When Doctors 'Redeploy,' the Money Changes Direction, Too

Hospitals are preparing for the 'surge'... It sounds like war... When doctors 'redeploy,' the money changes direction, too... Big tech at home... The countries you least want to visit now... 'Un ridículo' reporting...

Hospitals are bracing for the 'surge,' if they're not experiencing it already...

It's happening in towns and big cities across the country like New York, New Orleans, and Chicago. An emergency room doctor at Mount Sinai Hospital on the Windy City's west side told CBS News today...

I deal with gunshots every day and trauma and crazy stuff and this is the only thing that scares me... This is the most scared I've ever been being an ER doctor.

His story is not uncommon. Here in Maryland, I (Corey McLaughlin) heard from an intensive care unit ("ICU") department leader this morning. He's a very experienced pro.

He has been providing ventilator training to doctors, nurses, and residents from other departments in his hospital through Zoom (ZM) video chats over the past few days to help everyone prepare for their new, unexpected – yet now critical – job descriptions.

The hospitals are calling what's happening 'redeployment.' It sounds like a war...

And it has been fought on a few fronts already... The ICU doctor said he and his peers have learned a few things from what has happened in places like Italy and China that have already seen "peak" infections...

A big lesson: People experiencing the known COVID-19 symptoms might need to be intubated – meaning hooked up to a ventilator that will help them breathe – earlier than doctors would have considered under "normal" circumstances...

It's because of how quickly things can go bad for patients infected with this disease. This is why having the needed ventilators on hand is so important. Doctors don't know for sure how many they will need overall, or how many they may need to run at the same time.

The White House yesterday projected between 100,000 and 240,000 deaths from the virus in the U.S. In this case, we're hoping what they're saying is wrong... and that it's much lower.

Aside from the sobering projections, there are real 'second order' effects already playing out...

These are the indirect influences of the virus pandemic that are changing the way hospitals' balance sheets may look like in the weeks and months ahead...

For instance, with personnel shifting roles to treat something like COVID-19, things like elective surgeries at hospitals in the departments these doctors and nurses are leaving have been canceled indefinitely...

And no matter the location around the country, we can't imagine that many people want to go to their neighborhood doctor's office right now – and risk getting potentially sicker – if they don't have to...

In other words, as we know, 'business as usual' in health care has been disrupted...

The same can be said about a lot of things in life these days.

Of course, we're as concerned as anyone about the growing number of reported COVID-19 cases and deaths in this country and around the world, which we'll discuss as well today... It's all terrible.

But remember, here in the Digest, we also aim to bring you valuable information and perspective on the economy and markets that you can't find anywhere else... And we share the experience of the ICU doctor in part today to help illustrate a point...

Beyond the grim headlines and anxiety-provoking "body count" graphics on news channels like CNN, there are two clear trends that aren't being talked about right now in the mainstream news when it comes to health care...

According to Stansberry Research editor Thomas Carroll, who has analyzed the sector for two decades...

1) Fewer elective surgeries means less money for hospitals and providers.

"That's where they make their money," Thomas has said before. As Thomas predicted in the March 13 Digest, virus patients would need to stay under care for roughly two weeks, double the average hospital stay...

Coronavirus will limit the amount of patient turnover that we usually see. It will also change the mix – or different kinds of services – a hospital provides.

For example, hospitals need surgeries to drive their profit margins. Pre-op, surgeries, and post-op drive the most revenue at hospitals. Elective surgeries will likely fall as a result of coronavirus.

2) Health insurance companies may actually report greater earnings numbers than usual.

On balance, these companies – such as managed-care organizations Anthem (ANTM) and Centene (CNC) – will need to pay out less money, since most coronavirus patients will receive a treatment similar to what they would get if they simply had the regular flu...

By that, we're talking about hydration, rest, and hopefully no intubation to support their breathing. That treatment is a lower bill for hospitals and providers. As Thomas also wrote in that March 13 Digest...

This may sound counterintuitive. If doctors and hospitals are overrun with patients, they will collectively have to pay for that, right?

Yes, but that payment, as I mentioned, will be on the lower end of the stuff they pay for. And for the most part, people will be staying home and hunkering down to avoid becoming ill.

I expect medical costs to be lower than planned.

These are two macro trends to keep in mind if you have health care stocks in your portfolio... or if you're thinking about trading any of these stocks in the weeks and months ahead.

Regarding time, we still don't know exactly when 'this' will all be over – or when the virus will be contained...

We're hopeful the curve is bending and that other hotspots – like New Orleans – won't sprout...

But even when we do have more clarity on the path of the virus (and we expect the broader market to rebound only after that), it's hard to think that when things settle down, life is going to go back to exactly the way it was before this ordeal started.

First off, in the global economy, there's suddenly a few more trillion dollars in the system, thanks to the reaction here in the U.S. alone. And more could possibly be coming. We also might be flying Uncle Sam Airlines soon, too...

Second, in life on the ground, millions of jobs are gone and might not come back... And do you see that person across the street coughing? I'm staying away from that guy for a while. (Or maybe... I am that guy.)

Inside, kids are "learning from home" now... It's happening so much that technology giant Microsoft's (MSFT) Teams collaboration platform – which a lot of schools and businesses use – crashed two weeks ago when demand started to spike...

In the meantime, parents who are working at home with young kids due to the outbreak aren't just helping with homework anymore. Now, they're somehow being asked to balance work with teaching in some cases, too.

I don't want to give any school administrators any ideas that will suck the fun out of childhood. But will we even need to take "snow days" in places where virtual learning is doing the job today?

It's not far-fetched that a year or two from now during a blizzard that keeps everyone at home, school principals could say, "Sure, the roads are unsafe and closed, but school can still go on... you know, like in the pandemic days."

Big Tech is being used 'at home' big time today...

Along these lines, Stansberry NewsWire editor C. Scott Garliss recently talked with our new colleague Jessica Stone for an insightful video interview.

Scott and Jessica chatted about the tech companies that are seeing increased use during this cultural shift, as well as the ones could see sustained demand in our reshaped future...

You can click here to watch the full conversation between Scott and Jessica right now. And be sure to check out our Stansberry Research YouTube page and other social media channels for more video content from our editors around the clock.

Meanwhile, in the rest of the world...

Things are happening. Our colleague Brian Tycangco wrote in yesterday's Digest about the rebound that has been going on in China. Well, in other locales, things are getting worse...

If you think things are bad here in the U.S., our international editor Kim Iskyan reports that you can probably find several other countries that are worse places to be in today...

Kim filed the following dispatch from his post in Singapore. In it, he talks about the growing problems related to COVID-19 in India, Iran, Venezuela, and Bangladesh.

Kim takes today's Digest on from here...

When developed markets catch a cold, emerging markets develop pneumonia...

It's an old investment cliché. And it's being proven true right now – in the usual market terms, and today, on the medical front, too...

Because COVID-19 is a lot worse than the common cold, "flattening the curve" – virus-wise and economically – is even more painful for emerging markets than it has been for the U.S.

It would be difficult to imagine a more perfect petri dish for COVID-19 transmission than the crowded, polluted cities of the developing world – where hand sanitizer, time away from earning a living, and space to self-quarantine are impossible luxuries for most.

'The next global hotspot'...

Take India, for instance...

Bloomberg recently wrote that the world's second-most-populous country "could become the next global hotspot for virus cases, with experts warning containment measures that proved successful elsewhere in Asia may not work."

Early last week, the government of India – which has four times the population of the U.S. – ordered a nationwide lockdown to fight COVID-19. The Financial Times explained on Monday...

Millions of vulnerable urban migrants – mainly unsalaried workers dependent on daily wages to buy food and rent tiny squalid rooms – are making desperate journeys back to their rural homes to better survive the catastrophic loss of income.

Even in normal times – when people aren't in a frenzied rush to get home – personal space isn't a big thing in India.

I (Kim Iskyan) have been there only half a dozen times, but my enduring impression is... there are so many people everywhere. All the time. Every street, every day, everywhere... It always seems like a big concert (plus a football game) just let out.

According to United Nations data, India's business center Mumbai (formerly Bombay) is the world's second-most densely populated city on Earth, with 32,000 people per square kilometer. That's an incredible 18 times more than New York City and seven times more than Tokyo.

The only city on the planet that's more densely populated than Mumbai – where social distancing would require changing both the laws of physics and economics, as well as a mass societal brainwash – is Dhaka, the capital of Bangladesh.

'The world's most broken city'...

My main memory visiting Dhaka a few years ago was sitting in sweltering traffic. Along with poverty, disease, corruption, violence, pollution, and terrorism, it's why the New York Times once called it "the world's most broken city."

Bangladesh, located on the southern coast of southern Asia along the Bay of Bengal, is as big as Florida... but with eight times the population. The average person earns $4 per day.

Both Bangladesh and India have around one-quarter the number of hospital beds, as well as doctors, per 1,000 inhabitants as the U.S.

Improbably – since neither country is doing much COVID-19 testing – Bangladesh reportedly has just 51 cases of COVID-19, while India says it has around 1,600 (as many as North Carolina).

It's almost inevitable that these figures are going to explode in a massive, terrifying way.

In many emerging markets, 'flattening the curve' of the economic collapse will be as hard as fighting COVID-19 itself...

The same problems that are plaguing the U.S. – millions of people losing their jobs, no one buying anything, and the economy at a standstill – are happening in emerging markets...

But in these markets, it's occurring at an "on steroids" scale, since these nations are so much poorer than the developed countries.

In response, capital is fleeing high-risk emerging markets at a record rate... as in, four times faster than during the 2008-2009 global economic crisis.

And the 68% collapse in the price of oil since early January is another body blow to the economies of many countries – from Nigeria to Kazakhstan to Saudi Arabia to Venezuela – that rely on oil for export revenues.

As a result, the currencies of a lot of emerging markets are coming under heavy pressure.

Companies and governments in these markets won't be able to roll over their debt. The currency of South Africa – which is a major precious metals producer when its mines aren't closed down, like they are now – just hit an all-time low.

The MSCI Emerging Markets Index is down 27% from recent highs, compared with the 24% drop in the U.S. benchmark S&P 500 Index over a similar span.

And unlike the U.S. – which can throw trillions of dollars at the problem through handouts, economic stimulus, and quantitative easing – emerging markets can't just print more money to bail out their economies.

Well, let me make a correction...

Emerging markets can try to print more money, but the resulting hyperinflation will cause more harm...

Iran (50% inflation rate in 2019) and Venezuela (282,973% inflation rate in 2019!) were already in trouble on that front. And they're now at the intersection of the perfect storm of COVID-19 and the staggering drop in the oil price...

Things will only get worse for these countries – which is also bad news for the rest of us.

'Un ridículo' reporting...

Venezuela has the world's biggest oil reserves. Iran is fourth on the list. But their oil supplies don't help, considering the countries' other problems. And U.S. sanctions mean that neither country can easily sell its oil.

Over the past five years, around 15% of Venezuela's population (adjusted for population, that's like 50 million Americans) have already fled the country's poverty, violence, and bad government. And a lot more Venezuelans will leave soon.

Venezuela supposedly only has about 140 cases of COVID-19... But my friend Alejandro, who was my guide/bodyguard in Caracas when I visited in 2014, told me from his at-home quarantine in the country that he thinks that figure is "un ridículo."

The new trouble brewing in Iran...

Iran has reported nearly 50,000 cases of COVID-19, six times as many cases as California. Around 10% of the country's members of parliament were infected.

Iran's government has totally mismanaged the country's response to COVID-19, which it has claimed is an American bioweapon. The Economist reported that the country's supreme leader turned down an offer of American aid to fight the coronavirus because...

Possibly your medicine is a way to spread the virus more.

A few days ago, an old contact in Tehran who showed me around when I visited years ago told me over Skype, "If the current situation continues, it may end up with the destruction of Iran."

Meanwhile, an armed conflict involving Iran is probably a bigger threat than it was in early January, when a U.S. missile strike killed a senior Iranian military commander and brought the two countries close to war.

If things get worse, it's easy to imagine a desperate Iranian government throwing a Hail Mary to rally domestic support – by, say, launching a missile or two at a neighbor, in what is the world's most unstable region. And if it's aimed at the right place – a big oil pipeline, for example – it could also boost the price of oil.

So who's 'winning' as emerging markets melt down?

As we shared in yesterday's Digest, China is coming out strong...

Though China is the birthplace of COVID-19, it was able – through social control that is impossible in other more freewheeling and democratic countries – to stamp the coronavirus out relatively quickly.

While the economies of many developing countries are on life support, China will get out of it all with nothing more than a scraped knee. A lower oil price is supporting a lot of Chinese industry. And China's stock market is the best-performing major market in the world this year.

The massive market uncertainty we're seeing now will eventually create tremendous opportunities elsewhere around the world... But until the instability settles just a bit, it's a good idea today to avoid nearly every emerging market.

New 52-week highs (as of 3/31/20): DocuSign (DOCU) and Polymetal International (POLY.L).

In today's mailbag, a trio of subscribers sent in some interesting and timely reading... and another subscriber shares his thoughts on Porter's "Greatest of All-Time" portfolio recommendations. Do you have a comment or question? As always, send us an e-mail at feedback@stansberryresearch.com. As a reminder, we cannot provide individual investment advice, but we do read every note.

"The World Needs to Declare Bankruptcy," Reuters, via paid-up subscriber Chris R.

"The Great Suppression," American Institute for Economic Research, via paid-up subscriber Bret R.

"Herd of goats running riot through a Welsh town," The Guardian, via paid-up subscriber Paul M.

"You said you were interested in names... You had the 'GOATS.' In looking for a name of the biggest companies nobody has ever heard of? It seems obvious: The song writers. We hear about the musicians. We know the singers. The big players behind the scenes are often some of the wealthiest people, yet we don't have a clue who most of them are. It only seems appropriate to call the biggest companies nobody knows: 'The Song Writers.'

"Never felt compelled to write in before. Not sure why this hit me as necessary. I love music, but am not a musician. I'm not in the industry. Maybe it is because I have always been the guy plugging along behind the scenes making sure things are taken care of. The Rodney Dangerfield 'no respect' kind of guy. At this point in my life I am perfectly okay with being this guy.

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All the best,

Corey McLaughlin and Kim Iskyan
Baltimore, Maryland and Singapore
April 1, 2020