Milton Ezrati, senior economic and marketing strategist with Lord Abbet, has been getting interesting inquiries from investors and financial professionals as of late. They’ve been asking him what to make of the avian flu scare.

While he doesn’t dismiss the possibility of a pandemic coming to the U.S. and crushing equity markets, Ezrati is concerned that the scare may be inflated. “There are reasons for precaution, but I think the government telling us to hide tuna fish under the bed is a little extreme,” he says. “Couldn’t we just keep it in the cabinets?”

Joking aside, in a recent report, Ezrati wrote that some of the forecasted fatality numbers linked to a possible outbreak are hard to ignore.

“When the medical people–such as the U.S. Department of Health and Human Services and the World Health Organization (WHO)–get going, they can generate some pretty scary figures,” Ezrati wrote. “Official speculation by the federal government talks of the possibility of nine million Americans getting sick, resulting in some 180,000 dead…Estimates of worldwide deaths range up to 180 million…The biggest number in this seeming mortality projection competition appeared in ABC’s Frontline television show, which broadcast the possibility of 1 billion dead worldwide.”

Ezrati spoke to Staff Editor Ryan G. Murphy in late March.

What’s the general feeling about avian flu in the financial world right now?

Right now, the attitude is that there are too many ifs to do anything from an investment strategy point of view. If we have a pandemic and the [fatality] numbers we are getting are true, then it will be very hard on the market. People will want to be in cash and drug stocks. Right now, though, there are too many ifs. It’s more likely that there won’t be a pandemic, so its very hard for the market or any investor to do anything except watch the numbers. You can liken it to SARS.

What’s an investor to do, then?

No one knows exactly what to do from an investor’s point of view. Investors who are afraid of a pandemic and want to prepare for it now may miss too many opportunities. In order to move to cash and invest in drug companies, investors would be moving away from too much else.

If avian flu became a serious issue in the U.S., what would it take for investors to start running?

I think if we started seeing people die from this–if there was a crucial mutation in the virus. Right now, the virus has to mutate in order to become a threat to human life. Humans can’t get it from each other. Any human who’s gotten it has gotten it from the birds themselves. [Investors would start running] if there is news that the flu can be passed from one human being to another. There’s no doubt that a few chickens will die, but given the way we conduct our agriculture, it’s not even apparent that human beings will contract it in the U.S. or Europe. Right now I think you have to bet that the probability of a pandemic not happening is greater than the probability of having one. We’ve seen very little sign of it, maybe 200 cases around the world, most of which have been in Indonesia or Vietnam.–Ryan G. Murphy