Covid Winter is Coming

By: Justice Clark Litle

Nov 13, 2020 | News

On March 6, 2020, we wrote in these pages that 80 million Americans were likely to be infected by COVID-19, and that more than 400,000 Americans could die as a result.

At that early date, many did not believe it. Many thought it impossible. And yet, here we are. At the time of this writing, more than 242,000 Americans have died since February by official estimates, and the 400,000 threshold looks well within reach.

Scientists at the Institute for Health Metrics and Evaluation (IHME), at the University of Washington, anticipate the U.S. death toll could exceed 500,000 by end-of-February 2021 if social distancing habits and mask-wearing requirements stay relaxed.

And even if social distancing habits and mask-wearing measures are stepped up, the IHME models suggest another 100,000 Americans could die by the end of February. This puts the tally square in the range of our original 400,000 estimate.

If the total number of deaths surpasses 418,500, it will mean more fatalities attributed to COVID-19 than all U.S. civilian and military deaths in World War II.

On Thursday, Nov. 12, the United States broke a new single-day record for case rates and hospitalizations, with 153,000 new reported cases and 66,000 Americans hospitalized.

Eighteen states are now reporting record levels of hospitalization. Though intensive care unit (ICU) beds are reaching capacity, the bigger problem is staff shortages, as health care workers stay on the clock until they drop.

In North Dakota, the personnel shortage is so acute that staff are allowed to keep working even after they test positive for COVID-19. In El Paso, Texas, officials said they were bringing in 10 refrigerated morgue trailers, also known as “morgue trucks,” to deal with volume overflow as Texas becomes the first state to surpass a million cases.

North and South Dakota are leading the curve in terms of new cases and fatalities per capita right now, with other parts of the Upper West and Midwest not far behind, because these places are already cold.

All of this is going to get worse as winter descends, with low-temperature areas offering a preview of what the rest of the country will experience.

While the virus can survive and spread in high-temperature conditions, it does better in low-temperature conditions, and thrives in the presence of indoor gatherings with a lack of circulated air. As more American get-togethers move indoors, and Americans in general feel pandemic fatigue, the virus is in position to accelerate its spread in nearly every U.S. state.

“We are entering Covid hell,” says Michael Osterholm, director of the Center for Infectious Disease Research and Policy at the University of Minnesota and member of the Biden coronavirus task force.

Osterholm’s preferred solution is another round of mandatory national lockdowns, to help rein in COVID-19 hospitalizations and deaths before the vaccine cavalry finally arrives. But that almost certainly will not happen.

To the extent local lockdowns are ordered, they will come in conjunction with hospitals and morgues facing an El Paso situation, where resources are strained past the breaking point.

“We are past the point of getting the virus under control,” says Christopher Murray, the director of the IHME. “There is too much of it out there.”

Investors are looking past all of this — or trying hard to look past it, anyway — because equities represent a long-term stream of future cash flows, with most of those cash flows on the other side of the pandemic.

When you buy shares in a company, you are paying for a stream of returns that stretch out not just months or quarters into the future, but years and decades into the future. Thanks to the likely arrival of 90% effective vaccines, that means the number of quarterly earnings reports to be weighted post-vaccine far outnumber the handful likely to be dubbed pre-vaccine.

And when the United States makes it through Covid Winter — which could be America’s darkest winter in living memory, stretching back to the days of World War II — Wall Street anticipates vigorous economic activity, and exciting profit opportunities for the publicly traded survivors, on the other side.

Stock market optimism, in spite of what is coming, also relates to the Federal Reserve promising more or less unlimited support for credit markets. For companies with robust balance sheets and access to corporate lending sources, the key thing will be getting to the other side of Covid Winter — where new market share will be available by way of all the competitors who didn’t make it through.

On the human side of the equation, the next few months will be a time of precaution, and a time to avoid hospital trips if possible. When hospital capacity is maxed out, care shortages for non-pandemic-related issues can become dangerous. If someone needs a bed for a non-COVID-related issue and can’t get one, or needs a doctor or a nurse when none are available, that is when the problems of the pandemic spill directly into daily life.

Last but not least, on the market front, the intensity and ferocity of the COVID-19 surge means bullish investors are not home free.

There is a tension between wanting to look past the short-term pain of Covid Winter, with a focus on long-term growth and the prospect for dominant businesses, versus worries relating to the economic destruction that could unfold in the next three to six months, and nagging questions around the distribution and logistics of a COVID-19 vaccine.


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