All of them agree that the impact on a normally functioning global economy could be quite serious – e.g., a reduction in global GDP of more than 2.5%. However, that is already happening, even in the absence of an influenza pandemic. The real question is whether a pandemic would make things much worse. Our guess is that while it would worsen the situation somewhat in the short term, it might actually help it in medium term. This view rests on the key assumption that a flu pandemic might move the world back towards our cooperative scenario, and off the track towards increased conflict that we seem to be on today.

In terms of asset class valuations, our previous analysis was that the primary impact of an influenza pandemic would be a sharp rise in uncertainty, and an associated increase in demand for appropriate hedges, such as short term government securities and gold. Differential demand for different currencies could be driven by perceptions that one or more areas were coping significantly better or worse with the flu outbreak.

The reduced economic output associated with a flu pandemic would obviously be bad for equities, as well as commodities, assuming that the fall in demand for them would be much greater than any offsetting fall in supply. The impact on commercial property would depend on the severity of the influenza outbreak, with the more severe scenarios associated with lower valuations for commercial property, due to reduced demand.

However, as noted with respect to the economic impact of pandemic flu, these negative asset allocation effects have already occurred due to the financial panic of 2008. So rather than a substantial effect, at this point we estimate that the most likely result of the Mexican swine flu (assuming it doesn’t become much worse) is a damping of the (quite possibly premature) rally in global equity markets, and some further upward pressure on gold and short-term government security prices.

What are the signs and symptoms of swine flu in people?
The symptoms of swine flu in people are similar to the symptoms of regular human flu and include fever, cough, sore throat, body aches, headache, chills and fatigue. Some people have reported diarrhea and vomiting associated withswine flu. Severe illness (pneumonia and respiratory failure) and deaths have been reported with swine flu infection in people. Like seasonal flu, swine flu may cause a worsening of underlying chronic medical conditions.

How does swine flu spread?
Flu viruses are spread mainly from person to person through coughing or sneezing. Sometimes people may become infected by touching something with flu viruses on it and then touching their mouth, nose or eyes.

How can someone with the flu infect someone else?
Infected people may be able to infect others beginning one day before symptoms develop and up to seven or more days after becoming sick. That means that you may be able to pass on the flu to someone else before you know you are sick, as well as while you are sick.

How long can an infected person spread swine flu to others?
People with swine influenza virus infection should be considered potentially contagious as long as they are symptomatic, possibly up to seven days following illness onset. Children, especially younger children, might potentially be contagious for longer periods.

What can I do to protect myself from getting sick?
There is no vaccine available right now to protect against swine flu. There are everyday actions that can help prevent the spread of germs that cause respiratory illnesses like influenza. Take these everyday steps to protect your health:

• Cover your nose and mouth with a tissue when you cough or sneeze. Throw the tissue in the trash after you use it.
• Wash your hands often with soap and water, especially after you cough or sneeze. Alcohol-based hand cleaners are also effective.
• Avoid touching your eyes, nose or mouth. Germs spread this way.
• Try to avoid close contact with sick people.
• If you get sick with influenza, CDC recommends that you stay home from work or school and limit contact with others to keep from infecting them. Try to stay in good general health. Get plenty of sleep, be physically active, manage your stress, drink plenty of fluids, and eat nutritious food. Try not touch surfaces that may be contaminated with the flu virus. Avoid close contact with people who are sick.

What surfaces are most likely to be sources of contamination?
Germs can be spread when a person touches something that is contaminated with germs and then touches his or her eyes, nose, or mouth. Droplets from a cough or sneeze of an infected person move through the air. Germs can be spread when a person touches respiratory droplets from another person on a surface like a desk and then touches their own eyes, mouth or nose before washing their hands.

How long can viruses live outside the body?
We know that some viruses and bacteria can live two hours or longer on surfaces like cafeteria tables, doorknobs, and desks. Frequent hand washing will help you reduce the chance of getting contamination from these common surfaces.

Are there medicines to treat swine flu?
Yes. CDC recommends the use of oseltamivir (tamiflu) or zanamivir (relenza) for the treatment and/or prevention of infection with these swine influenza viruses. Antiviral drugs are prescription medicines (pills, liquid or an inhaler) that fight against the flu by keeping flu viruses from reproducing in your body. If you get sick, antiviral drugs can make your illness milder and make you feel better faster. They may also prevent serious flu complications. For treatment, antiviral drugs work best if started soon after getting sick (within two days of symptoms).

If I am traveling, should I carry Tamiflu?
Consult with your medical provider. Consideration should be given to carrying Tamiflu, especially to areas where access to healthcare may be limited. Tamiflu, which can reduce symptoms if started within two days of onset, might be considered for patients who have:
• underlying chronic medical conditions such as heartdisease, diabetes, asthma, or a compromised immune system;
• had flu like symptoms for less than 48 hours.

Should travelers carry antibiotics?
Antibiotics are not effective against a flu virus. In some cases with severe influenza, antibiotics are used to treat complications of the flu such as bacterial pneumonia. But the selection of which antibiotics to use would require expert medical advice. A traveler who develops significant respiratory illness should seek medical care rather than self-treatment with oral antibiotics.

What should I do if I get sick?
If you become ill with influenza-like symptoms (e.g. fever, body aches, runny nose, sore throat, nausea, or vomiting or diarrhea), contact your health care provider, who can determine if influenza testing or treatment is needed. Stay home and avoid contact with other people as much as possible to keep from spreading your illness to others. Employees with significant respiratory illness or fever should not go to work. Notify your manager of the illness as well as your medical provider.

In children, emergency warning signs that need urgent medical attention include:
• Fast breathing or trouble breathing
• Bluish skin color • Not drinking enough fluids
• Not waking up or not interacting
• Being so irritable that the child does not want to be held
• Flu-like symptoms improve but then return with fever and worse cough
• Fever with a rash

In adults, emergency warning signs that need urgent medical attention include:
• Difficulty breathing or shortness of breath
• Pain or pressure in the chest or abdomen
• Sudden dizziness
• Confusion
• Severe or persistent vomiting

Should I travel to Mexico or other affected areas?
Neither the U.S. Center for Disease Control or the World Health Organization has issued travel health advisories. However, it is recommended that people postpone travel to affected areas at this time.

What is the risk of catching swine flu if I travel to or live in Mexico or other affected areas?
The risk is unknown but probably low. The disease is spread via respiratory secretions so good personal hygiene is important to reducing the risk.

What is the risk of contracting swine flu from exposure to travelers from an affected area?
Visitors who feel well should pose very little exposure risk. Swine flu in Mexico has shown human-to-human transmission. Visitors who feel ill or have a fever should not come to work to avoid the risk of spreading influenza or another viral illness and should seek medical attention.

Where do I get additional information?
http://www.cdc.gov
http://www.who.int/en
http://www.dhhs.gov/nvpo/pandemics/
http://www.cdc.gov/swineflu/swineflu_you.htm

SOURCE:

The Unknown

What makes this strain of influenza and this particular outbreak cause for concern is the unknown. Health officials, at this point, do not know how pathogenic this strain of the influenza virus is. In other words, there is little clarity around how serious the illness is, among the people who become infected. In the early stages of an epidemic, reported mortality rates (the number of deaths divided by the number of persons infected) are often inflated, because health officials only know about the most serious cases. As of this writing, Mexico has reported 149 deaths and approximately 1600 cases. My contact says that while this mortality rate seems high, it is hard to say whether this strain is extremely deadly, or whether health systems in Mexico and the United States are identifying those with the most serious infections. However, she does have concerns given that all of the deaths reported in Mexico are among otherwise healthy adults. Generally speaking, the majority of influenza-related deaths occur among those with compromised immune systems, such as cancer patients, those whose immune systems are undeveloped, such as young children, and those whose immune function has declined, such as the elderly. So, the fact that not a single death thus far has been among anyone under age three or over age 60 is a red flag.

Spread and Containment

While influenza viruses infect many animals, including but not limited to birds, pigs and horses, the probability of any particular strain to become pandemic depends greatly on its ability to be effectively transmitted between humans. Again, until health officials are able to gather more information on who may have been infected but only developed a mild illness, it is hard to say just how effectively this H1N1 strain is transmitted. However, there has been documented human-to-human transmission. With cases reported in Mexico, the USA, Canada, Scotland and Spain, the cat is out of the bag – this has the potential to spread quickly around the world. Containment is probably not a viable control measure.

In addition, this particular strain of H1N1 virus is a mixture of four different influenza strains (1 avian, 1 swine, 2 human), the combination of which has never been documented among humans. In other words, the entire human population can be considered susceptible to infection.

Quick Note on Tamilfu and Relenza

Laboratory data show that this form of influenza is susceptible to Tamiflu (oseltamivir) and Relenza (zanamivir). However, influenza viruses mutate quickly and it is possible that this virus could develop resistance to either or both of these antiviral medications, especially if the medications are overused or not used properly (i.e., not finishing the fully prescribed amount). A word of caution – antivirals are most effective when taken within 48 hours of exposure and are effective in reducing the seriousness of the infection. They don’t cure influenza.

Swine Flu’s Market Implications

We see this as a very volatile story and one that will likely spread in its impact on the global markets. As seen today, there are highly speculative plays in drug-makers, airlines, and consumer discretionary stocks and indices. Today saw major moves in airlines like FAA (Claymore/NYSE Airline Index Fund) down 10.5%, consumer stocks like CCL (down 13%), RCL (down 16%), and drug companies like GSK (up 7%). We see these trades as highly volatile and “chasing the news.” While shorting airlines or buying vaccination makers have some merit, we are cautious to jump into such pure speculation trades. These trades seem highly likely to overshoot as traders uses these stocks as the new fast money vehicles.

What does seem clear is Mexico’s (EWW-iShares MSCI Mexico Index Fund) instability and vulnerability to this crisis. As a country already “on the brink”, we see this situation as disastrous for Mexico. While the economic fallout will obviously depend on the virility of the Swine Flu, we see this as the potential “knock-out” punch to Mexico’s growing list of problems. Using the SARS epidemic as a proxy, an estimated .8% was shaved off of China’s GDP in 2004. That was during a relatively healthy time for the global economy and a year in which China’s (FXI-iShares FTSE/Xinhua China 25) economy grew by almost 10%. In 2009, Mexico is suffering contagion from the global economic slowdown (the Mexican government previously estimated -2.8% GDP growth in 2009), a sharp decline in remittance payments, and a violent and destructive drug war. Early estimates have this outbreak costing Mexican companies $85 million a day in lost revenue, a figure likely to increase. The Mexican Central Bank will have its hands full defending the Peso (FXM- Currency Shares Mexican Peso Trust). There are early reports that Mexico will tap its $47 billion credit line from the IMF.

At ETFDesk believes the following funds will continue to have downside relating to this crisis:

FXM- Currency Shares Mexican Peso Trust
EWW- MSCI Mexico Index Fund
FAA – Claymore/NYSE Airline Index Fund
ILF- iShares S&P Latin American 40 Index
FXI-iShares FTSE/Xinhua China 25