COVID-19 remains a global crisis and we realize that many people need to keep up with COVID-19 developments, particularly since we are moving into the more critical stage (“restart economy”), so feel free to share our commentary to anyone who has interest.
Several states today and yesterday reported somewhat meaningful increases in COVID-19 cases, including NY, NJ, and MA. But none of the governors, during their press briefings, seemed particularly concerned about this rise. In total, US daily cases jumped to 32,179 (+3,269, a pretty sizable jump) with 75% of that attributable to NY, NJ, MA. NY Gov Cuomo spent much of the time discussing the results of NY state serological study which found the prevalence of COVID-19 (based on antibodies) to be ~10X higher than previously thought and NYC with an estimated 21% of residents have been previously exposed (13X). Cases are rising but state leaders are not sounding incrementally alarmed and perhaps this is a sign that hospitalizations, intubations, and death are their new benchmarks.
But what we think is the most meaningful development today is that NY state study is now the 5th serological study that shows vastly higher COVID-19 prevalence. Why does this matter? We think it casts the pandemic in a very different light, with COVID-19 likely asymptomatic for 92%-98% of those infected and 2% requiring hospitalizations. If this is in fact correct, this means testing is far less important than treatment, and vaccines may be the least important. And with such high prevalence, the convalescent plasma may be the most promising, since the data suggests there are as many as 46 donors of plasma in NYC for every patient that is hospitalized. Way more availability of plasma.
As for markets, stocks managed a flat day on a mixed earnings picture, plus terrible economic data as 4.4 million jobless claims show the economic damage is broadening. But most investors are already aware that the economy is worsening. In fact, the bigger element of uncertainty at the moment is the pace at which the consumer will re-engage, particularly with the “social distance taboo” of restaurants, travel, and entertainment.
FYI, we quantify the consumer expenditures on these categories (see below) and it is ~$700 billion of the $8T consumer wallet and $14T of consumer PCE. The largest share of consumer wallet is housing + transportation + food = 66% (mostly at home food). So the social distance taboo is a relatively large 9% but if the US follows the path of China and these categories worth $700 billion see a 33% overall lower level (vs pre-pandemic), this represents a 3% overall hit to consumer expenditures.
In other words, once the economy is re-started, the “hole” that will need to be filled by that potential 33% drop is $240 billion, which is not a deep a hole as one imagined a month ago.
POINT #1: NYC serological study (early) points to 13X > prevalence compared to “confirmed” cases
One of the more notable developments today was NY Gov. Cuomo announcing the results of a serological study (antibody-based) of NY state. According to the NY study, 3,000 residents of the state were randomly tested (subjects found at grocery stores + shopping locations in 19 counties). We did not have access to the full report and are presenting the data as disclosed in his press briefing.
– The most surprising statistic is that Cuomo suggested at ~14% of NY state residents have already been exposed to COVID-19, which is 10X the “official” case count.
– For NYC, the estimate is >21% of NYC has COVID-19 antibodies and is 13X the official estimate.
– This is now the 5th fairly large scale serological study and the summary of the other 4 are shown below: Los Angeles County, Chelsea, MA, San Francisco, and Gengelt, Germany.
As we noted in an earlier FLASH, the conclusions for these studies is largely the same. The actual prevalence of COVID-19, based on antibodies is 13X to 50X to 80X greater than official tallies.
For NYC, 1.8 million residents (or 8.4 million) have been exposed to COVID-19 (21% city) and 1.7 million have no symptoms.
To really appreciate what this study means, take a look at the two comparative COVID-19 tables below. The first column is the “official data” as reported by NYC.gov and the second is adjusting the case figures for the NYC serological study (see above). This really changes what one would understand about COVID-19, ultimately:
– Total cases would be 1.8 million versus 141,754 as officially reported, representing 219,407 cases per 1mm vs 16,877.
– The percent requiring hospitalization drops to 2% from 26% officially
– The adjusted mortality rate would be 0.6%
– 1.7 million NYC residents, of 8.4 million had tested positive and have antibodies.
There are multiple ways to interpret this data. And because of that, we want to be careful. We have thoughts here, but with everything regarding COVID-19, the future is uncertain, so please keep this in mind. For many, the fact that 92% of COVID-19 infections have no symptoms is a cause for alarm. After all, this study suggests that 92% of cases, referring to the asymptomatic cases, are “silent carriers” of the disease and thus this is terrifying.
A perspective — imagine if policymakers knew hospitalization 2% and mortality 0.6% vs original belief of 20% and 5%-10%
But let us offer a different perspective. In February, when US policymakers were initially responding to the COVID-19 crisis, they had two rough frameworks in mind:
– China + Asia data suggested that 20%, or 1 in 5, would be hospitalized and 5% would perish.
– Italy saw a rapid spread with 20% hospitalized and >10% mortality.
– The Imperial College study, using these stats suggested as much as 2-5 million Americans would perish, a terrifying prospect.
But the adjusted case progression would have suggested that the death toll would be 150,000 to 200,000.
Why does this matter?
POINT #2: High prevalence changes “way forward” –> Treatment > Testing > Vaccine and argues start economy sooner
We think the conclusions from the 5 serological studies completely change (we realize you will disagree) the way forward. As a side note, it could have changed how policymakers would have reacted — instead of shutting down the economy, the US might have only shut down NYC (for instance).
At a high level, we think 3 significant changes in the path forward are raised by the serological studies:
– First, the case for expanded testing is undermined and Treatment > Testing > Vaccine. In short, if an astounding 21% of NYC residents have COVID + >90% asymptomatic, why quarantine so many with no symptoms, if the risk of serious illness = 2% for others
– Second, the best treatment path forward may be convalescent plasma, based on the implied math, there are 46 donors of antibody-rich plasma for every 1 person in the hospital. And makes the path of COVID-19 less dependent on the success of Remdesivir and HCQ.
– Third, if 21% of NYC has COVID-19 and 92% have no symptoms, then it seems like the calculus favors opening the economy sooner.
– Fourth, this kind of diminishes the risk of a second wave. This is a WEAK point, so take it with a grain of salt.
Again, this is simply our observations, based on changing what we understand about COVID-19 and the risks and progression of the disease.
Treatment > Testing > Vaccine… Testing + Contact Tracing + Quarantine wrong path if >90% cases are asymptomatic + 21% of NYC is asymptomatic
Yesterday, we wrote about the National Governors Association, NGA, which wanted to increase testing by a factor of 10X from 750,000 per week nationwide to 7.5 million. And to employ an army of contact tracers, to forensically document new cases and trace their movements from the first spread.
The focus is on “transmission risk” from an infected to a healthy person. But if 92% never develop symptoms and only 2% need to be hospitalized, does it makes sense to quarantine asymptomatic individuals?
If they infect someone, there is only a 2% chance of serious complications. This was originally believed to be 20%. A 10X difference in risk, we believe, would change the benefits of contact tracing/ mandatory quarantines, etc.
If 21% of residents have antibodies, there are 46 potential donors for every 1 person hospitalized
Convalescent plasma, or using the antibodies of a recovered person, to a sick individual becomes practical. Think of it this way:
– Asymptomatic are “donors” and is 21% of NYC.
– Sick individual need “plasma” and is 0.004% of NYC
– There are 46 potential plasma donors for every NYC resident who needs convalescent plasma.
Convalescent plasma is a proven treatment path. And makes the future path of COVID-19 less dependent on Remdesivir and HCQ. Equity markets kind of softened today on the “leaked” FT story about poor results with Gilead’s Remdesivir trial in China.
If >21% of NYC residents have COVID-19 antibodies, strengthens the case to re-open economy sooner…The fact that COVID-19 is overall far less deadly, means COVID-19 is also a far lower threat to the global economy. We know many will disagree with this fact.
In fact, we expect people to say “Hey, I still will not go to a restaurant or a theater”
But two things to keep in mind on that. First, “social distance taboo” activities like travel, restaurants, etc., are a shockingly small part of the overall consumer wallet (see next section). Second, if more serological studies confirm these 5, policymakers, the media and the public will eventually see COVID-19 less as “Contagion” or “World War Z” or “Walking Dead” and more like a very serious communicable disease. But one that does not warrant shutting the world economy down.
WEAK POINT but unlikely to see the second wave… everyone will just have it
On this point, we have a WEAK argument. Basically, we think there will not be a second wave, because COVID-19 will continue to spread. Hopefully, the weather will diminish transmission, and sunlight (recent studies) will further weaken spread. But asymptomatic patients means this may just be a persistent disease but one that is not coming in a second wave.
Why not a second wave? The idea of a second wave, we believe, is stronger is 100% of the cases are symptomatic, in the sense that with the R0 spread factor + 20% facing serious illness, then COVID-19 keeps cascading across a population. But if NYC has 21% already antibody positive, and likely it is rising every week, then there is less likely cascades of ICU.
POINT #3: How much of a consumer wallet will have “social distance taboo”?
The Bureau of Labor Statistics (BLS) puts out some really detailed data on consumer spending. And a version of the Consumer Expenditures Survey from 2018 has 974 detailed breakouts of the $8T consumer expenditures. It is so detailed, roasted coffee, frozen juice, chewing gum, etc. and even Encyclopedia spend is tracked. The grouped 9 (roughly) categories are below:
– 33% of the consumer wallet is spent on housing ($2.6T)
– Transportation is another 16% and food is another 13%.
– These 3 categories account for almost two-thirds of the wallet.
Social distance “taboo” total $717 billion, or 9% of this wallet.
We heard several clients tell us they won’t go to a restaurant, bar, sporting event, plane or concert for a long time. We understand. If COVID-19 is still out there, why would anyone risk it?
But what is the total value of this “taboo” category? We went through and listed these consumer expenditures and detailed them below.
– in total, it is $717 billion annually or 9% of overall consumer spending.
– Restaurant + bars + eating out is $493 billion or ~70% of this total.
If the post-recovery drop = 33%, Consumer spend overall down 3%
If consumers are “slow” to come back and therefore is only back to spending 66% of their original plans on these social taboo categories, that is a 33% drop post-expansion or $239 billion less on these categories. That is a big drop but it does look like the drop seen in China post-lockdown.
– in rough math, 33% of $717 is $239 billion drop
– the hit overall to consumer expenditures is a 3% decline.
– some of this will be offset by spending more money at home — groceries, dining in, nesting, etc.
The 40% drop in gasoline in the past year = $111 billion in extra cash flow for the consumer…
The consumer is also getting a $111 billion benefit from lower gasoline, which has fallen about 40% in the past year. The breakdown is shown below.
The point of this is to highlight there are so many puts and takes on the consumer wallet at the moment. And overall, once the economy re-opens, the risk of a social distance taboo, while will pose risks to those industries, is a smaller share of wallet than is apparent from the headlines.
POINT #4: Daily new cases really jumped across the USA today to 32,179 (vs 28,559 yesterday) making the last two days discouraging sign
The last two days have been a step backward for the daily net case count in the US. The total reported figure is 32,179, +3,620 from the day prior, and on top of a +2,825 increase reported yesterday. As you can see below, it is up from 24,730 seen 5 days ago and a big jump in the last few days.
– At the state level, 8 of the 14 states with the highest daily cases reported a rise.
– can we explain why 8 of the 14 states are seeing a rise? ~40% of the rise in cases is coming from NY/NJ and add MA and this totals +2,698 or 75% of the increase.
MA + NY + NJ = +2,698 rise in daily cases, or 75% of the surge in past day…
The breakdown from the top 30 states is shown below and there is a notable surge in NY, NJ, and MA below. MA Governor Charlie Baker on Thursday called the cumulative toll “staggering” but besides noting the rise in testing, did not offer a reason for the jump. And did not seem particularly alarmed. As for NY, Gov Cuomo highlighted the continued drop in hospitalizations and intubations as progress.
– Just an observation, but it does seem like states are using a shifting yardstick to measure progress. Previously, case count would be the benchmark and this 2-day rise would be alarming.
– But perhaps the fact hospitalizations, ICU usage, and intubations and deaths are falling, and given the higher prevalence of COVID-19 via serological tests, perhaps state/ local governments are defining progress with a broader set of measures.
This is not entirely clear to us that this is happening and we will look into this in the coming days.
As cases have risen, the US is reporting a decrease in reported deaths to 1,874 and this is an improvement from the last two days. Several states, including NY, have broadened their definition of COVID-19 deaths, including labeling some deaths as COVID-19, if the patient had suspected illness but was not tested.
The three states with big jumps in cases NY/NJ and MA have steady figures in reported deaths.
– Looking at the top 30 below, the states reporting relatively sizable rises in deaths are CA, Maryland, and Michigan.
But the picture of the overall death is somewhat better than the case count.
