Higher Asymptomatic COVID-19, Lower Deaths Rates Positive

COVID-19 remains a global crisis and we realize that many people need to keep up with 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.

Stocks have taken continued bad news in stride: a mixed earnings picture, plus terrible data as 4.4 million jobless claims show the economic damage is broadening. Most investors are already aware that the economy is worsening. 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.

A lot has happened in the past week and here’s my breakdown.

POINT #1: A notable developments was a serological study (antibody-based) of NY state. Some 3,000 people were randomly tested. Most surprising was that NY governor Mario Cuomo suggested ~14% of NY residents have already been exposed to COVID-19 and >21% for NYC, or 10X and 13x the “official” case count, respectively. This is the fifth fairly large-scale serological study, including places like Los Angeles County and Gengelt, Germany, with similar conclusions. The actual prevalence of COVID-19, based on antibodies, is 13X-50X-80X greater than official tallies.

For NYC, 1.8 million residents have been exposed to COVID-19 (21% city) and 1.7 million show no symptoms. If this were consistent across the state, then total cases would be 1.8 million vs. 141,754 officially reported, representing 219,407 cases per 1 million instead of 16,877. The percent requiring hospitalization drops to 2% from 26% officially, and the adjusted mortality rate would be 0.6%.

There are multiple ways to interpret this data, so we want to be careful. Everything regarding COVID-19 and the future is uncertain. Reasonable people might disagree. For many, the fact that 92% of COVID-19 infections have no symptoms suggests they are many “silent carriers.”

However, imagine if policy makers knew hospitalization were 2% and mortality 0.6% vs. the original belief of 20% and 5%-10%, respectively. Instead of millions dead in the U.S. alone, as some predicted, the adjusted case progression would have suggested that death toll would be 150,000 to 200,000.

POINT #2: This matters because I think a higher prevalence changes the “way forward” more to treatment > Testing > Vaccine and argues restart economy sooner. And instead of shutting down the U.S., perhaps high incidence regions could have been closed.

First, the case for expanded testing is undermined. If an astounding 21% of NYC residents have COVID-19 and >90% asymptomatic, why quarantine so many with no symptoms, if the risk of serious illness = 2% for others? If they infect someone, there is only 2% chance of serious complications. This was originally believed to be 20%. A 10X difference in risk, I believe, would change the benefits of quarantines.

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. Convalescent plasma is a proven treatment path. And makes the future path of COVID-19 less dependent on Remdesivir and HCQ.

– Third, if 21% of NYC has COVID-19 and 92% have no symptoms, then it seems COVID-19 could be a far lower threat to the global economy and the calculus favors opening the economy sooner.

Two things to keep in mind. “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 those five studies, policymakers, the media and the public will eventually see COVID-19 less as “Contagion” or “World War Z” and more like a very serious communicable disease, but importantly one that does not warrant shutting the world economy down.

POINT #3: How much of a consumer wallet will have “social distance taboo”? According to the Bureau of Labor Statistics: of the $8 trillion in consumer spending (2018) 33% is spent on housing ($2.6 trillion), 16% on transportation and 13% food, or almost two third in total. That leaves about one-third for everything else.

The social distance “taboo” totals $717 billion, or 9% of this wallet, and restaurant, bars and eating out is $493 billion or ~70% of this total. If, say, consumers are “slow” to come back and spend 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.

The hit overall to consumer expenditures is a 3% decline, and some of this will be offset by spending more money at home — groceries, dining in, nesting, etc. I want to highlight that there are many puts and takes on the consumer wallet at the moment. Overall, once the economy re-opens, the risk of a social distance taboo—while it will pose risks to those industries—is a smaller share of wallet than is apparent from the headlines.

POINT #4: Recent days have seen a step backwards for the daily net case count in the US, which has risen. However, at the same time, hospitalizations, ICU usage and intubations and deaths are falling in some states, and, given the higher prevalence of COVID-19 via serological tests, perhaps state/ local governments are defining progress with a broader set of measures.

Additionally, the US is reporting a decrease in reported deaths. 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. But the overall deaths picture is somewhat better than the case count.