7 Things I Learned About Covid-19 in Italy That Will Happen In the U.S.

7 Things I Learned About Covid-19 in Italy That Will Happen In the U.S.

Note: As I believe this is extremely time sensitive, I didn’t give this post the attention to detail it deserves with respect to editing. Please excuse any grammatical mistakes and thank you in advance for your understanding.

Three quick points before we begin.

First, those close to me would describe me as one of the most optimistic people they know. It is difficult for me to be pessimistic about the future, but one of the many lesson’s poker has taught me is that one suffers greatly when they see the situation for how they want it to be instead of how it actually is. I aim to bring that unbiased lens to the situation at hand.

Second, I implore you to read my latest post ‘How I Come to My Conclusions’ as I want to be fully transparent about why I think what I do, so you can give my ideas the credence you believe they deserve.

Finally, I sincerely hope I’m wrong about much of what I’m about to say.

Okay, let’s do this.


Coming to a City Near you

The first question on everyone’s minds is, ‘will Covid-19 come to my area?’

The answer is yes. Marc Lipsitch, professor of epidemiology at Harvard University, believes 40-70% of the worldwide adult population will contract Covid-19.

With the number of cases in the U.S. doubling every three days (following an exponential growth model), it’s clear we need to enact aggressive social distancing measures to flatten the curve to not overrun our health care systems.

This is now in effect to varying degrees in the U.S., but it’s going to be both too little and too late.

Remember, Wuhan was closed when there were only 572 cases on January 22nd, and they still exploded to over 80,000. The U.S. has taken far fewer extreme measures and with more total cases (many more are believed to be undocumented), so we should expect the situation to be much worse stateside.

But wait, we’ve encouraged social distancing measures in hot spot areas and even closed down businesses. Won’t that stop the outbreak?

It’s unlikely.

Italy originally tried the same approach, but it failed. If you think it will work in the U.S. you’re mistaken. (This video sums it up quite well).

Fortunately, Italy quickly moved through the phases of imposing controls until they ultimately realized that a forced government lockdown with strict penalties for anyone who disobeys the rules is the only way to stop the spread. Measures continue to get stricter by the day.

Some feel that Italy reacted too late, and while this may be true, the point I want to stress is I’m extremely confident the U.S. has taken less strict actions and at a later stage than when they were enacted in Italy.

The boomerang will hit harder when it comes back around.

Italy’s same process will play out in the U.S. for many reasons, but one of them is simple math. The point in which extreme social distancing measures must be implemented to effectively ‘flatten the curve’ is before the hospital capacity is at 5% of its limit.

Governments simply will not react in time.

Sadly, the draconian but necessary measures will likely only come when the hospitals are full and pleading for help. And, as I explained in my previous post ‘A Bet We Cannot Afford to Lose, reacting to the current data will always leave us behind the curve. Therefore, tragically, I believe the health care system collapse is inevitable.

To what degree will depend on each one of us, and what measures we take now to give everyone who needs care the best chance they have. Please, act responsibly.

Are We Going to Reopen the Economy?

The second question on everyone’s mind is, how long will these social distancing measures be required?

Trump recently touted it be a short lived 15 days. He recently doubled down on this. He’s wrong.

But wait, what about the recent resurgence in support for reopening the economy?

Ah, yes, I remember that stage of the epidemic well. Italy was there roughly a month ago. After our initial lockdown phase (much more liberal than our current one), the citizens of Milan (the business capital of Italy) wanted to get back to work.

The ‘Milano si rialza’ (Milan gets back up) campaign went viral, and encouraged a temporary loosening of social distancing measures.

It was extremely short lived. As I anticipated would happen, Covid-19 has become politicized, with the right wanting to reopen the economy. Seeing that they are in power, this may come to fruition in the U.S.

This will be the social equivalent of a dead cat bounce (and, consequently, will be an amazing opportunity to short the market). It won’t last long. When the hospitals exceed capacity and are shouting from the rooftops, a mandated lockdown will eventually take place. As things worsen and as the hospitals cry louder and louder and the situation deteriorates, the laws will slowly become stricter over time.

(As an aside, the right’s cavalier position on Covid-19 will increasingly cost them favor with the public as the situation worsens, as they will be on the wrong side of this bet, potentially leading to the left gaining power in 2020).

When we look back at this decision in retrospect, the consensus will be that we should have reacted earlier and much more aggressively, taking the final but inevitable steps of strict lockdown right away instead of in stages.

I know this because it’s exactly what has happened where I am in Lombardy, Italy, and, so far in this crisis, the U.S. is following the exact same path.

Why Suggesting Social Distancing Won’t Work

Many of my ideas have come from Scott Gottlieb. In this thread, he makes an astute observation that ‘we didn’t prepare in Jan for March.’ Sadly, we won’t prepare now for summer.

In short, history will repeat itself. The only way we’ll learn the lesson is when hospitals are full.

How Long Will the Covid-19 Lockdown Last?

I believe some form of a lockdown will be in place until a vaccine is found, which experts believe will be 18 months from now. As I am writing this article, the BBC has just released a video explaining why this will happen in the UK. The same will transpire in the States.

In my blog 3 Ways Coronavirus Will Disrupt the Poker World, I began advocating that people should plan for a demand shock that lasted a year.

Everyone thought I was crazy.

I’m now increasing that timeline based on my understanding of how long it takes for a vaccine to be widely distributed. My ideas aren’t science fiction. They’re based on the research out of the Imperial College on what the next 18 months will look like. (They hypothesize a best case scenario of intermittent lockdown followed by limited societal function using a conservative 2:1 ratio).

Scott Gottlieb, former FDA Commissioner, who has been spot on about his predictions since January, also agrees.

To maintain this thesis, you only have to believe two things: the only way to stop it is extreme social distancing, and stopping Covid-19 will be a top priority.

We’ve already discussed the first, but let’s take a deeper dive into the second. 

Where Covid-19 Meets Politics

Even proponents of reopening the economy and the ‘let people die’ approach, will eventually realize that society can’t function without a medical system.

Second, the people will all support the lockdown. Currently, 96% support it in Italy. It won’t take long before the public perception shifts in the U.S. (Here are the 5 stages in which it will happen).

It’s not my intention to debate the pros and cons of economic lockdown, but one thing is for certain: the truth is extremely difficult to prove.

Furthermore, it’s equally difficult to measure, as there’s no conversion between human lives and economic output. But, when given the choice between the two, people will value human life more.

Finally, politics will come into play.

It’s clear from the data that Covid-19 disproportionately affects the elderly. Remember, the baby boomers control the majority of the wealth and represent the majority of the voters.

While there will be great pressure to return life to normal, and I believe it will happen sporadically in several cities around the U.S., when social distaning measures are relaxed the  evidence is clear; there’s a resurgence in the spread.

Reduction in the transmission of Covid-19 will be every politician’s priority because it will increasingly become most citizens priorities. Again, this will happen in proportion to the hospitals reaching capacity and people’s parents and grandparents are being refused care.

Experts predict some states such as NYC are less than two weeks away from this threat becoming a reality, and we should expect more cities to follow.

The reason is two fold: lack of testing means we can’t properly identify and isolate cases and second, the social distancing measures enacted in the States (although some think are extreme) are a fraction of what China and Italy has done. And even in Italy, with more beds per capita than the U.S. and far higher rated hospital systems, they still collapsed.

Remember, when it comes to aggressive measures it looks like this: China > Italy > U.S.

Therefore, the opposite is true, when it comes to the size of the catastrophe, it looks like this: U.S. > Italy > China.

As hospitals overflow, stopping the spread will become a top priority, and, most importantly, those who are advocating this are the ones with money, influence and who represent the majority of the voting public.

The politicians will respond.

How Does the Lockdown Play Out?

There are two ways this will play out, both leading to a similar result. The first is that eventually, and likely too late, Trump will likely issue a nationwide lockdown of some kind, despite saying I don’t think we’ll ever find that necessary’ on March 20th. Like he has many times on Covid-19, he’ll change his mind.

The second option is local governments do it one by one as cases hit them.

There will undoubtedly be a portion of the U.S. population which feels their rights are being infringed upon and they may try to riot. When the protestors meet the army, things could get ugly.

In what order this occurs isn’t what’s important. So long as you maintain the thesis that spread is inevitable, and reducing it will be a top priority, the result the same: an entire lockdown of the U.S.

The delay from when these measures need to be done and when it will be done means Covid-19 will spread silently and exponentially to most places in the U.S., which means it will require a much longer shut down period than we saw in China.

But Wait! What About China?

Some have argued this won’t last long and point to China as a model for how we will recover.

They forget not the early and extreme actions the Chinese took, which aren’t happening in the U.S. In China, lockdown means not leaving the house.

Having lived in Macau for 3 years, I can state with confidence this collective psychology of the western world toward independence and personal freedom is wildly different than its Eastern counterpart. In the Orient, they listen to authority and respect the rules.

This won’t happen as much in the West and we’re already seeing examples of this defiance. Australia was forced to close Bondi Beach due to crowds gathering, and we’re seeing the same thing happen in California.

Even now in Italy, where citizens face heavy fines and jail time, people still continue to gather in public places, (such as parks), and they had to close them down. (For more on the differences between the U.S. and Asia, see this Tweet).

Therefore, a suggested lockdown simply won’t work to reduce the spread unless it’s forcefully mandated by the government. Even then, it won’t work as well as it did in the East. I’m seeing this first hand in Italy, where, despite the full blown enforcement of draconian measures (the most strict outside of Asia), the people still aren’t as cooperative as they were in China.

Can't Life Just Be Normal Again?

The reason we will not be able to return society to the workforce (like we’ve seen in China) is not only because we will not follow social distancing measures, but also because the West doesn’t have the same controls on its people. Of course, this is a good thing in almost all circumstances, perhaps except controlling the spread of a pandemic. (In fact, one of the risks we face is Covid-19 leading to more surveillance). 

One of the many examples is China’s use of technology to closely monitor each citizen. They require their population to download an app and use an algorithm to assess each person’s risk, providing color codes to their citizens.

If, for any reason, your ‘flag’ turns from green to red, you must self isolate for 14 days. Leaving the infringement on personal freedoms and ethics of this aside, it’s clear we’re not going to be able to track people in this way. Our only choice will be draconian lockdowns.

Lady Luck to Save the Day?

It’s important to realize that outcomes aren’t binary and the unknown variables (i.e. chance) play a significant role in how things ultimately play out. When I write ‘this will happen,’ I’m speaking in terms of expectation, which means the most likely outcome if you ran this simulation thousands of times. In short, I believe my ideas have the highest probability of transpiring.

As I have many times at the poker table, when I’m in bad shape in a big pot, I pray for some luck. I’m doing the same here.

But in life, as in poker, there is variance, and we only get to ‘deal out the cards’ once. As a result, we’ll never get to see what probability my ideas had to occur. This is just how life works.

One such way in which society could get lucky is if Covid-19 vanishes in the summer (although, it’s likely to return in the winter, thereby restarting this vicious cycle). Experts are skeptical of the disease vanishing, but it’s one way in which my hypothesis doesn’t happen.

A second is we find a magical cure. Another obvious, but not to be understated one is I’m flat out wrong.

Naturally, there are more.

Many will think my ideas are radical, far off and unlikely to play out. That may be true. It also may be a sign I’m early to the party and have seen things that others aren’t yet seeing. In other words, I’m ahead of the curve.

Time will tell.

In a future article, I’d like to decode what I believe the effects of Covid-19 mean for the economy, financial world and markets. Subscribe below to be notified when it comes your way.

Is There Any Good News?

Of course.

We’ve survived world wars, plagues, the Great Depression and more.
We’ll get through this too.

Keep calm and social distance.
Alec ♠️

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  • Adam March 24, 2020 5:18 pm

    Alec, thank you for your opinion. It’s good to hear from the frontlines how things are in Italy. Like you said the majority of our population will be exposed to this virus. My theory is that it actually was here a lot sooner than the government said it was. Also In the US our death rates seem to be at a lot lower than anywhere else. Maybe our healthcare system is a little more prepared for this with respirators and supplies to handle more cases. We will see how this plays out but I encourage you to stay optimistic and trust the Lord through all this. Prayers to you, your family, Italy, and the world.

  • Christian March 24, 2020 7:34 pm

    I live just right at the eastern border of northern Italy, at the boarder with Veneto and for sure luck playd its part, as Patient#1 is a young (38) guy with a superactive social&sport life. He runned in 2 races, went to parties, cinemas and what not in the 2 weeks before he showed first synthoms. Now this young, healthy fellow is intubated in ICU. Before diagnosis he passed the virus to 5 between doctors and nurses. And not each & every 5 of them visited him closely. I’m saying this because voices say that COVID’s victims are only very old people or people with pre-existing conditions. Another voice is “it’s not more contagious of a standard flu”. I believe the simple story of Patient#1 denies clearly both assumptions.

  • Christian March 24, 2020 7:38 pm

    Only our prompt responsability and strict respect of the rules will end this sooner. We all need to understand that ONLY a VERY STRICT approach to this emergency can give us a chance to end this emergency before a worldwide defiance will disrupt society as we know it now.

    It can remain a terrible crises we face that will pass, or it can become an unthinkable unprecedented and forever lasting consequences in our and future lives.

    (It didn’t fit in one message but I felt necessary to post this. We, in the front line of this war, we, who can see military convoys loaded with coffins, we that used to have 1, 1.5 pages in the news dedicated to deaths and now have 20, 25, we know how urgent, how bad this is).

  • Ken Mai March 24, 2020 8:23 pm

    At the poker table, the player sometimes gets into a hand where his gut tells him he’s heading down a dangerous path and he’s behind. He could be losing his whole stack if he makes the wrong decision, but there are enough tangibles to justify him (pot odds, player history, etc.) for following that direction. I sense Donald Trump is now in a similar situation at the White House wrt to COVID-19. He’s a gambling man throughout his whole life. The difference now is he’s gambling with millions of American lives rather than his own stack of chips. God helps America.

  • Pascal March 24, 2020 8:37 pm

    Alec, you are right ON ! it is amazing to see this lack of understanding from the population everywhere. Beaches full in Florida, young people partying for March break ???? Seriously, the US is gone be hammered and they deserve it. There is no way they will be able to handle the number of sick people. They can deny as much as they want, the reality is still there, it is not pretty. All healthcare system are scared to death, they perfectly know they will have a very hard time to take care of everybody. Here, in Canada, we are facing the same problem. The number of test done is very low…it is probably the best way to say: “we don’t have to many cases”…of course, the real number are different. The lockdown has been done with hope that we will stop the spreading and limit an overdose on hospitals. It was done way to late.Nobody knows what is the next step and how far we will have to go. I work in the healthcare system and I can tell you we are not optimistic.

    • Alec Torelli March 25, 2020 7:15 am

      Best of luck Pascal. Thanks for the feedback.

  • R. Harvey March 24, 2020 9:43 pm

    Thanks for your insights, one of the better articles I have read. While I hope you are wrong, I can see the logic of your conclusions. Plus you are “on the ground” and ahead of us in the USA.
    As of writing this, we have hit 52,000+ cases of Covid19 and 668 deaths. Italy has had more deaths in 24hrs, but this is just the beginning for us. NY is crying out for help, he needs 30 or 40 THOUSAND ventilators. FEMA sent him 400. It’s like a political satire I saw, where the Trumptanic has hit the iceberg and the captain announces “be calm, lifejackets are on order”.
    I also like the idea of the ‘dead cat bounce’ to the economy, which will happen of Trump relaxes the social distancing at Easter. I don’t short the market in these situations- but agree with the analysis.
    Finally, everyone take care of yourselves and you loved ones. Be safe Alec and continue to give us your point of view.

  • Reggie Young March 24, 2020 9:54 pm

    Hi Alec,
    This was a well written and thoughtful article about the virus that was written in plain english. I learned a lot and most people who read it will gain much knowledge and understanding. Keep up the good work. Your lessons in life are easily transferable and implemented into people’s lives. Thank you again.

  • Alex March 25, 2020 12:44 am

    Excellent and clear.

  • Alec Torelli March 25, 2020 7:14 am

    Thanks Reggie!

  • Alec Torelli March 25, 2020 7:14 am

    Thanks for the post. Stay safe Christian

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