Virus Comments

Mizuho- This is the core problem. The market consensus last week was that the Novel Coronavirus is SARS 2.0 and all assets were being priced according to that consensus. Meanwhile, this virus has spread considerably faster and killed more people than SARS, in less time. The question for investors is, in which direction is the consensus likely to be wrong? A virus isn’t going to destroy much intrinsic value in the long run, of a software patent or a pipeline or a hotel or factory or whatever. But there’s also real potential for distress and/or liquidation is there if the virus goes pandemic outside China over the next year or two. For example, I think that it’s possible cruise lines could lose money outright if people get jittery about committing to vacations that might lead to quarantines or hospital stays. Worse, they may simply be denied ports of call worldwide. where will they trade if they have negative EPS over a 12-month window?

Via JPM

If Virus peaks in Feb/mar hit to GDP , 0 .5-1%

Virus peaks in Feb/mar but with Gradual production normalization

Virus peaks on April with further extension of suspensions nationwide Drop in growth expectations 1.5-2%

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