Quote of the Week
“The world breaks everyone, and afterward, some are strong at the broken places.” – Ernest Hemingway
Last week was a good week for the markets. Most markets were up about 2% or so, with the outlier being the Nasdaq down -1.08%. The high-flying stocks of the Nasdaq are just starting to decline, which reminds me of the “Tech Bubble” of 2000. The Nasdaq is in a similar situation as in 2000, with the Index dominated by just a few stocks. Five stocks make of 40% of the Nasdaq, which is similar to 2000.
We are entering into the meat of the corporate earnings season, which, due to the shutdown in the second quarter, should be a disaster. We will see if the weak second-quarter earnings drive the market lower or the hope of a vaccine in the future keep stocks at this elevated level. Or, will the fact of the virus coming back with potential shutdowns dampen hopes for a “V” shaped recovery. I am betting that the recovery will be more if an “L” shaped recovery because of the virus. I read today that business leaders are already seeing a decline in business activity as compared to May and June. Other than the “don’t infringe on my rights” group, people are scared to venture out.
I have had a few calls recently asking why we aren’t in the market with it being up so much this year. The real fact is that most markets aren’t up this year. The Nasdaq is up substantially due to the five stocks referenced above. However, the actual markets are not up, and in fact, some are down considerably, as shown in this chart.
Source: AZ Daily Star 07-19-2020
We are still maintaining our conservative position. Economic events are the craziest I have ever witnessed in my career. Our portfolio obviously trails the Nasdaq by a lot and the S&P 500 by a little, but we are beating all of the other indexes listed above.
Pop some popcorn, grab a drink of your choice, find a comfortable chair, and watch the show about to unfold. This show could even exceed the fireworks display over Mount Rushmore. Plus, you won’t have exposure to Covid-19.
Larry’s Thoughts – R0 Gauging
You’ve probably heard the term R0 used more frequently during these times of COVID. The following link offers a great explanation. https://www.healthline.com/health/r-nought-reproduction-number
For those of you that don’t like clicking on links, we have reprinted it here for you. Please keep in mind this article was written earlier in the year and updated in April. For current Arizona numbers, please go to this website for https://rt.live/us/AZ. Drop the “/AZ” to see all states.
What Is RO? Gauging Contagious Infections
Medically reviewed by Alana Biggers, M.D., MPH — Written by Vanessa Bates Ramirez — Updated on April 20, 2020
R0, pronounced “R naught,” is a mathematical term that indicates how contagious an infectious disease is. It’s also referred to as the reproduction number. As an infection is transmitted to new people, it reproduces itself.
R0 tells you the average number of people who will contract a contagious disease from one person with that disease. It specifically applies to a population of people who were previously free of infection and haven’t been vaccinated.
For example, if a disease has an R0 of 18, a person who has the disease will transmit it to an average of 18 other people. That replication will continue if no one has been vaccinated against the disease or is already immune to it in their community.
What do RO values mean?
Three possibilities exist for the potential transmission or decline of a disease, depending on its R0 value:
- If R0 is less than 1, each existing infection causes less than one new infection. In this case, the disease will decline and eventually die out.
- If R0 equals 1, each existing infection causes one new infection. The disease will stay alive and stable, but there won’t be an outbreak or an epidemic.
- If R0 is more than 1, each existing infection causes more than one new infection. The disease will be transmitted between people, and there may be an outbreak or epidemic.
Importantly, a disease’s R0 value only applies when everyone in a population is completely vulnerable to the disease. This means:
- no one has been vaccinated
- no one has had the disease before
- there’s no way to control the spread of the disease
This combination of conditions is rare nowadays thanks to advances in medicine. Many diseases that were deadly in the past can now be contained and sometimes cured.
For example, in 1918 there was a worldwide outbreak of the swine flu that killed 50 million people. According to a review article published in BMC Medicine, the R0 value of the 1918 pandemic was estimated to be between 1.4 and 2.8.
But when the swine flu, or HI NI virus, came back in 2009, its R0 value was between 1.4 and 1.6, report researchers in the journal Science. The existence of vaccines and antiviral drugs made the 2009 outbreak much less deadly.
The R0 for COVID-19 is a median of 5.7, according to a study published online in Emerging Infectious Diseases. That’s about double an earlier R0 estimate of 2.2 to 2.7
The 5.7 means that one person with COVID-19 can potentially transmit the coronavirus to 5 to 6 people, rather than the 2 to 3 researchers originally thought.
Researchers calculated the new number based on data from the original outbreak in Wuhan, China. They used parameters like the virus incubation period (4.2 days) — how much time elapsed from when people were exposed to the virus and when they started to show symptoms.
The researchers estimated a doubling time of 2 to 3 days, which is much faster than earlier estimates of 6 to 7 days. The doubling time is how long it takes for the number of coronavirus cases, hospitalizations, and deaths to double. The shorter the time, the faster the disease is spreading.
With an R0 of 5.7, at least 82 percent of the population needs to be immune to COVID-19 to stop its transmission through vaccination and herd immunity.
The study authors say active surveillance, tracking the contacts of people who contracted the coronavirus, quarantine, and strong physical distancing measures are needed to stop the coronavirus from being transmitted.
How is the RO of a disease calculated?
The following factors are taken into account to calculate the R0 of a disease:
Some diseases are contagious for longer periods than others.
For example, according to the Centers for Disease Control and Prevention (CDC)Trusted Source, adults with the flu are typically contagious for up to 8 days. Children can be contagious for longer than that.
The longer the infectious period of a disease, the more likely a person who has it can transmit the disease to other people. A long period of infectiousness will contribute to a higher R0 value.
If a person who has with a contagious disease comes into contact with many people who aren’t infected or vaccinated, the disease will be transmitted more quickly.
If that person remains at home, in a hospital, or otherwise quarantined while they’re contagious, the disease will be transmitted more slowly. A high contact rate will contribute to a higher R0value.
Mode of transmission
The diseases that are transmitted the fastest and easiest are the ones that can travel through the air, such as the flu or measles.
Physical contact with a person who has such a disease isn’t needed to transmit it. You can contract the flu from breathing near someone who has the flu, even if you never touch them.
In contrast, diseases that are transmitted through bodily fluids, such as Ebola or HIV, aren’t as easy to contract or transmit. This is because you need to come into contact with infected blood, saliva, or other bodily fluids to contract them.
Airborne illnesses tend to have a higher R0 value than those spread through direct contact.
What conditions are measured by RO?
R0 can be used to measure any contagious disease that may spread in a susceptible population. Some of the most highly contagious conditions are measles and the common flu. More serious conditions, such as Ebola and HIV, spread less easily between people.
This illustration shows some commonly known diseases and their estimated R0 values.
Tips for prevention
R0 is a useful calculation for predicting and controlling the transmission of disease. Medical science continues to advance. Researchers are discovering new cures for different conditions, but contagious diseases aren’t going to disappear anytime soon.
Take these steps to help prevent the transmission of contagious diseases:
- Learn how different contagious diseases are transmitted.
- Ask your doctor about steps you can take to stop the transmission of infection. For example, wash your hands regularly with soap and water, especially before you prepare or eat food.
- Stay up to date on routine vaccinations.
- Ask your doctor what diseases you should be vaccinated against.
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These are the opinions of Larry Lof and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. Past performance is not indicative of future results. Due to our compliance review process, delayed dissemination of this commentary occurs.
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