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Looking at the Dow futures, which are currently 400 points down, which is being attributed to the coronavirus. Why? About 50 or so people have died, apparently mostly because of compromised immune systems. Only a small handful of cases in the US. It’s about as contagious as the flu, which killed about 30,000 or so people last year.

Why so much effect on the markets for coronavirus? Just having a hard time getting my head around it.
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It's the uncertainty spooking everyone.
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"Why so much effect on the markets for coronavirus? Just having a hard time getting my head around it."

*******************************************************************************

The world economy depends a great deal on free movement and routine manufacture and transfer of
goods and services. A worldwide pandemic - say of the black plague variety - would severely
impact trade. Even though Kimberly Clark sales might skyrocket - their ability to produce Klennex
and ship the product would be harmed.
So, fear takes the foreground - and with a market that is somewhat overbought, there is a reason to
sell. This even though selling will only generate cash which would also be of lesser value if a
true pandemic occurred.
The potential for dead bodies tossed into the streets would be difficult to imagine for most
modern cultures - but dealing with such a scenario would be difficult. Even more so than an
election year.

Howie52
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Two suspected cases in our area already, with a university that has a very large Chinese population that just came back from winter break.

Uncertainty and fear will keep people in their homes, buying less. Huge ripple effect in a global economy.

IP
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Looking at the Dow futures, which are currently 400 points down, which is being attributed to the coronavirus.

There is never a single reason markets move. Some people might be reacting to the virus, others to other economic or political news. Some are selling because they need the cash for spending.

So I don't believe your basic statement is correct - that the drop in Dow futures can attributed solely to the coronavirus. Perhaps a portion can be, but certainly not all.

--Peter

PS - What is 400 points in terms of a percentage drop? Is it a meaningful drop or just the usual random noise?
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Uncertainty and fear will keep people in their homes, buying less. Huge ripple effect in a global economy.


Well.... sure. But by that logic, airlines should shut down everyone should be cowering in their homes every flu season.

It seems to me that the panic is kind of unwarranted, right now, given what we know about the potential impact.

I was just surprised on my news to see the festooned in Dow futures attributed to something similar to the flu.
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I was just surprised on my news to see the festooned in Dow futures attributed to something similar to the flu.

Market is looking for a reason for a correction, and it won't take much. Could be this virus, which given how little we understand it and people are contagious even before having symptoms there is room for fear, or the preview POTUS' lawyers gave this weekend of his defense could be having impact too.

IP
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It seems to me that the panic is kind of unwarranted, right now, given what we know about the potential impact.

We know the potential impact, a few hundred million dead. What we don't know is the likely impact, most likely not that bad, a few thousand or few hundred thousand dead. BTW 100k dead is about 1/3 day's average world-wide death toll (7.7B people, 72.6 year life expectancy). Once the likely impact is known everything will settle down. Until we know which way the disease is trending people are nervous.
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It seems to me that the panic is kind of unwarranted, right now...

Panic? Right now all US markets are down less than 2%. A correction would be at a minimum 10X these levels. The point drop has to be kept relative to the total.

IP
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Why so much effect on the markets for coronavirus? Just having a hard time getting my head around it.
================================
There is more going on. Per MarketWatch, just now:
https://www.marketwatch.com/story/dow-down-414-points-on-los...
Dragged down by losses for shares of American Express and UnitedHealth, the Dow Jones Industrial Average is in a selloff Monday morning. The Dow DJIA, -1.43% was most recently trading 414 points lower (-1.4%), as shares of American Express AXP, -3.39% and UnitedHealth UNH, -3.30% have contributed to the blue-chip gauge's intraday decline. American Express's shares have fallen $6.09 (4.5%) while those of UnitedHealth are off $9.60 (3.3%), combining for a roughly 106-point drag on the Dow. Also contributing significantly to the decline are Nike NKE, -1.94%, Cisco CSCO, -2.75%, and Apple Inc. AAPL, -2.85%. A $1 move in any one of the 30 components of the benchmark equates to a 6.78-point swing.

Now, I have noticed in the recent past that Cisco Systems and Apple have been particularly affected by adverse news suggesting problems with trade with China, e.g., any kind of rumbling from Trump or from China hinting at more trade-war problems. That doesn't explain all the market activity though.

And the markets have really surged in December and January, so any kind of negative news could prompt active traders (and/or their pre-programmed algorithms) to decide that it's time to pause and sell to lock in some profits.

As for the 2019 Novel Coronavirus (2019-nCoV), it's a newly discovered one, so there's a lot we don't know about it.

https://www.cdc.gov/coronavirus/2019-ncov/downloads/2019-nco...

For one thing, as a Coronavirus, it's related to, but not the same as, the H1N1 ("Swine flu") virus from a few years ago. The vaccine for the H1N1 virus is included in this year's flu shot. Whether this would help protect from the new virus is unknown. There is not a specific vaccine for the 2019-nCov.

Bill
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It seems to me that the panic is kind of unwarranted, right now, given what we know about the potential impact.

If you think the market is frothy already, it doesn't take much to cause a panic. Especially on Wall Street that already is prone to jitteriness.

The "normal" flu does kill a few people, but mostly you just feel like crap for a few days and it's over. This one has killed 41 with only about 1400 cases so far. By "normal" flu standards that is a high percentage. If this becomes a pandemic like the Spanish Flu, there will be lots more dead people and a serious effect on commerce for months. SARS had a significant effect on the markets, and so far the Wuhan flu is being compared to that. If it reaches the severity of Spanish Flu, watch out below...
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But by that logic, airlines should shut down everyone should be cowering in their homes every flu season.

Most airlines have waivers for people to change flights to China and some cruise lines are suspending China operations. Most airports receiving flights from China are putting in screening processes.

I’m in New Zealand so it may look different from here. I did fly through Hong Kong during SARS and that airport had significant screening for any passenger with even a slightly elevated temperature.

People who think they may have been exposed are cowering in their homes. The problem is the ones that don’t know or who are ignoring the risk to others.

It has definitely impacted Chinese New Year travel and celebrations around the world.

I head back to the US in a couple of weeks so I will be watching this.
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It will depend on what steps they have to take to get out in front of it. They are already instituting lock downs and travel restrictions. If they have to continue to do that as the virus spreads to other cities, it would have a devastating effect on the Chinese economy, hence the world economy.
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"The "normal" flu does kill a few people, but mostly you just feel like crap for a few days and it's over. This one has killed 41 with only about 1400 cases so far. "

As a point of reference, the "normal" flu has killed 14 in Dallas county this year (probably means this season). Not even headline news here.

Also 1400 is a very small number of people in a country of 2 billion.

As the Hitch Hiker's Guide says:
Don't Panic.
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I was pointing out the percentage. Fourteen deaths out of how many people have had the flu in Dallas county? Ten thousand? More? Most people don't even report it, they just stay home for a few days. Forty one deaths out of 1400 is a high mortality compared to the "normal" flu.

But, no, don't panic. Yet. Though over the weekend more cases popped up in the US (one in Tempe, and I think three more in Virginia...or was it North Carolina...).

Point being, given the abnormally high mortality rate and the innate jitters of market traders, any little thing can send them into a panic. And this would be one of them.
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As a point of reference, the "normal" flu has killed 14 in Dallas county this year (probably means this season). Not even headline news here.

If regular flu had the same mortality rate as coronavirus, those 14 fatalities would have been more like 400.
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Point being, given the abnormally high mortality rate and the innate jitters of market traders, any little thing can send them into a panic. And this would be one of them.

Fortunately for me, I'm still in accumulation phase so I want stock prices to be lower.
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If one has some available funds, a buying opportunity is usually a good thing. Unless you have to live on your invested funds, then it can be painful. :-)

I have some free cash, and could use a buying opportunity. Things have run up enough that I'm uneasy investing. I think we're near a top. Maybe not at it, but close enough.
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What's also scaring people is that the news keeps getting worse. First it was no person-to-person transmission. Then it was person-to-person transmission is occurring, so avoid people with symptoms. Earlier today they reported that the virus is mutating and that people are contagious before symptoms appear (so screening people is bit ineffective).

And if you watch the global map of reported cases, it changes hour to hour.

So it's not that the virus is super scary right this minute, it's that if it keeps to its present trajectory, it may become very scary indeed. Reacting to potential dangers has survival value, so it's not surprising that people pay attention.
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"As the Hitch Hiker's Guide says:
Don't Panic. "

**************************************************************************

But when the government, airlines, industry, media and religious leaders of all
stripes start quoting Douglas Adams - you might get a touch antsy.

Howie52
Sirius Cybernetics Corporation shares are trembling as we post!
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Though over the weekend more cases popped up in the US (one in Tempe, and I think three more in Virginia...or was it North Carolina...).

Three suspected in VA, but the 2 here in Central VA tested negative. The one in NoVa is still pending.

IP
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Why so much effect on the markets for coronavirus? Just having a hard time getting my head around it.

I'm recalling a portion of one of Nassim Taleb's books (maybe "Skin in the Game"). They asked people to rate the likelihood of some sort of natural disaster happening in California. Then, they rated the likelihood of an earthquake happening in California. People rated the earthquake possibility higher than the natural disaster...but an earthquake is a *subset* of all natural disasters, so the general disaster probability has to be higher (or at least no less) than that of an earthquake.

That underscored a couple of things to me, the one applicable here being that "people are bad at estimating risks."

Another likelihood is that people are telling themselves that *they* are rationale and not likely to panic, but *others* may panic, driving down stock prices. So it seems rationale to pull some money out of stocks because of the chance of others' overreaction. Since P/E ratios are high, the stock market is priced for...maybe not perfection, but for a continuous flow of good news and neutral news. But when the news said "this is the biggest decline since October," I thought "OK, every six or so months, we'll have a decline that's a 'once, twice or 3x per year' sized."

There are probably three scenarios:
1. The market will go down a little and recover. In that case, it doesn't make sense to adjust your asset allocation because you surely can't time short term movement.
2. The market will go down for a while and recover, but not soon. In that case, you'll be glad for the stable part of your portfolio if you're going to need money any time soon. If you're on the cusp of retirement or in retirement, you already know you should have some non-risk or lower-risk assets, and it doesn't make sense to adjust your asset allocation.
3. The market will go down down down and never recover. In that case, your asset allocation doesn't matter and you'll rely on your firearms and emergency provisions.

I keep thinking about an old saying that "The stock market is at a peak when the shoe shine guy gives you stock tips." It's probably good to let a little air out of the stock market periodically to shake out those who think that it returns 20% a year and never goes down. Remember that study about how investors earn ~4% less than the funds they own? The ones piling in now include the ones who are smug about selling before the last downdraft, but never got back in, and are feeling the pain of missing out on last year's 37% run-up.
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Netflix has a lovely documentary called Pandemic.

Episode 1 was good. They’re working on a universal Flu vaccine for all flu past present and future.

Also pointed out there are communities with ONE doctor. In America. Went to one. Doctor lives in the hospital. If one of those gets hit ....well meds go to the big cities first so they’re going to be screwed.

Interesting not scary. Although the Spanish Flu spread worldwide because of soldiers returning from WW I (normally people didn’t travel back then much) and killed more people than both world wars combined. Mass graves. Here. Pennsylvania. 150 million.

I don’t worry about overpopulation. One bug like that and we’re good, as it were.
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...the Spanish Flu spread worldwide because of soldiers returning from WW I (normally people didn’t travel back then much) and killed more people than both world wars combined.
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Yes. I had a great-aunt I never met, because she died of the Spanish flu after having served as an army nurse in WWI. She got sick and died after the war was over.

Bill
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I have heard it asserted that the Spanish Flu ended the War. Supposedly nations couldn't field enough soldiers to fight because they would get sick (and sometimes die) before they got out of boot camp. Though I didn't learn that in high school, and I am somewhat intrigued but skeptical.
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"I have heard it asserted that the Spanish Flu ended the War. Supposedly nations couldn't field enough soldiers to fight because they would get sick (and sometimes die) before they got out of boot camp. Though I didn't learn that in high school, and I am somewhat intrigued but skeptical. "

**************************************************************************************

Nations will always find more and younger men to put on the front lines. Wars end because
one side or the other cannot afford to pay to continue the effort - or one of the governments
pursuing the actions fall.
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Recently heard some MD interviewed suggest that the overuse of aspirin (a new wonder drug at the time) exacerbated the hemorrhagic effects of Spanish Flu and increased the death toll.


I dunno... Interesting ponder
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