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Swine Flu Shorts

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April 27, 2009 – Comments (26) | RELATED TICKERS: SFD.DL2 , OMAB , PAC

No the title of this post does not refer to some new fashion trend that's arriving just in time for the summer, "Oh man, did you see that honey in the swine flu shorts."  Nope I'm talking about the latest hot global pandemic...swine flu (see article: Swine flu sparks global concern).

Let me begin by saying that while this disease outbreak (or whatever you want to call it) is a lot cloer to home for Americans than the Asian Bird Flu that happened a couple of years ago, in the end I suspect that its impact will be the same. This means first and foremost that anyone believes that this is some sort of new Armageddon that will wipe out 50 to 100 million Americans like some flu did a hundred years ago is Cuckoo for Cocoa Puffs, though I'm sure that this will provide some temporary ammunition to the bomb shelter, survivalist crowd so to speak.  I'm not saying that a deadly virus that wipes out half of the world is impossible, just that it is a very unlikely outcome.

Although it had a real impact upon the unfortunate families that were affected by it, Bird Flu was not devastating.  What it did have however was a major negative impact upon the stocks of a number of companies.  Anything relating to chicken was temporarily crushed.  I need to do some research, and perhaps someone who is reading this can help me, to see exactly what companies' stock prices were hurt by the bird flu, but one that comes to mind off of the top of my head is Buffalo Wild Wings (BWW).  If the bird flu had a negative impact upon any company that was remotely associated with chicken, the swine flu will likely have a negative impact upon companies that are associated with pig products like ham and pork.

Smithfield Foods (SFD) is the largest public producer of pork that I am aware of.  Rumors of a potential takeover have buoyed its stock price somewhat lately and it has stated that it has tested the pork from its Mexican facilities and it is save, but come on.  I'm about the least worried person around about the potential health impact of pork upon me and even I wouldn't buy pork from Mexico right now.  Even is this news doesn't have any real impact upon the company's earnings, and I suspect that it will, it is going to take a hammer to its stock in the short run.

Another group of companies that I suspect will be hammered by this news is Mexican Airports. Over the past several months I have been writing about how I believe that the slow economy and the media reports of widespread violence in Mexico would have a negative impact upon the stock prices of Mexican airport operators OMAB, PAC, & ASR as it took a toll on their traffic numbers.

Now these companies have something else to worry about...the swine flu.  I have seen a number of reports about students from all over the world, from New York to New Zealand coming down with suspected cases of the swine flu after going on vacation to Mexico.  When one out of every five residents of a country's largest city are wearing masks to protect themselves against the virus I'm definitely not going to that country on vacation, even if the real risk of me contracting something is minimal.  Fewer tourists means less traffic and in turn less money for Mexican airport operators. 

Bloomberg had an article on the swine flu and airlines this morning:

Airlines Look for Flu Symptoms While Keeping Flight Schedules

U.S. airline operators are on "heightened awareness" for passengers that display potential swine flu symptoms but have not canceled any flights to Mexico yet.  Passengers do however have the option to cancel their flights to Mexico or change them to another location without having to pay any of the normal fees or penalties.

While airlines aren't officially canceling flights and the Center for Disease Control has not yet officially recommended avoiding travel to Mexico this sort of negative news could potentially have a devastating impact upon the country's tourism business and have a negative impact upon the volume of travelers that visit its airports.

Travel to Asia dropped dramatically several weeks after the first cases of SARS were reported back in 2003 and the demand didn’t pick back up for six months.

This news will likely make Mexican airports a great short as a trade and it could provide investors with a long term horizon to get into these companies on the cheap.

Deej

26 Comments – Post Your Own

#1) On April 27, 2009 at 7:12 AM, TMFDeej (99.40) wrote:

Here's a blurb from another Bloomberg article that supports the theory that the airline industry will sell off on the swine flu headline.

"Airlines Retreat

Paris-based Air France KLM-Group fell 7.7 percent to 8.29 euros in Paris trading. Four people in France suspected of suffering from swine flu have tested negative for the virus, an official at the Health Ministry said today. London-based British Airways Plc tumbled 7.3 percent to 151.9 pence.

Beijing-based Air China Ltd., the country’s largest international carrier, slumped 13 percent to HK$3.49 in Hong Kong. Singapore Airlines Ltd., the world’s second-biggest carrier by market value, slipped 4.5 percent to S$10.12."

Deej

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#2) On April 27, 2009 at 7:37 AM, abitare (35.90) wrote:

Yep, airlines and airports = good shorts. Although I would take a gander at Southwest here, if there is a big sell off. Luv is a best of breed.

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#3) On April 27, 2009 at 7:52 AM, alstry (35.41) wrote:

Deej,

Mexico City has a population of 20,000,000 million people.  It is the most populated city in the world.  Many are very poor.  Just through natural population change, my guess is that about 1000 people die per day...or 7000 per week.

It would be interesting to learn how many traditionally die from the flu around this time of the year.  Is the 60 to eighty people that died in the last week more or less than historical norms?  Are people becoming hysterical for no reason?  What percentage of all flus are derived from animals in one way or another?

However, we know that 16.2% unemployment is NOT normal nor is exports being down 50%.

 

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#4) On April 27, 2009 at 7:59 AM, dudemonkey (40.89) wrote:

Is it time to start stockpiling canned goods, guns, ammo, and back issues of playboy in my Underground Recession Bunker?

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#5) On April 27, 2009 at 8:02 AM, KamranatUCLA (29.14) wrote:

Dow will be down 1000 points today

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#6) On April 27, 2009 at 8:09 AM, XMFSinchiruna (27.49) wrote:

Deej, I'm impressed. In addition to being a skilled stock picker and top-rate blogger, you're also an epidemiologist with the requisite expertise to declare this new virus no more worrisome than the avian flu after just a few days of assessment.

Since you suspect a similarly benign outcome on the basis of that exhaustive research, then surely you're correct that anyone concerned about a broader pandemic must certainly be certifiably insane and should immediately be labelled with some kind of dismissive language... let's try the "bomb shelter, survivalist crowd" this time and see if those crazy people finally just admit that they're crazy and pipe down for a change.

You know I like and respect you a lot, but this is now the second time you have really disappointed me with that kind of effort to dismiss the ideas and concerns of many of your fellow Fools by suggesting it's somehow crazy to be more concerned than you.

People are concerned, some more than others. None of us want to see panic nor paranoia, but I think you need to be responsible in backing up your "suspicions" about the potential severity of this outbreak with the facts. In your post, for example, you failed to mention that this swine flu in fact contains DNA signatures of avian flu and common human flu strains together:

"The virus is an influenza A virus, carrying the designation H1N1. It contains DNA from avian, swine and human viruses, including elements from European and Asian swine viruses, the CDC has said."

You also failed to note that a combined, or "reassorted" virus melding avian flu with other viruses, resulting in transmutation to enhanced virulence among humans mirrors the precise concerns that the CDC expressed at the time of the avian flu outbreak that they indicated could mean the difference between troublesome outbreak and global pandemic. Consider this media report from 2004 of CDC laboratory effortst o "reassort" avian flu with additional viruses during that 2004 outbreak:

"One of the worst fears of infectious disease experts is that the H5N1 avian influenza virus now circulating in parts of Asia will combine with a human-adapted flu virus to create a deadly new flu virus that could spread around the world. That could happen, scientists predict, if someone who is already infected with an ordinary flu virus contracts the avian virus at the same time. The avian virus has already caused at least 48 confirmed human illness cases in Asia, of which 35 have been fatal. The virus has shown little ability to spread from person to person, but the fear is that a hybrid could combine the killing power of the avian virus with the transmissibility of human flu viruses. Now, rather than waiting to see if nature spawns such a hybrid, US scientists are planning to try to breed one themselves—in the name of preparedness. The Centers for Disease Control and Prevention (CDC) will soon launch experiments designed to combine the H5N1 virus and human flu viruses and then see how the resulting hybrids affect animals. The goal is to assess the chances that such a "reassortant" virus will emerge and how dangerous it might be."

Which is more cuckoo for cocoa puffs ... assuming everything will work out just fine because it always does and this is America and we're the greatest nation on Earth and nothing that happened in history could ever happen again because now we have technology to save us blah blah blah... or basing one's assessment of the potential dangers upon the actual facts available and taking basic steps to prepare just in case this is this is the pandemic that epidemiologists have been saying was inevitable for decades?

In the meantime, do you mind ceasing these completely unnecessary efforts to label those whose level of concern may not precisely match your own as crazy? It's counter-productive, and such conclusions do not hold up to the scrutiny of reasoned debate.

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#7) On April 27, 2009 at 8:28 AM, TMFSpiffyPop (99.39) wrote:

Kamran,

Wanna bet? I'll give you 8-to-1 odds. :) --David (one hour before market open) 

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#8) On April 27, 2009 at 8:37 AM, TMFSpiffyPop (99.39) wrote:

TMFSinchiruna,

I didn't see Deej affecting to be anything more medically professional than a passive observer. He didn't use any particularly strident language. I appreciated his perspective, and think he'll be right. That said, he didn't exactly go out on a limb. The line that appears to have touched off your response stated that anyone who thinks one in 6 Americans will die by the swine flu is cuckoo, which I believe most of us would agree with. But that was not much more than a straw man -- as it is so unlikely. He allowed significant damage could still be done.

What he was trying to do was to forecast the real impact. You may disagree -- you apparently do. I would suggest that, rather than react defensively, just feel free on your own blog to assert your viewpoint -- provide your own best forecast. I would be interested to read it. --DG

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#9) On April 27, 2009 at 9:15 AM, TMFDeej (99.40) wrote:

I knew that someone would call me on my statement that the Swine Flu will be no big deal and Sinch certainly did.  While you are a great writer and I enjoy our interaction here on CAPS, you never fail to seize an opportunity to make a mountain out of molehill. 

You're always betting on the unlikely and I'm always betting on the likely.  You don't have to like what I'm saying, it's just the simplest, highest probability outcome.  Investing is about playing the odds.  Nothing is a sure thing.  If I had a company on my radar that gets hit by swine flu concerns as long as it has a strong balance sheet, I'd buy it in a second.

I'm not sure that I ever claimed to be an epidemiologist, though I did stay at a Holiday Inn Express last night (OK I actually hate those commercials, but this exchange was begging for that response).  Not to make light of others' suffering, I tell you what Sinch if the swine flu actually becomes a wide-spread problem in the United States I will completely shave my head.

We're talking about less than 100 deaths in a country that has a healthcare system that is much worse than ours at the end of the traditional flu season.  Of the handfull of people who have contracted this strain of the flu in the United States only one was even hospitalized and none have died.

Mark my words, the swine flu will make a lot of noise, just like the avian flu did but its real impact will be minimal.

Deej

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#10) On April 27, 2009 at 9:20 AM, XMFSinchiruna (27.49) wrote:

TMFBreakerDave

I have no forecast for this virus, except to say that I see some cause for concern.

With all due respect, I don't think a numerical cut-off of forecasted fatalities delineates the difference between those on the receiving end of Deej's characterization and those thereby cleared by Dr. Deej as perfectly sane. :) It's not about numbers, it's about the flawed logic behind the statement, and the slippery slope of a mindset that seeks to question the sanity of any who feel a genuine sense of concern about this outbreak. It's about more than just this one post and more than this one issue.

I have no idea what will become of this outbreak. I hope it dissipates and disappears. I hope it will not mutate and that mortality rates will end up being very low. However, I vehemently oppose the notion that anyone concerned about a larger-scale event here must be, as you reiterate from Deej's post, cuckoo.

I am trying to make a broader point about tolerance of multiple viewpoints, and the ethical pitfalls of seeking to label broad swaths of the population as crazy on the basis of their opinions or concerns about the future.

It is entirely in keeping with the spirit of CAPS, furthermore, that such an improper characterization should not go unchallenged. I continue to have the utmost respect for Deej, and my satire in the first paragraphs above was meant playfully.

 

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#11) On April 27, 2009 at 9:34 AM, XMFSinchiruna (27.49) wrote:

TMFDeej

You're still da man! :) I have pure respect for you, but as you know I have to chime in when I find troublesome logic being employed. :)

It's not about which outcome is more or less likely or what will become of the outbreak... it's about casting stones with labels at anyone whose concern level might be more hightened than your own. That's the part I have a problem with. I make no quick assumptions about potentiasl outcomes, but as a pragmatist I tend to at least consider the possibility of a pandemic in this kind of a situation.

I would rather prepare for the worst and hope for the best, then to hope for the best and not be prepared at all. That may mean that you and I walk to a different drum, but it sure doesn't make me cuckoo.

If you're wrong and this thing does become a real problem, the last thing any of us are going to care about is how much hair is on your head.

All I'm asking for is a distinction between disagreeing with an alternate perspective and the assumption that those holding different views or concerns must be crazy. I think it's intellectually unsound, and I think it's a slippery slope.

There, I've said my peace, and now we can go back to being bros. Gotta love CAPS!

:)

 

 

 

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#12) On April 27, 2009 at 10:35 AM, madcowmonkey (< 20) wrote:

What are you guys doing, modeling how to have a discussion on CAPS? too funny....although needed.

Is there too much to really digest at this point to make a prediction of what is going to happen? I think so. Everybody relax for a second and get more educated on the subject than what you have read on the internet and over the weekend in papers. Heated disputes within the first week of a "pandemic" rarely come out to the correct conclusion.

I remember on thursday or friday TMF posted a paper from the AP and within minutes it was a blog. Had anybody else even heard of the swine flu before this? Doubt it.

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#13) On April 27, 2009 at 10:36 AM, madcowmonkey (< 20) wrote:

BTW- the tickers are dropping just like you predicted.

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#14) On April 27, 2009 at 10:36 AM, leohaas (32.41) wrote:

"This means first and foremost that anyone believes that this is some sort of new Armageddon that will wipe out 50 to 100 million Americans like some flu did a hundred years ago is Cuckoo for Cocoa Puffs, though I'm sure that this will provide some temporary ammunition to the bomb shelter, survivalist crowd so to speak". You have just categorized the majority of the frequent CAPS bloggers!

But to focus on the investment impact: airlines will take a hit until this thing is over, the market in general will take a hit today and maybe over the next couple of days. But the pork-related industry? This disease may become a pandemic because its ability to spread from human to human. It has little to do with pigs other than that one of its ancesters before it mutated in its current form was a disease among pigs. The time to worry about pigs was before the virus mutated.

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#15) On April 27, 2009 at 11:07 AM, portefeuille (99.59) wrote:

The time to worry about pigs was before the virus mutated.

The best comment I have read so far in the "caps" game, and I have read quite a few lately.

(still laughing, thank you, I have fever myself since yesterday but do not really live in a "swine flu hot spot" so paracetamol should do)

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#16) On April 27, 2009 at 11:51 AM, ralphmachio (24.76) wrote:

It figures, pigs are flying and FAZ still seems motivationally challenged. i have my tin foil hat rockin , surrounded by positive energy crystals, hookah hose in hand, and i can't get the thought out of my mind,"Kamran, you are nuttier than last christmas' fruit cake if you think the dow is dropping 1000 points today, but I would certainly do a jig"

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#17) On April 27, 2009 at 12:22 PM, ocsurf (< 20) wrote:

Seoul, South Korea is the most populated city in the world :)

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#18) On April 27, 2009 at 12:38 PM, TMEBenBenBen (< 20) wrote:

TMFSinchiruna:

 

Good job, keep it up!  I appreciate that you chose to speak up, both in challenging DEEJ's flippant evaluation of situation and  in bringing to light the counterproductive derisiveness of ad-hominem attacks.

 

DEEJ consistently writes thought provoking pieces and has a loyal and even protective following that value his work.  That he is a great writer makes it all the more disappointing when weak logic are defended with 'your-either-with-us-or-crazy' lines in his litterary sand

 

It isn't that someone's aesthetic sensibilities might be bruised by ignoring some stylistic convention.  The damage is that over time some people that respect DEEJ for the other great things he has written, may begin unwittingly to model their own thinking in this way.  Enough has been done in recent times that pushes the population towards foregoing critical analysis and holding disparaging views of those who disagree.

 

At any rate, thank you TMFSinchiruna:being consistent and maintaining the high ground.  and thank you DEEJ for all the other great things you have written.

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#19) On April 27, 2009 at 1:05 PM, TMEBenBenBen (< 20) wrote:

ocsurf

Actually Soel and Mexico City don't make the top 5 in the list of most populated cities proper.

 

Mumbai

Shanghai

Karachi

Istanbul

Delhi

Sao Paulo

Moscow

Seoul

Beiking

Mexico City

Tokyo

Jakarta

New York City.

 

If you go fbeyond the city limits and include suburbs then the list changes and Tokyo ranks #1

The most populous municipality is Chongquing, and I haven't the faintest idea where in China that might be.

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#20) On April 27, 2009 at 1:25 PM, portefeuille (99.59) wrote:

If you include everything inside a circle of 500 km (ca. 311 miles) maybe I win (148 million) ...

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#21) On April 27, 2009 at 1:26 PM, portefeuille (99.59) wrote:

radius, that is. 30 million within 150 km.

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#22) On April 27, 2009 at 2:04 PM, devoish (98.56) wrote:

Deej

Enjoy your pork dinner, but tell the kids to wash their hands. according to the WHO the swine flu is airborne transmitted, contains a mutation the avian flu did not have that allows to transmitt from person to person, not just animal to person. It is too late not to travel to Mexico, as it is already out.

Extra attention should be paid to the normal things you would do to protect yourself from getting a cold from someone else, until this passes.

http://www.cdc.gov/swineflu/ 

If you are like me and are concerned the CDC might downplay the risks in order to prevent panic or just be late to the game, be extra careful.

What You Can Do to Stay Healthy

There are everyday actions people can take to stay healthy.

Cover your nose and mouth with a tissue when you cough or sneeze. Throw the tissue in the trash after you use it. Wash your hands often with soap and water, especially after you cough or sneeze. Alcohol-based hands cleaners are also effective. Avoid touching your eyes, nose or mouth. Germs spread that way.

Try to avoid close contact with sick people.

Influenza is thought to spread mainly person-to-person through coughing or sneezing of infected people. If you get sick, CDC recommends that you stay home from work or school and limit contact with others to keep from infecting them. Report this comment
#23) On April 27, 2009 at 3:16 PM, glennwhiteside (22.14) wrote:

I haven't seen it mentioned that antivirals are effective against this strain, and it's the middle of spring -- not the usual time of year for flu pandemics.

 

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#24) On April 27, 2009 at 10:44 PM, OtherOracleOfOMA (34.91) wrote:

Yeah... I'm not too worried about this; frankly, it seems like another corporate-media pseudo-crisis designed to distract people from how badly the 'Street is ripping them off. In any case, it's nearly a certainty that it's not pig or bird flu that'll get you, it's the sausage and KFC.

Seriously, when did we become such bed-wetting infants? Oh God, people in a developing country have the flu! Must stock up on guns and canned tuna! Didn't you hear, Mexicans have the flu! The world is coming to an end!

Get a grip, people.

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#25) On April 28, 2009 at 6:28 AM, TMFDeej (99.40) wrote:

Update:

Of note, The U.S. government is urging travelers to avoid nonessential travel to Mexico because of the swine flu outbreak. This definitely will not be good for Mexican airports in the short run.

WHO raises pandemic alert level; more swine flu cases feared

Deej

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#26) On May 01, 2009 at 6:48 PM, cooleo44 (< 20) wrote:

alstry

From where do you get 16.2% unemployment?

http://www.tradingeconomics.com/Economics/Unemployment-rate.aspx?symbol=MXN

http://www.tradingeconomics.com/Economics/Unemployment-rate.aspx?Symbol=USD

 Are you talking about a specific city?

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