History is repeating yet again! In early August I wrote about an eerie historical parallel fulfilled on the centenary of the First World War right down to the day. Just as war had broken out in the Balkans between Russia and Europe’s super-powers Austria-Hungary & Germany in late July of 1914, so too precisely 100 years later in July of 2014 conflict was once again heating up between Russia and Europe in Ukraine, not far from the original iteration a century before.
If that wasn’t enough to send a chill up your spine, then maybe a second iteration of history repeating itself will be. Toward the end of World War 1 in 1918, the Spanish Influenza began racing around the world, infecting some 500 million people (30% of the global population), killing 50 to 100 million (3-6% of the population) by 1920.
In a second eerie parallel linking WWI with today, we may be seeing the beginnings of another devastating pandemic – Ebola.
The threat of this iteration is potentially the same as the first, with the speed of the spread accelerating as per the graph below.
“The Ebola epidemic ravaging parts of West Africa is the most severe acute public health emergency seen in modern times,” the World Health Organization stated last week. “Never before in recorded history has a biosafety level four pathogen infected so many people so quickly, over such a broad geographical area, for so long.”
Until last week, the outbreak was still confined to a small region in Occidental Africa, primarily Guinea, Liberia and Sierra Leone, infecting over 7,000 people and killing over 3,000 of them. In an effort to contain its spread, all flights in and out of the region have been cancelled indefinitely.
Just two days ago on September 30th the first extra-continental case of the outbreak was diagnosed in Dallas, Texas – a man whom The New York Post identifies as the very president of one of the infected West African countries, Liberia. NYP reports that President Thomas Eric Duncan may have contracted the disease while helping carry an infected teen to a hospital in Monrovia, Liberia, in mid-September.
Before arriving in Dallas on September 19th, Duncan and his travel party made stops in Brussels, Belgium, and Washington DC, though it is unclear how many persons may have come in contact with Duncan and his travel party at the stopovers or aboard their public commercial flights. On his Dallas visit, Duncan had visited five homes, all inhabitants of which are being tested.
“Let me be real frank to the Dallas County residents,” Dallas County Health and Human Services Director Zachary Thompson spoke candidly to the press. “We have one confirmed case. There may be another case that is a close associate with this particular patient. This is real.”
The outbreak is no longer an epidemic; it is now officially a pandemic.
Wall Street Reacts
As the disease slips through the containment net, the United Nation’s World Health Organization is urging all nations to stop all flights in and out of Occidental Africa immediately.
In response, shares of airline companies in the U.S. began falling sharply yesterday, with United Continental Holdings (NYSE: UAL) falling 2.82%, American Airlines Group (NASDAQ: AAL) falling 3.07%, Spirit Airlines (NASDAQ: SAVE) falling 3.36%, Delta Air Lines (NYSE: DAL) falling 3.46%, JetBlue Airways (NASDAQ: JBLU) falling 3.53%, and Southwest Airlines (NYSE: LUV) falling 3.61%, while the broader market S&P 500 fell only 1.32%.
It is not yet apparent how much of yesterday’s sharp sell-off on U.S. equity markets was attributable to this first case of Ebola in America, and how much was due to traders positioning themselves ahead of tomorrow’s September jobs report. The week leading up to a jobs report often sees heavy trading either up or down depending on what the prevailing rumor is regarding the non-farm payroll number.
Automatic Data Processing – “one of the largest providers of business processing and cloud-based solutions”, the firm indentifies itself – released its projection for 213,000 new jobs. However, the firm has been grossly inaccurate before, with last month’s projection of 202,000 new jobs overshooting the actual number of 142,000 by a full 60,000.
If tomorrow’s jobs number is over 200,000, there may be further selling on Wall Street, as the strong number would increase the likelihood of the Fed’s first interest rate hike coming sooner than later, goading markets to adjust downward on account of a more rapidly approaching monetary tightening.
Most likely yesterday’s sell-off came as a combination of the two – the anticipation of a strong jobs number and the first Ebola case in America, given its potential impact on the U.S. economy.
Economic Impact of Ebola
Although the number of flights between the U.S. and west Africa is relatively small – only a “handful”, reports the Dallas News – just the idea of contracting a virus through travel is enough to reduce travel volume significantly across all lines of travel. Cruiselines were thus also affected yesterday, with Norwegian Cruise Line Holdings (NASDAQ: NCLH) falling 2.36%, Carnival Corporation (NYSE: CCL) falling 2.56%, and Royal Caribbean Cruises (NYSE: RCL) falling 4.9%.
Hotel and resort stocks were similarly hit hard, including Intercontinental Hotels Group (NYSE: IHG) falling 2.56%, Wynn Resorts Ltd. (NASDAQ: WYNN) also falling 2.56%, Marriott International (NASDAQ: MAR) falling 2.8%, and Empire Resorts (NASDAQ: NYNY) falling a whopping 6.41%.
In stark contrast to these sell-offs, though, were huge gains in pharmaceutical companies that could see an increased demand for any drug that could cure Ebola or at the very least treat its symptoms. One of them, Tekmira Pharmaceuticals (NASDAQ: TKMR) surged 18.21% yesterday, adding to an already stellar rise reaching 180% since July.
“Investors are betting the Vancouver [Canada]-based company has a leg up on competitors because last month the FDA gave it a green light to provide its experimental TKM-Ebola drug to test subjects with confirmed or suspected Ebola virus infections,” reported CNN Money.
Another pharma stock to surge yesterday was Hemispherx Biopharma (NYSE: HEB) which rose 15.14% after announcing earlier this week “a series of research collaborations aimed at developing treatments to fight Ebola”.
NewLink Genetics Corporation (NASDAQ: NLNK) jumped as well, rising 7.14% yesterday on the hope that an upcoming Phase 1 clinical trial of its experimental Ebola vaccine will bear fruit.
A Greater Fear
Yet as terrifying as the rapid spread of this disease may be, there is something more frightful still, as President F. D. Roosevelt cautioned in his first inaugural address in 1933 – and that is “fear itself”.
With Ebola now having reached North American shores, we are going to be hearing and reading a great deal of reports on the disease, its cause, its spread, its symptoms, its treatment, and its casualties. The worst thing we can do is allow it to paralyse us with fear.
Even the worst known disease in modern times – the Spanish Influenza of 1918-20 – claimed less than 6% of the global population, most of whom lived in nations disadvantaged by unsanitary conditions and poor hospital care. While that figure seems of little consolation, modern medicine and the rapid detection and isolation of cases have reduced our risks dramatically. With new drug development and approval for testing expedited, it won’t be long at all before a useable vaccine is made available.
Though history will always repeat itself, each time it does humanity seems to get a little better at dealing with it. The same should hold true this time around.