Blogs & Comment

Flu infecting fund managers

Much of the media coverage of the global flu outbreak has been sensational drivel. Unfortunately, the N1H1 strain still has a 50-50 chance of becoming a large-scale killer, at least according to leading epidemiologists at the Milken Institute Global Conference, who should be taken more seriously than Fox news.
Fund manager David Kotok, who runs New Jersey-based Cumberland Advisors, is now in the hope were wrong camp. His firm has distributed masks and hand sanitizer to staff and activated a pandemic contingency plan. I wear an N-95 mask in public places like airports and on flights, he says.
As a risk manager, Kotok has made it his business to study the big three flu shocks. He notes the most infamous occurred in the 1918-20 Spanish flu period, which also involved a variety of the H1N1 strain. The first signs of outbreak came in the spring of 1918 and it was as small as the current flare-up. The killer phase occurred in subsequent flu seasons, when estimated deaths hit between 40 and 100 million, or somewhere between 2% and 5% of the total world population. In the U.S. about 25% of the population was infected and 500-700 thousand died.
In the Asian flu episode of 1957-58, Kotok notes, the virus form was H2N2. Estimated global deaths were 1 to 1.5 million. The third reference is the Hong Kong flu of 1968-9. It was the H3N2 strain and had a low death rate but a high infection rate. Globally it killed about 1 million people.
Cumberland is naturally also practicing risk management with the portfolios it manages, playing it safe by raising cash reserves. This was easier to do after an eight-week, 30% stock market rally, Kotok reported in a recent commentary. So I guess its fair to say that the swine flu timing was opportunistic.
Like Kotok, I have no idea how the current H1N1 risk will play out. But I do know that some of the smart money is leaving the market again and that poses yet another risk to the folks who are just talking themselves into buying equities again.
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DOUBLE TAKE: Aside from trying to promote myself while generating Web traffic that helps put bread and butter on my table, this blog aims to stir debate by taking a harder look at current news and events. I obviously enjoy voicing my own opinions, but I am a big boy and I welcome all comments that dont require R ratings. So let me have it via this blog or send me an email at tom.watson@canadianbusiness.rogers.com. I reserve the right to post email comments without disclosing the senders name. If you dont think I am a total twit, follow my DOUBLE TAKE posts via my NotSOCRATES Twitter site at http://twitter.com/NotSocrates. THOMAS WATSONis a Senior Writer and editorial board member at Canadian Business magazine. Since winning a community journalism award as a cub reporter with the Hamilton Spectator in the early 90s, he has covered business, finance, politics and technology for various news outlets. Prior to joining CB in 2001, he reported on the steel and automotive sectors for the Financial Post. Watson received his first magazine award nomination for exposing a stock manipulation plot aimed at Waterloo, Ont.-based Open Text in 2000, when he was head of investor relations for an international venture capital outfit in the City of London. Watson holds graduate degrees in journalism, international relations and public finance and undergraduate degrees in history and politics.