[MahomesMagic]

Letter from an investment advisory firm to its clients on Covid/Investing

The 20th-century’s greatest pandemic (the Spanish Flu
of 1918) probably had an R0 just above 2.0, so the herd immunity threshold was likely 55-60%. But historians
estimate just 20% of people had been infected when the Spanish Flu’s spread suddenly collapsed. Philadelphia
saw peak deaths in mid-October 1918, but by mid-November the disease was effectively gone from the city. Spread
of the Spanish Flu peaked and plunged in weeks, without ever reaching herd immunity.
So how do we explain this?
The answer: there is not one, but two levels of population “immunity” to consider.
First, herd immunity: the level of specific resistance in a population required for a disease to fully disappear.
Second, the disease break point: the level of specific resistance in a population at which spread of a disease
collapses. The disease break point is generally one-third or less the threshold required for herd immunity.

The disease break point model uses graph theory to better explain how outbreaks evolve in practice. The model
assumes actors and outcomes are not equally distributed – and in fact assumes they are concentrated in certain
individuals and sub-populations. A node with a well-connected social graph is more likely to be infected early and
to transmit the disease widely. Once recovered, however, the “immune” node becomes a dead-end for future
disease spread. The system spikes and then collapses far quicker than a herd immunity model (a homogenous
approximation model) would predict as these “super-spreaders” become “super-suppressors.”
For COVID-19, the implications are powerful. If C19’s R0 is 2.5-3.0 and its herd immunity threshold is 60-65%,
then the disease break point would be only 15-20% specific resistance (a population’s precise disease break point
likely varies somewhat due to differences in susceptibility and social graphs).
Our research indicates Europe and the US reached this disease break point in March and April, respectively. We
believe spread of COVID-19 in these geographies has peaked and is now in irrevocable, sustained decline.
https://drive.google.com/file/d/1Ws6...kSK3OS5l44ASqc