World Event Trading How to Analyze and Profit from Today’s Headlines phần 4 ppsx

Avian influenza refers to a large group of different influenza viruses that primarily affect birds.. pan-For this reason, avian H5N1 is a strain with pandemic potential, since it might u

FIGURE 4.3 Singapore Dollar

Source: Used with permission from Bloomberg L.P.

FIGURE 4.4 South Korean Won

Source: Used with permission from Bloomberg L.P.

Severe Acute Respiratory Syndrome (SARS) 65

FIGURE 4.5 Japanese Yen

Source: Used with permission from Bloomberg L.P.

FIGURE 4.6 Cathay Pacific Airways Ltd

Source: Used with permission from Bloomberg L.P.

FIGURE 4.7 Four Seasons Hotels Inc.

Source: Used with permission from Bloomberg L.P.

and American Airlines all experienced a drop of between 3 and 5 percent.Air Canada was already in a weak position and the stock price further dete-riorated, dropping from C$3 to C$1 as the company flirted with bankruptcy(Figure 4.8) In contrast, drug companies that were associated with provid-ing a cure or a test did well, and Gilead Sciences (GILD) went up as fast asthe airline stocks went down (Figure 4.9)

One more general point is that disease outbreaks have sharp, term impacts that either exacerbate the trends in place or provide temporarypops in the other direction As you saw in the preceding chapter, the FederalReserve was in the process of cutting interest rates to extremely low levelswhen SARS broke out This is generally U.S dollar negative and equitypositive All of the stocks quickly recovered, as did the currencies that werenegatively impacted

short-Disease outbreaks offer traders and investors great opportunities to

make money, if they can maintain composure and act You can either go

with the direction the disease is heading by selling the region impacted oryou can fade the move by buying into the sell-off in expectation of a relativelyquick rebound For the fade, the risk is that the disease has a longer, moreprotracted effect In that case, just like during the Black Death, the best tradewill be staying alive To reduce risk, you can buy a stock of an industry that

Severe Acute Respiratory Syndrome (SARS) 67

FIGURE 4.8 Air Canada

Source: Used with permission from Bloomberg L.P.

FIGURE 4.9 Gilead Sciences

Source: Used with permission from Bloomberg L.P.

is impacted, but not in the region It’s the market painting with a broadbrush when it sells all the stocks in an industry just because some of themare negatively impacted And it’s a great opportunity to take advantage of

as the industry leaders will rebound Without sounding too opportunistic,this is why professional traders do well in times of social upheaval: Theyhave a game plan for when opportunity strikes

C H A P T E R 5

Bird Flu

The avian flu or bird flu is an unusual twist to our section on infectious

diseases Unlike the previous outbreaks, this one has already beenpredicted with possible cataclysmic results It just hasn’t happenedyet and begs the question, will it happen? Our work from the previouschapters is the foundation for approaching this unique situation Therefore,this chapter is going to be like the Ghost of Christmas Future, as we’ll peerinto the possibility of a pandemic flu outbreak that has not yet occurred,but could

Bird flu has a long history, and the virus has been recognized as a highlylethal disease of poultry since 1901 In 1955, the United Nations Food andAgriculture Organization (FAO) identified a specific type of influenza virus

as the causal agent of what was then called fowl plague In 1997, therewere outbreaks of this highly pathogenic H5N1 type virus in poultry farmsand wet markets in Hong Kong Not long after, Hong Kong reported humaninfections with the virus, with 18 cases and six fatalities This is the firstreported incidence of human infection with the H5N1 virus

Since then, the reports of bird deaths have been accelerating and ing throughout the world almost as fast as the doomsayers pushing the panicbutton on another 1918 Spanish flu From Indonesia to Azerbaijan to Iraq,there have been confirmed human cases as the migratory patterns of birdshave spread the disease In fact, the H5N1 avian influenza has spread so farand so fast that it is endemic in the Far East and may become that way forEurope and Africa It is estimated that the global fight against the diseasecurrently needs as much as $1.3 billion to 1.5 billion to fund prevention andresearch over the next two years to prevent a massive outbreak It is widely

spread-69

estimated that millions of people could die if bird flu mutates into a formthat can be transmitted from human to human like a seasonal flu.

This chapter reviews what is currently understood about the disease,where it may be going, and how to respond should it happen

WHAT WE KNOW ABOUT INFLUENZA

The following list is taken from the World Health Organization (WHO)’sTop Ten about a pandemic influenza (www.who.int/csr/disease/influenza/pandemic10things/en/)

1 Pandemic influenza is different from avian influenza.

Avian influenza refers to a large group of different influenza viruses that primarily affect birds On rare occasions, these bird viruses can infect other species, including pigs and humans The vast majority

of avian influenza viruses do not infect humans An influenza demic happens when a new subtype emerges that has not previously circulated in humans.

pan-For this reason, avian H5N1 is a strain with pandemic potential, since it might ultimately adapt into a strain that is contagious among humans Once this adaptation occurs, it will no longer be a bird virus—it will be a human influenza virus Influenza pandemics are caused by new influenza viruses that have adapted to humans.

2 Influenza pandemics are recurring events.

An influenza pandemic is a rare but recurrent event Three demics occurred in the previous century: “Spanish influenza” in

pan-1918, “Asian influenza” in 1957, and “Hong Kong influenza” in 1968 The 1918 pandemic killed an estimated 40 to 50 million people world- wide That pandemic, which was exceptional, is considered one of the deadliest disease events in human history Subsequent pandemics were much milder, with an estimated 2 million deaths in 1957 and

1 million deaths in 1968.

A pandemic occurs when a new influenza virus emerges and starts spreading as easily as normal influenza—by coughing and sneezing Because the virus is new, the human immune system will have no preexisting immunity This makes it likely that people who contract pandemic influenza will experience more serious disease than that caused by normal influenza.

Bird Flu 71

3 The world may be on the brink of another pandemic.

Health experts have been monitoring a new and extremely severe fluenza virus—the H5N1 strain—for almost eight years [as of October

in-14, 2005] The H5N1 strain first infected humans in Hong Kong in

1997, causing 18 cases, including six deaths Since mid-2003, this virus has caused the largest and most severe outbreaks in poultry on record In December 2003, infections in people exposed to sick birds were identified.

Since then, over 100 human cases have been laboratory confirmed

in four Asian countries (Cambodia, Indonesia, Thailand, and nam), and more than half of these people have died Most cases have occurred in previously healthy children and young adults Fortu- nately, the virus does not jump easily from birds to humans or spread readily and sustainably among humans Should H5N1 evolve to a form as contagious as normal influenza, a pandemic could begin.

Viet-4 All countries will be affected.

Once a fully contagious virus emerges, its global spread is ered inevitable Countries might, through measures such as border closures and travel restrictions, delay arrival of the virus, but they cannot stop it The pandemics of the previous century encircled the globe in six to nine months, even when most international travel was

consid-by ship Given the speed and volume of international air travel today, the virus could spread more rapidly, possibly reaching all continents

in less than three months.

5 Widespread illness will occur.

Because most people will have no immunity to the pandemic virus, infection and illness rates are expected to be higher than during sea- sonal epidemics of normal influenza Current projections for the next pandemic estimate that a substantial percentage of the world’s pop- ulation will require some form of medical care Few countries have the staff, facilities, equipment, and hospital beds needed to cope with large numbers of people who suddenly fall ill.

6 Medical supplies will be inadequate.

Supplies of vaccines and antiviral drugs—the two most tant medical interventions for reducing illness and deaths during

impor-a pimpor-andemic—will be inimpor-adequimpor-ate in impor-all countries impor-at the stimpor-art of impor-a pandemic and for many months thereafter Inadequate supplies of

vaccines are of particular concern, as vaccines are considered the first line of defense for protecting populations On present trends, many developing countries will have no access to vaccines throughout the duration of a pandemic.

7 Large numbers of deaths will occur.

Historically, the number of deaths during a pandemic has varied greatly Death rates are largely determined by four factors: the num- ber of people who become infected, the virulence of the virus, the un- derlying characteristics and vulnerability of affected populations, and the effectiveness of preventive measures Accurate predictions

of mortality cannot be made before the pandemic virus emerges and begins to spread All estimates of the number of deaths are purely speculative.

WHO has used a relatively conservative estimate—from 2 lion to 7.4 million deaths—because it provides a useful and plausible planning target This estimate is based on the comparatively mild

mil-1957 pandemic Estimates based on a more virulent virus, closer to the one seen in 1918, have been made and are much higher However, the 1918 pandemic was considered exceptional.

8 Economic and social disruption will be great.

High rates of illness and worker absenteeism are expected, and these will contribute to social and economic disruption Past pandemics have spread globally in two and sometimes three waves Not all parts

of the world or of a single country are expected to be severely affected

at the same time Social and economic disruptions could be rary, but may be amplified in today’s closely interrelated and inter- dependent systems of trade and commerce Social disruption may be greatest when rates of absenteeism impair essential services, such as power, transportation, and communications.

tempo-9 Every country must be prepared.

WHO has issued a series of recommended strategic actions for sponding to the influenza pandemic threat The actions are designed

re-to provide different layers of defense that reflect the complexity of the evolving situation Recommended actions are different for the present phase of pandemic alert, the emergence of a pandemic virus, and the declaration of a pandemic and its subsequent international spread.

Six distinct phases have been defined to facilitate pandemic paredness planning, with roles defined for governments, industry, and WHO The present situation is categorized as phase 3: A virus new to humans is causing infections, but does not spread easily from one person to another.

pre-NOW DO I HAVE YOUR ATTENTION?

After reading this, I realize the basis instinct is to go buy masks, stock upthe shelves with food and water, and hide in the basement—which I did

a little myself when I first read reports on this from Foreign Affairs and

WHO If you really want to get spooked, read some of the U.S government’spreparation suggestions, like storing a two-week supply of water and food,

at www.pandemicflu.gov

It’s important to understand that although the world is getting preparedfor a pandemic, it is far from certain that one is going to occur This virushas been around since 1901, but we’ve seen only three influenza outbreaks,

of which only one caused massive deaths and disruption to society Eachsubsequent pandemic was less lethal, as deaths declined from 40 to 50million in 1918 according to WHO to 2 million in 1957 and to 1 million in

1968 It’s this progression that leads us to various scenarios of the potentialoutbreak of disease

In Chapter 2 on the 1918 H1N1 outbreak, we discussed how the virusmutates as rapid reproduction produces mistakes in the genetic code Thesemutations are how the disease progresses and increases its ability to spread,along with its lethality So far, the avian influenza has remained solely on

a bird-to-human transmission schedule This means that to contract thedisease one has to come in direct contact with the birds or their drop-pings Direct-contact deaths of this kind have occurred in parts of theworld that have the closest and most frequent human-to-animal proxim-ity As we learned from Chapter 4 on SARS, the Far East gets the awardfor these conditions and Vietnam is the poster child for poultry-humancontact

According to the United Nations Food and Agriculture Organization(www.fao.org), approximately half of all Vietnamese households, rural andurban, keep poultry In the eight million rural family households, three out

of four typically own chickens and keep backyard flocks Taking a step backfor the entire region, the bird population for the eastern and southeasternparts of Asia is estimated to be around six billion birds Like Vietnam, theregion has a large portion of the poultry population in smaller farms This

is important for policy reasons when a government attempts to stem thespread of the disease by culling the birds In November 2005, China hadoutbreaks of the disease in nine different provinces that resulted in theculling of around 20 million birds

To recap, proximity to infected birds is the key determinant for man infection If this is the case, then the culling would work and stop thespread of the disease Pretty simple, right? Well, this is where the mutationcomponent of influenza is the problem Eventually, biologists believe theH5N1 strain will mutate and make the jump from bird-to-human to human-to-human transmission This is when the big trouble starts and when thedisease can explode into a major killer Remember, influenza virus is air-borne, unlike SARS Its transmission is immensely facilitated by this feature.Also remember, quarantine will be useless because those who are infectedwith influenza and contagious can be asymptomatic and appear healthy Inother words, you wouldn’t know who to stop and stick in a hospital untilit’s too late

hu-Of course, if it’s like the Spanish flu, those infected could die within 48hours of getting the disease anyway Nice thought The point is that, justlike the Spanish flu, an avian flu pandemic would have to burn itself out ormutate itself out rather than be eradicated by any medical prevention andisolation program from a government

BACK TO THE FUTURE: A SHORT VIEW

OF A LONG TIME LINE

We’re going to mention only a few points on the time line, as there has yet to

be a major human avian influenza outbreak and market reaction to it ever, there are some interesting sequences for the development of the dis-ease This chronology comes from the World Health Organization’s web site

How-This time line starts in 1996, and could reach as far back as 1918 Personally, I didn’t take much notice of a potential pandemic until the

summer of 2005 when an article by Laurie Garrett in Foreign Affairs

called “The Next Pandemic?” came out.

Bird Flu 75

The WHO’s time line shows a progression of the disease as avian fluspreads in fowl first and then in humans across the globe In three years, ithas worked its way up from Vietnam into China, across to Russia, and intoEurope By the time this book is published, avian flu should be in NorthAmerica and perhaps human cases will have occurred as well Also, thevirus is mutating; it’s infecting not only birds, but also those lovely crittersfrom SARS, civet cats, as well (July 15, 2005)

In November 2005, this is what the U.S Homeland Security Council’sNational Strategy for Pandemic Influenza had to say:

The current pandemic threat stems from an unprecedented outbreak

of avian influenza in Asia and Europe, caused by the H5N1 strain

of the Influenza A virus To date, the virus has infected birds in 16 countries and has resulted in the deaths, through illness and culling,

of approximately 200 million birds across Asia While traditional control measures have been attempted, the virus is now endemic in Southeast Asia, present in long-range migratory birds, and unlikely

to be eradicated soon.

A notable and worrisome feature of the H5N1 virus is its ability

to infect a wide range of hosts, including birds and humans As of the date of this document, the virus is known to have infected 121 people

in four countries, resulting in 62 deaths over the past two years Although the virus has not yet shown an ability to transmit efficiently between humans, as is seen with the annual influenza virus, there is concern that it will acquire this capability through genetic mutation

or exchange of genetic material with a human influenza virus.

It is impossible to know whether the currently circulating H5N1 virus will cause a human pandemic The widespread nature of H5N1

in birds and the likelihood of mutations over time raise our concerns that the virus will become transmissible between humans, with po- tentially catastrophic consequences If this does not happen with the current H5N1 strain, history suggests that a different influenza virus will emerge and result in the next pandemic.

The takeaway here is that if it isn’t this strain of influenza, it’ll be anotherone sometime soon, and we had better be ready for it when it happens

KNOWN TREATMENTS

Here’s what the WHO has to say in the frequently asked questions (FAQs)section on avian influenza (www.who.int/csr/disease/avian influenza/avianfaqs/en/index.html#drugs2):