Cumberland Advisors Market Commentary – Wuhan, Hubei, Beijing, Washington: Case Studies in Gov’t Failure under Viral Conditions

Let’s summarize the Wuhan, Hubei, Beijing cover-up and aftermath: October and November – flu-like symptoms, sickness and deaths attributed to flu. December – whistleblower doctor joins other doctors in alerting colleagues of novel coronavirus. Whistle-blower and other doctors punished by China government and silenced.

Market Commentary - Cumberland Advisors - Wuhan, Hubei, Beijing, Washington Case Studies in Government Failure under Viral Conditions

China later attributes source of virus to seafood market (this is now believed to be false). Evolution of revelations intensifies in December. US agencies are alerted to new virus in late December. Trump administration remains silent on the issue between mid-December and mid-January as China trade war negotiations are concluded and documents signed. Post mid-January – number of confirmed cases grows, death toll grows, pandemic risk grows. Today, the virus makes daily headlines worldwide.

Dear readers: This commentary is about governments and their actions. I will offer citations and let each reader draw her/his own conclusions.

Please note that as of this writing there are “almost 400 million people under some form of coercive quarantine” in China. (“Chinese financial shock gathers steam as world holds its breath on coronavirus,” https://www.telegraph.co.uk/business/2020/02/07/china-contract-europe-near-recession-world-holds-breath-coronavirus/). Think about that. That number is roughly equal to the entire population of Canada and the United States living under some form of restriction.

Multiple studies suggest that there are many more infections than are reflected in the numbers that are being released by China, where the number of cases outstrips the capacity to test for the virus. Just today (Feb. 10), Dr. Eric Feigl-Ding (Epidemiologist/Harvard ’07, Hopkins ’04)  Tweeted how the “Chinese govt is now officially cheating the numbers: test positive but no symptoms?  China will no longer count that person as a confirmed case!!! This will also make death% look higher too.  This kind of science corruption can not stand!  Let’s tell @WHO this is not okay!”

Here are two additional sources to consider:

1) Interview with Professor Neil Ferguson, director of J-Idea at Imperial College London, https://www.youtube.com/watch?v=ALQTdCYGISw&feature=youtu.be

2) Lancet study estimating the likely number of cases as of January 25 at 75K and modeling the likely spread. “Nowcasting and forecasting the potential domestic and international spread of the 2019-nCoV outbreak originating in Wuhan, China: a modelling study,” https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(20)30260-9/fulltext

Let’s get to the United States. We have already established the deceptive and suppressive behavior of the Chinese regime and the horrifying results.

We’ve asked, what did the Trump Administration know and when did it know it? Was any information withheld as Trump’s team completed the trade deal? (See “A Wuhan Coverup and the Trade Deal?” https://www.cumber.com/cumberland-advisors-market-commentary-a-wuhan-coverup-and-the-trade-deal/.)

But what about US preparedness and federal budget funding? Does the isolationist and antiglobalist Trump policy raise coronavirus-related risks for Americans? Here is a link to the Centers for Disease Control and Prevention (CDC) budget and a comparison over three years: https://www.cdc.gov/budget/documents/fy2019/fy-2019-detail-table.pdf. Please review the section at top, entitled “Immunization and Respiratory Diseases.” Look at the total. In fiscal year 2017, which was the final year of the Obama administration’s budget, the expenditure totaled $793,274,000. FY 2018 was under a continuing resolution because there was no political agreement on a final budget. The total dropped to $744,766,000. FY 2019 is President Trump’s budget (), and the total had fallen to $700,828,000. Please see “Budget Cuts Have Made the US Less Ready for Coronavirus,” https://inkstickmedia.com/budget-cuts-have-made-the-us-less-ready-for-coronavirus/.

Readers, please note that during this time Trump administration’s spending for all purposes rose to record amounts and that the federal deficit has now trended above $1 trillion annually. Of course, Trump and his budget advisors and economic counselors could not have known about the coronavirus. But they certainly had the recent history of previous epidemic risks like Zika and Ebola and the 2009 flu pandemic.

Trump’s new budget vision was just released. The Wall Street Journal reported (Feb. 9) that “The Centers for Disease Control and Prevention would see its budget decline 9%, but with the coronavirus sparking global panic, $4.3 billion in funding for fighting infectious diseases would be preserved. Separately, the administration has notified Capitol Hill that it might reprogram $136 million in funds from fiscal year 2020 to address the virus, the administration official said, though no decision has been made on whether the money is needed.”

A 9% cut for CDC on top of a three year downward cutting trajectory.  But keep the infectious disease fight money flat? Trump knows he cannot defend a cut on infectious disease during an election campaign.  Query: Will it take an outbreak cluster of sick and dead people within US borders to wake Washington up?

In terms of the current handling of coronavirus surveillance in the US, we note Dr. Scott Gottlieb’s call, “Stop a US Coronavirus Outbreak Before It Starts,” published in the Wall Street Journal, for testing wherever cases of unexplained pneumonia begin to pop up in US states and territories, on the assumption that community spread could already be happening in the US: https://www.aei.org/op-eds/stop-a-u-s-coronavirus-outbreak-before-it-starts/. Gottlieb, a physician, is a resident fellow at the American Enterprise Institute and a former commissioner of the FDA (2017–2019).

Let me be very clear here. Trump is not the only Washington culprit. The Democrats (Schumer-led) in the Senate join the Senate Republicans (McConnell-led) on the continuing resolutions and in the final budget-debate agreements. The same Democrat-Republican joinder plays out in the House. It takes both parties to pass a budget or a continuing resolution. They blame each other easily, but they are shown to be failing when the full picture is revealed. Will voters get angry enough to turn on all incumbents and throw out officeholders in both parties? Maybe, if the pandemic reaches the US in sufficient size.

We have seen this budget dance before. Here is a report about the United States Zika virus spread which was exacerbated by government failure:

“During January 1, 2016–June 30, 2017, among 2,004,630 live births, 3,359 infants and fetuses with a birth defect potentially related to Zika virus infection were delivered to residents of the 22 jurisdictions, including 2,813 (83.7%) with brain abnormalities and/or microcephaly and 546 (16.3%) with eye abnormalities without mention of a brain abnormality (overall prevalence = 1.7 per 1,000 live births; 95% CI = 1.6–1.7) (Table 1). During the reference period, in areas with widespread local Zika transmission, limited local transmission, and without local transmission, prevalences were 1.3, 2.2, and 1.7 per 1,000 live births, respectively (Table 2).” (https://www.cdc.gov/mmwr/volumes/69/wr/mm6903a3.htm)

In my Zika pamphlet, I documented the US government’s failure to fund a Zika bill. Republicans used the proposed legislation to try to hurt Planned Parenthood. Democrats used it to fight over funding for Puerto Rico. In the end, time was lost; hence, the results you see above. President Obama stubbornly refused to back off his view on the Puerto Rico allocations, so a “clean” Zika bill never got to a full vote. All indications are that a clean bill would have passed with overwhelming bipartisanship.

Here is the link to the entire Zika pamphlet to anyone who would like to see it: https://www.cumber.com/zika/

Zika PDF

When I wrote it, I was repeatedly asked: “Why is Zika so important that you write about it often?” I am now getting the same question about coronavirus.

Answer: I believe that health issues and disease threats offer us the chance to assess the functioning of a political system. SARS, Ebola, bird flu, Zika and now coronavirus show whether or not the political system can be proactive. The quality of governance of a country is revealed, and its functionality or lack of same becomes measurable in statistics of suffering, illness, and death. Such is the case now in America as we clearly see that our elected political leaders are failing at a budget proposal offered, at a critical juncture, to grasp the magnitude of this threat. Thus both our elected Democrats and Republicans are at fault. They own the outcomes.  China’s leaders have already failed.

Dear readers who are still with me. Health issues allow for demonstrations of leadership success or leadership failure. Success requires the government and the private sector to engage in a proactive joint effort. Consider the polio vaccine or measles or tuberculosis treatment. Think about pneumonia shots or the shingles vaccine. How did these things happen? How are they funded? Why are they now ubiquitous? Why are we older folks healthier and more protected against illness than we have ever been?

Then ask why we abandoned the Zika-impacted infant yet to be born. Are we facing the same destiny with the coronavirus?

My friend and fishing camp attendee Ben Hunt is the Co-founder & Chief Investment Officer of Second Foundation Partners.  He offered this characterization In his “Epsilon Theory” writings:

“There’s a pose that very sick farm animals sometimes take when they’re near death, where they lie down and twist their head way back into their shoulder in a very unnatural way. It’s an odd sight if you don’t know what it signifies, a horrible sight if you do.

“Both the Republican Party and the Democratic Party are starting to twist their heads back into their shoulders. I don’t know if it’s too late to save them or not, but I’m increasingly thinking that it is. We need to start thinking about the funeral, who’s going to speak, and what they’re going to say.”

I hope there is no cluster coronavirus breakout in the United States.  I fear that is what it will take to change the Washington attitude.

David R. Kotok
Chairman and Chief Investment Officer
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