Masked Bike Rides
Overly Optimized
Exogenous Causes
Silver Linings
A Suggestion
New York and Final Thoughts

In baseball, there is a kind of pitch called the “changeup,” designed to look like a fastball while actually going slower. The deceived batter swings too soon and misses. Strike, you’re out. The world has thrown a wicked biological changeup at the global economy.

This is kind of how coronavirus fear is spreading from China to the rest of the world and now the US. We think it’s coming fast. Many Americans have swung at the pitch by selling stocks, stocking up on food, cancelling travel plans, and so on. Those may prove to be wise choices. But in fact, the ball is still coming.

As of now, the medical data is a still evolving. What’s clear is we face an easily transmitted, flu-like virus. However, it’s more dangerous than the normal seasonal flu, particularly to the elderly and people with other health conditions. And it is spreading. The US appears to be a few weeks behind other countries where the situation is already much worse.

Every death is sad, and we should all take precautions. But we will adapt, and in due course have a vaccine that reduces the risk. The economic damage will be both harder to control and harder to repair. This week’s letter will focus on the economic impact globally—but specifically in China.

The Federal Reserve cut rates this week and bond traders clearly see more cuts coming. Jim Bianco says Fed officials know markets will keep falling anyway; they just want to manage the decline. Maybe so, but the problem began in China, and that’s where the solution will have to begin, too.

The good news is there are things we can do to help. I’ll mention one big idea at the end of this letter. But first, we’ll take a closer look at what happened in China and how it affects the world economy.