Monday, June 29, 2009

How Swine Flu May Affect Stocks

. Monday, June 29, 2009

By Ken Little

Should stock investors be concerned with swine flu?

You may be wondering why so much attention is being paid to this strain of flu?

Health officials are always concerned about diseases that are transmitted from animals to humans. There are several reasons for concern, but near the top of the list is when a virus is transmitted from animals to humans it may mutate into something that is more deadly.

SARS (severe acute respiratory syndrome) almost became a pandemic in 2003-04. The disease passed to a farmer in southern China spread around the world infecting more than 36,000 people.

Some 750 plus of the victims died.

Fear of SARS crippled international travel and cost billions of dollars in lost revenue and extra expense for a variety of industries.

China was widely criticized for keeping the outbreak silent by censoring the media.

By the time the world learned of the outbreak, the disease had already spread outside of China’s border.

Since that incident, China has become more open to the world health community.

Most of the deaths due to H1N1 so far have been in Mexico, although that may change.

Health officials are concerned that the H1N1 flu may return during the regular fall flu season in a much more dangerous form.

This has happened in the past, so health officials are scrambling to contain this outbreak and to prepare for a potentially worse second round.

Widespread concern about a health threat can create chaos in the market.

Outside of some drug manufacturers, there aren’t many businesses that profit from a health crisis other than of some short-term gains in accelerated sales of items (such as stockpiling food and supplies).

The health care industry lacks the capacity to treat a large new population of the disease’s victim. In a health emergency, they will treat everyone they can and worry about who can pay later.

Unfortunately, the 47 million without health insurance may be at the most risk. They are less likely to take necessary steps, such as vaccination if one is available, than people with health insurance.

When schools begin closing in large numbers, parent will struggle to find child care and many will end up missing work to stay home.

Some businesses may suffer a large absentee rate as workers become more concerned with gathering with other people and risking exposure.

In a true pandemic, there may be few safe options for investors.

As commerce and society are disrupted, the economy will suffer business slowdowns and large absenteeism rates.

We are a long way from that stage now and are hopeful that steps taken by governments and world health officials will keep the outbreak under control.

If not, cash may be the only safe place for your money.

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