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  • Market Shrugs Shoulders at Ebola

    Posted by Dan from Madison on October 17th, 2014 (All posts by )

    One of the ways I like to put “disasters” into perspective is to try to understand what the markets, in general, think. This from today’s Bloomberg Municipal Market Brief:

    Debt issued for Texas Health Resources is gaining even after the death of a patient from Ebola and the infection of two nurses raised questions about practices at one of its 25 hospitals. Bonds sold through an agency of Tarrant County, Texas, that mature in February 2021 traded Wednesday at an average yield of 0.55 percent, or 0.09 percentage point above benchmark munis, data compiled by Bloomberg show. That’s the smallest yield spread in at least 20 months. Obligations due in 2036 and 2040 changed hands this week with the least extra yield since last month.

    Hospital debt has gained 12 percent this year, better than any other investment-grade area of the muni market, Barclays Plc data show. Texas Health has the fourth-highest grade from Moody’s Investors Service, which said in August it could raise the nonprofit’s rank. That was enough to make David Jaderlund of Jaderlund Investments LLC a buyer Wednesday. “I’ve been following them for years and they continue to have
    strong debt coverage — I’m really not worried,’’ said Jaderlund. “I’ve been a buyer of that hospital for years and will continue to be. I’m not concerned and the market doesn’t seem to be either.’’

    Well, I guess, at least for this company, Ebola doesn’t seem to be that big of a deal, for now anyways.

     

    9 Responses to “Market Shrugs Shoulders at Ebola”

    1. Grurray Says:

      That’s weird, and especially with Obamacare coming you would think hospital munis would be less attractive.

      I take a look at the iShares muni etf, MUB, once in a while. It’s been on a tear for the past year.

    2. Bob Says:

      @Grurray Actually, many expect the opposite. Emanuel has stated that he foresees hospitals become vertically integrated service providers and also provide an insurance like product. Many others agree, as do I, so it would be interesting to hear what our resident doctor has to say.

    3. grey eagle Says:

      When Ebola comes to the town where you live:
      1. Cashiers at the stores where you shop will realize that if they come to work, they will die of Ebola. The stores will close.

      2. People who work in offices will fear that someone else at a nearby desk is sick with Ebola. People will work from home or the office will close.

      3. All sporting events with crowds will close.

      4. The economy will shut down. Food will be locked up in closed stores. Power, water, TV, radio, gas stations will stop working.

      Between 30% and 50% of the people in the city will survive. Of a million in DC, 300,000 will live. These survivors will have immunity to Ebola. What happens next? see YOUTUBE. Search for “Bring out your dead” – a clip from a Monte Python movie.

      Faith healers will come to town. Search Youtube for “Dies Irae Bergman” for a key scene from the movie Seventh Seal.

    4. Dan from Madison Says:

      I guess that means the bonds might default, Grey Eagle?

    5. grey eagle Says:

      In the modern era trading does not have to stop if all the traders fall over dead. There are still trading programs at work. However, price changes in bonds today are driven by the Fed screwing around and rarely by fundamentals. Over the last 1000 years debts are enforced even if all the lenders died in a plague if, and only if, the enforcers are still alive and inclined to enforce the debt.

    6. Grurray Says:

      Vertical integration – I suppose I should have seen that coming. While I’m sure it will be lucrative, it sounds like another public-private cartel.

    7. Sgt. Mom Says:

      I suppose I should go re-read Gina Kolata’s account of the 1918 Influenza epidemic to get an idea of what to expect.
      At some point in the epidemic, all public events and functions will close down, if that book is any guide and Grey Eagle suggests. It will be either at government fiat or by the fears of individuals. There is a commenter on a discussion at (IIRC) Neo-neocon who likens this to news about an impending hurricane in a coastal community. You monitor the news, make preparations as the news reports suggest; shop for necessities, pack your car, nail up plywood over the windows, sort out your options in response to the latest weather calculations – stay or go? – and prepare before the last-minute panic as the storm bears down on your town.

      I think that a lot of us are making quiet preparations, while not making a show of “run in circles, scream and shout” and continuing on with our regular lives. I am. At present from various reports (not from the mainstream media, natch) it would seem that Ebola is hard to catch from casual contact; direct exposure to ‘bodily fluids’ of an actively sick or recently deceased person seems to be the key agent, which would put medical professionals and emergency response personnel like ambulance medics at the most risk. Or someone living on most intimate terms with someone afflicted with it. But if it turns out to be transmitted through the air – from coughing or sneezing by an infected person, or insect and animals (which is theoretically possible, since I gather that the meat of wild animals in Africa is suspected as the original source) then all bets are off. It will be as bad as the 1918 influenza epidemic – and in places and communities without competent medical resources and strong-minded civil authorities, it will likely be horrific.

      The most horrific part is that the CDC and the NIH have been … so hapless. They had, as Instapundit keeps saying, just one job. But they bungled it, and the fed-gov has lost just about every shred of credibility they had – not that they had all that much, since the election of Obama and his coterie of political lickspittles.

      I suppose that the one hope that we have of any kind of effective response will be due to the enterprise and creative thinking of local authorities and individuals.

    8. MikeK Says:

      “Emanuel has stated that he foresees hospitals become vertically integrated service providers and also provide an insurance like product.”

      I have been following the developments at the hospital I used to practice at and they are not pretty. They went for the “vertically integrated model” and are now having a few slight problems like having the Joint Commission yank your accreditation for poor performance.

      The joint Commission is like the refs at an NFL game. It can get expensive as the hospital has had to shut down all surgery, labor and delivery and cardiology. Those are most of the cash cows of hospitals. Vertical integration means you now have a much larger overhead. When the revenue drops because you screwed up something like this, bankruptcy is much closer.

      My old hospital now has a guy from Pepsi-Cola running things. He thinks the numbers are the reality when the real things are people and procedures. When four patients get infected total joints in one month, bad things happen to the hospital. All the same organism, I understand, and not a typical skin contaminant like Staph.

      Of course, the administrator making $ 1.5 million is not going to lose his job if he can help it. Throw a few $50,000 per year nurses under the bus.

    9. grey eagle Says:

      The Canadians are testing a vaccine in Africa. CDC and FDA rules forbid UD forms to test drugs in Africa because that is racist. So the USA drug companies and docs-with-garages can’t test until there are 2000 USA white people with Ebola. Fortunately the Russians have 3 vaccines in development which they will test in Africa. But Obama is trying to start a war with Russia so they might not want to help out.