Thursday, July 31, 2014

America's Near-Miss with Ebola


Updated November 2016

Given the expedience of today's air travel, an outbreak of a deadly virus like Ebola could spread very rapidly.  Back in 1989, there was a very close call with such an outbreak in the United States, sourced at a research institute located very close to one of the most highly populated regions in America.

Let's open with a photo of the Ebola virus: 



Reston, located about 10 miles from Washington, DC, was home to the Reston Primate Quarantine Unit, part of Hazleton Research Products (now Covance Inc.).  In the 1980s, Hazleton   was the world's largest independent biological testing company and the largest manufacturer of scientific equipment in the world.  Covance, once part of Corning Incorporated, still deals in the importing, breeding and sale of laboratory animals.  

During the period between the 1940s to 1970s, various species of primates from both Africa and Asia were imported into the United States to aid the scientific community in disease research.  The risk that these primates would carry a communicable disease was not lost on researchers who established a protocol that led to the quarantining of primates for between 40 and 90 days under the watchful eyes of the United States Public Health Service.

The first outbreak of a primate-related virus occurred in 1967 at a laboratory in Marburg, Germany.  Imported African green monkeys carried a virus that caused severe hemorrhagic fever in both humans and non-human primates; the Marburg virus caused 31 cases of hemorrhagic fever that resulted in seven deaths.  The same virus re-emerged in 1975 in Johannesburg, South Africa, again in the period between 1998 and 2000 when it killed 150 people in the Democratic Republic of Congo and in 2004 when it killed 227 people in Uganda.

In October 1989, 100 crab-eating macaques were imported from Ferlite Farms, located in Calamba, Laguna south of Manila, Philippines, and ended up at the Reston Primate Quarantine Unit.  At that time, the Reston facility already had 500 macaque monkeys housed in their facility.  Shortly after their arrival, scientists started noticing an abnormally high mortality rate; by the beginning of November 1989, 29 of the 100 monkeys had died.  In a post-mortem examination, the on-site veterinarian, Dan Dalgard, noticed that the interior of the body looked very strange with a massively swollen spleen and blood inside the intestines.  He suspected that the deaths were caused by simian hemorrhagic fever or SHFV.

Reston's veterinarian then sent samples of the tissues to the United States Army Medical Research Institute of Infectious Diseases or USAMRIID, located north of Reston at Fort Detrick, Maryland.  USAMRIID is the only laboratory in the Defense system that can study high risk viruses that require maximum biohazard containment.  The virus that caused the SHFV was considered to require a Biosafety Level 4 (BSL-4) designation, the highest level of containment.  When working in a BSL-4 lab, scientists wear a Hazmat suit and have a self-contained oxygen system.  They work in negatively pressured room to prevent viruses from escaping and must go through a series of showers before entering and exiting.  In the case of the SHFV filovirus, the veterinarian at the Reston facility sent the frozen samples to the USAMRIID wrapped in tin foil.  By the time the samples arrived at their destination, they had thawed and fluids were dripping from the packaging.

Meanwhile, back at the Reston facility, veterinarians euthanized the remaining monkeys from the October shipment, however, despite those precautions, monkeys in other rooms began to show the same symptoms and die.

USAMRIID analyzed the Reston virus and determined that the cause of death was Ebola, the same strain that had caused the outbreaks in Zaire and Sudan in 1976.  In those outbreaks, more than 600 cases were noted with a mortality rate of 53 percent in Sudan and 88 percent in Zaire.  By the time USAMRIID had ascertained that the Ebola - Zaire virus was responsible, six weeks had passed since the monkeys started dying in Reston, Virginia.  A program was put in place by USAMRIID, the Centers for Disease Control and the Virginia Department of Health to prevent the virus from spreading.  When USAMRIID staff arrived for a walkthrough of the Reston facility, they found staff and animal handlers were still working without taking precautions.  The decision was made to euthanize all of the facility's monkeys, however, during the process, a single monkey escaped.  It took the better part of two days to catch and euthanize the escapee, an incident that could have led to further infections.  For the following eleven days, the Reston Primate Quarantine Unit was decontaminated using bleach.  Decontamination also included a three day period when the building was filled with formaldehyde fumes to ensure complete cleansing.

Of the 1787 staff members who had contact with the infected monkeys at the Reston facility, only two were hospitalized.  It was also found that six people who had worked with the primates had serologic evidence (i.e. antibodies) of an ebola infection.  Both hospitalized staff survived their illnesses.  Scientists later found that the Reston virus was a new variant, now known as EBO-R, that had slight genetic differences from the other known ebola viruses.  An additional six individuals had  In the Reston variant, there was a high death rate among infected monkeys, however, it was not deadly to humans.

Given that the Ebola virus is spread through direct contact with the blood or secretions of an infected person or exposure to objects that have been contaminated with infected secretions, if the Ebola outbreak in the densely populated Eastern United States had been of a type that had a high human mortality rate, the Reston outbreak may have been a history-changing event.

References:





Wednesday, July 30, 2014

Gaza Daily Major Incidents Report

Updated August 30, 2014

While the world has moved on and the violence between Israel and the residents of the Gaza is no longer page one news, as you can see, I'm still recording the ongoing hostilities that are chronicled on the United Nations Relief and Works Agency (UNRWA) website.  Their daily Emergency Reports of the situation in the Gaza provide a relatively unbiased summary of what is happening on the other side of Israel's no go zone that follows the border between the two states.

For your information, here is a chart summarizing what UNRWA terms "major incidents" which includes the number of daily cross-border rocket, mortar, missile and navy and tank shell incidents since the beginning of the conflict in early July:


Please note that no data was given for July 18th, 2014 and that the data for July 19th only provided the totals for both sides.  Also note that I have provided a ratio of the armaments that both sides trade with each other; since early on, for every rocket or mortar that is sourced from the Gaza, Israel's Defence Forces respond with nearly 5 missiles, naval shells or tank shells.

Here is a bar graph comparing the total number of "major incidents" for each side of the conflict:


For your information, I will be updating this posting on a daily basis as UNRWA provides the public with the data.  I will not be adding any personal editorial comments or background information to this posting.  If you wish to get more background information on the conflict, you can either refer to my previous postings that you can find here, here and here or the UNRWA website.

As well, UNRWA announced that they now have 55,849 Internally Displaced Persons (IDPs) in 85 shelters.  There have been 2104 Palestinian deaths, 1462 of which have been civilian, and 67 Israeli deaths linked directly to the hostilities.

Just to help those of us who are far removed from the action, here is a video showing what a Gaza-based rocket attack is like from the Israeli perspective:



Here is a video that shows what an IDF-based attack is like from the Palestinian perspective:



How utterly horrifying.

High Yield Corporate Junk - Inflating Another Asset Class

Updated September 2014

Actions taken by the Federal Reserve and their peers around the world have had a marked impact on interest rates, pushing them down and keeping them at ultra-low levels for an extended and unprecedented period of time.  This has created a demand for yield and has pushed many investors into fixed income investments that they would otherwise not consider given the risks involved.  This is particularly true for what is termed "high yield corporate debt" aka "junk bonds".

Every quarter, Thomson Reuters releases its "Debt Capital Markets Review" which looks at the world's debt markets, including the market for "junk".  In the first half of 2014, global debt capital markets' activity totalled $3.2 trillion, an increase of 4 percent on a year-over-year basis and the strongest since months in global debt capital markets since 2009.  In the second quarter of 2014, the volume of high yield corporate debt issued reached a new quarterly record of $148.3 billion, up 14 percent from the previous quarterly record seen in Q1 2013.  Of the high yield debt issued in the first half of 2014, 63 percent or $260.5 billion went to issuers in the United States, France and the United Kingdom, up 9 percent over the same period in 2013.  In the United States, over the first half of 2014, a total of $176.47 billion worth of high yield corporate debt was issued in 296 separate deals, up 2.1 percent on a year-over-year basis.  Europe saw their high yield issuance rise by 47.4 percent over the same period in 2013 to $107.5 billion.

Here is a graph showing the increase in the issuance of global high yield corporate debt:


You'll note that the issuance of junk debt over the past year (Q2 and Q3 of 2013 and Q1 and Q2 of 2014) is far higher than in any other four quarter period going back to the beginning of 2006.  That can be attributed to two factors:

1.) With interest rates at or near all-time lows, less creditworthy corporations are trying to raise money while it is inexpensive to do so.

2.) With interest rates at or near all-time lows, investors are desperate for yield and are choosing to ignore the risks involved in junk bonds, pushing up bond prices and pushing down yields.

As we all know, there is a lot of money to be made underwriting corporate debt deals.  Let's look at the biggest beneficiaries of the global debt issuance:


You'll observe that the list is a who's who of Wall Street that lined up to benefit from American taxpayers' "involuntary generosity" during and after the Great Recession.  

In total, the top ten bookrunners issued $1.979 trillion in global debt and equity and raked in a cool $12.174 billion in manager fees in the first half of 2014.  Underwriting fees for high yield debt over the same period totalled $3.4 billion, up one percent from 2013 and made up 28 percent of total fees earned.

Lastly, let's look at the spread between the benchmark yield (i.e. the no-risk yield) and the yield on junk bonds:


The spread between no-risk fixed income investments and high yield debt is now at a five year low of less than 3 percent, less than half its normal level, largely because of the massive investor demand for yield that has resulted in higher prices/lower yields for junk bonds.  This demand has resulted in several high yield deals of unprecedented size in the first half of 2014 including the largest ever by Altice and Numericable's $16.5 billion deal to fund their purchase of SFR, the French mobile company.

The spectre of a looming high yield corporate debt collapse is real.  As interest rates on high grade debt rise, the prices of high yield bonds will drop, leaving investors with a potentially substantial capital loss.  As well, as interest rates rise, the less creditworthy companies that were able to issue debt during this low interest rate period will find it difficult to raise additional debt, particularly if investors see the debt as risky.  This will make it difficult for these corporations to expand their operations.


Thanks to the Federal Reserve's monetary experiment, we have seen interest rates compressed to an artificially low level, resulting in fixed income investors taking risks that they may otherwise have been unwilling to take.  Given the bloating of the junk bond market over the past two years, the bursting of the corporate high yield debt market will be particularly painful for many investors.  On the upside, Wall Street will still get to keep the billions of dollars in fees charged to help investors invest!

America's Consumer Debt Delinquency Crisis

A recent study by the Urban Institute and the Consumer Credit Research Institute looks at debt delinquency in the United States.  Before we delve into the contents of this study, let's look at how much commercial bank consumer debt there is out there according to FRED:


According to the Federal Reserve Bank of St. Louis, there is a total of $1.17 trillion in consumer loans outstanding at America's commercial banks.  At the beginning of the Great Recession, there was "only" $798.1 billion in consumer debt in December 2007.  This means that consumer debt to the commercial banks alone has risen by $372 million or 46.6 percent in less than seven years.

If we look at total consumer debt including housing and non-housing debt, this is what we find:


In the first quarter of 2014, total household debt was $11.65 trillion; $8.69 trillion of which was housing debt and $2.96 trillion of which was non-housing debt.  Here is a chart showing the quarter-over-quarter and year-over-year changes by debt category for Q1 2014: 



We should also bear this graph in mind:


While consumer confidence has improved since the depths of the Great Recession, it is still below its historical inter-recessional levels, particularly if one looks back to the period between 1995 and 2000.

Now, back to the study.

The authors open by noting that their study used data from TransUnion to measure the number of Americans that are at least 30 days late on a non-mortgage payment.  This data represents only Americans with credit files and does not include the 22 million American adults that have no credit file.  In general, these non-represented people tend to be low-income and cannot access credit meaning that they generally do not have overdue debt.

Here is a map of the United States, with the census tracts coloured according to the percentage of adults that have debt that is past due with the darker blue colours representing a higher percentage:


On average in the United States, 5.3 percent of adults have credit that is past due.  

Now, let's switch gears for a moment and look at how many Americans have debt that is in collections.  A shocking 35.1 percent or 77 million Americans have debt that is currently in collections and the average amount of debt being collected is $5178.  Interestingly, the average household income for debtors that are past due is $72,274, well above the median household income with four family members of $67,457 in 2013. 

The areas with the highest share of past due debt and debt in collections are found in the South, particularly the East South Central and West South Central parts of the United States as you can see with the concentration of darker blue colours on the previous map.  In the East South Central region, 6 percent of people have debt that is past due and 41.3 percent have debt that is in collections.  In the West South Central region, 7.5 percent of people have debt that is past due and 43.6 percent have debt that is in collections.  Around 40 percent of the census tracts with the highest concentration of debt that is past due are found in Louisiana and Texas.

Of the states, Nevada has the highest percentage of people with debt in collections at 47 percent.  The District of Columbia (41.8 percent), Alabama (41.7 percent), Arkansas (40.2 percent), Florida (41 percent), Georgia (42 percent), Kentucky (41.9 percent), Louisiana (43.8 percent), Mississippi (44.7 percent), New Mexico (40.8 percent), North Carolina (40.3 percent), South Carolina (46.2 percent), Texas (44.7 percent) and West Virginia (41.5 percent) all have more than 40 percent of their people with debt collections.

The states with the lowest percentage of people with debt in collections are Hawaii (22.7 percent), Massachusetts (23 percent), Minnesota (19.8 percent), Nebraska (23.9 percent), North Dakota (19.2 percent), South Dakota (20.8 percent) and Vermont (23.7 percent).

If we look at the amount in collections, Nevada comes in first with $7198 followed Wyoming at $6803, Alaska at $6443, Florida at $6396 and Arizona at $6224.

What I found interesting about the study was that there was a tenuous relationship between debt problems and income level.  While areas with lower household income tend to have more people with  debt that is past due, the mathematical correlation of -0.3 suggests that there is more to debt problems than income levels.


The danger of debt in collections cannot be understated.  Debt in collections is a result of failing to make a payment on an outstanding bill which can include medical bills, credit card bills or utility bills among others.  This problem can haunt consumers for many years, impacting their ability to get credit in the future and their ability to "get ahead". The high number of Americans with delinquent debt suggests that the financial distress being experienced by many families since the "end" of the Great Recession is far from over.  To at least some extent, we have the Federal Reserve's easy money policies to thank for making credit appear to be the cheapest it has ever been.  America's consumer debt problems may also go a long way to explaining why consumer sentiment is still well below historical levels.  In our consumer-driven economy, this negative sentiment is reflected in the very modest growth levels of the economy as a whole.