Decided to rebalance our SMSF after all

Despite expecting the economic impacts of the Global Covid-19 crises to be severe, we've decided that since we'll have to head back towards our long-term asset allocation (the Vanguard High Growth Index Fund) eventually, we may as well start shifting a portion of our SMSF investments out of the Bond and Conservative Funds and back into the High Growth Fund.
I had initially been considering shifting to 50% High Growth Fund, 35% Conservative Fund and 15% Bond Fund, but as the management fees are higher for the first $100K in each fund, we'll pay slightly lower fees having only two fund investments rather than three. So after a quick 'trustee meeting' of myself, DW and DS1 (the three SMSF members), we decided to just switch to 50% High Growth Fund and 50% Conservative Fund.
This means that overall our asset allocation has changed from:
up to 20 Feb:    100% High Growth Fund    = 90% Growth/10% Income
Feb-May:          70% Conservative Fund/30% Bond Fund = 21% Growth/79% Income
25 May:            50% High Growth Fund/50% Conservative Fund = 60% Growth/40% Income
By being only 20% invested in growth assets from Feb-May we avoided much of the investor angst experienced in late March, but don't want to sit 'on the sidelines' until the stock markets have fully recovered. Putting some of our SMSF investments back into growth assets while the markets are still down ~15%-20% looks reasonable from a long term perspective (the market may well suffer futher declines, but as we'll be invested for many decades such 'blips' have to be tolerated).
The US S&P and Australian AllOrds Indices dropped about 35% from 20 Feb to the lows around 23 Mar, and since then the US S&P has recovered to be 'only' 13% below the 20 Feb level, while the Australian market is still roughly 23% below the Feb level. Looking at past recessions the stock markets often continue to produce reasonable returns even when the 'real' economy is doing poorly, so waiting until the recession is over would probably not provide the best outcome overall.
Recent Australian and US stock market performance shows the deep Covid-19 dip and the rapid partial recovery:

While stock market performance over the past century shows that such sudden dips are generally a 'buying opportunity' in the long term:

Should we have moved back into growth assets earlier? Or sat for another 6-12 months in income assets? Only time will tell, but you can only take your best guess and live with the result. Deciding to do nothing at all is still a decision...

ps. I got a call from Vanguard a few days after I mailed in the switch form, asking for clarification as I'd only filled in the % I wanted after the switch (I had assumed they would work out the most efficient way to shift my current asset allocation to the new ratios, but no, they need explicit details of what to sell and what to buy.) I explained that to minimize transaction costs (the buy/sell unit price differential) I didn't want to sell all the Conservative Fund units and then rebuy half of them! So we worked out that I could sell all the Bond Fund units and 25% of the Conservative Fund units and invest the proceeds 100% into the High Growth Fund. After checking with the processing department, the rep said they I would have to fill in a new switch request form, with those details filled in, so I had to quickly complete a new form, get DW to sign it, and scan and email it back via the 'secure email' service I had to register to use. Unfortunately I filled the form in too quickly and accidentally ticked 100% into the Growth Fund rather than the High Growth Fund! D'Oh!

Ah well, we'll be switching back to our long term allocation of 100% High Growth once the current volatility has settled down, so for the time being I'll just leave us allocated 50:50 in the Conservative:Growth Funds as it won't have too much impact on this year's performance (and it might turn out to be good to remain a bit conservative).
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Australia may be joining the elite club of countries that are significantly limiting Covid-19 spread

An interesting log-log plot of new cases in the past week, vs. accumulated cases seems to be a good indicator of when a country has 'flattened the curve' effectively. While it is impossibly to completely eradicate Covid-19 once it gets into a community/country (given that many infected people are essentially asymptomatic while contagious, so won't be detected as testing the entire population on a continuing basis is impossible), some countries have managed to reduce the number of new cases per day (the 'natural' trend is for infection rates to keep rising until most people are either infected or immune). Other countries still seem to be struggling to get on top of the spread while total cases are still small. Australia seems to be in the 'club' of countries that have managed to put in place measures to reduce infection rates at a fairly early stage (while total cases were still relatively small) - the other countries being Taiwan, Hong Kong, Japan(?) and South Korea.

Other countries seem to have also put effective controls in place (China), or have signs of progress (Spain and Italy) but at a much later stage (when case numbers and deaths had already escalated):

And other countrie have yet to show any sign of getting the situation under control:

However, Japan provides an example of where the infection appeared to be under control for a while, but then took off again. So, until a vaccine is available, efforts to minimise spread will have to be maintained, either continuously (at massive economic cost, but minimising deaths from Covid-19), or intermittently (or less stringently) so that either 'peaks and troughs' or infection (that the hospital capacity can manage) occur, or a steady, relatively low rate of infection is maintained.

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When experts are idiots

Reading an article in the SMH about the impacts of police having to issue warnings and in some cases fines for people continuing to ignore the social distancing and 'stay at home' instructions, I was struck by one reported quotation of an expert (who should know better):

"Peter Collignon, an infectious diseases physician and microbiologist at Canberra Hospital and a professor at the Australian National University, has made the same point, accusing authorities of overcooking the response for no genuine public health benefit. "You are safer outside than inside. I do not see how anyone's going to get this virus if they keep two metres away from someone and I don't see how anyone's going to get it if they sit on a park bench," Collignon told The Canberra Times."

I'm not an infectious diseases physician, but even I can imagine a highly probable scenario where Covid-19 could easily be passed via people sitting on a park bench. According to WHO:

"How long does COVID-19 last on surfaces?

According to the World Health Organization, it is not certain how long the virus that causes COVID-19 survives on surfaces, but it seems to behave like other coronaviruses. Studies suggest that coronaviruses (including preliminary information on the COVID-19 virus) may persist on surfaces for a few hours or up to several days. This may vary under different conditions (e.g. type of surface, temperature or humidity of the environment).

If you think a surface may be infected, clean it with a common household disinfectant to kill the virus and protect yourself and others. Clean your hands with an alcohol-based hand rub or wash them with soap and water. Avoid touching your eyes, mouth, or nose."

So, here's a scenario for Professor Collignon to get his mind around:

1. Person A (who is not in home isolation as they feel fine and don't know that they have Covid-19 and are infectious) goes our to buy a Kebab and sits on a park bench eating his lunch and enjoying the sun.

2. He has to cough and coughs into his hand - he'd normally cough into his elbow buy he has his hand full with a kebab so uses his free hand to mask his cough.

3. He finishes off his kebab and uses his free hand (that he coughed into) to push off the park bench, walks to the bin and throws his kebab waste away, then goes home.

4. Person B, a perfectly healthy 55 year old is out for a stroll with his partner decides to sit on the bench, carefully sitting 1.5m apart. When sitting there person B happens to put his hand on the bench where person A touched and left Covid-19 on the surface. He happens to touch his face while walking home with his partner.

5. A week later person B falls sick and soon after his partner also falls ill.

Still can't see how anyone can get the disease by going out and sitting on a park bench Prof. Collingnon?

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Is Covid-19 spread being contained globally, or is testing providing misleading data?

My daily plots of WHO Sitrep data suggests that the rate of increase in global cases (excluding China) has finally started to drop below the previous exponential rate of increase. On the one hand this may indicate that social distancing and lock downs in Australia, Europe, the US and elsewhere are finally having an impact (by reducing the number of people each contagious, undiagnosed case can infect). Then again, the fact that the raw deaths/cases ratio had been increasing might suggest that the number of positive test results was falling behind the actual number of cases (either because of lack of testing capacity, or simply because you don't know who should be tested).

Hopefully the number of cases globally may be heading towards a plateau around of under 10 million, and deaths may stay below 250,000-500,000. Then again, that may simply be a plateau in the developed country cases (similar to the previous plateau achieved in China), and there may be a global 'third wave' once Covid-19 spreads throughout India and sub-Saharan Africa...

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Heading towards 1MM Covid-19 cases and 40,000 deaths globally by the end of March

Unfortunately the Covid-19 situation outside of China is dire, with countries being too slow to introduce detection, then containment, and now social distancing/self-isolation. During January and February the world first learned about the novel coronavirus in Wuhan, and then watched on in amazement at the draconian measures being taken to contain the spread within China. All while taking minimal actions to prepare for a possible pandemic.

The fact that China apparently managed to bring its outbreak under control (and the few cases detected outside of China during February) seems to have actually hindered global preparations - governments around the world were focussed mainly on reassurance and preventing economic dislocations by maintaining 'business as usual' approaches for far too long.

Now, the global rate of increase in Covid-19 cases and deaths has grown sufficient to outweigh the positive results achieved in China and South Korea, as can be seen below.

Global Covid-19 cases outside of China continued to rise exponentially:

While control achieved within China gave a false sense of security to the WHO and other countries:

But cases outside of China have now increased sufficiently to dominate the overall trend in global cases and deaths:

And with no indication that the spread of Covid-19 is yet being adequately controlled outside of China and South Korea, it looks as if the world may hit 1 million cases and close to 40,000 deaths from Covid-19 by the end of this month...

Governments around the world are belatedly trying to boost their ICU capacity by ordering mechanical ventilators - which will rapidly exhaust stock is on hand around the world (the government equivalent to suddenly running down to the local supermarket and trying to buy a month's supply of toilet paper!).

Hopefully everyone takes 'social distancing' and 'self-isolation' seriously enough to slow the rate of increase ('flatten the curve') to an extent that health capacity isn't totally overwhelmed. Otherwise the death rate could climb due to lack of trained staff, facilities and specialist life support equipment even in developed countries. What the situation is going to be like in India and African and South American countries in 2 or 3 months doesn't bear thinking about.

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Friday's 'relief rally' in US and Australia probably premature

After record losses on Thursday, the Australian market started out badly on Friday but then recovered (and actually ended with slight gains) in the afternoon. Then the US market did quite well in Friday trading, recovering a large fraction of Thursday's decline. As usual, market commentators attempted to attribute the market movements to one 'sound bit' cause - in this instance the 'prospect' of the US congress and the US President getting their act together and providing some financial support in terms of sick leave and other measures to provide financial support to victims of Covid-19. However, I don't think that 'fiscal measures' are going to be particularly effective in ameliorating what is a medical and social behaviour crisis. Normally providing financial support (e.g. $750 government hand-outs to welfare recipients in Australia) would boost spending, and have a 'multiplier effect' (you give someone $100 extra cash and they go to the shops and spend $200). But in this crisis I don't think that having some spare cash will encourage people to go shopping if they are sitting at home in order to avoid catching Covid-19. Similarly, while providing 14 days sick leave in the US will replace income for those required to self-isolate for two weeks, it won't go far for those that actually catch Covid-19 and end up in hospital for treatment, and will be of limited help for those that finish off two weeks self-isolation due to exposure ('close contact') to a Covid-19 case, but find out that they are 'negative' for the virus. In those cases they are still likely to eventually catch Covid-19 for real - and will have already used up their sick leave. I suspect people will be extra cautious and any financial support will end up being used to reduce household debt or kept as an emergency reserve (to pay bills when you are actually sick with Covid-19). People are only likely to spend the extra cash on household consumption (and hence provide economic stimulus) if they feel that the crisis is being mitigated and will be brought under control by government action - and I can't see this happening any time soon.

Given the continued rate of growth in global Covid-19 cases (about 4% increase in numbers each day), and the worrying death rate (about 3%-4%, which suggests considerably under-reporting or lack of testing), the economy is likely to suffer more and more as patient numbers overwhelm medical capacity and death rates rise exponentially. This is likely to disrupt business and the economy no matter what fiscal stimulus measures are taken.

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Covid-19 won't be contained

Well, it certainly looks like attempts to contain the spread of Covid-19 have failed. The rapid increase in cases outside of China is now making a significant contribution to the total number of cases and fatalities, and looking at the ex-China case numbers there doesn't appear to be any significant reduction in the exponential increase in cases.

The fatality rate has also trended towards the upper range of my estimate at 3.4%-3.6%, with the 'current day' deaths/cases converging with the 'current day' deaths/T-4 cases. I've seen one 'expert' suggest that this fatality rate might overestimate the actual death rate for those that catch Covid-19, with the logic being that the number of cases is probably under-reported (with many 'mild' cases of Covid-19 not being diagnosed/tested/reported). But to me that would also mean that the actual rate of spread is a lot worse than the reported figures indicate, which would certainly not be good news.

The other reason to 'not panic' that was cited by medical experts in the early stages of this pandemic was that while the fatality rate for Covid-19 (at the time) was thought to be around 1%-2%, the number of cases was much lower than occurred in a 'normal' 'flu season, so the absolute number of fatalities would not become significant. That made the unwarranted (optimistic) assumption that Covid-19 would be easily contained...

Unfortunately, it looks like Covid-19 may eventually spread throughout the global population and could end up infecting 25%-75% of the population. If the true fatality rate (with access to ICU treatment levels) is around 3%, and could be as high as 5% in areas without access to ICU levels of treatment, then the possible number of deaths resulting from Covid-19 during the coming 12-18 months is truly horrendous (I won't bother putting the figure here, as I don't want to be overly alarmist). The thing to bear in mind is that Covid-19 may infect more people than occurs in a 'normal' 'flu season, because a) there is no vaccine available, b) people have no immunity at all, and c) it is highly contagious (more like the 'flu than MERS). And the other thing to remember is that 'flu typically has a death rate of around 0.05% to 0.1% while Covid-19 may have a death rate of around 3% - which is 30-60 times higher!

One thing that may (or may not) be reassuring (depending on your age and overall health) is that the overall death rate is skewed by its impact on older persons - the death rate is 14.8% for those over 80 (I'll tell my parents to stay on their farm and not visit town if at all possible!), and is 8% for those aged 70-79, and 3.6% for those aged 60-69. 1.3% for those aged 50-59 (me and DW), and just 0.2% for those aged 10-39 (and no-one under the age of 9 has died so far). That still means that in our family, if we all eventually catch it (and barring any new treatment regime becoming available), there is about a 1-in-30 chance that one of us would die.

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Australia is "well prepared" for Covid-19 - really?

According to the head of the Biosecurity Program at UNSW's Kirby Institure, Australia might need 650,000 ICU bed's in a worst-case Covid-19 scenario (which considers the 'what if' case of 25%-75% of the population eventually being infected) - although these beds would be needed "over a period of time", such as one year.

However, even if a patient only required IC treatment for two days (which is probably way too low a guesstimate, given the average ICU length of stay is 3.3 days), that corresponds to 3,560 ICU beds in continual use dedicated exclusively to Covid-19 patients. Given that Australia only has approximately 2,000 ICU beds in total (spread across public and private hospital ICU units) that would seem to be a bit of a challenge -- especially as most of the ICU beds are already fully utilized for patients with burns, trauma, heart attacks etc. So, a 'worst case' scenario would imply almost tripling the number of ICU 'beds' (which in reality means a whole load of specialized equipment and infrastructure, specialist medical staff, and associated support staff...)

If one assumes ICU beds only have 90% availability (i.e. allow some 'down time'  for cleaning/disinfection between patients, maintenance, breakdowns etc.) and the LOS for Covid-19 turns out to be at least the same as the average ICU LOS (3.3 days), then the ICU bed requirement in Australia in the 'worst case' could easily hit an additional 6,500 ICU beds (a four-fold increase in the existing number of ICU beds). And its not as if Australia would be able to source additional technical and staff resources from overseas in such a situation (Australia's traditional answer to shortages in nursing staff is to poach them from the UK health system...), as other countries would be trying to boost their capacity at the same time.

BTW, the current fatality rates are skewed towards countries that have quite good health care capability (China, Korea, Japan, Iran) - and in that sample roughly 5% of Covid-19 cases have needed IC, resulting in the current fatality rate of between 1%-3%. If/when Covid-19 spreads to developing countries in Africa etc. the lack of ICUs could mean the fatality rate in those countries approaches 5% (those that 'need' ICU and can't get it would presumably not have good outcomes).

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