Bird Flu and Retirement Income: A Friend’s Warning

Panic, supply shortages, and social isolation won’t be the only issues

retirement portfolio protection

The other night I attended my local men’s book club—essentially a group of intelligent and interesting guys who get together once a month to talk, socialize, and discuss our monthly book and other things that are on our minds. So, it was not completely out of the ordinary for one of the men to turn the conversation away from the book near the end of our time together. “Guys, I just have to tell you that bird flu is inevitably going to come over to humans. I’m really worried about it. The panic when it hits with a 50% fatality rate will make COVID look like child’s play.” The guy had worked in public health during his career. He is friends with Michael Osterholm, Minnesota’s most well known public health guy, now at the University of Minnesota. “Right now, people are working around the clock to try to figure out treatments and vaccines, but the problem is that you can’t really do that until you have the variant of the virus in front of you. We don’t know what variant will be transmissible in humans because it has not evolved yet. So there will inevitably be a lag.”

In other words… it’s inevitable. At some time, bird flu, otherwise known as H5N1 flu virus, is going to infect humans and become transmissible from person to person. For a period of time, just like in early COVID, there will be few if any answers. If it acts like the one that hits birds, we can expect 50% fatality rate. If it acts like the one in cows right now, it will be more like 2-5%--similar to COVID. In the beginning, we won’t know how to protect ourselves. So, it’s inevitable—there will be a panic.

My book club friend mentioned the obvious things to think about in a panic—N95 masks, toilet paper, and similar supplies that got scarce when COVID hit. We got a dry run of public panic, so we can anticipate what will happen. On the other hand, we can’t rely on the government response because we also got a dry run of that would be like. During COVID, the Trump team supported vaccine development in the shortest time in history. That was a win. On the other hand, they seemed to confuse people with suggestions of drinking Lysol to treat COVID and spinning the reality of the situation for apparent political advantage. Love or hate Trump, this means that we are on our own if a pandemic breaks out. You are going to have to make your own decisions based on politically toned, probably inaccurate information. Vaccines may come, but they will take a while. Treatments may come, but they will take a while. If the worst form of the virus takes hold, a whole lot of people are going to die. Those of us who prepare and take care of ourselves are more likely to get through, but there are no guarantees.

What About My Income?

Then, I got to wondering… what about my investments? The stock market and the economy both took a dramatic fall initially with COVID. Remember oil prices going negative? If I remember right, there was a day when people would pay you $37 a barrel to take the oil away from them. Not sell it to you for that… actually pay you to take it from them. Supply chains broke. People couldn’t come into work safely. Markets only righted themselves after massive government intervention and dole outs.

The financial implications of another pandemic could be just as devastating as supply shortages or getting sick. Many people my age rely on retirement portfolios to live, and if these are devastated, providing for oneself may become impossible whether there are supplies on the store shelves or not. So, how do I protect my source of income? I decided took more closely at my risks and opportunities.

Step 1: Where Am I Vulnerable?

The first thing is to review my current holdings to see what happened to them during the pandemic panic in 2020. I’m analyzing each stock’s chart and dividend history. I may or may not do something, but by reviewing this history I am less likely to be surprised by how the stock reacts to another pandemic. It is also good to know how the stock is positioned this time around. Have they overleveraged? Or have they shored up the balance sheet? Do they display vulnerabilities that are more likely to be hit this time than last time? If it is dividend payer, what might happen to that dividend, which is a piece of my income? With that information I can make a plan.

Step 2: Consider Opportunities

Second, where are the upward investment opportunities that would be associated with another pandemic? There were some big winners last time—Zoom, Amazon, delivery services, and so on. The vaccine makers, Pfizer and Moderna, also did very well. Most of us were not in a position to see these opportunities because no one really saw COVID coming. This time is different. We can see bird flu coming. It’s been coming for years, and recently it broke out into human beings and probably isn’t too far from human-to-human transmission. We know it is coming. Who is positioned to win on this?

Some Possible Opportunities

No one knows, of course, but we can make some guesses. Here are some things I have thought about. Please note that I am not a financial advisor and I am not making any recommendations on these investments. Consult your own financial advisors before making investment decisions.

Bird Flu Prevention: One candidate has to be Cidara Therapeutics, a company that has been developing an antiviral drug to become a universal flu preventative that is not a vaccine. There’s a lot to its story, but essentially they are at phase 2b clinical trials with a drug that seems to be working. That could be a big deal and earn a fast track approval in a global emergency. And right ow, the company owns all the rights to the key molecule called CD388.

Bird Flu Vaccines: Many companies are working on vaccines for bird flu, but as noted, it is challenging since the exact strain that would pass from human to human is not yet known. Nonetheless, companies like Moderna are creating mRNA vaccines for seasonal flu and testing it for efficacy against bird flu, and CSL is testing a second generation H5N1 vaccine called Audenz, as well as developing an mRNA vaccine. The key for CSL as an investment is that they already have a contract for 150 million doses with the US government should a pandemic break out.

Bird Flu Test Kits: Two other companies have been developing test kits for bird flu—Hologic and Virax Biolabs. After COVID, it is not hard to imagine how essential these kits would become for tracking the spread of bird flu and personal exposure management.

Here is a website with further information on these and other stocks: https://www.birdflustocks.com/stocks/.

Some Things I am Going to Avoid

There are also some areas I intend to avoid for investments. It is not hard to imagine what an H5N1 bird flu pandemic would do to industries like airlines, hotels, restaurants, theaters, and concert halls. I will not be making investments in commercial real estate either—an industry that has already been reeling from the rapid rise in interest rates as a response to inflation, and therefore is especially susceptible to a downturn. A new pandemic would led to another big push into remote work situations, further reducing the need for real estate.

A Final Word

Like COVID and the many events driven by climate change, bird flu will mark a radical change in society. There’s a good chance its effects will be different from those we’ve seen before, but some will be very similar. Preparation to get through a temporary disaster is crucial, even if “temporary” means a few years, as it did for COVID. My book club friend sounded the warning: the coming of bird flu in human-to-human transmission is almost inevitable. It’s coming to people. This time, we have a chance to prepare ourselves, even if the government won’t and even if we don’t know exactly when it will arrive. We can prepare for employment and income disruptions, supply shortages, capital market disarray, extensive loss of life, social isolation, and more. We’ve already seen this movie. We have nothing to lose by stacking the odds in our favor.

Anthony Signorelli

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