The Ireland Event

Daily reported new Covid cases, Ireland, through Jan. 7, 2021

For the past year, I’ve been consumed with how Covid numbers are used/manipulated to create political narratives. From China to WHO to don’t-test-don’t-tell to Covid Trutherism in all its forms … that’s been the windmill I’ve tilted at for almost 12 months now.

Last week I became consumed by a new twist on all this – Covid numbers that were being largely ignored. Insane infection numbers coming out of UK and Ireland, apparently driven by a new virus strain, that we acknowledged over here but didn’t seem to be too mussed about.

It reminded me of the Covid numbers coming out of Italy last February. Was Europe once again our crystal ball? Were we once again going to ignore THAT?

And when I say “insane infection numbers” I mean a 30x spike in Covid cases in Ireland over the span of two weeks in late December, where the R number – the basic reproductive rate of the disease – went from something around 1.2 to something around 3. Where you suddenly went from a few hundred new Covid cases every day to more than six thousand cases every day. All in a country the size of Alabama (which, btw, currently has about 4 thousand cases every day).

So I’ve been trying to figure out what happened in Ireland, and whether it could happen here.

To do that I had to research this new UK-variant of the virus. I had to research the way in which Covid is explosively spreading in Ireland, and whether that was similar or different to US. I had to research what it MEANS to have an R-number go from 1.2 to 3.  And finally I had to dig into why this ‘Ireland Event’ was not being discussed by US Covid missionaries (to use an Epsilon Theory term) like Scott Gottlieb or Tony Fauci.

I’ll start with the conclusion.

I believe there is a non-trivial chance that the United States will experience a rolling series of “Ireland events” over the next 30-45 days, where the Covid effective reproductive number (Re not R0) reaches a value between 2.4 and 3.0 in states and regions where a) the more infectious UK-variant (or similar) Covid strain has been introduced, and b) Covid fatigue has led to deterioration in social distancing behaviors.

A single Ireland event is a disaster. A series of Ireland events on the scale of the United States is catastrophic. If this were to occur, I’d expect to see a doubling of new Covid cases/day from current levels in the aggregate (today’s 7-day average is 240k/day), peaking somewhere around 500,000 new daily cases before draconian economic shutdowns (more severe than anything we’ve seen to date) would occur in every impacted major metro area. Hospital systems across the country would be placed under enormous additional strain, leading to meaningfully higher case fatality ratios (CFRs) as medical care was rationed. Most critically, this new infection rate would far outpace our current vaccine distribution capacity and policy. Assuming that vaccines are preferentially administered to the elderly, aggregate infection fatality ratios (IFRs) should decrease, but the overall burden of severe outcomes (death, long-term health consequences) would shift to younger demographics.

Current US government policy rejects the possibility of an Ireland event, largely because of what I believe is a politically-motivated analysis by the CDC that models more than 100 million Americans already possessing Covid antibodies, prior to any vaccination effort. Using data from flu monitoring programs in prior years, the CDC models project that 70 MILLION Americans have already gotten sick with symptomatic Covid, but decided to just write it off as a bad cold and never got tested. I am not making this up. Add in another 10 million or so Americans who the CDC models as having already had asymptomatic Covid, add in the 23 million Americans who we know have had Covid, and voila! – per the CDC, one-third of the American population is already effectively immunized against getting Covid in the future. And obviously enough, if >30% of Americans are already effectively immunized against Covid because they’ve already gotten sick, then it’s very difficult to hit the Re numbers of 2.4 – 3.0 that Ireland is currently experiencing.

I think this model is wrong, and I think the CDC knows that it’s wrong.

I think it’s wrong because the 2021 behavior of someone who thinks they might have Covid is very different from the 2015 behavior of someone who thought they might have had the flu, but the CDC assumes it is the same in their models. You don’t ignore Covid. You don’t just brush it off. I’d say that no one just brushes off Covid symptoms the way they might have brushed off flu symptoms in the past, but of course that’s not true. I’m sure there are millions of Americans who have, in fact, had symptomatic Covid and ignored it, particularly in spring and early summer when our national testing capability was pathetic. But 70 MILLION Americans? Twenty percent of ALL Americans? More than three times the number of known Covid cases? C’mon, man.

I think the CDC knows this model is wrong because if it were true – if they actually thought that one-third of Americans were already effectively immunized by having Covid antibodies – this would be an ENORMOUS factor in determining vaccination policy. Otherwise, you are going to be wasting one-third of your precious supply of vaccines on people who don’t need it.

I think the CDC knows this model is wrong because if it were true, how do you make sense of Covid hospitalization rates?

Again, were there millions of undiagnosed and “brushed-off” Covid cases in the spring and early summer when Covid testing was ridiculously sparse? Absolutely. But unless you’re prepared to say that either the SARS-CoV-2 virus is much more dangerous today than it was in the spring or that hospital Covid admission policies are much more lenient today than they were in the spring, I think it is impossible to reconcile actual Covid hospitalization data on 23 million symptomatic-and-diagnosed Covid cases with a model of 70 million symptomatic-but-undiagnosed Covid cases.

So yes, I think this model is nuts. I think this was a politically-motivated Trump Administration exercise to “prove” that the US infection fatality rate (IFR) is really tiny and you’ve got nothing to worry about. One of many such politically-motivated efforts across many institutions to minimize the risk and impact of Covid-19.

But this CDC model is why prominent Covid missionaries like Scott Gottlieb and Tony Fauci have said that they expect daily case numbers to decline from here on out, not accelerate, and this is why I think a potential Ireland event is NOT priced into any mainstream market expectations or political expectations for 2021.

Unfortunately, once it becomes apparent that an Ireland event is occurring, it’s too late to stop it.

In our human-scale, linear world, we experience exponential growth like this: nothing, nothing, nothing … case, case, case … cluster, cluster, cluster … BOOM! But by the time we start to really pay attention to an exponential growth process – typically at the cluster stage – the process is already too entrenched to stop it, absent incredibly harsh social measures like you see China reinstating today in Shijiazhuang, a city of 11 million. No government in the West is prepared to even talk about these measures, much less implement them. So we’re always surprised by the BOOM. If an Ireland event occurs here, it will be no exception.

A full-blown Ireland event is driven by both the more virulent UK-strain AND a deterioration in social distancing behaviors. Either taken alone is bad enough. It’s the combination, though, that creates a regional superspreader event. Irish health authorities estimate that their starting point for Covid Re was something between 1.1 and 1.3 (meaning that, on average, one person infected with the SARS-CoV-2 virus would pass it along to 1.1 – 1.3 new people). They blame deteriorating masking/social distancing for the majority of their “event” (say, a 0.9 – 1.1 increase in the Re number), and the UK-variant for the balance (say, a 0.5 – 0.7 increase in Re). This is very much in line with the latest research from Public Health England, which estimates that the UK-variant Covid virus is approximately 40% more infectious than the baseline virus. Notably, the UK-variant shows an even greater increase in infectiousness for “close contacts” (not necessarily face-to-face, never touching and perhaps up to 2 meters apart) rather than “direct contacts”, meaning that the UK-variant virus is particularly successful at bridging the air gap between strangers or short-duration contacts in an indoor space. This is … ummm … troubling. As lax as we all have gotten with our mask wearing and our social distancing outside of the home, the UK-variant virus dramatically reduces the margin of error we have with mask wearing and social distancing outside of the home.

For the same reasons that we humans typically don’t recognize an exponential growth process prior to the cluster, cluster, cluster stage, we have an even harder time appreciating the impact of even a small increase in the effective reproduction rate of Covid. A 40% increase in Re has an enormous impact on how many people will be infected by Covid. For example, let’s assume that the current Re for the United States is something like 1.4 (I think it’s probably higher than that in areas like SoCal, and going up everywhere as Covid fatigue takes hold). With a 5-day infection cycle (assume you pass along the virus to 1.4 new people within 5 days of contracting the virus yourself, i.e. before you become symptomatic), a single Covid case will result in a grand total of 2,296 Covid infections over a 100-day period. Now let’s increase that Re by 40%, so that it’s not 1.4 but is 2.0 … now that single Covid case will result in more than 2 MILLION total Covid infections over a 100-day period.

This is the power of exponential growth. The numbers get silly … I mean, take that Re up to 3.0 (the high end of the current Ireland estimate), and a single Covid case will result in 5.2 BILLION total cases over a 100-day period, about 60% of the entire human population on the planet. Obviously our social behaviors around the disease would change dramatically well before we got to that point. But the real challenge of all this from a social behavior perspective is the nothing, nothing, nothing … case, case, case … cluster, cluster, cluster … BOOM! nature of any exponential growth process.

That Re of 2.0 that results in 2 million total infections from a single Covid case over 100 days? On Day 30 there are only 127 total cases. Not noticeable at all. On Day 50 there are just over 2,000 total cases. Barely noticeable. Let’s say you’re an elected political leader. Are you really going to take the steps that are necessary to stop this process – like shutting down domestic travel to and from an infected area, like physically quarantining entire cities – over a few hundred cases? Not a chance. Even if you’re right … even if you prevent a catastrophic outcome through your actions on Day 30 or Day 50 … your voters will never know that you were right. They will only experience the lockdown pain, and they will never credit you for the catastrophe averted.

I think we’re already at Day 30 in a dozen states. I suspect we’re already at Day 50 in a few.

So look, maybe I’m wrong about all this. Maybe we’re already well along the path to herd immunity, and one-third of Americans currently have Covid antibodies through prior exposure, just like the CDC models say. Maybe we’ll all rediscover that old-time religion when it comes to mask wearing and social distancing outside of the home. Maybe governors and the new Administration will focus on containing the UK-variant through domestic travel restrictions. Maybe we’ll wake up tomorrow with a new urgency about vaccine distribution.


But my spidey-sense is really tingling on this one.

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  1. Avatar for TARS TARS says:

    Anyone buying the popular narrative that we’ll avoid hyperinflation? Another massive outbreak, and a large round of stimulus on top of that, seems inevitable. Also seems as though we’ve already reached hyperinflation when looking at assets like real estate. What am I missing here, and how can we protect the value of our holdings?

  2. Avatar for bhunt bhunt says:

    An “Ireland Event” outbreak, with draconian shutdowns, an unemployment shock and small business bankruptcies, would be massively deflationary.

  3. Hi Ben,

    Thanks for another fantastic and frightening analysis.
    Writing from my smug position in Sydney I hope you’re wrong of course.

    It’s worth considering the Australian and New Zealand perspective on shut-downs.
    I grant that we have certain favourable conditions (being an island is one), but our leaders, nationally in NZ and state based here in OZ, have done exactly what you said the public would not accept, namely lockdowns over a few cases. Other state borders to New South Wales shut over Christmas when we had less than a hundred cases in total (all cases here come from overseas arrival quarantine lapses).Apart from inconvenienced holiday makers trying to cross borders, no one has really complained.

    In Queensland, the state with one of the stricter border closure policies in 2020, the government was re-elected last year with an increased majority.

    That the UK and US are only now demanding overseas arrivals be COVID free quite frankly seems insane to us

    I don’t know if it’s more effective messaging, a compliant national character, whatever, the go hard go early policies adopted in this part of the world have worked spectacularly well, so far at least.

    Good luck up there.


  4. Yes, the voters will forgive our politicians for locking down an entire city over a few cases… But guess what? In China where there is no worry about voter reaction, that is exactly what they are doing. They are being every bit as draconian over a few cases today as they were back in Wuhan in March. The Chinese know what they are dealing with; no need to spin it this way or that. They are just getting it done no matter what. As if we needed anything else to push us further behind China!

  5. Maybe we have herd immunity… maybe not… Either way, God bless the front line workers, first responders and the medical professionals. My experience would lead me to understand that more tests = more positives. Most of the positives that I interact with have had a cold. Hope that is all there is to it, and prayers for those who’ve experienced much worse because I know that is true also. That is what is awful about CV19… both experiences are true. No Fear… Hold the Line… Lead from the Front.

  6. Wish you had an “Edit” function here. My topic sentence is blown!
    Meant to say voters in US will definitely NOT forgive politicians for any further lockdowns…

  7. So Ben, what percent chance is “nontrivial”? Obviously, the crowd is positioned for the vaccine to save us, that we want have the exponential virus growth like a 1918 pandemic year. US dollar down and 10 year treasury down had gold and silver trading higher. US dollar down and 10 year treasury yield up has put a halt on gold and silver with real rates rising. Having puts on HYG going into spring last year was my single best trade, but that’s been neutered by the Fed. Gotta believe 10 year treasury yields would be cut in half by a deflationary event, would also take the air out of the banks. And ohhhhh those bitcoin bulls would just get crushed. The problem with any of those trades, what is the Fed’s response to an “Ireland event” and how quickly would they be pushed to the point of buying equities. I live in a suburb of Houston, Texas, just my anecdotal view, virus was rampant in July/August, but mostly controlled before cases started rising again in the last 30 days. I grew up in the small town of Meridian, Mississippi, parents and friends still live there. Virus has been steady there since July, just know that up whatsoever. My friend is an RN at the local hospital in Meridian, they have been on drive-by on/off for the last 45 days with only 2 hospitals in the small town. With the poverty rate in Mississippi and lack of resources, and Ireland event would be devastating. *** If any part of this comment crosses the line for Ben and Rusty’s lawyers, don’t hesitate to delete. I write these comments as much for myself, as anything else. What I’d really like is for everyone to tell me where I’m wrong?

  8. Assessing the reaction function of retail odd lot call option buyers topped off with more stimulus checks (and hopes of even more) that know the Fed has their backs! There’s something I never thought I would be contemplating while trying to devise a set of trades for a potentially wrong-footed consensus. There are so many crowed, consensus trades. But I wonder if all that buy the dip retail money won’t just flow back into the stay at home stocks again as rates would collapse, they are perceived as less vulnerable to fundamental misses, and they are very long duration vehicles. Some parts of the market seem to be figuring out the path ahead- like REIT’s that haven’t overcome the first vaccine Monday opening print in mid-November. But, the balance of action seems to be driven by either cash that is put back in as every potential risk event passes or hedges are unwound.

    If past is prologue credit stress has to be a driver for a break as it forces unwinds of carry trades, slows share repurchase, and pressures quant driven strategies. Forecasts of a 9% default rate in '21 have scared no one off of the Fed put in HYG. I would say shorts in the Russell 2000, where everyone is moving for the reopening trade will work again. And, so many investors are in that trade just for beta, there is no real market cap worth worrying about from an index perspective. But, it may take until after Valentine’s Day for all of the fund flow to finish getting over their skis there.

  9. In my home state of Mississippi, Oct 1, 2020 started the MOM campaign. All my FB friends were buying T-shirts and using profile picture filters for MOM. That is “Mask Off Mississippi”. It was great until the hospitals starting filling up and people started dying.

  10. I have followed Chris Cole since he started Artemis. That piece is a great read, particularly for those stuck in the Fed model, falling rates is all investors will ever navigate Wall St garbage. That is 100 years we are trying to propose hedges or profit from trades with a 100 day horizon here!

  11. I saw predictions recently of a million vaccines delivered a day… My simple human mind was impressed with this steady linear growth. Then I realized the enemy has the ability to compress time with exponential growth. Ben’s right, we are going to have trouble outrunning this new strain that seems to be rapidly approaching the cluster cluster stage. Buckle up and wash your hands.

    I got the first dose of the vaccine on Thursday, just trying to make it to day 10 without getting sick!

  12. A not so happy Valentine’s Day indeed.

  13. Lol “a few cases”. You cannot be serious. Here’s how I know it’s not “few cases”: because the CCP says it’s a few cases. If you’re still putting your trust in numbers from China then you’ve missed a major subplot in the narrative.

  14. And I thought an Ireland Event was a potato famine… Maybe that will be next if the complex food supply chain breaks down.

  15. I have had it , let’s just say I don’t want it again.

  16. Respectfully, and I would put Chris Cole in the category of brilliant, that note above is a sales brochure saying, “my process is better than yours”. And his process probably is better than mine, but in 29 years of trading, March 2020 was my best month ever. Was some of it luck? Absolutely, but I also have an Amazon receipt where I bought mask on January 21, 2020. Did I buy puts on HYG in November 2019 because I knew a pandemic was coming? Absolutely not, trade was based on the product being crap and I thought it would blow up like XIV if there were some kind of credit event. I’m convinced it would be 0 without the Fed stepping in. 

    I don’t detail that to say my process is better than anyone else’s, I’ve had my ass handed to me too many times to count. What I’ve learned and even as the Artemis note details “most investors would rather fail conventionally than to succeed unconventionally”, a little like Ben Hunt saying a “failure of imagination”. Our markets are increasingly becoming like pushing on a string, and the probability of significant events, in my opinion, are becoming more frequent. Again, another quote from the Artemis note “underperformance of the traditional portfolio is a systemic risk.”

    Peter, you are probably right on the “buy the dip” crowd, no reason for anyone not to continue what’s worked based on the Fed put. I’m conflicted on what the difference in probability is between a humanitarian event and market event. It’s weird that we even state that, but 4000+ deaths per day now and the market does not care. If the high-frequency data starts showing weakness, the Fed doesn’t have the luxury of lowering rates without going negative. And they probably need to put significant pressure on Pres. and Congress to give new authorization for any SPV’s. Interesting headline as I write this on Bloomberg … “US covert hospitalizations on cusp of 1st decline in months”. All these twitter followers Ben pissed off must’ve let their subscription to ET expire.

    Full disclosure: I have no clients, trade only for myself, held multiple securities licenses in the early 90s, but simply a lover of markets and the game. And fyi, does not have to be late at night, I’ve said plenty of stupid things in the middle of the day. :slight_smile: #ExcitingTimeToBeAlive

  17. Avatar for bhunt bhunt says:

    No one is more suspicious of Chinese data than I am. That was the topic that first grabbed me a year ago, and that was the subject of the ET note - “Body Count” - that started all of our efforts here.

    But the issue here isn’t whether there are 150 new Covid cases in China today, or 1,500 or 15,000. The issue isn’t the CCP-reported Covid data. The issue is the CCP response function to new Covid cases. I think that William’s point is that this response function is an order of magnitude more draconian than anything in the West, regardless of stimulus in the form of “true” number of cases. I agree with that point.

  18. Avatar for bhunt bhunt says:

    Yes, Ireland has reinstituted (and significantly added to) all of the Covid policy restrictions that they relaxed going into the Christmas holidays. Unfortunately, once you have an event like this, that’s the only way to get it under control - really draconian lockdown policies with strict enforcement.

  19. I’m going to respectfully push back a little here. The Total Draconian Response Index is benchmarked against cases. If this is China’s response and the case count is indeed under 1,000 then that looks very, very harsh and draconian. But if it’s 10x or 20x that, do we judge it the same? I do not. I hear what you’re saying, but I’m still viewing it relative to what human beings actually do IRL. First we underreact, then we overreact. My bigger issue is we don’t know if this is China overreacting or if this is warranted because the case count is that bad.

  20. Ben:

    You had me at " display of competency by officials" a year back.

    In this instance I think you overlooked the GCR (Guiness Consumption Ratio) Factor.

  21. Avatar for bhunt bhunt says:

    Fair. I think there’s enough data that comes in from non-official sources (consulates, local HCW social media posts, etc.) to identify when things get REALLY bad, like in Wuhan last year. But I’ll grant you that we have no idea whether the caseload in Shijiazhuang is 100 cases per day or 2,000 cases per day. Even in the latter case, I would characterize their response function as close to the totally draconian, policies that would be met with near riots (I think) if they were imposed in, say, LA. Can we agree that China has a more hair-trigger response function than the West, and that this hair-trigger is attached to a bazooka rather than a 12-gauge shotgun?

  22. I would absolutely agree with that. And I don’t even want to think of what would happen if the US responded similarly in the current environment. My God. It keeps me up at night.

  23. Avatar for PJSPHD PJSPHD says:

    I believe it was the MS governor who made similar, mathematical points about the absurdity of encouraging herd immunity. This was months ago. I know little about him, but I respected him for going against the tide of his party’s narrative.

  24. Ben, This has dropped off the radar. Written on January 12, you stated that “I think we’re already at Day 30 in a dozen states. I suspect we’re already at Day 50 in a few.” We are now at day 62. I am reading about a third wave in Europe and Italy is shutting down for Easter. But although the news mentions mutated strains: Germany is witnessing the third wave of the coronavirus pandemic as the cases of infection spiked in the country after the rapid spread of the mutated strains, as per media reports.
    The coronavirus cases have also surged in the Netherlands, Sweden, Ukraine, and Greece".

    I see no data on whether the more infectious mutated strains are now dominant. Fauci is cautioning against relaxing restrictions in the U.S. The CNBC article mentions relaxed restrictions and slow roll-out of vaccinations in Europe but no mention of the newer strains. Why are we not reading about this important (?) factor in the third wave? Do you have updated thoughts?

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