Markets politics

Michael Burry Has Some (Strong) Opinions On Coronavirus Lockdowns

"...blockhead policies lacking all nuance and understanding."

Michael Burry is a lot of things most of us will never be.

For example, he’s one of the few people who can claim to have actually predicted one of the biggest financial meltdowns in modern history. “Actually”, as opposed to the scores of market participants (professional and otherwise) who purport to have some loose claim on “calling the GFC”.

Burry is also a man who was portrayed on the silver screen by Christian Bale, a distinction he shares with Patrick Bateman, Dick Cheney, Moses and Batman.

Also, Burry is an M.D. (Vanderbilt University School of Medicine).

Over the past several days, Burry has spent what appears to be quite a bit of time tweeting about coronavirus. His take seems to be an amalgamation of big data advocacy to combat the spread and a soft version of the idea that the “cure is worse than the disease”.

“[It’s] a helpful page, but this War Games map is a waking nightmare, and it does not have to be”, Burry said, of the famous Johns Hopkins COVID-19 tracker which is one of (if not the) go-to source for data on the virus.

“For perspective, influenza hospitalized 400,000-730,000 Americans this year, and killed 24,000-63,000”, Burry remarked, on Monday, adding that it’s “not as bad as 2017-2018, when the flu killed as many as 95,000, but still, sadly, 7 children died last week”.

“Note this is with a widely used and effective vaccine program”, he continued. “The numbers are 95% confidence interval numbers [and] there is no reason to believe COVID numbers are any more precise, but that is because talking in ranges is good for science but not politics or media”.

The key point from Burry, is that “denominator deflation infests COVID-19 stats”.

While doubtlessly lost on many, that’s common sense. It’s not clear he’s trying to say anything that’s overtly hyperbolic or otherwise “out of consensus”.

“In countries with more comprehensive testing, there are better estimates of the true case fatality rate of COVID-19, ~0.2-0.5%. With universal testing it would be lower”, he goes on to remark, employing the chart below.

That captures the gist of his arguments, which are being sensationalized by some media outlets.

He said as much on March 23, when he made the rather uncontroversial claim that “if COVID-19 testing were universal, the fatality rate would be less than 0.2%”.

You can quibble with the actual figure, but the point (that if we could somehow know the “true” number of cases, the mortality rate would be very small) is self-evident.

His other main claim, though, is the subject of some debate.

Commenting on the likely actual mortality rate, Burry says it’s “no justification for sweeping government policies, lacking any and all nuance, that destroy the lives, jobs, and businesses of the other 99.8%”.

Couched in those terms, it’s hard to argue with Burry, but whether he realizes it or not, he’s constructing a straw man. Specifically, the use of descriptive terminology like “lacking any and all nuance” makes it impossible to argue with the rest of his claim. That is, if you accept that government policies devoid of “any and all nuance” are generally bad (and that’s almost a tautology), then you have to accept the latter part of his claim, which is an implicit call to reopen the economy.

That kind of argumentation won’t work in a logic class, but it works on Twitter.

Burry goes a bit further, inserting himself into the domestic violence discussion. “Domestic violence [is] ‘flourishing'”, he says, citing a piece from The New York Times.

“This [is] happening right now”, Burry laments. “[It’s] infuriating that governments sacrificed these women and children with blockhead policies lacking all nuance and understanding”, he fumes. “Politicians and media ran roughshod over these victims”.

Unlike the vast majority of investors who have presumptuously weighed in on the relative merits of reopening the economy, Burry is a doctor, and therefore does have a claim on an educated medical opinion.

And yet, as ever, some of the questions he’s posing (he makes them statements, but they’re really questions) are the same vexing quandaries currently being debated by the best epidemiologists, virologists and immunologists on the planet, in conjunction with politicians who, in some cases, are desperate to restart the economy.

So, while Burry has an M.D., and has proven himself to be a formidable intellect capable of conducting analysis at a level of granularity normally reserved for computers, not humans, the suggestion (tacit or otherwise) that everyone currently working to pull off an impossibly difficult balancing act between minimizing the imminent threat to human life (the virus itself), second-order effects (e.g., domestic violence), long-term health threats (e.g., depression from lost employment) and possibly permanent loss of economic output, is somehow intellectually inferior to Burry, is laughable.

His opinion is welcome, of course. Indeed, his medical training means it’s more welcome than most when it comes to investors commenting on public health crises.

But this isn’t the housing market, and the career virologists and epidemic experts around the world aren’t Alan Greenspan. Burry may well be more right than most. But unlike the pre-2008 mortgage market, this isn’t a situation where he can claim to be totally correct while everyone else is completely wrong.


 

25 comments on “Michael Burry Has Some (Strong) Opinions On Coronavirus Lockdowns

  1. “Burry is also a man who was portrayed on the silver screen by Christian Bale, a distinction he shares with Patrick Bateman, Dick Cheney, Moses and Batman”.

  2. “Burry is also a man who was portrayed on the silver screen by Christian Bale, a distinction he shares with Patrick Bateman, Dick Cheney, Moses and Batman”. This is by far the funniest line I’ve read all year!!! LMAO!!!

  3. Anonymous

    That movie was great.

  4. Would love to know if his opining has anything to do with a position or his portfolio. In the thick of things, seems irresponsible from someone with medical training to publicly rebuke.
    *For the record – what he’s saying is not incorrect.

  5. “It’s like the flu” is contradicted by the basic facts. The death rate may only be .3% with perfect data… but then isn’t the flu with perfect data also far lower than the estimated range of 0.01% of the population? Any way you slice it this bug is a bigger deal than any flu in history. Maybe we’d be better off economically if 3 million people died, especially since they would likely have preexisting conditions… I mean who doesn’t want to practice eugenics, especially if mother nature is taking the lead?

  6. His answer really is.
    “People with corona should not be admitted to hospitals. Hospitals were efficient and able to deal with normalized disease. Reduction in longevity is acceptable. We had a nice run of wishing 90 y.o. Happy Birthday. Fat Diabetics have only themselves to blame. Have a national referendum.
    And if this thing mutates to the grade schools….oh well.”

    We have a known unknown at this point. Second wave of Spanish influenza was doozy.

    • Full disclosure.
      I have a vested interest in this. Suffolk County N.Y. My girlfriend was to go for 4 day chemo today. On hold. Fast growth Bcell lymphoma Brain. I have closely been tracking numbers here and if this evenings numbers stable the way yesterday has, just maybe a bed next week.
      Bull=momentum. Bear=value I did the last of my selling 2/28 and 3/2. I have had 2 positions since. Yesterday morning started the second sell by thursday. The new weighting of 500 funds might prove simpler way to play that game next time.

  7. Im surprised at the tone here. Burry is correct on the large scale. yet our society is now beholden to anecdotal stories outweighing the large scale strategy on how to win the war, and have a homeland to return to. We are already in a depression, gdp today vs 90 days ago is off by 50% (guesstimate here of course). As the BIS says, knock on effects may be “non-linear’ aka, you cant jsut send everyone a little bit of money and expect 2-3 mnths of gdp (and balance sheets, and loan payments) just to come back…not all demand for missed consumption is being ‘pent-up’—a lot of it is permanently lost. Also, the $ funding shortage would have had an impact on markets in short order anyway…actions by govt are comounding the negative impacts…but the virus is now justifying far MORE intervention than would have been required, had govts used a more nuanced approach to shut downs etc.

    For Dr H and everyone else….what will victory look like? what will it actually take to get people back on planes and kids in school? the psych damage means that airlines will lose 1/4 of top line, for a long time. many people wont get jobs back (esp the longer this takes). non-linear, means geometric…and if $1.5T per month in lost gdp….try $7-$10trillion to fill the sinkhole (not back stops…straight cash inthe mailbox). IF 1 million lives are saved at a cost of only $1T, thats $1million per person, that kind of decision making is not sustainable.

    • Yeah, but what politician will say that on TV?

    • I hate to break this to you, but with or without lockdown protocols, people are going to be scared to get on planes, shake hands, hug, go to dinner, etc. for a long time to come. That may be amplified by the media attention this has received, but we (in the US) cannot control what protocols are in place in China, Italy, Spain, etc. What are we supposed to say? “Don’t look at what’s going on over there.” ?

      Also, we cannot force people to get on planes. Similarly, you can’t go around and demand that people go to Starbucks because in the estimation of the US government, it’s better that economic activity keeps running considering a relatively small mortality rate.

      Let’s say you’re the government and you say to me: “Come on man, go get a Starbucks, you’re healthy, and the statistics say the chances of you contracting, let alone dying from, this virus are much lower than the risk of, for example, driving to Starbucks!”

      Then I say to you: “I’m not going to Starbucks. I’m scared. It’s just that simple.”

      What do you plan to do then? Start mandating economic activity under penalty of fine?

      The point is: People ain’t gonna go out anyway. This non-sourced rhetoric about how everyone is just itching to go stand in crowded lines at retail stores is nonsense. Of course people want to work, but that’s because they’re more scared of being broke than sick, not because they’ve done the math and have come to the conclusion that the statistics don’t warrant the containment measures.

      • I think I should emphasize that it’s obviously true that an approach harnessing big data and machine learning which would have led to a more effective government response across countries would have clearly been preferable, and that’s an argument that, for example, JPMorgan’s Marko Kolanovic has made, in lengthy notes written in matter-of-fact terms that are conducive to serious discussion and debate. But Burry has to understand that like it or not, he’s a literal movie star — so, if he’s going to show up on Twitter and start talking about this, he’s going to be subjected to a ton of scrutiny. That’s how it goes. Also, I think my treatment of his comments as presented here is totally fair — in fact, it borders on flattery at certain junctures, despite my not generally agreeing with some of his points.

        • Genius’ lie to themselves the best told lies.
          He left medicine for what reason? Your article and depiction of his sentiment was fairly presented. He is quite sophisticated.

        • H-Man, Burry is an idiot. According to his numbers the flu kills 20,000 to 65,000 annually. Take his death rate for Covid at .02% and assume 1/2 of the US population is infected (170M), the body count is 340,000. Move the infection rate down and you are not close to the flu rate. Open the flood gates as he proposes, the bodies pile up. He doesn’t tell you how many bodies you need for an economic recovery.

      • It would appear that people do not want to stand on line at hospitals. I was a FDNY Lieutenant and have been talking to guys in the field. I thought this might be coming. Only makes sense.

        National Review.

        Gwynne Hogan at Gothamist writes that a rash of in-home deaths in New York City suggests the city may be undercounting its COVID-related fatalities:

        The FDNY says it responded to 2,192 cases of deaths at home between March 20th and April 5th, or about 130 a day, an almost 400 percent increase from the same time period last year. (In 2019, there were just 453 cardiac arrest calls where a patient died, according to the FDNY.)

        That number has been steadily increasing since March 30th, with 241 New Yorkers dying at home Sunday — more than the number of confirmed COVID-19 deaths that occurred citywide that day. On Monday night, the city reported 266 new deaths, suggesting the possibility of a 40% undercount of coronavirus-related deaths.

        When I read Governor Cuomo Emergency Dept of Health protocols I knew it was gonna get real. The paperwork part of it was very interesting to me. Unintended consequences.

  8. It is very difficult to extrapolate a death rate without knowing the infection rate. When testing becomes universal, we will have a much better handle on the mortality and morbidity of the virus. Morbidity may well be more consequential than most imagine (e.g. permanent disability, greater susceptibility to lung infections etc. . .) we just don’t know. Just like we really don’t know how easily the virus is transmitted and whether it effects all populations equally not just obvious co-morbidity factors such as COPD, heart disease, diabetes, obesity etc. . .then there is the obvious interest in repressive regimes to suppress public information about the extent of the spread. The Spanish flu enjoyed the benefit of a lack of public information.

    The reality is that the measures we are taking are very inefficient but currently the most effective way to avoid overwhelming the health care system (and Mr. Burry seems to forget that large portions of our health care system are private and for profit) in the near term while epidemiologists gather better information and develop more efficient ways to suppress the contagion effect while researchers develop effective therapies and then ultimately a vaccine.

    But of course not everyone will be willing to be vaccinated and this administration is probably not the one we should rely upon to mandate its universal application.

    The problem macro-economically is that there was too much debt taken on to generate too little growth. More debt for even less growth. It is something of a positive feedback loop and there is no leader in the world that is going to say to the people “we are all need to work harder for less”

  9. Qualified outlier experts can be found in every field (another example – in climate science). A rational non-expert goes with the scientific consensus – and being science that is not of course guaranteed to be right.

  10. Think on the lockdown/open up question all you want, but we are going to keep on the say we have been, namely lockdown then figure when where and how quickly to open up. The investment seers should spend their brain power on how to play the market. Maybe they are so smart and prescient that they already have, but don’t want to lessen their gain by telling us. Or maybe they are as stumped as most of us are and are passing quarantine by gaming deaths instead of dollars.

  11. Wait until the “avalanche” of dividend cuts, reduced stock buybacks ( won’t have cash to execute) and then new equity issuances to repay debt get rolling. Once a public company (or two) does this, it will be so easy for other public companies to follow that behavior.

    I am from Colorado and one thing I have learned is how “little” it takes to start an avalanche on a 30 degree slope. Quite frightening.

  12. Mr. Oxygen

    Let me add my experience. I was sick at the wrong time. Sunday wife has a “cold” no “cough”. Weds night felt like i a cold, decided to work from home for awhile. Thurs dry cough felt like a flu, went to the VA triage’d; no temp, stay home for 14 days. My bah, a truly good has it now for two days minor lung symptoms. Nobody knows what we have. Maybe we can get a test in the future that shows if you have been exposed.

    There are a lot of people sick at the wrong time. The numbers don’t lie but they never tell the truth; i think we are missing ~25% of the infected in the count. Kemp may disagree.

    So I am better except easily fatigued. Work: building spreadsheets into reference guides for stakeholders, e-mails etc… I can get about an hour in at a whack and the take about thirty mins. We are going to get through it even Reggie White.

    At least we are not bored.

  13. Mr. Oxygen

    Bah and Reggie = my Cairn Terrior.

  14. Only an MD (or Rick Santelli) could come up with such a cruel and heartless plan. MDs are taught in medical school to lose their empathy; otherwise they’d lose their minds, especially, say ER docs. (Source: I was pre-med, thank god dropped out and went into computer science instead, but still have many friends who are docs. The dermatologists are happy; the ER docs, not so much.) If you want to see how Burry’s idea of letting herd immunity take effect would work out, check out the UK, where they tried it for a few weeks – Johnson refused to shut the schools, and was encouraging people to go about their normal lives – take the tube to work, etc. (Source: I have numerous friends in London). And now Johnson is in the ICU. Or let’s see where the Southern US states – Georgia, Florida, South Carolina – are in a few weeks. As for the mortality rate, nobody knows either the numerator OR the denominator. Infections are probably undercounted – the asymptomatic and mild cases aren’t tested. But deaths are undercounted as well, for various reasons (people dying at home, deaths attributed to pneumonia or heart disease, as for the most part, people aren’t wasting the hard-to-get tests on corpses). But one thing I do know – the Chinese have better data than we do, as they were hit much earlier. And if the morbidity rate was “only” 0.2% as Burry claims, China would NOT have shut down half their country and destroyed their already faltering economy.

  15. Obviously, Burry is relevant and worth paying attention to. However, with any outlier event, there is a possibility that certain people will actually predict it with skin in the game. He was that statistical outlier a decade ago. Amazingly so. What are the odds he will make consistently correct contrarian calls for the rest of his life? Infinitesimal.

  16. I think that is essential to know your risk factors.

    The 1st data coming out of China showed a bias by sex, males died at a higher rate… and in China men smoke more than women (smoking = reduced lung capacity). I was amazed in France that everyone smokes. In the cases v. deaths graphics it appears that France is right up there in terms of deaths relative to other countries. I don’t see Italy or Spain labeled but Italy’s NH said, “99% of Italy’s coronavirus fatalities were people who suffered from previous medical conditions” (Bloomberg, 3/18), no mention of smoking…

    I hope that someone will present the demographics on COVID-19 with respect to risk factors sooner than later.

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