Flattened Curve Doesn't Mean The Dying Is Ending Anytime Soon

flatten the curve. Bill de Blasio, Mayor of New York City, coming out and saying that the numbers are looking encouraging, that you're actually seeing them go down when it comes to the death counts as well as the hospitalizations and diagnosed cases of the coronavirus in New York. But what will this curve look like? That is the question that Kathy O'Neil explored in a column recently for Bloomberg Opinions. Just to give you a sense of her background, her

math background, which I deeply respect. She founded worka o r C. A a and algorithmic auditing company, and she's the author of Weapons of Math Destruction, which I love the title of and can joins us now you wrote in a recent column. Cathy, this isn't the flattened curve we were promised. What do you mean by that? Well, thanks for having me. Um. Every time you go to a Cuomo press conference midday, he he'll have slides, and often those slides have models of what the flattened curve

looks like and what the current curve looks like. The models, UM, which I think are often made by McKinsey or some other modeling group. UM, there are symmetrical, which is to say, they go up to a peak and they come back down. They often look like normal distribution curves. UM. That is

not the actual empirical information we've had. If you look at Italy, Spain, France, UM, places that are a couple of weeks in front of us, what actually looks like this is both for the counts of people infected and as well as for the death counts. It looks like a pretty rapid rise at the beginning. So the first part of the curve looks right, It hits the top, and then it just slowly plateaus and then slowly descends. It is not coming down as fast as it went up. So, Cathy,

what do you think I mean? I remember we've heard Governor Cuomo talked about a plateau ing, you know, as opposed to the apex and then coming down. Um, so is it your sense that the the coming down on the backside will be significantly longer than kind of that

ramp up we saw in the month of March. That's correct, And I should mention by the way that, um, the weekends are always looking better than during the week So the fact that the last couple of days looked pretty good, I'm happy about that, of course, but I want us to be prepared for what's going to happen today and tomorrow. But by tomorrow night it will look a little bit less positive than it does now. And then it happened

last Tuesday, it happened the tuesday before that. So that's one thing to keep in mind when we look at these these daily data tables. But yeah, the real, the real reason I think that this matters, this asymmetry of this curve, is that when Cuomo says, you know, we're past the peak, and when he says the worst is over, that's technically possibly true, but it doesn't mean we like half the people who have died have died, or have

the people who will have died, have died. We might be looking at many, many weeks of lots of multi hundred UM deaths per day. We don't actually know how long it's gonna last and how quickly it will descend. Now, of course I hope that it descends very quickly, but the evidence from Italy and Spain, where they had quite strong restrictions for social distancing and saying your home and quarantining um, those graphs do not go down quickly. They're still at hundreds of deaths per day in both of

those countries. The importance of this isn't just to understand what we're in for that perhaps we have a whole lot more pain ahead of us, but also when to reopen Kathy. Is that right? I mean, in other words, if a lot of people are still getting diagnosed with the coronavirus, being over the peak in the short term doesn't necessarily mean that the danger necessarily is gone. Right,

That's very true. I mean, I think what what Cuomo cares about very much, and and it's a very real concern, especially if for the governor, is that the hospitals are not overwhelmed, that the number of ventilators we have in our state or in our country UM is sufficient. And so in that sense, the fact that we have passed our peak, it's very very important. It's it's crucial in fact, because the peak is of course a very real thing for hospital UM, you know usage. However, it doesn't say

a lot about timing UM. And for that matter, even if even if the number of deaths per day goes down to quite small, reopening too early before we actually have control whether we have don't have treatment, we don't have a vaccine UM, and we don't have UM you know, widespread testing might be a huge mistake because that curve

can pick right back up again. So, Kathy, that's kind of where I wanted to go, because that seems to be where the conversation is shifting now is to when and how do we reopen UH the economy, And in the absence of any federal guidelines, which we don't seem to be getting, it's kind of left up to the states. How do you think it should go based upon some of the data we've seen from some of the countries

that maybe a little bit ahead of us. Yeah, I mean, and I'm no, I'm no expert, and I'll just say it this way, there's lots of ways to define success UM, and in this case, Cuomo has defined success as the peak has passed, and really that is only success in a very narrow sense. It's a success for hospital um,

hospitals not being overwhelmed. It says almost nothing about when we should open, how we should open, how we should do that, beyond the fact that we don't want this to happen again, and we don't want this to happen again worse than it happened the first time. Kathy, as a mathematician and a hedge former hedge fund analysts, and a professor, you look at data a lot, and there's a question about the integrity of the data that we're getting when it comes to virus counts. Just by virtue

of the lack of testing. By one asktimate Johns Hopkins data, it shows that about one percent of the US population has been tested. Do you trust the extrapolations that we're seeing as accurate based on the numbers, as being a full representation at least of how far this has spread? Absolutely not, and thank you for the question. I wrote another column last week about ten data flaws that I

have observed with the daily data UM. One of them that I was quite adamant about was that we are just missing a whole slew of nursing home depths, and that, of course has been coming out in the last few days. There's so many biases going on in the in these numbers, UM, the very first and most prominent one being that I believe that the actual number of infected people is around ten times as many as as as are reported, simply

because there are so many asymptomatic people. But there's also other problems like besides the nursing home death, besides death that happened in homes, besides death that happened where people where there's more than one cause of death and we don't really know because there was no test available. We simply have tests themselves that have more false negatives and

false positives. Some doctors are thinking, some researchers think that the solve false negative rate is more than which is to say that if you get tested and you get negative, there's a chance that you are positive. UM. That's for the individual, but for the for the overall data set, what it means is that we are vastly underestimating the number of positives, even for the people that we're testing. So it's a major problem. Our data is not good

and we are so spoiled for data. We think of data as just being as available as the Internet, and in a lot of ways it is. But this is a whole new kind of data set that we just don't have do not have yet. So, Kathy, you know there's a role here for technology. And I think in the last week or so, Apple and Google have talked about, you know, getting a COVID nineteen tracking app, and I know you've done some work on that. What do you do you think that holds some hope for really tracking

this and getting better data. You know, we would get some more data. My biggest concern about that are the blind boss of that data set because UM, as I understand it, almost all of the tracking apps UM that have been suggested are opt in. So who would opt into The first question have to ask is who would opt in for that UM And the answer is people who are worried but do not? Uh do not? You know that basically have the luxury of being worried if

you will. So in other words, the people that are delivering our food, the people that are the frontline workers, they don't have the option of sort of not going to work because they need the money, or they even even more stark, they might not even have the option of getting treated if they do get sick because they're not insured. So I just think there's a whole slew of people, and it's not just a random selective of people.

It's the people that are most at risk, most likely to be getting infected, that will simply not opt in. And so then the question becomes how useful is a tracking app where the most infected population, the most vulnerable population, not to mention people that don't have cell phones, that live in nursing homes or prisons. Those people are the very ones that will not be part of the system. So I feel like it is actually a pretty limited

amount of good that could be done. Although you could collect some data, the data you're most interested in would be invisible to you. Kathey O'Neill, thank you so much for being with us. Kathy O'Neil a mathematician, a Bloomberg opinion columnist, also a former Hedge fund analyst and professor UH and of course author of fantastic book. I recommend you do read it. Who all about the practice of math and the intersection between it and the financial world. Paul,

very much. The financial world right now focused on the price of oil as we look at a plunge to lois and two, a lot of disparities between the front end contract that expires tomorrow, not a lot of volume, people kind of discrediting it as it plummets and looking to the June contract. Nevertheless, what it highlights to me is the massive gap between where you can actually buy or sell a barrel of oil versus the futures contracts.

In other words, the physical demand is just non existent, and there are circumstances where I say, in Texas, uh, some shell producers and drillers are actually accepting two dollars per gallon in order just to get it off of their lots. And it raises this question of of what this does longer term, how long this will persist, and what kind of cuts would be required turn it around.

What we've been talking about today is oil uh w T I training down about here today to ten and seventy five cents a barrel that's on that may contract that June contracts, which is a more actively traded one that is up north of that. But still down for the day. It's got a sense of what is going on in the global energy space. Vince Signarella, global macro strategist for Bloomberg News, joins us on the phone. So, Vince, what do you make of what's going on with w

t I today. Well, I mean this, you know, the story just hasn't changed really. Um, we're seeing basically drop and demand of what O pe plus has put at something around thirty million barrels a day and potential O pep plus cuts between ten and fifteen million barrels a day. So at the end of the day, it doesn't really

change the story. It just means oil will fall in in theory, uh, you know, more slowly, but we're getting towards levels and I think this is running it around my British petroleum days of of the late eighties, where I think ten dollars or so was about as low as we got in the oil. So it kind of have to wonder if we're getting, you know, pretty close to the bottom of this. Can US equities rally if

you have oil this kind of level. Yeah, you know, the the the correlation between US equities and crew is very very tight historically. Um, but it moves. This moves more on the demand side of things. So it's the demand side of oil that that that correlates with equities, not the supply side. And this drop in oils supply related um um in the sense that there's way too much of it, uh and they can't cut down to

where the to where the demand is. But I think we're now at a place where we've we've reached as pretty much as low as we're going to get. You know this, this lack of demand is what weighed I think equities looking backwards now, the equity market is looking forward and they're looking past this next month or two. I think they maybe a little prematurely, but they seem to have discounted it, and they're looking at demand being aggressively picking up in the future from these levels. At least.

This is what folks are telling me when I talked to guys this morning about career futures, and what they're doing is yelling at me and telling me, don't look at the as we as we hothead oil flowing to the lowest in April, don't look at the front contract expires tomorrow. The June contract down eight point six percent, is more indicative of to where the price of oil

really is. Yeah, this is what I'm struggling with. People expecting that demand will pick up in the following months, and you're seeing this in the steepening of the forwards curve when it comes to two futures in the oil pad. I'm starting to understand why people think that the demand

is going to pick up so much. In other words, yes, we're going to have some sort of reopening, but is that going to be enough at a time when in Texas there some producers are paying two dollars for for people to come and take the oil off their off their property. Yeah. No, I I totally agree with the least.

I think that's I think the market is way too optimistic, and I think, you know, one of the things we really need to look forward to look toward, and what you know people like Dr Fauci are reminding us of is opening up too quickly or reopening too quickly and perhaps seeing a second surge in the virus. That is without question or real possibility. The state of Texas is looking at reopening um plans when they've tested from what

I understand, one percent of the population. So it's really difficult to see how you can be looking at reopening things is where you have absolutely no handle on really the spread of the of the virus. So Vin's just going at the overall volatility in the equity markets. I'm looking at the vix here something Tom likes to call out. Tom King likes to call out. And you know, we peaked at over eighty, but we're certainly a long ways from the you know, the mid teens level that we've enjoyed.

I guess pre virus give us a sense of kind of what that tells you is the market getting a little maybe too sanguine about kind of the near intermediate term. Yeah, I mean in a way it doesn't mean you look, you know, I have to say I looked. I look, when I look at futures in the evenings, you know, the night before, I'm like, they're only down four hundred.

You start to think like, I'm getting accustomed to these moves of of being, you know, almost getting getting used to the fact that you know, two point moving into doubt. It's really not that big a deal anymore in terms of, you know, comparatively speaking, And I think the markets starting to fall into that trap as well. Where you know, a lot of the money that we're trading right now, a lot of what we're seeing. You know, everybody talks about it, but it's it is a reality. It's a

lot of it as machine driven. Um. I think the the interesting point is these are algorithmic, algorithmic programs that are pre virus written. They're running I think in a way, I think that's trading on the world things. I mean, they're just not built for this type of the move So that's why I think we're seeing this volatility and we'll see it continue for a while. Vince Signarella, I would love to keep talking with you. We have to

leave it there for Tom constrains. Vince Ignerella, global macro strategist for Bloomberg speaking to us about those algories which are written for another era. Everything written for another era, nothing written for this era, which is unprecedented in every which way. Let me take a look at gold that is up eleven percent year to date. Is people look for a safe haven among other issues here in this

incredible time we're living through. Will Ryan is a founder and CEO of Granite Charity Space in New York City, UH and spends a lot of time looking at the gold market, So will give us your thoughts as we take a look at gold. How do you think gold should be used in investors portfolio in these uncertain times? All right, Paul, good morning. Um, well, I think the main demand for gold at the moment is the people that are really looking for some kind of protection, some

kind of installation from what's happening. And typically these times, people are not investing in gold to make money per se, They just don't want to lose money. And that's really been the main theme I think since this crisis has started. So you know, gold typically acts as a diversifier because it's uncorrelated to the stock markets. In other words, of the stock market falls, typically you can see gold rising and really that's created a big demand for investors who

are fearful about you know, losses in the portfolio. So gold has been a big winner recently. Is people look to the potential for money printing around the world and just sort of a lack of stability. Uh, as we head towards are in a global recession, I'm wondering though going forward, what arguments people should really be looking at in terms of deciding whether to buy or sell gold.

In other words, is it the money printing argument that the idea that developed markets are going to somehow devalue their currencies because they are engaging in unprecedented stimulus and bailout efforts, or is it more behaven investment strategy. During a tumultuous time, people want something to anchor their bets to, and gold is a good place. I think it's both, Lisa. I mean, I think you've got a verse situation that's very similar to what happened in two thousand and eight.

Of course, in two thousand and eight, you had those two particular situations at play, where you had a lot of money printing here in the US but all around the world. At the same time as you had, you know, fears about the market in general and people looking for an alternative two stocks and bombs. So I think you give the same thing this time around. I would just add in one more thing that, of course, all this

money printing is unprecedented. We said that last time in two thousand and eight, but um, this time around, it it's even bigger in terms of the magnitude and the scale. I think what comes with it this time, which is different from two thousand and eight is I think we'll see a lot more spending from the federal government. In many ways, a lot of the policies that were enacted

post two thousand and eight were more restrictive. You could you might argue that they were sort of austere or policies of austerity, um, and that limited or put the brakes on inflation. I think this time around, Um, we've already already started talking about what the administration is talking about, you know, potential two trillion dollars of infrastructure other types of spending, and I think that this time around that could lead to inflation. So it's it's interesting, Will, So

what is your sense as two bonds here? I mean, we've had tremendous for school stimulus, monetary easy looking at the bond market right here. Yeah, so the bond market, I means has been big mess um as you know, but obviously the Federal Reserve is stepped in and really backstop the entire bondmark. And then you know, clearly that started with treasuries as one would expect, which is the playbook from the last financial crisis of from two thousand

and eight. And then what's different this time is that's been extended into corporate bombs and now obviously the latest as jump bonds, and so really the entire market has been back stopped by the Federal Reserve, which has made that again unprecedented versus what we've seen in the past. And you're just talking about inflations, you sort of have the fedbackstop, and then you also have the idea that you do believe that inflation is going to start picking up.

I'm trying to square that with the reality that we're looking at right now of oil and the fact that oil prices have fallen to the lower since nine two and just keep falling. And I'm talking about the front end contract and let's just put aside some of the technical backings here. It's clear that there is a glut of oil and we are running out of storage capacity.

Square that with the idea of inflation. Well, oil is a very very specific thing at the moment, and you know you have again this is really quite incredible situation where we're probably here in terms of Cushing, which is the main storage you know, hub for W T I oil, We're probably going to reach the top of the tanks in terms of storage capacity sometime maybe as early as next month, and really there's no other place or very few options as to where else you can store excess capacity.

As you know, the the coronavirus has taken all transportation for the most majority of transportation offline, and you need to see a recovery in in the gasoline market to

increase oil prices. But I think, coming back to the inflation re argument, you can have a situation where this money printing, extreme kind of debasement leads to inflation, albeit albeit while you have severe sort of economic indicators that that are down and an oil is a big one, all right, So there's this idea of the print a lot of money and it loses its value and prices go up, and then you have oil is sort of

a barometer of global trade and global growth. Do you expect oil prices to remain depressed for a long period of time or do you adhere to the idea that in the short roum we're going to see production drop off, We're going to see oil producers just stop out their their wells, and then that will lead to a spike in oil prices when the economy comes to some sort of new normal post pandemic um. You know, I I don't know, is the honest answer, because there's so much

play here. I mean, one thing I will say is there's been a lot of talk about the Opeque Russia UM supply cuts that were announced just over a couple of weeks ago, but that doesn't come into play until May one, So we've still got another month to play out of all that supply cut takes place. But even then, I don't think that's enough to, you know, to stave off the sheer demand destruction that we've seen. I mean, as you know, the biggest, you know, the biggest contributor

to demand is transportation. And if transportation it's just not operating, then you don't have that demand. And that's why we've seen this unprecedented build up in capacity. So I think that you're going to exceed this continue for as long as that, um, you know, that sector stays down, our dormant and so we start driving again. And if that's into the into a that's into a market where apply as being cut or adjusted to coordinate, and you could

see as blank in demand. But I think right now, UM, you know, the clear and obvious thing is the oil prices are going to be low for some time until this this is correct grafted. Yeah, well Ryan, thank you so much for being with us. Will Ryan, chief executive officer of Granite Shares talking to us about a range of commodities as we face a recession and the question is for how long and how will we restart the economy. Thanks for listening to the Bloomberg P and L podcast.

You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney. I'm Lisa abram Woyds. I'm on Twitter at Lisa A. Bramwoits one before the podcast, you can always catch us worldwide. I'm Bloomberg Radio.