A number of new films have been produced chronicling the misadventures in America’s residential property markets and financial system.  One such story is American Casino. 

I have yet to see the film.  However, below is a clip from the filmmakers Andrew and Leslie Cockburn on one unforeseen consequence of the recent financial crisis. Abandoned homes in newer California sub-divisions are a breeding ground for mosquitoes, increasing the threat of West Nile virus.

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I do think that we have seen a robust response to Swine Flu, sometimes bordering on panic.  Much of this seems like overkill.  However, first analyses of the H1N1 virus suggest this response is entirely warranted:

H1N1 swine flu is spreading fast enough to justify calling it a pandemic, say epidemiologists who’ve analysed the pattern of spread so far.

“The message is that the epidemic is spreading very much as expected based on past flu epidemics,” says Christophe Fraser of Imperial College London, and co-leader of the analysis team.

The results suggest that the H1N1 virus is showing “sustained human-to-human transmission”, thereby justifying the WHO’s pandemic phase 5 rating, one short of the most severe.

Read more at New Scientist.

Having read John Barry’s “The Great Influenza,” about the Spanish Flu epidemic of 1918-1920, I think it bears remembering that the first probable incidents of flu were recorded in February 1918. It wasn’t until October that the virus’ true epidemic proportions were registered.  One-third of the deaths were registered in mid-September to December.

Even if all seems well with the Swine Flu, I sleep better at night knowing continued vigilance is still the order of the day.

Source
First analysis of swine flu spread supports pandemic plan – New Scientist

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This is a pretty cool video from New Scientist.  This team of modelers has come up with a way to model human mobility using data from dollar bill tracking site Where’s George? The result is a model that tracks smaller human movements, unlike airline traffic data.  These modelers have determined worst case scenarios for the spread of Swine Flu. The result of their analysis is pretty comforting. Take a look

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This comes from Bloomberg. Unfortunately it is pretty scary stuff:

The World Health Organization said the first pandemic since 1968 is imminent after an outbreak of swine flu spread to eight nations and 11 U.S. states.

The WHO’s Director-General Margaret Chan raised the agency’s six-phase pandemic alert to 5 from 4, the second jump in three days, at a news conference in Geneva today. Level 5 means a pandemic, or a global outbreak of a new virus, is near.

“The biggest question right now is this: how severe will the pandemic be,” Chan said. World nations “should treat this as an opportunity to ramp up preparedness.”

WHO and other health authorities have begun developing a vaccine against the disease, linked to 159 deaths in Mexico and 1 in the U.S. More than 100 swine-flu cases have been confirmed in North America, Europe and the Pacific, and the virus will probably spread, Keiji Fukuda, WHO’s assistant director-general for health security and environment, said today in a conference call with reporters.

“We have been preparing all along as if this is going to stage 6,” Janet Napolitano, U.S. Homeland Security secretary, said at a news conference in Washington earlier today. “Our preparations are for a situation in which this does become a full-fledged pandemic.”

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From the FT:

The US reported the first death outside Mexico from the swine flu virus on Wednesday as governments around the world stepped up preparations for a possible pandemic.

As Germany became the eighth country to report cases of the infection, a US government official confirmed to Reuters that a 23-month-old child had died in Texas from the new H1N1 virus.

Video from CNBC:

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The following is the currency outlook released today by the Brown Brothers Harriman Currency Strategy team:

Swine flu and concerns about US banks may be hitting the headlines but, the European banking sector remains a threat for the euro zone. Indeed, ECB President Trichet, speaking in NY yesterday, highlighted the fact that the European banking sector is significantly important in the euro area compared to the US although Trichet noted signs that liquidity was moving away from the ECB balance sheet to the money markets was an indication of improving confidence. The President held back from making any strong hints about policy, merely stating that any non-standard measures would be announced at the next meeting May 7. He attempted to address the criticism that the ECB’s refi rate is higher than the Fed rate by pointing out the importance of the 0.25% deposit rate in Europe, and the rough parity of euro and dollar money market rates. The President also defended the ECB’s stance on policy indicating the ECB had been the first to introduce non-traditional policy measures. The ECB’s balance sheet did expand in late 2008 although overall assets have slipped by more than 10% since their January highs. While the Fed’s balance sheet also slipped as some programs such as the commercial paper program began to take affect, the Federal Reserve have continued to adopt additional policy measures including the purchase of US Treasuries and expanded its MBS program to address other financial concerns. The ECB President and some ECB members including Weber and Hurley appear to be continuing with a cautious approach to policy. That’s in contrast to other ECB members such as Austrian Council member Ewald Nowotny whose dovish comments yesterday coincided with the euro’s tumble by over a big figure to around $1.30 yesterday. Nowotny said the central bank ‘stands ready to use unconventional measures of quantitative easing to assure European firms and consumers access to credit at appropriate conditions.’

The Japanese yen is the top performer against the major currencies today; the US dollar has now given up 38.2% of this year’s gains against the yen (JPY95.98) while the euro cross has now lost half its gains (124.76). That isn’t a reflection of the Japanese economy. While there have been some signs that the decline in exports may be easing, today’s retail sales point to ongoing weakness in the consumer sector. Retail sales fell for a seventh month in March. Sales were down 3.9% from a year ago compared with February’s 5.7% slump. Though better than the 4.7% drop expected, this is still a sharp decline, and just one month’s data. Meanwhile, the April business confidence index showed a slightly better monthly outcome, up to 30.8 from 30.4, though not as much as expected. Note that the BoJ is holding its regular meeting on Thursday: rates will most likely stay on hold (at 0.1%) and the central bank already on a program of quantitative easing.

The Mexican peso has lost further ground overnight amidst concern about the escalation of the swine flu scare. The World Health Organization said the flu outbreak is no longer containable, upgrading its global pandemic alert level to four from three. The current outbreak of flu in Mexico is a cause for concern for both the people of Mexico and the economy, but is also raising concerns about the possible effects on economies worldwide. Level five signals a pandemic is imminent while level six signals it is under way. However, it remains too early to make any material changes to our Mexico forecasts just yet, but the situation bears close watching. There was further news that could increase risk concerns for investors with the Wall Street Journal reporting that US regulators have told Bank of America and Citigroup that they need to raise more capital based on the stress tests. The two banks are expected to respond, denying the assessment, according to the report.

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I showed you a video from CNBC in a previous post detailing how Swine Flu spreads in humans. Here is a second look at what Swine Flu is all about in three videos from the Wall Street Journal.

New York City Mayor Michael Bloomberg says “stay calm.”

But the White House has put us on full alert and the disease has spread in the U.S. Take a look at the video. Not good – especially for a world in recession.

Here’s the last Wall Street Journal Video which talks about the logistical challenges of dealing with the disease for the Obama Administration. Neither a Health and Human Services appointee nor an FDA appointee has been confirmed. Let’s hope these guys have it together better than Bush during Katrina.

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After a good run-up in the last month, the Mexican Peso is getting crushed in the currency markets today.  How much of the pullback is a result of the news regarding Swine Flu and how much is technical, due to the prior run up, is hard to identify.  Nevertheless, the outbreak will have a negative effect on the Mexican economy and trade, making the recent IMF package Mexico has received a good buffer in case things get worse. Russia and China have already banned U.S. pork imports as well (Sounds like a political move if you ask me).

The Currency Strategy Team at Brown Brothers Harriman notes that the U.S. Dollar and the Japanese Yen are benefiting against a wide swathe of Emerging market currencies, not just the Peso.  And airline stocks are getting hammered as well.

The US dollar and yen are up against the major and emerging currencies. Concerns Mexican swine flu could become pandemic after Pres Obama declared it a public health emergency helped drive the dollar and the yen higher with the Mexican peso the hardest hit, falling over 2% against the US dollar. While the outbreak has potential to create additional problems for the global economic slowdown, so far officials have responded quickly and decisively to the outbreak, something that did not happen during the SARS outbreak. The euro is already overextended on the downside and is likely to trade higher as the focus turns to other event risks this week, the FOMC meeting, the release of further bank earnings reports and the stress test.

The global equity markets are being hit by concern about swine flu adding to existing concerns about US banks amidst talk 3 of the 19 US banks that underwent Federal stress tests have been asked to raise capital. Still, airlines have been amongst the hardest hit today while health care related equities are benefiting. In Asia, China’s Shanghai Composite, down 3.2%, and the Hang Seng, down 2.7%, were amongst the hardest hit in Asia but not just due to memories of China’s slow response to the SARs epidemic. China’s largest bank, ICBC fell over 5% on reports Amex and Allianze planned to sell shares. Japan’s Nikkei bucked the trend, adding just 0.2% as M&A related news supported the market. European bourses are lower, erasing some of last week’s gains while early indications suggest US markets will open sharply lower. On a positive note, Chrysler reached a tentative agreement with UAW that boost the odds it can avoid bankruptcy. Most commodities are lower including gold and oil. Grains are also lower on concern demand for animal feed grains could fall.

While the crisis has not hit epidemic proportions (see Paul Kedrosky’s bubonic plague map), an epidemic outbreak is clearly on everyone’s minds as more than 100 people in Mexico have died.

If you are looking to get a read on epidemics, try John Barry’s The Great Influenza about the Spanish Flu epidemic of 1918-1920.

Below is a CNBC video of how Swine Flu spreads in humans.

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Hurricane Ike is going to be a difficult storm. It is a massive storm with tropical storm force winds covering the entire Gulf of Mexico. Disruptions in the Gulf of Mexico, in refining capacity and in gasoline distribution, as well as gasoline shortages at the pump will certainly drive up prices.

Let’s just hope people heed the Texas Governor’s warning and evacuate as mandated.

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