveling with the people not shining them on and bull****ting them right into the grave, along with destroying the economy at the same time to avoid having to get up at the lectern and tell the truth.

These are facts and no amount of arm-waving will change them.

And I'm not the only one who has figured it out either.  

What we're doing now will destroy our economy, we will drop the constraints, the disease will come roaring back and the people will die anyway but we'll have a Depression on top of it.

That's stupid.

Argue with my math.  I dare you.

View with responses (opens new window)