How will Covid-19/Coronavirus Affect my Alternative Investment Portfolio? Part 13: May 23rd Update
Updated: 3 days ago
U.S. pushes forward in fight against the virus; Is the Georgia reopening a peach or a pit?; Corona-free, care-free or brain-free?; U.S. gets no relief from unemployment's pummeling; New unemployment statistic finds almost 1 in 3 Americans out of work in April; "Yes, we need more stimulus. No, we don't. Okay, maybe we do..."; Stock market surges on promising early trials of radical mRNA vaccine from Moderna, despite unexceptional and incomplete results; A history of the "magic" (and potentially deadly) 6 foot rule; Disturbing study finds anti-malaria drug Hydroxychloroquine associated with 34% increased risk of death and +137% increased risk of serious heart arrhythmia; Good news on mysterious Covid-19 re-lapses; Groundbreaking Singapore study suggests we are quarantining people longer than we need to; Some tantalizing clues on immunity; U.S. warms up its ambitious "Warp Speed" drive in pursuit of vaccine; Update on my personal investment strategy.
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As usual, a lot of things affecting investors happened this week. Before jumping in, here's a quick summary of the series so far:
U.S. Pushes Forward In Fight against the Virus
U.S. Covid-19 deaths mounted yet again this week. As of Saturday night, 97,414 people had been killed (versus 89,420 last week). And it's now inevitable that the country will pass the grim milestone of 100,000 deaths this upcoming week. This is a number that was once thought to be the upper end of deaths if the country did a lockdown. To honor the dead, a bipartisan group of U.S. senators proposed a moment of silence at noon on June 1st and the President ordered all flags on government buildings flown at half staff this weekend.
However, the country also pushed forward this week as well. The U.S. death doubling rate (the time it takes for deaths to double) continued to drop to increasingly sustainable levels. This week, it fell to 7 weeks (49 days) from 6 weeks (42 days) last week.
The country also continued to make additional slow, but definitive, positive progress bending down the curve of daily deaths:
Meanwhile, Sweden has opted for a lockdown-lite policy (see part 8). We have long hoped that their success, if any, would be good news for countries, like the U.S., that want to exit lockdown without implementing more thorough testing and tracing (like South Korea and China).
This week may have been a breakthrough moment for them:
About a month and a half ago, Sweden appeared to have things well under control but suddenly suffered a disheartening 2nd wave. Then, over the next 3 weeks, they beat it back down, only to hit a plateau. And then they started gyrating wildly.
However, about 2 weeks ago, Sweden adjusted a key part of that strategy for dealing with senior care homes, where the death rate had spiraled out of control. On May 12, country announced it would spend $220 million to increase staffing levels.
And this week, things have improved dramatically:
Their statistics seem to backtrack more often than other countries, so they may not be the final word. But let's hope we'll see the same kind of progress here next week.
As we talked about in part 12, the Swedish model isn't perfect. They're suffering 3 to 7 times the death rate of neighboring Scandinavian countries who have similar demographics.
And their model probably won't work as well in other places. For example, the U.S. can't expect to match the results, because we have a much more vulnerable demographic of older, less healthy people and far fewer single-member households (20.4% versus their 39.2%).
But for many, the biggest disappointment with Sweden's lock-down lite is that it has not been able to stop them from entering a severe recession. Their GDP for 2020 is projected to be -5.6% (versus -5.9% for the U.S., and -8.1% in the Euro Zone).
South Korea: Masters of the Three T's
Let's look at a country that has led the world in both saving their economy and saving lives. That's South Korea, which has threaded this needle by reopening the economy and also using an aggressive mixture of the Three T's of disease control (testing, tracing and treatment). We talked about their strategy in part 6.
This week they continued their strong performance and still have one of the lowest death curves in the world:
Early in the week, South Korea suffered a spike due to an outbreak in one of their club districts. But this would not even registered as a tiny blip in most other countries which have much higher death rates. And later in the week, it died down again.
Meanwhile, the South Korean economy is expected to shrink by only a modest -1.2% in 2020 (versus -5.9% in the U.S.). And, unlike the U.S., they've done that without having to take on the record debt of a $3 trillion stimulus package (and the U.S. probably has more to come... see section below).
Is the Georgia Reopening a Peach or a Pit?
The U.S. continued to exit lockdown with several states loosening restrictions.
Generally, it takes at least 2 to 4 weeks to see the results of any given day's action, because it takes that long for the disease to progress from infection to symptoms to confirmed positive test results, and may take another 2 weeks or more before death. So we won't know the results for a while.
But, since Georgia opened up earlier than most states, it's furthest along and is arguably the most helpful to look at.
Google is currently reporting cell phone data for free to help people understand Covid-19. Unfortunately, it looks like they dropped the ball this week with their reports. The historical curve they are showing for retail visits this week looks nothing like what should be the identical data from last week's report. So this was disappointing. I'll give them another week to hopefully figure things out.
Thankfully, there's another source to get similar information. Placer.ai also uses mobile data to track retail and restaurant sales. Last week, I looked at McDonald's, so for some variety, I took a look at Applebee's this week.
Foot traffic broke out from a 2 week rut and improved to -31.63 last week (versus a year ago) from -40.43 last week. And the trend clearly improved dramatically after the April 27th restaurant reopening (rising from -84%, year on year, to -40%).
In comparison, the entire U.S. improved more modestly from -74.31, year on year, to -67.2.
If businesses are doing as well as the foot traffic, then they are still hurting badly in Georgia. But the trend is clearly improving rapidly and they are doing better than the nation as a whole.
On the other hand, to sustain economic success, the state will also need to avoid an out-of-control epidemic that forces a second closing. And some are concerned that threading this needle between economic growth and health may end up being difficult.
How is Georgia doing there?
After enjoying a relative plateau for about a week and a half, Georgia appears to have a spike this week. So that's not great to see. However, the data is noisy, so we'll have to wait for at least another week or two to get an accurate bead on this.
Corona-free, Care-free or Brain-free?
Meanwhile, some epidemiologists have feared that public fatigue with lock-downs, warm weather and the long Memorial Day weekend might encourage significant numbers of people to engage in high-risk behavior. If enough of this happens, it will trigger multiple cluster infections and a second virus wave. And if so, then some economists believe this would jeopardize the fragile recovery and require a devastating re-shut down.
As of Saturday, news and video footage of some of that behavior was on display from Lake of the Ozarks, Missouri. A bar and grill called BackWater Jack's threw a huge pool party called "Zero Ducks Given". And hundreds of vacationers can be seen reveling, disregarding all social distancing protocols, and partying like it's still 2019.
Another video showed a packed line of even more people waiting to get inside. As the camera panned to him, one man loudly and proudly self-diagnosed his health as "Corona free!" The organizer claimed on Facebook that the venue worked with and had taken the advice of government officials and management teams and "will be following social distancing guidelines,” adding, “extra precautions and safety measures will be taken."
Back inside, a St. Louis local news station crew captured several ironic scenes of people packed like sardines in front of a huge sign that said "PLEASE PRACTICE SOCIAL DISTANCING. <--- 6 FEET APART --->".
After viewing these and other videos of weekend activity, Dr. Deborah Birx, coordinator of the White House coronavirus task force, said she was "very concerned". “We now have excellent scientific evidence of how far droplets go when we speak or just simply talking to one another, and we know that it’s important for people to socially interact. But we also know that it’s important that we have to have masks on if we’re less than six feet, and we have to maintain that 6-feet distance.” (See later section on why some are questioning whether even the 6 foot rule is enough to be safe).
Virtually No Slowdown in Unemployment Pummeling
For the 9th week in a row, millions more Americans filed for unemployment. This week it was another awful 2.4 million, bringing the total to a mind-numbing 38.6 million.
Many were hoping for a rapid reduction in job loss. That eventually has to happen when the bottom is hit. Unfortunately, they were disappointed, as this week's numbers were virtually unchanged from last week's numbers (2.4 million, versus 2.69 million last week, which was adjusted after Connecticut declared they had made a clerical error).
We can only hope that next week's report will show more improvement.
New Unemployment Statistic Finds Almost 1 in 3 Americans out of work in April
Meanwhile, the Chicago branch of the Federal Reserve announced that they'll be releasing a new monthly unemployment figure called "U-Cov".
As we discussed in part 11, the people who designed the traditional unemployment figure had no idea we would ever experience a virus shutdown. And so, the methods they use leave out large numbers of people who are currently unemployed. This includes those who are unable to look for work because of shutdowns and those who incorrectly self-classify themselves. So, the new Covid unemployment rate will fix that in the May report.
The Chicago Fed also announced that they've re-examined the previous April report to see what the real U-Cov unemployment rate was back then. The existing headline unemployment rate from that report was already a brutal 14.4%. But they found the actual U-Cov unemployment rate was a mind-blowing 30.7%.
This is three times worse than the worst of the Great Recession (10% in 2009). And it's even more severe than the Great Depression (24.9% in 1933).
Interestingly, the actual U-Cov unemployment rate, 30.7%, ended up being very close to the 27.8% we estimated back in article #11. Back then, it seemed staggering to imagine that 1 in 4 Americans could really be out of a job. Now, it's looking like the reality is actually closer to 1 in 3.
And unfortunately, the May jobs report (starting with data from April 12) is expected to be worse.
"Yes, we need more stimulus. No, we don't. Okay, maybe we do."
After the unemployment report came out, Dallas Federal Reserve Pres. Robert Kaplan didn't mince words. He said:
“This is a historic contraction, very severe. There’s going to be a need for stimulus in the future. That’s likely to have to come from the fiscal authorities [i.e. the federal government].”
This echoed the comments made last week (see week #12) by Federal Reserve Chairman Jerome Powell.
This week, Chairman Powell testified to Congress and again expressed concern that the rescue packages passed so far aren't enough to prevent permanent damage and a long recession. Then last Sunday, he reiterated the point on an interview. He also suggested that life support for unemployed workers and closed businesses might be needed for "3 or 6 months".
Last week, one chamber of the U.S. Congress passed an additional stimulus bill totaling $3 trillion. The bill included a second stimulus check of up to $1200 for individuals, funding for enhanced testing and tracing, assistance for front-line workers, $1 trillion for cash-strapped local, state and tribal governments, and an extension of unemployment benefits.
However, the head of the other chamber (controlled by the opposing political party) said he was concerned about the cost as well as where the money would be spent. So he declared the bill dead on arrival and shelved it. Additionally, the President said he wouldn't sign it, which confirmed its death.
But over the last few days, the appetite for stimulus appears to be changing again.
A couple days ago, White House economic advisor Kevin Hassett said another round of stimulus is "coming sooner rather than later". The President echoed this on Thursday saying the U.S. should take "one more nice shot" at stimulus. Later that day, Treasury Secretary Stephen Mnuchin said he sees a "strong likelihood" of another stimulus law passing.
So the House is staying in session part of next week to try to pass a bill that both parties can agree on. And then the Senate plans to convene next on June 1. We'll see what happens here over the next couple of weeks.
Stock Market Surges On Promising Early Trials of Radical mRNA Vaccine from Moderna, Despite Unexceptional And Incomplete Results
On Monday, Moderna, a company working on experimental mRNA vaccine for the virus, announced positive results for phase 1 trials.
The testers, 45 patients, received 2 doses of Moderna's vaccine candidate at low and middle doses (25 to 100 micrograms), and none reported any health issues. The company claims that 25 of these patients were found to have developed a certain antibody to the virus at levels similar to people who have recovered from infection. They also tested the antibody each patient produced to see if it could kill the virus in a test tube. The company claims that 8 of the samples did kill the virus, and results for the rest are pending.
The FDA has already approved phase 2 human trials, and if successful, then phase 3 would be scheduled for July.
If those human trials are successful, then their manufacturing partner (Swiss drug manufacturer Lonza Group AG) claims they can manufacture up to 100 million doses per year per manufacturing line. They are currently setting up a line in New Hampshire and have scheduled to set up another one in Switzerland later in the year.
Moderna (like several other companies) uses a radical, new vaccine design called mRNA. And the development time is potentially much faster than traditional techniques. It also should, theoretically, produce vaccines that don't require expensive and time-consuming handling/conditions during distribution, such as very cold temperatures. At the same time it's also experimental and unproven. This mRNA has never yet produced a vaccine that has successfully passed all human trials.
Traditional vaccines are made up of weakened viruses, inactive pieces of a virus, or proteins from the virus made through genetic engineering. When put into the body, they trigger a lasting immune response similar to that of someone who's been infected by and recovered from the real virus.
Moderna uses a completely different technique with mRNA. They inject RNA (Ribonucleic acid), which is genetic code made up of proteins, into a human. The RNA hijacks cells (much like a virus does) and instructs them to make a protein that is intended to look very similar to the real virus. (In this case it's a virus-like protein that contains the same spike as coronavirus, but can't replicate). The theory is that this will then produce the same lasting immune response as a traditional vaccine and make the recipient immune.
This technique has the theoretical advantage of extreme speed. Moderna started working on its vaccine as soon as Chinese scientists published the gene sequence for the virus back in January.
By February, they had already released the first batch of candidate vaccines to the U.S.'s National Institutes of Health (US NIH). And in mid-March (while most of the U.S. was just learning about the virus), they had already injected it into their first healthy volunteer. In comparison, many traditional techniques are far behind.
The news of the trial sent Moderna shares soaring. The company's stock jumped to $80 per share (from $20 earlier in the year). Some skeptics pointed out that this company with zero successful products for sale now had a valuation of $29 billion. But their voices were drowned out in the buying stampede.
Moderna also announced, at the same time as their press release, that it would sell an additional $1.3 billion in new shares to fund the vaccine project. These shares were rapidly scooped up. And the enthusiasm was contagious. The entire stock market rallied, as investors imagined the end of the pandemic would be coming soon.
However, the next day, several vaccine experts pointed out some flies in the ointment.
Contrary to popular belief, stage 1 trials actually are not very hard to pass. All they do is test general safety so the overwhelming majority of candidate vaccines (73%) pass it. In comparison, only 33% make it all the way through the much tougher steps of stages 2 and 3. So while it's a positive step, it also isn't a huge accomplishment. And much more difficult tasks lay ahead.
Second, there were questions regarding just how good Moderna's results actually were. As mentioned above, the company did not release the actual data. And several vaccine experts said the lack of this critical data made it impossible to truly assess the actual success or failure. Considering that the company was also trying to sell $1.6 billion of securities to new investors at the time, they would also have a financial incentive to exaggerate their success.
But, even if the press release is taken purely at face value, there still are some significant issues.
The release talked about only 8 out of the 45 subjects and was silent about the vast majority (37 out of 45). A mere 8 patients out of 45 isn't statistically significant and doesn't prove that it was really a success or not.
The immune response was tested only in the lab, via mice. And many times what works in a mouse fails in a human. So again, it's unknown if that was really a success or wasn't.
They also only tested people two weeks later, while vaccine antibodies need to last much longer to actually be effective. According to Anna Durbin, a vaccine researcher at Johns Hopkins University, "That’s very early. We don’t know if those antibodies are durable". So again, this may or may not have actually been a success.
The mRNA vaccine technology has not yet ever produced a vaccine that has tested safely, and some are concerned about unexpected side effects. For example, some researchers are concerned that it may generate strong type I interferon responses that could lead to inflammation and autoimmune conditions.
Medical site StatNews also pointed out that when there is a legitimate scientific breakthrough, the National Health Institute is normally the first to loudly trumpet the small success of one of its partnerships. So far it's remained silent which may be another sign that the enthusiasm was premature.
By Thursday, share prices in Moderna had pulled back from the original offering price of $76 per share. And, by the end of Friday, they fell further to $69 per share, giving investors a quicker than expected loss.
Disturbing Study Finds Anti-Malaria Drug Hydroxychloroquine Associated with 34% Increased Risk of Death And 137% Increased Risk of Serious Heart Arrhythmia
Initially, there was a lot of hope that the anti-malaria drug hydroxychloroquine could be an effective treatment of the virus. Early studies looked promising. However, none of these were large, nor scientifically sound double-blind studies.
Then, as we talked about in part 8, the drug went through its first real test. In a study of 150 patients in a double-blind study, it was not able to clear the virus any faster than doing nothing. And it also made patients 30% more likely to suffer from side effects. So many were disappointed. However, there was still a small sliver of hope that perhaps a larger study might find something different.
That study arrived this week. It looked at an impressive 96,000 patients and examined their outcomes. It also looked at what happened with using hydroxychloroquine alone vs. combined with the antibiotics azithromycin or clarithromycin (which some had hoped might be more effective than taking the drug alone).
The results were again disappointing. It found the drug was ineffective in all combinations, and made no positive difference versus taking nothing at all.
Additionally, using Hydroxychloroquine caused a disturbing 34% increase in risk of death and 137% increase in risk of serious heart arrhythmia. The combination of hydroxychloroquine plus antibiotic was even worse, and increased the risk of death by 45% and heart arrhythmia by 411%.
Mandeep Mehra, was a primary author of the study and is both a Harvard Medical School professor and physician at Brigham and Women’s Hospital. He said that, in retrospect, the choice to use these drugs without systematic testing was "unwise". He added, "I wish we had had this information at the outset, as there has potentially been harm to patients".
Eric Topol, a cardiologist and director of the Scripps Research Translational Institute, said "It’s one thing not to have benefit, but this shows distinct harm. If there was ever hope for this drug, this is the death of it.”
On March 30th, the FDA had previously granted wide Emergency Use Authorization for the drug. Then on April 24th, after the initial study came out, it reduced it to hospital use and drug trials only.
After the latest study, Peter Lurie, (former Associate Commissioner of the FDA who now heads the Center for Science in the Public Interest), called for the FDA to completely revoke all authorizations to use the drug against the virus.
A History of the "Magic" (and Potentially Deadly) 6 Foot Rule
Most people believe that if they stay 6 feet away from a person with Covid 19, they can't catch the virus. Perhaps it's because current CDC guidelines mention this number specifically. They say a person "staying at least 6 feet away from other people" is the "best way to reduce the spread of coronavirus disease".
But last week, we talked about how scientists have released detailed "autopsies" that have thrown the wisdom of this number into doubt. They've dissected and analyzed how certain mega clusters of infections have started and found that the disease spreads remarkably easily indoors. And unfortunately, plenty of people have been infected well beyond 6 feet (some of whom later died). So reliance on the 6 foot rule can be a potentially fatal mistake.
Ironically, these newer studies are published on the CDC website. But despite this, newer guidance has not been issued (nor is it expected).
But where did the CDC's "magic" 6 feet number come from, anyway? The answer to that is both fascinating and potentially troubling.
As late as the 1980's, the health guidelines recommended 1 foot as the "safe" distance to avoid catching respiratory diseases. This was based on a 1948 military study. Scientists put 50 sailors with strep throat into isolated rooms and put petri dishes at different distances from them. And they told them to cough, sneeze and talk. Afterwards, they cultured the dishes to see if they could grow bacteria or not.
They found that typically bacteria only grew within 1.5 feet or less from the person. So this influenced the rule of thumb, which was shortened to the 1 foot rule. However, the study also showed that one of the sailors spewed contagious bacteria up to 10 feet away. Why this data point was deemed safe to ignore is unclear.
Then, in 1981, an outbreak of deadly meningitis at a Texas school caused the CDC to reconsider the 1 foot rule. When 31 kids in 2 classrooms ultimately came down sick with the disease, the researchers tracked it back to a single child who spread it to 4 initial friends. Since their chairs were all situated about 2.5 feet apart, the new "3 foot rule" was born.
Some have pointed out that this was not a comprehensive study of the outbreak at all. And just because the disease spread at 2.5 feet and less, does not necessarily mean it could never spread at further distances (since many more kids ultimately got sick).
Regardless, the 3 foot rule became the CDC's new recommended "safe" distance to avoid catching respiratory diseases. And this survived until the early 2000's.
Then the 2002 SARS epidemic hit, and proved that the 3 foot rule was a potentially fatal fallacy. A single man on a 3 hour flight from Hong Kong to Beijing infected 21 other people, and 5 of them ultimately died. The vast majority were more than 3 feet away.
The CDC noted that those in the same row and up to 3 rows in front of the patient were most at risk for catching the disease (as well as the flight attendant who also caught it). And they estimated that the distance of 3 rows was about 6 feet. So they set this as the new "safe" distance. And so the "6 foot rule" was born.
This choice may have been somewhat arbitrary and seems to have omitted important data points. On that same flight, people up to 7 rows away (i.e., 18 feet) still caught the disease. And a study on the incident reports: "It is notable that 56 percent of the passengers who became infected were not seated in the same row as the index patient or in the three rows in front of him." So arguably, the 6 foot distance was obsolete the moment it came out.
However, it's persisted until today and looks unlikely to change. Today, we know sneezing and coughing alone can spread virus-carrying particles very quickly up to 20 feet. And mere speech has been photographed as lofting particles capable of transmitting the virus into the air for more than 8 minutes (which potentially allows them to drift even further).
So, some argue it's time we give the guidance a more thorough look, and a potential refresh.
Good News on Mysterious Covid-19 Re-lapses
There's still a lot we don't understand about Covid 19. And one of the more troubling mysteries is why some people catch the disease, recover and then test positive again later.
On Monday, the U.S. Navy announced that this had happened to 14 sailors on the U.S.S. Theodore Roosevelt. As we talked about in part 9, the ship was hit with a raging outbreak in late April that forced it to port.
The 600 sailors who caught the virus have since been recovering. But 14 sailors are of particular interest. They each fought off the disease, spent 2 weeks in quarantine and then successfully tested negative for Covid 19. To minimize the chance of test error: each sailor had to test negative twice, and the negative tests had to be separated by more than a day. (Each day they were tested with 2 different tests.)
Yet, not long afterward, some experienced symptoms again. So, the Navy retested them. And to their surprise ,they found that these 14 sailors were somehow now testing positive again. As usual, some had symptoms and some were symptom-free. This was a similar dynamic to the original outbreak on the ship where 60% of the infected had no symptoms.
But this was not the first example of this phenomenon. In May, South Korea announced they had found 160 people who recovered and then later tested positive again. Like the Navy, the country also required the person to test negative twice and on different days before considering them to be cured. And they also required a similar 2 week quarantine. Like the U.S.S. Roosevelt, some of them had symptoms like coughing, and others had none.
Japan, India and China have also reported the same strange thing happening in their countries.
Deenan Pillay is a virology professor at University College London. He says that whatever this is, it seems to be unusual for a coronavirus. Other strains like MERS and SARS disappeared after the initial infection and never showed up again on tests.
There are several theories on why this might be happening.
Maybe the tests are wrong. No test is 100% accurate so maybe these people never really recovered from the disease in the first place. However, the Navy deliberately took extra steps to minimize the chance of that kind of error. And South Korea claims they also take extra precautions and feel that testing error was unlikely.
Other people theorize that perhaps some of the people who recover from the virus aren't immune. And so they might run into someone else who has the disease and get it again. And last month, the World Health Organization quoted a small Chinese study that found that they couldn't detect signs of antibodies in some people who had recovered from the disease. If accurate, these people might have difficulties avoiding a second infection. And it might mean that some people who are counting on immunity after getting disease, could be making a dangerous mistake.
However, South Korean officials are skeptical of this idea. They say the re-positives occurred fairly regularly (on average 13.5 days) after the patients were initially discharged as healthy. So it's difficult to imagine how so many patients in completely different areas would all just happen to run into an infected person and manage to do it with such similar timing as the others.
Another theory is that maybe the virus has the ability to go dormant, and then reactivate. There are other viruses that can do this like mononucleosis (i.e. "mono" or "the kissing disease"), cold sores, HPV (common warts), shingles, and latent tuberculosis infections.
If true, this would be potentially very troubling news. It would almost certainly make detection, testing and eradicating the virus much more difficult.
South Korean officials leaned toward this theory early on, but also stressed that results were very preliminary and they would continue to research this.
On Tuesday, they announced some additional information. The Korean Centers for Disease Control and Prevention had studied 285 relapsers, and found some good news.
As discussed in previous weeks, the country has aggressively implemented sophisticated virus tracking systems through cell phones and public records. And by using that data, they found that relapsers are not passing the disease on to others. So this was very good news.
And when they took specimens from the relapsers and tried to grow the virus in cultures, they could not do it. They theorized that perhaps the patients were shedding either noninfectious or perhaps even dead virus particles. Regardless of the reason, this was also a good sign.
So while we still don't know exactly what's happening, the end result was still very positive news. And South Korea will now allow people who recover to go back to work and school (regardless of whether they retest positive or not).
Groundbreaking Singapore Study Suggests We Are Quarantining People Longer Than We Need To
South Korea's idea was taken a step further by a completely unrelated Singapore study which was released on Thursday. Scientists tested and followed 766 patients and found that some people can test positive for the virus for a long time (22% still tested positive by day 28). This wasn't a surprise and was already widely known. But what was a surprise is that they also found no evidence that the virus can spread past day 11.
How did they determine this? Like South Korea, Singapore does sophisticated contract tracing and they found zero contact tracing evidence of anyone spreading the virus past day 11. Additionally, they took the test results of patients and used them to attempt to grow the virus in the lab. They were able to do this successfully many times but never for anyone past day 11. If this is correct, then the implications are huge. Many countries rely on additional testing to determine who has and who hasn't recovered. And in places like the U.S., where there isn't enough testing to go around, people are typically advised to self-quarantine for 2 weeks. If this data is accurate, then both of these strategies been keeping many people confined longer than they need to be.
So Singapore’s National Centre for Infectious Diseases is now switching the country's own policy to allow people to leave quarantine after they reach day 11.
Some tantalizing clues on immunity
Meanwhile, an even bigger and perhaps an even more important mystery is still unresolved.
Are people who recover from the virus immune from getting it again? Some viruses proffer immunity and others don't. And if people are immune, then how long are they immune for? With other viruses, it may be as short as a few weeks, or as long as years.
If people are immune for at least a couple of months, and we're able to detect that, it would be a game changer. This would allow us to issue "immunity certificates" to those people and clear them to go back to work and school. And this would allow us to reopen the economy much more quickly.
So far, we still don't have any definitive answers. But this week we received some tantalizing clues.
Covid-19 has a similar shape to its coronavirus cousins, and shares a lot of common characteristics with them. And researchers in Singapore cooperating with Duke Medical School in the U.S. have studied one of them extensively: Severe Acute Respiratory Syndrome or SARS. And with that disease, they found "significant levels of neutralizing antibodies" lasting from 9 to 17 years after initial infection. So, if Covid 19 is similar, antibodies might last a nice long time.
Another study found that children who have covid-19 were found to produce much higher levels of a certain antibody (IgM) than adults. And they theorized that perhaps this is why children are more resistant to the disease. If true, it also suggests that antibodies are important in preventing infection. However, this study is not yet peer-reviewed.
Health experts predict that we'll be hearing more on this, as the scientific work on this issue continues.
US warms up its Ambitous "Warp Speed" Drive In Pursuit of Vaccine
Last week, the U.S. government announced that it launched an ambitious development program to create a vaccine in record time. As we discussed in part 12, it's called "Warp Speed" and aims to shave 8 months off the traditional process by applying the venture-capital (VC) model to vaccines.
Warp Speed will finance up to 8 promising candidates in parallel, and also finance the manufacturing before knowing which one(s) are successful. The expectation is that most will fail but the hope is that one or more will pass. If so, the financial gamble will pay off with a vaccine made in a fraction of the normal time. The goal is to produce 100 million doses of the vaccine by November and 300 million by January 2021.
This week, the U.S. announced its first investment. It pledged up to $1.2 billion to AstraZeneca Plc to finance the final stage of human testing (phase III) of its vaccine candidate. And if successful, the majority of the money will go to fund the massive manufacturing buildup required to produce it in mass quantities.
The vaccine was created by the University of Oxford and uses a harmless virus that’s been modified to reproduce the surface spike protein from SARS-CoV-2. If successful, the human body reacts to it with an immune response. And that enables the body to also guard itself from the real thing.
The treatment has already passed phase I and phase II clinical trials. And AstraZeneca says the final stage will run from June to August and involve an impressive 30,000 participants (including children). About 10,000 are being recruited from the U.K., but infection rates are going down so rapidly there that the leader of the Oxford team (Prof. Adrian Hill) says there's only a 50% chance they will be able to collect enough data there. So testing has been expanded to the U.S. and other areas where infection rates are growing.
If successful, Astra says they can deliver 300 million doses to the U.S. by October. The company also claims it has the capacity to make 1 billion doses through supply chains in the U.S. and the U.K. The U.K. government is also a funder, and announced last Sunday that it had also invested $79 million.
2) The U.S. also gave $30 million to French drugmaker Sanofi which has two Covid-19 vaccine projects under way.
The U.S. funded Sanofi's protein antigen candidate, which uses a molecule designed to trigger an immune response in the body. The treatment delivers it with a platform that Sanofi uses already for its influenza vaccine, called Flublok.
Sanofi has partnered with its traditional U.K. rival GlaxoSmithKline to accelerate progress. And the pair plan to start human trials in the second half of this year. If successful, then GlaxoSmithKline would do the heavy lifting of the manufacturing. Sanofi claims that together could make 600 million doses annually and they are targeting having a vaccine widely available by the second half of 2021.
Meanwhile, a recent Yahoo/YouGov poll found that 1 in 5 Americans said that if a vaccine comes out, they won't take it.
Some health officials cautioned that the name "Operation Warp Speed" probably wasn't the best choice for calming fears. Many of the skeptics are already very concerned the vaccine will not be adequately tested for safety.
Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, empathized with those concerns, saying, "When they hear ‘Operation Warp Speed,’ they think, ‘Oh, my God, they’re jumping over all these steps and they’re going to put us at risk.'
However, he also claimed that no steps would be eliminated, and that the speed comes from doing properly paced things in parallel. This creates “risk for the investment” but not for the patient or the “integrity of the study.”
“You’re doing things in a totally unprecedented way, and you’re going really fast but not compromising safety because you haven’t cut out any of the steps you would have done had you done it the traditional way."
Update on My Investment Strategy
Every week I take a look at the latest developments and data and reevaluate my personal outlook on the possible economic scenarios and my personal investment strategy. This week I've made quite a few additions. But my general conclusion is essentially the same as I felt in my recent deep dive investment strategy update in part 11.
Treatment: I believe chances are good we'll have an effective treatment for Covid 19 (i.e. antibody treatment, vaccine, etc.) by fall or winter of this year. And with some luck we could even have more than one. If also feel it's unlikely it can be manufactured and distributed in large enough quantities to treat everyone who wants and needs it. If that happens then it will not be enough to revive the economy completely. And there may be potentially huge quality-of-life difference between the treatment-haves and treatment have-nots. This will be divisive and exacerbate already strong tensions in our society and/or around the world.
Economic recovery: Pretty much everything that's happened to date has been much worse than the consensus expected. More people have been killed. Many more than expected have lost jobs. The stimulus and unemployment aid was enormous but has too many unexpected holes and isn't getting to many of the people who need it the most. States are starting to reopen but most individuals are still choosing to stay at home anyway. Unfortunately, I currently feel a V-shaped recovery is unlikely and it will take on the long-end of scenario # 3 "longer" at 4-6 months (or more). We've already had one quarter of negative growth in Q1 (-4.8%) and Q2 will be record-breakingly bad. So a technical recession (2 consecutive quarters of negative GDP growth) is inevitable.
Investments: If the above is correct then it will unfortunately be painful for many individuals and some investors. And some subsectors of alternative investing (like certain real estate classes) will come under heavy stress. Many may fold in the coming months. At the same time, I think there will also be an opportunity to purchase distressed assets at very favorable pricing and significant discounts. And I believe that patient, discerning investors may be able to take advantage of once in a decade or once in a generation opportunities. More details on my personal economic outlook and strategy are here.
Strategy: 1) Invest in assets that are corona-virus resistant (and uncorrelated with the business cycle). That includes: 1a) Music royalties (which can actually do better in lock-downs due to increased streaming). 1b) Life settlements (which actually perform better when people are dying faster and in any event isn't directly tied to the business cycle) 1c) Litigation finance (which performs based on winning or losing cases and also isn't directly tied to the business cycle). 2) Continue to hold cash and be patient for distressed opportunities. The worse the economic damage, the more chance there will be for once-in-a-generation or once-in-a-lifetime opportunities.
My opinions and strategy will change if we get some better or worse news on the science side or some of the other X factors. For example, the stimulus bill being debated in Congress is one that could shift things in a more positive direction (depending on what it does). The virus getting out of control again in large areas and forcing large lock-downs a second time, could make things worse.
Next: Part 14
How will Covid-19/Coronavirus Affect my Alternative Investment Portfolio? Part 14: May 30th
US marks grim milestone with 100,000th death but also makes further progress; World showdown: Who's fighting the virus the best?; A reopening dud in Georgia? ;US employment continues painful freefall but could be closing in on bottom; Backbone of U.S. economy crumbled in april as salaries were slashed; What will the economic recovery look like? V-shapers, u-shapers and w-shapers face-off; Researchers uncover more positive clues about Covid 19 antibodies; Update on my personal investment strategy. Click here to read part 14.