The Coronavirus Reality Gap: The Only Chart that Matters

Every time my phone starts ringing off the hook with TV networks asking me to make an appearance on their shows, I know there’s a Reality Gap big enough to make some real money.

In the last 13 days, I’ve been invited on 7 times – talking about the coronavirus and what it means to markets and individual stocks.

The News Media is having a field day over China’s coronavirus outbreak.

Every minute there’s a new update on infections, possible mutations, comparisons to SARS…

This human tragedy is being milked for all it’s worth.

The reason why is simple: fear sells. No TV news segment, no news website, no cable news update is complete without a coronavirus update, because that’s what gets views.

And more views mean more money selling ads.

It’s overtaken the top of the news agenda – the President’s impeachment trial, Monday’s Iowa caucus, even the record-breaking wildfires still raging in Australia.

Not to mention the things you can actually act on, like Amazon’s extraordinary earnings surprise…

And the News Media isn’t the only culprit here, either.

Big Government is getting in on the game too, with health organizations under-reacting, then over-reacting, and now issuing jarring statements:

This morning, just after 10:00am, this headline came out – “CDC: Preparing as If Coronavirus Is ‘The Next Pandemic'” – leading to a 250-point drop in the Dow.

And lost amid all this noise is a Reality Gap between what’s being said and what should really matter…

The truth.

And the truth is, we’re turning the corner on this outbreak. As the very numbers the News Media use to whip up fear show, coronavirus cases are peaking.

The end is in sight.

So it’s time for you to position yourself for the buying opportunity to come…

News Media and Wall Street Want You to Be Afraid

Now, let me be clear. We’re not going to wake up in a couple of days to the news that there are no more cases.

This outbreak will continue for a while. But it’s rate of growth is dropping. And that’s the sign (which I talked about in our Sunday Straight-Up Profits video update) that makes all the difference.

We’ve been getting such bad coverage of the data (because fear mongering sells…), that the engineer in me cried out for a better way to assess the data. So, I took the time to grab the data and build a graph so that we can see whether the outbreak is growing or shrinking in rate of transmission (cases) and acuteness (deaths).

So forget the daily squeals of how many new cases are being added. Here’s the only chart you need, which shows how quickly the number of cases and deaths have been growing (hint – the growth rate is actually shrinking, and consistently so):

As you can see, both numbers have been growing slower and slower. This is what the News Media doesn’t want you to see. They want you to hear 2,857 new cases and think how big that number is. But the day-to-day growth rate is shrinking, and that’s the key for us as traders and investors.

There are many possible reasons for this slowing growth in new cases and deaths: China’s quarantine, better treatment, earlier diagnosis, etc.

Probably a mix of most of these.

Whatever the reason, soon the numbers will plateau. There will be bumps along the way, but the coronavirus outbreak is showing clear signs of peaking soon.

Now, the News Media will want to keep this story alive. So once the numbers stop climbing, I’m sure they’ll try to keep our fear alive and our eyeballs on the news with some other angle. Probably “human interest” stories profiling what it’s like to have been infected, or what life in one of China’s quarantined cities was like.

Wall Street is getting in on the hype too. For example, Delta Air Lines Inc. (DAL) just announced that it is cancelling many of its scheduled flights to China through at least April 30.

United Airlines Holdings Inc. (UAL) and American Airlines Group Inc. (AAL) announced similar cuts last week.

That’s a very long time. Especially with about half the aviation industry’s growth coming from the Asia-Pacific region. It’s also unclear how much this will help contain the virus, since some flights will still go ahead.

I expect all three airlines to resume service faster than that.

Governments, meanwhile, are doing their part to ramp up fear, too…

Big Government is Overreacting

New Zealand and Maldives have both announced a ban on visitors from mainland China, while the U.S. has banned foreign nationals who have been there in the last two weeks.

What we’re talking about here are PR stunts, however well-intentioned, aimed at making you feel safer.

But they end up simply reinforcing the idea that this virus outbreak is so dangerous it requires extraordinary measures.

When in fact, the outbreak has been blown out of proportion.

Let me put it this way. The Johns Hopkins Center for Systems Science and Engineering is hosting a live map of coronavirus cases right here (click the map at the bottom).

As I’m writing this, the number of total infections in China’s Hubei province, where the outbreak started, is listed as 11,177.

That’s almost 64% of the worldwide 17,489. The province also accounts for 350 confirmed deaths, over 96% of the global total.

Meanwhile, Hubei province is home to 58.5 million people.

That’s means less than 0.02% of inhabitants infected. That’s 191 out of every 1,000,000 people. At the very heart of the outbreak.

Without question, there’s a heartbreaking human tragedy behind every single one of those cases. My heart and prayers go out to everyone affected, and everyone who’s lost a friend or loved one.

But it’s important we keep some perspective here. News Media, Big Government, and others want you to be afraid. Whether there’s a reason to or not.

I recommend you don’t let them.

Because while they’re busy trying to make you afraid, you might miss out on what you can actually do about this outbreak…

Get Ready to Buy the Dip

As the coronavirus outbreak starts plateauing, the markets will begin to turn. We already saw a bit of that on Monday, when U.S. and European markets opened up despite China’s massive losses earlier that day.

Buying the market in general is going to be the near-term play here. I especially recommend looking at Chinese stocks, which have been beaten down even more than the market in general. Alibaba Group Holding Ltd. (BABA) in particular has suffered, even though its business model and future revenues are not at any real risk from coronavirus.

In the medium-term, there may be some pain as China’s massive quarantine procedures impact their economy. As I’m writing this, some 50 million people have been asked to stay in their homes to prevent the spread of the disease. That means a lot less consumer spending, which has already showed up in oil demand numbers. Already, Chinese oil demand is down a whopping 20%.

I’ll be keeping a close eye on these developments.

But I’m not worried about them right now.

Buying BABA or some AAPL – stocks that have been affected much more than the broader U.S. markets – will pay off as the spread of the virus is contained and slows even further.

Or if you want an even safer play, grab some Microsoft (MSFT) – a stock that hasn’t been affected much at all by the virus outbreak. I gave an MSFT option trade recommendation to my BetaFlow subscribers on Friday, and in less than two trading days, they had the opportunity to secure a 124% profit!

That win marks the sixth profit of at least 100% or more that the beta testers of my newest trading strategy have had the chance to take just since the start of 2020. Get the latest news and updates as this incredible service goes live by joining the BetaFlow mailing list.

Click Here to Join the Mailing List
Great trading and God bless you,

D. R.

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