How Will Covid-19/Coronavirus Affect my Alternative Investment Portfolio? Part 23: August 1st
Updated: Feb 8, 2021
U.S.'s second wave of deaths accelerates to more than one per minute; Some states make progress fighting second infection wave, others show ominous hints of letting up too soon; Georgia economy remains stuck in a coma; Economy battered by more record unemployment as progress goes into reverse for second week in a row; Financial cliff update: Congress and executive branch can't close the deal; Study suggests more than 20%+ of people who have covid-19 are incorrectly told by tests that they don't; Study finds more than 20%+ of people who have covid-19 are incorrectly told by tests that they don't; U.S.'s hapless testing strategy may be getting a much needed booster shot; Why an effective vaccine may be -- not the end of the pandemic story, but -- only the beginning of a new chapter; Study finds infected children under five host 10x - 100x more corona-virus particles than adults and may be much more highly infectious; CDC releases study of Georgia YMCA summer camp that was overrun with corona-virus and infected 260 in about a week; Teachers union will strike if adequate school safety measures are not put in place for reopenings; New Johnson & Johnson Vaccine Protects Monkeys From Covid-19 with a Single Shot; Operation Warp Speed awards $2.1 billion more for vaccine from Sanofi and GlaxoSmithKline; Update on my portfolio.
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This week the news accelerated versus last week. Most of the information centered around the second virus wave, the financial cliff, the effects of the virus on children, school re-openings and vaccines.
By the way, this is one article in a multi-part series that has been published weekly since the pandemic began back in March 2020. The series started with three introductory articles on the virus, effect on the economy and alternative investment classes. And then it moved on to weekly updates on the latest and greatest developments (along with weekly updates on my evolving personal portfolio strategy). You can see the links to every article in the series here.
U.S.'s Second Wave Of Deaths Accelerates To More Than One Per Minute
For the 20th week in a row, the United States battled the coronavirus called SARS-CoV-2, which causes the Covid-19 disease. By Saturday morning, the death toll had climbed to 156,772 (versus 148,860 last Saturday morning).
Meanwhile, for the third week in row, the daily death rate moved in the wrong direction. Deaths continue to increase in what has clearly become a second death wave:
(Note, the small and temporary surge between day 104 and 110 was not an actual increase. It was caused by a statistical aberration produced when the CDC changed its accounting methodology and then worked through the backlog caused by the change).
On Wednesday, the second wave surge caused the nation to re-achieve the grim milestone of suffering an average of one death per minute. And the national statistics were accompanied by reports of record deaths in several states. On Wednesday, Florida, North Carolina and Idaho all set single day records. And on Thursday, new records were set by Florida (again by surpassing the previous day), Arizona and Mississippi.
On the other hand, virus infections tend to lead deaths anywhere from 2 to 8 weeks (depending on how long it takes someone to die and how long it takes their particular location to report the information). And at a national level, these have started to level off:
This could be a potentially promising sign. If declining case numbers end up proving accurate, then we might see the death statistics improve in future weeks.
It's important to note that looking at infections can give a less reliable perspective than would looking at death statistics, because case numbers rely on adequate testing. And in the U.S., testing suffers from shortages of critical reagents necessary to run them, as well as staff (see section below).
And, data from some states hints that they may be losing control of the second wave, which might ultimately negate the other states' declining case numbers (see state roundup section below for more). We will continue to watch and see how it evolves.
How did others around the world do?
As we discussed in part six, South Korea uses an aggressive mixture of the Three T's of epidemic control (testing, tracing and treatment). And through most of the epidemic, it has been one of the world leaders in both minimizing deaths (one of the lowest per million) and also minimizing economic damage (their economy is now mostly open and growth is projected to barely shrink this year, while in comparison, the U.S. still has significant closures and is projected to take a -5.9% hit).
This week, South Korea looked like this:
They made further progress fighting back their second wave which was good to see. However, the tiny size of their "wave", in the first place, renders it too minuscule to even be noticed by the majority of countries who are dealing with much more severe issues. And this week, the South Korean economy continued to remain predominantly open for business.
Meanwhile, Sweden has opted for a lockdown-lite strategy (see part 8). While they've enacted some lockdown measures (shut down grade schools, prohibited gatherings larger 50, instructed elderly people to stay home and young people to work remotely, enacting social distancing rules at restaurants, etc.), they never went into a full lockdown like many other countries.
The hope has been that if this works well, it might provide another workable model for other countries looking to deal with the virus.
It was good to see that this week they continued to make progress reducing their death rate:
Sweden's road to reach this point has been bumpy. The country enjoys a number of unique advantages in fighting the virus that most countries don't have, including an extremely large number of people who live alone, are young and have no children. Despite this, their death rate has been many times worse than other Scandinavian countries (with similar demographics) as well as other countries. However, the hope is that if they can continue to push down their death curve then eventually they might be able to make up this deficit.
How did they do this week? To see, we need to look at deaths per million. Unlike raw deaths, this puts countries of different sizes on an equal playing field. Here's how they did:
As usual they were a bit volatile. But they have clearly now surpassed the United States (versus just three weeks ago when they were doing worse). So they've made progress there.
They still have a long way to go to catch up with their Scandinavian neighbors, as well as best-in-class South Korea and Taiwan (who have approximately 40 times less deaths). But they're moving in the right direction.
It's important to note that if and when they do catch up, it would only be in the narrow time span of that one week. And a fair country comparison would have to also look at total deaths per million since the beginning of the pandemic. There they are still operating at an enormous deficit due to their previous inability to control their pandemic:
This is such a large deficit that some epidemiologists believe it may be insurmountable (at least if an effective vaccine or treatment arrives sooner rather than later).
But no one knows how all this will play out. For example, other countries could experience surges and they might not. Or a vaccine may not be as effective as some are expecting (see section below for more). So the balance could change and we will continue to monitor them and will see.
The other big issue that Sweden needs to overcome is that lockdown lite has thus far been a failure in its main goal: protecting the health of the economy. The country is still expected to plunge into a severe recession (their GDP is projected to be -5.6% in 2020, versus -5.9% for the U.S.). This is a bit better than the average -8.1% projected for the Euro Zone, but is not the large benefit many hoped to see.
But again, if they continue to make progress on the virus, then that could improve as well. We'll continue to watch and see.
Some States Make Progress Fighting Second Infection Wave, While Others Show Ominous Hints of Letting up Too Soon
Over the last four weeks, we watched as the second wave of virus infections swept the Sun Belt (and then spread to other areas of the country over the last three). And we talked about all of the virus control measures that have been put in place, including more than 50% of states with mandatory mask requirements.
As mentioned above, we saw something potentially crucial, last week: infections in the Sun Belt appeared to be leveling off and dropping. If this continues then a drop in deaths would be expected to follow in two to eight weeks as well (since people can take different amounts of time to die, and different locations take different amounts of time to report the information).
How's it looking this week?
Let's start with Florida, which is currently the epicenter for deaths in the U.S.:
On one hand, deaths accelerated this week in an alarming fashion, setting new records virtually every day. And the state hospital system is creaking under the strain. On Wednesday, Florida's Agency for Healthcare Administration reported that ICU Usage at 51 hospitals across the state were at 100% capacity or above. Once a hospital goes over 100% capacity, it can tap into a limited number of general-purpose beds that it can convert.
According to a report from the Department Of Health And Human Services, ICU beds in Miami-Dade County hit 146% capacity.
On the other hand, infections are starting to drop, which is an encouraging sign for the future (with the limitations mentioned in the first paragraphs of this week's report, above).
Unfortunately, Mother Nature is going to make analyzing Florida difficult next week. The state initially announced that starting this Thursday, all public testing centers will be closed for approximately a week due to incoming Tropical Storm Isaias. This was later updated: testing centers on the Gulf coast were not closed, as the storm was projected to stay toward the east.
As we discussed last week, Florida has an unusually long delay in getting test results back (five days or more). So even though the closings in western Florida happened this week, it doesn't affect this week's data. But, for at least the next week, it will probably make accurate comparisons impossible.
How is Texas looking?
This graph is more disturbing. As in Florida, Texas's deaths are surging. But the leading indicator of new infections appears to have stopped improving and may be moving into reverse.
And the actual infections are almost certainly higher, because the state had to shut down some major testing centers starting last Saturday, due to Hurricane Hannah. So this suggests the state may be definitively backtracking.
If this trend continues next week, it could be highly problematic for the health of the population and the state's economy. We'll continue to watch them to see.
In the meantime, this week, in hard-hit Houston, the chief medical officer of United Memorial Medical Center, Joseph Varon, said he'd signed more death certificates in the last week of July than at any point in his career:
"I have been in the middle of earthquakes, in the middle of bombings, in the middle of tsunamis. I’ve been involved in every possible catastrophe that you can imagine. And by far, this is the worst.”
He also criticized the large number of Houston residents who were disregarding health guidelines.
“My motto has been, [that] at the present time I’m pretty much fighting two wars: a war against covid and a war against stupidity. And the problem is that the first one I have some hope about winning. But the second one is becoming more and more difficult to treat.”
How is Arizona doing?
They are looking like the best of the three states, so far. Deaths have leveled out, and infections are dropping. Let's hope they keep this up.
What about North Carolina?
This is more troubling. Deaths are accelerating in North Carolina, as in some of the other states. But, the early progress in reducing infections appears to have stalled and seems to be plateauing. We will continue to watch them closely to see what happens next week.
How about South Carolina?
Clearly, South Carolina is being hit unusually hard with more rapid acceleration of deaths than others. But their future currently looks more promising than Texas's and North Carolina's, with continued progress fighting down new infections.
How about Idaho, which last week was mentioned as a hotspot?
Idaho's graph is unsettling, because it shows both rapidly accelerating deaths and a stalling of progress on infections. And like in Texas, the Idaho health system is under seige. Last week, two intensive care units at hospitals in Idaho's largest healthcare system (St. Luke's Health System) maxed out at 100% capacity. And unlike larger hospitals, these smaller hospitals had little to no ability to surge beyond it.
Dr. Joshua Kern, Vice President of medical affairs for St. Luke’s Magic Valley said.
“In Nampa, they literally had no beds. It would be very difficult in our other facilities because they are big enough that usually the limiting step is more staffing for those beds as opposed to the literal number of beds. But in Nampa where it’s a slightly smaller hospital, we had gotten to the point where we basically had one bed left in the entire hospital at one point.”
So last week, both overloaded hospitals began transporting patients to the larger, main facility in Boise.
This week that larger Boise ICU is now running at 130% of normal capacity. To handle the extra load, the hospital itself is shipping in additional respiratory therapists from as far as two hours away.
Chris Roth, the president and CEO of St. Luke's Health System, said the situation is okay for now but by the end of the month could be dire with the current trend.
"We are taking care of everyone who needs care today, and we will continue to do that. But August will be too late, and we will find ourselves in a situation where that could very well change."
So looking at all the states together, progress has been mixed. Some states appear to be making progress battling down the second wave. Others appear to be stalled or even backtracking, and may have let up on precautions too soon.
Meanwhile, new problems may be surfacing in several new states. On Tuesday, the head of the National Institute of Allergies and Infectious Diseases (NIAID), Dr. Anthony Fauci, warned that percent rate of coronavirus tests is rising in Ohio, Indiana, Tennessee and Kentucky. He added, "That's a surefire hint that you may be getting into the same sort of trouble with those states that the southern states got into trouble with."
The next day, Ohio Gov. Mike DeWine announced limits on county fairs, barring grandstand events, rides and games. This week, Kentucky Gov. Andy Beshear also announced tightening restrictions with bars being shut down for two weeks and indoor dining restricted to 25% of capacity. He also recommended that schools postpone in-person classes until late August. (See later section on proposed school openings).
Georgia's Economy Remains Stuck in a Coma
One of the most important questions for investments (as well as the health of the country) is "what will the shape and speed of the recovery be?" If it's V-shaped and quick, then many investments will be just fine. On the other hand, if it's one of the other shapes (U-shaped, swoosh, etc.), then some or many investments could run into problems. (See part 14 for more information on the possible "recovery shapes" and their ramifications).
To monitor the evolving situation, we've been watching Georgia very closely. It was one of the first states to reopen. So we expected this to make it a useful early indicator of what could be in store for some other parts of the nation.
Back on April 24, Georgia Governor Brian Kemp reopened nail salons, hairdressers, bowling alleys and gyms (as long as they followed state protocols). Then three days later, restaurants and theaters were allowed to reopen. So they've effectively been open for over four months.
How are they doing? Since there's no official government or state data on this, we've been looking at Placer.ai. This is a service which tracks mobile phone usage to different types of businesses to measure foot traffic.
Here are the statistics for the current footfall for Georgia's Covid-19-sensitive industries (versus the same week one year ago). And to see the trend, here are the same stats for every week over the last month.
Apparel: -32.62% (versus -31.72, -29.59%,-29.53%,-15.73% the past four weeks)
Dining: -23.03% (versus -20.92%, -24.91%, -24.17%, -24.47% the past four weeks)
Fitness: -37.02% (versus -38.24%, -37.78%, -32.4% and -39.53% the past four weeks)
Hotels / Casinos: -40.97% (versus -33.16% , -30.14%, -39.90% and -34.18% the past four weeks)
Shopping Centers: -25.5% (versus -20.07% ,-26.39%, -32.31% and -22.91% the past four weeks).
This is not a good report. Virtually every category shows backtracking and the numbers are moving the wrong way, getting worse, rather than improving. The one exception is fitness which barely improved by about 0.25 percentage points. And all of them continue to appear to be at grossly unprofitable and are at unsustainable levels.
If this is an accurate reflection of the economy, then it's not in good shape, and not experiencing a quick, V-shaped recovery.
How is Georgia doing fighting the virus?
On the one hand, deaths plateaued this week (although at a high level). On the other hand, the leading indicator of infections continued to rise slightly. So far this doesn't look likely to push the economic situation in much of a positive direction.
We will continue to monitor Georgia and see how things go next week.
Economy Battered by More Record Unemployment As Progress Goes into Reverse for Second Week in a Row
For the 18th week in a row, the economy was battered by previously unheard-of levels of new unemployment. This week, an additional 1.43 million people reported losing jobs:
The economy needs these unemployment numbers to drop way down (and sustain that drop) to have a chance to heal. But again that didn't happen this week. And for the second week in a row, the numbers moved in the wrong direction. The previous week, only 1.3 million jobs had been lost (and 1.31 million and 1.4 million the weeks before).
If this trend were to continue, it would mean business struggles are increasing. This would be potentially devastating to the chances for a quick V-shaped recovery.
Meanwhile, as we've talked about in the past: at this stage of the crisis, the "continuing claims" is an even more useful statistic to look at in this report. That's because jobless claims give us only half of the picture: how many jobs have been lost. The continuing claims number removes the people who have been rehired from this. And so, that tells us how many are unemployed right now.
This week, continuing claims were 17 million. This number also moved backwards from the prior week (got worse by 867,000 more people). And this caused the largest increase in this metric since early May. On the surface, this seems to corroborate the idea that the economy has been hitting an inflection point recently. But, since this trend is even newer than the raw unemployment figures, we'll continue to watch it to see.
In the meantime, the parent company of Men's Wearhouse (Tailored Brands) reported this week that more layoffs are on the way. The company currently employs 19,300 people, but missed a bond payment and will be preparing to file bankruptcy in the third quarter. It expects to close 400 to 500 unprofitable stores. Even before the outbreak, it was experiencing financial pressure from changing consumer tastes and e-commerce. But just as with the three other retailers we've discussed, who declared bankruptcy in the last few weeks (JCPenney, J.Crew and Neiman Marcus), Tailored Brands was done in by Covid-19. The pandemic caused massive revenue losses and drove a stake through its heart.
On Thursday, the U.S. Commerce Department reported more bleak information.