Investing in the Age of Ebola

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Wow, the markets have been horrible lately haven’t they? These daily drops remind me of the fall of 2008, all over ebola, why?

Have you seen the movie Contagion? That is actually a very good and accurate exploration of what would happen with a deadly global pandemic. Do you watch Doomsday Preppers? That is a show many like to make fun of, but they too often touch on these topics.

The biggest risks are in fact economic here, and the reason is fear. Odds are you’ll never get ebola, no one you know will ever get ebola, but what happens when there are enough cases that people start getting afraid of getting ebola?

Airlines stop flying, for one, people in general stop traveling, for two, and if it gets really bad, people stop going to work, people stop going to school. At the first early stages people will panic and, wearing protective gear, buy everything on the supermarket shelves. Then the trucks stop driving, and they do not restock. That is the risk, society grinds to a halt and everyone bunkers down in their home afraid to leave. Obviously one of your best investment bets would be a short index ETF, but I do have some long ideas.

So suppose people stay home all day, what will they need? Stuff, and entertainment. I think ecommerce could do well in such an environment. So long as the ecommerce companies can convince their employees to keep coming to work they should be able to beat out brick and mortar. Who is going to go to a mall in an ebola area? Seriously? Amazon even delivers some nonperishable groceries.

This then leads us to delivery companies. UPS runs mostly on natural gas, and I imagine they could easily adapt their driver uniform to be a brown hazmat suit. The natural gas is a big deal as it is delivered largely by pipelines, not by delivery trucks, and it will not be hurt by any sort of overseas disruption to supply. On the otherhand, UPS drivers are unionized, and the union might protest and prevent their drivers from working. Fedex ground drivers are independent contractors and might be more likely be enticed to keep working, however their more independent nature might make it harder for them to adapt to be able to do safe deliveries, plus they all need regular unleaded. I’m not sure which one would do better, I’d lean towards UPS, but it could be a toss up. I do know the demand for their services should increase.

Then there is entertainment, if you’re stuck at home all day you need something to do. Amazon again could benefit, as could the cable providers and of course Netflix. Anyone more to do with TV than movies in a theater would do well. No one will go sit in a movie theater if they fear infection. Also, no one will go a theme park, no one will go to a sporting venue. Live entertainment will be dead. Entertainment in the home is where it is at. Microsoft might do well. Disney… I’m not sure. They have movies, and theme parks, but also a strong TV presence. On balance I’d pass I guess (though I own Disney now, and I’m very bullish outside of end of the world scenarios). Any entertainment that entertains you at home would be a buy, other forms would be a sell. Google should do pretty good.

What about education? Online education providers I think would be a buy, traditional schools and college campuses are petri dishes of infection. Are there any publicly traded K-12 online education providers? I don’t know, but there are college level ones, they would be a buy. Of course, most colleges and universities today also offer online courses to compliment their brick and mortar, so it may be a bit of a wash. But more students would definitely be enrolling in those programs, the technology providers that enable or manage those systems would be a buy.

Likewise makers of telecommuting, telepresence, or telemedicine technologies would be a buy. What is the ultimate rubber glove or mask? Being in another building entirely, maybe being in your home office, and working from there. There are a variety of companies in this space.

Copper could see added use, and this is one of the stupidest things in the world. Copper has natural antimicrobial and antiviral capabilities, germs just can’t live on copper surfaces. So of course, all hospitals use brushed stainless steel touch surfaces because its pretty…. In my opinion the government should issue a regulation mandating copper touch surfaces on all new hospital equipment and in new buildings, they’re no more expensive than stainless steel, and the science on it is solid. Why they haven’t done this yet I have no idea, we’ve known about the antimicrobial benefits of copper for a long time. I once spoke with a healthcare architect about it and he said all the fixture manufacturers picked stainless steel and they would have to retool for copper and simply aren’t willing to make the change, and their customers, the hospitals, largely aren’t asking for this for whatever reason. Ebola is the least of it, hospital acquired infections are a big deal. Schools could also benefit from all copper doorknobs and whatnot. I’m not a fan of government regulation in general, but this is one issue where I think some smart regulation could kick the industry in the pants and get the gears turning to do something that will provide a serious benefit.

I could also see a benefit for private security contractors, police forces could be overwhelmed with rioting or looting or enforcing quarantines and curfews, and even the national guard, it may come to the government hiring private security contractors for use on domestic soil.

Those are my ideas for silver linings in this bad situation. Mostly I think that the age old wisdom will hold true, this too shall pass. If you bought a short index fund you could get killed when the ebola scare passes and markets rebound, but if you really think it won’t pass, these are my ideas. Disclosure long Amazon, long Disney, no other positions in anything mentioned.

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