How Will Covid-19/Coronavirus Affect my Alternative Investment Portfolio? Part 24: August 8th

U.S.'s second death wave continues to climb, but there may be light at the end of the tunnel; Sunbelt states make progress against second wave of infections while all nervously eye potential third wave; The economic stall-out continues at dangerous and unsustainable levels; Economy hammered by more record unemployment as jobs recovery runs out of gas; Financial cliff update: more "jaw-jaw" but still no deal; Biggest U.S. banks report a gargantuan $150 billion of deadbeat consumer and business loans; Only a week into America's back-to-school experiment, and already some school districts are looking shaky; Eli Lilly announces Phase 3 trials of Covid-19 antibody drug for the elderly; Johnson & Johnson is awarded $1 billion by Operation Warp Speed for 100 million doses of its Covid-19 vaccine; Relief/NeuroRX treatment appears to dramatically turn around critically ill Covid-19 patients; Update on my portfolio.

(Usual disclaimer: I'm just an investor expressing my personal opinion and not a registered financial advisor, attorney or accountant. Consult your own financial professionals before making any financial decisions. Code of Ethics: I / we do not accept any money from any sponsor or platform for anything, including postings, reviews, referring investors, affiliate leads or advertising. Nor do we negotiate special terms for ourselves in the club above what we negotiate for the benefit of members.).

Quick Summary

This week, the news was much accelerated compared to its pace 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 Death Wave Continues to Climb But There May Be Light at the End of the Tunnel

For the 21st 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 164,144 (versus 156,772 last Saturday morning).

For the fourth week in a row, the daily death rate moved in the wrong direction and continued in what has become its 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 due to that change).

The overwhelming consensus of economists is that a sustained second wave would sabotage chances of a quick, V-shaped recovery. If this occurs, the recovery would assume a different shape (W-shaped, U-shaped, etc.) which would be slower, involve more damage to health and economy, and potentially cause problems for some or many consumers, businesses and investments. (See part 14 for more information on the possible "recovery shapes" and their ramifications).

So this is not good news.

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, cases have started to taper down:

This could be a potentially promising sign. However, infections aren't as reliable as death statistics because they rely on adequate testing. And as we've discussed in previous weeks, the U.S. suffers from critical shortages of the equipment, staff, and chemicals needed to run them (see part 23).

Still, it does suggest a chance that deaths may start leveling off in the future, as well. But this depends on states successfully fighting their second waves and not accidentally entering into third waves via school openings. We will look at those issues in depth in later sections.

And we will continue to watch the trends next week, and see how they evolve.

Global Round up

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 to GDP).

This week, South Korea looked like this:

This week they beat down their second wave before rebounding a bit. However, the tiny size of their "wave" would be too minuscule to even count as a wave in 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-on lockdown like many other countries.

The hope has been that if this worked well, it might provide another workable model for other countries looking to deal with the virus. Here's how they look this week:

This chart was great to see as Sweden continued to make progress.

But 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) and other countries in general (who don't have these advantages). However, they have hoped that if they continue to push down their death curve, they eventually might be able to make up this deficit.

How did that look 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:

The progress here is remarkable. Three weeks ago, Sweden was doing worse than the United States (which itself is a significant laggard at about 300x higher death rate than top tier countries). This week, Sweden not only continued to greatly surpass the U.S., but also dropped below Australia (which is in the second tier). And it is clearly now in the group of first tier countries. So that was encouraging.

On the other hand, that is only a snapshot of this most recent week, and it ignores the rest of the pandemic. Once we look at the bigger picture, things look like this:

Cumulative death rates per million show a completely different story, with Sweden still the worst of them all, because its previously stratospheric death rate ran rampant for so long. At this point, they still have a long way to go to catch up with other countries (as they have 5.3x the deaths of Denmark, 9.6x deaths of Finland, 57x deaths of Australia, 96x deaths of South Korea and 1965x deaths of Taiwan).

Many health experts believe we are likely will get an effective vaccine or treatment later this year. If so, then there may not be enough time for Sweden to ever catch up. On the other hand, if the pandemic is still running at full speed in 2021, and/or if other countries stumble while they don't, then the Swedish model may still prove itself.

The other big issue for Sweden to overcome is that lockdown lite has thus far been a failure in its main goal: protecting the health of its 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 can sustain their progress on the virus, then that economic outlook could improve as well. For now, it still looks like they've suffered the worst of both worlds (economic and public health). We'll continue to watch and see.

Sunbelt States Make Progress against Second Wave of Infections While All Nervously Eye Potential Third Wave

Over the last 5 weeks, we watched as the second wave of virus infections swept the Sun Belt (and then spread to other areas of the country). And we talked about all of the virus control measures that have been put in place in response, including reinstatements of key portions of lockdowns and more than 50% of states making mask-wearing mandatory.

How did these conflicting factors play out this week?

Last week, Florida and Texas were experiencing a disturbing rise in record-setting deaths, but also appeared to hit an important inflection point. Cases appeared to be tapering off, and as mentioned above, these can act as an early notice of what will happen with deaths 2 to 8 weeks later. So, here's how they look this week:

In this week, both states saw welcome signs of a small drop in deaths.

And at first glance, infections also appear to be dropping in both, too, which would be fantastic. However, as we mentioned last week, the state of Florida shut down testing sites across the eastern part of the state due to tropical storm Isais. So its infection statistics are artificially deflated this week, and possibly next week as well. We'll have to wait at least until then to truly see how it's doing.

The Texas infection data may also be misleading. This week, the Houston Chronicle reported that due to bureaucratic snafus, the state has been unable to report thousands of cases that are being done with antigen testing.

Antigen tests (not to be confused with antibodies tests) are rapid diagnostic tests typically done in doctor's offices, hospitals and standalone clinics, that deliver results in less than 30 minutes. But the problem is that the state of Texas relies on an overloaded, antiquated fax system to compile its data. And it's been unable to sufficiently clear the backed-up system to be able to include the quicker tests.

As a result, an analysis by The Chronicle estimated that "at least tens of thousands of cases... but likely far more" have been omitted from the official stats.

So, the official Texas infection numbers may or may not be helpful in predicting deaths. We'll see.

Meanwhile, state health officials in Alabama claim that the mask mandate that they previously enacted is improving things. And this week, the stats seem to confirm this, with infections dropping:

Deaths are also down from the peak two weeks ago (although it's also possible recent progress could have stalled).

Despite the progress made, some healthcare administrators in Alabama voiced strong concerns about what might happen to state hospitals if school reopenings cause overload due to a third wave. (See later section for more on school reopenings).

Don Williamson, the president of the Alabama Hospital Association, said:

“My fear is if we don’t see some decline in hospital caseloads, we’re going to be really, really challenged when we’re faced with increased caseloads due to schools reopening. I hope I’m wrong, but I don’t know of any biological reason I’ll be wrong.”

Meanwhile, Mississippi grabbed the unwanted record this week for worst (highest) test positivity rate in the nation. They took the title away from Florida by clocking in at an eye-watering 21.7%.

The positivity rate is the percentage of tests that come back positive. And a large number can mean inadequate testing and/or that the disease is spreading rapidly in the community. So it can be a leading indicator of future deaths and this could be an ominous sign for the future. To put it in perspective, the World Health Organization recommends striving for a maximum 5% positivity rate in testing, to keep the virus under control.

How is Mississippi doing for the moment?

Right now, they are doing all right, with falling infections and, just recently, an apparent decrease in deaths.

But here too, some have voiced concerns about school reopenings causing progress to backtrack. Tim Moore, president of the Mississippi Hospital Association, said:

“It’s a bad move to open up all these schools right now. Have you ever tried to socially isolate a second-grader? It’s like trying to keep frogs in a wheelbarrow.”

LouAnn Woodward at the University of Mississippi Medical Center in Jackson, said Thursday that a third wave could push hospitals past the breaking point. “Our ICUs have been full for weeks. It’s a very acute issue we’re facing here.”

On Thursday, the Corinth School District, which re-opened last week, reported that 116 students were quarantined after positive cases were identified on campus. Carey Wright, Mississippi’s superintendent for education, warned the future is uncertain. And when asked if she expected a similar situation at other Mississippi schools, she replied, “Let me just say, I won’t be surprised.”

Meanwhile, the issue of test positivity brings up another question. How are the other states currently doing with that? Here's the latest from John Hopkins University:

Many areas in the country (like hard-hit Miami-Dade in Florida) are targeting a 10% maximum before considering implementing restrictions. John Hopkins University reports that there are currently 13 states that are above 10% and fail the standard. As mentioned above, the World Health Organization goes further and considers 5% to be the maximum acceptable level before a community reopens. By this standard, only 14 states meet the threshold.

Still, the above are just "best guess" guidelines by health officials trying to do their best with limited data. And no one knows the exact percentage of positive tests that will or will not tip a state into a new wave of infections and deaths. So we will continue to monitor and see what happens.

The Economic Stall-Out Continues At Dangerous and Unsustainable Levels

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 almost 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.

For the past four weeks, we've been tracking Georgia's Covid-19-sensitive industries (foot traffic this week versus the same week one year ago). But for some reason, the site did not update the data this week.

So instead, we will look at the national statistics. Here is the change in foot traffic year on year for the industries we were looking at: apparel, fitness, shopping centers, dining, hotels and casinos.

That isn't a pretty picture. About half of the categories slightly improved and about half got slightly worse. But, either way, there was essentially no improvement from last week. And, foot traffic is still down anywhere from -27% to -56%. These levels are very depressed and unlikely to be profitable or sustainable. And nowhere are the numbers showing any of the improvement that would be necessary to experience a quick, V-shaped recovery.

But we will continue to monitor and see how this evolves.

Economy Hammered By More Record Unemployment As Jobs Recovery Runs Out Of Gas

Before the pandemic hit, the U.S. economy had never experienced a week where 1 million people suddenly lost jobs. But, since the pandemic hit, it's been hammered for 18 weeks that way, with no let up. And unfortunately, this week, the pummeling continued for the 19th week in a row. Thursday's jobless claims report showed that 1.19 million new people lost their work and source of income:

The one silver lining is that at least this was slightly less than last week. The past two weeks' progress had actually gone into reverse and each number had been worse than the last. So that turnaround was a positive. But the sustained high levels of damage nonetheless make the odds of a quick, V-shaped recovery continue to look extremely unlikely to many.

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 16.9 million, which was barely improved from the 17 million last week. Just as in the jobless report, the continuing claims number also has the same small silver lining, in that at least it's slightly lower than last week. This number had also gone into reverse. But still, this kind of snail pace improvement isn't enough to allow quick economic recovery to take root.

And unfortunately, as in previous weeks, there were multiple announcements this week about new economic pain on the horizon.

1. 3M, a manufacturing conglomerate, announced 1700 layoffs to allow it to cut costs.

2. L Brands, which owns Victoria's Secret as well as Bath and Body Works, announced it would lay off 850 people or 15% of its corporate workforce.

3. Lord and Taylor, a retailer which was started back in 1826, announced it would be entering bankruptcy. It currently has 38 locations.

4. NBC Universal, a media company which owns NBC, announced layoffs that were vaguely described as "less than 10%" of its 35,000 employees.

5. Delta, a U.S. airline, reportedly asked 3000 flight attendants to take unpaid leave for 4 to 12 months. On top of the 20% of the workforce that was already cut out earlier with buyouts and early retirements, the company this week reported to the state of Georgia that more than 800 employees will be laid off (presumably in Atlanta, its headquarters).

This week, we also received the monthly payroll report. Here were the July results:

On one hand, it showed 1.48 million more people have gotten new jobs from the previous month.

On the other hand, this was comparatively only a drop in the bucket compared to the massive loss in May and far short of what would be needed to have an effective recovery. As a result, the headline unemployment rate barely fell (from 11% to 10.2%).

And as we discussed in part 19, the headline rate doesn't include all of the unemployed. It omits people who have given up looking for work, which which makes sense in normal times. But it doesn't make sense right now, because many people who want work can't even begin to look, because jobs aren't available yet. So, to get the full picture, we need to look at the U-6 rate, which was 16.5%. This also was improved from last month's 18%. However, it still means an unhealthy economy with more than 1 in 7 Americans out of a job.

But, most disturbing about the report was what's happened with progress. The number of 1.48 million new jobs was significantly stalled from the previous month (4.79 million in June and 2.72 million in May). Looking at the picture visually:

We can see that progress is moving in the wrong direction. And the job recovery appears to already be petering out, far short of where it needs to be to get back to pre-pandemic levels.

Previously, we had talked about how state and local governments are also suffering from this pandemic, because unemployed people and closed businesses don't pay taxes. And so they have been hit with drastically lower tax revenues, which is causing significant increases in services and layoffs. How did all that play out in July?

On one hand, it appears at first sight that there was a slight recovery in these payrolls (although still at historically low levels). But unfortunately, this is most likely just an aberration due to an unusual year. Per Adam Ozimek, chief economist at UpWork:

Govt jobs were "up" a seasonally adjusted 301,000 but this is probably largely noise. Normally govt employment declines in July, necessitating a seasonal upward adjustment to keep it level. It declined earlier than normal this year, making the seasonal "wrong".

Meanwhile, CreditCards.com published a survey this week showing how confident consumers feel about paying their credit card debt. Many of the unemployed have used credit cards as a lifeline in the absence of a paycheck. But this isn't a permanent solution.

Disturbingly, the study found that almost half of consumers with credit card debt say they don't have the money to make minimum payments in the next three months without additional government aid.

They found that 30% will be able to pay without new stimulus payments and 18% will be able to pay without a continuation of unemployment benefits.

So the big question is, will these benefits be coming? This is what I call the "financial cliff" and its edge is where the country is currently teetering. We'll talk more about this in the next section, regarding the possibility of additional government support.

Financial Cliff Update: More "Jaw Jaw" but Still No Deal

As we discussed in past weeks, much of the country is teetering on the edge of a very uncomfortable financial cliff. And if it isn't resolved, there could be significant pain coming up for consumers, businesses and investors in virtually every alternative investment asset class (especially real estate and private equity).

Why does the cliff exist? Well, so far, the economy has taken unprecedented amounts of damage through record-setting unemployment. And normally, this would already have resulted in widespread damage across the economy. While there has been substantial damage in specific sectors (like hotels, travel, etc.) this hasn't spread widely yet (for example, into apartments, office, self storage, mobile home parks, business loans, etc.).

That's because, as part of the $3 trillion Covid-19 stimulus package, unemployed workers were receiving an extra $600 per week. Additionally, many citizens got free stimulus checks of $1200 per person (and $500 per child). Also, governments at the federal, state, and local levels have passed moratoriums on evictions and foreclosures to keep unemployed people in their homes.

None of these programs was perfect, and we talked in past weeks about how snafus caused millions to be unable to get deserved and needed aid. But still, these programs have contained untold amounts of damage.

Now however, the problem is that the $600 unemployment payments expired last week, the stimulus payments were a one-time event, and many of the moratoriums have expired or are about to expire. The original thought was that the pandemic would be long gone by now. But obviously, we now realize, that was overly optimistic. And, if the government doesn't pass new stimulus, many consumers will fall down a painful economic cliff. And we can expect them to drag down businesses and investors along with them.

So all eyes have been on Washington for the last couple of weeks to pass a new stimulus law. But last week, the deadline for extended unemployment payments expired and the two political parties were too far apart to come to an agreement.

This was not for a lack of trying.

Previously, one political party (let's call them "Party A") had passed a $3.5 trillion stimulus bill in May. Now, the other political party (let's call them "Party B") had objections to the new bill that Party A put forth, regarding the large size of the aid package and some other components. Despite this, Party B was unable to get enough agreement amongst its own members to pass a competing bill. So it had been negotiating with the White House and Party A to try to bridge the differences and get a law passed with bipartisan support.

So what happened this week?

First, Party A dealt with Party B's size objection by dropping their proposal from $3.5 trillion down to $2 trillion. And they did this by moving up the expiration of the renewed $600 unemployment payments from January 2021 to an earlier date.

However, the opposing party, B, balked because they wanted to see the $600 amount itself reduced, and also said its members would not agree to more than $1 trillion. A suggestion by Party A to split the difference on cost was also rejected as too expensive.

There were other points of contention as well. Party A had originally passed a bill in the lower chamber that would spend $915 billion to provide aid to state and local governments whose revenues have been gutted by the pandemic. Party B was only willing to offer $150 billion and again the parties could not bridge the difference.

So unfortunately, once again, Thursday arrived and there was no deal. And for the second week in a row, the Senate had to adjourn without reaching a deal to address the financial cliff.

On Saturday night, the White House issued 4 executive orders to address some of the issues on its own. However, the Constitution generally gives Congress the sole power to allocate money. So, the legality of the President's authority to do some of this without congressional approval was questioned by some legal experts and is expected to draw a review in the courts. The White House issued four orders:

1. Provide $400 per week in unemployment with 75% coming from the federal government from and 25% from the states. However, the money to pay for this comes from funds that were allocated by Congress for other purposes ($44 billion from the Disaster Relief Fund on the federal side and taking the state money from the $150 billion Coronavirus Relief Fund). And again, under the Constitution and legal precedent, only Congress has the ability to choose where money is spent. So, legal scholars question the legality of this and expect it to be challenged in court. If it does hold up to legal challenges, then an additional factor is that much of the state money has already been spent, so it's uncertain if states will be able to hold up their end. And $44 billion doesn't go very far on the federal side, either. Andrew Husby of Bloomberg Economics says, "Because the plan taps a limited pool of existing funds to extend unemployment benefits, there is a high risk they run short." He estimates a cost of about $30 billion a month at current unemployment, which would mean the money would run out in less than two months (and sooner if a second or third wave accelerates layoffs). Since this would be before the November election, many believe this will have to be addressed by Congress in the end.

2. Delay payroll taxes for workers making under $100,000 a year from September 1 to December 31. A payroll tax cut is a controversial policy that is unpopular and was rejected by both political parties since it's expensive and doesn't help anyone who doesn't already have a job. Here, the White House acknowledged that it does not have the authority to issue a tax cut, so instead chose to delay the due date (which all agree it does have the authority to do). However, this results in a messy situation where workers would be required to pay the deferred taxes back on December 31. And if an employee were to be laid off or quit, the employer would be stuck on the hook and required to cough up extra money to pay for it. As a result, many analysts expect employers to ignore this order.

3. Extend the previous eviction moratorium passed by Congress which recently expired. This moratorium protected people living in buildings with federally backed mortgages. Party A (which is the opposite party of the President) said it supports this action, but warned that the government could not stop here, because it would just shift the problem to landlords and investors. They said they are pushing for government aid either to the landlords, or to the renters so they can make their payments.

4. Suspend student loan payments until December 31. These are currently suspended already under the previous stimulus law, but are set to expire on September 30.

If all the controversial orders withstand court challenge, the total size of this package would be about $150 billion. That amount would be only a small fraction of even the starting point negotiations for Party B ($1 trillion) and an even more minuscule fraction of the bill passed by Party A ($3.5 trillion). Also, both parties had agreed in principal on numerous things that are missing from these executive orders: stimulus checks, Paycheck Protection Program (PPP) funds to help small businesses, help for state and local governments, money for healthcare, more testing, aid for schools etc..

Additionally, it may not even be accurate to call this package a stimulus as it is effectively only moving around a relatively small amount of money that would have been spent elsewhere beforehand.

As such, many analysts believe that on their own, these measures are inadequate to address the financial cliff.

So all eyes remain on Washington to see if the two chambers of Congress and the White House can come up with a more substantial agreement this upcoming week.

Biggest U.S. Banks Report A Gargantuan $150 Billion Of Deadbeat Consumer and Business Loans

This week, the four largest U.S. banks (Citigroup, Bank of America, Wells Fargo, J.P. Morgan) reported in SEC filings that they have at least $151.5 billion of loans that have not made payments on time and have been deferred:

The borrowers ranged from consumers to homeowners to small businesses and were comprised of everything from credit card debt to mortgages. J.P. Morgan Chase offered clients rolling three-month deferrals for as long as a year on residential mortgages. Bank of America offered up to 60 days of deferrals on consumer credit cards.

Earlier in the quarter, the banks announced that there was a lot of uncertainty over how many of these loans would end up being complete duds and losses. They've currently set aside enough cash to cover a little bit over $32 billion from this period.

Only a Week into America's Back-To-School Experiment, and Already Some School Districts Are Looking Shaky

As we talked about in the state section, some health experts are concerned about the possibility of a third virus wave occurring with fall school openings.

Worry about this has been building for weeks. And this concern was escalated by new studies that came out last week strongly suggesting that children spread the virus at least as easily as adults (and children under five spread it 10x-100x more).

The studies were coupled with a CDC report that detailed a coronavirus outbreak at a Georgia YMCA camp this summer. Despite following all state health precautions, 260 students and staff members became infected in about a week, and the entire camp had to be shut down. (Notably, masks were required for adults but not for kids, which many health experts believe was a critical shortcoming).

This week, more data points came back from schools that have been pushing to open early.

On Monday, the state of Kansas reported that 6 out of 11 school leaders who attended a leadership retreat to prepare for the school year had contracted COVID-19. The meetings occurred last week and lasted three days. Symptoms ranged from mild to severe and one person required hospitalization in the ICU.

On Tuesday, teachers at Georgia's largest school district (Gwinnett County Public Schools) returned to elementary, middle and high school campuses to start in-person planning. The next day, 260 district employees were required to quarantine due either to positive tests or to coming in contact with those who had. Of these, 28 were confirmed cases, 67 were suspected and 168 were close contacts. The superintendent, J. Alvin Wilbanks, said the majority were people who caught it from community spread before going to school. Schools are still scheduled to open online learning on August 12 and to begin the first phase of in-person classes on August 26.

After the incident, the Atlanta Journal-Constitution newspaper was flooded with hundreds of phone calls, texts and emails from Gwinnet employees asking to remain anonymous and accusing the district of flouting claimed health policies. Employees said that they had witnessed in-person training and meetings taking place without surfaces being disinfected and wiped down. Masks that were supposedly required at all times were not being worn. And, the school system have been unable to supply promised sanitizers. On Thursday, hundreds of teachers and their families staged a park-in protest at the district office for the school system, parking horns and displaying signs.

At least one teacher, Ashley Newman, quit when she was not given the option to work from home (despite the fact that the school does have online classes). After deciding to leave, Newman told WAGA-TV:

“Back in April, teachers were considered heroes. But that messaging has changed. Now, if you’re not willing to risk your life by going into a building unnecessarily, then you’re lazy.”

Meanwhile, Corinth, Mississippi, opened its schools last week. And by early this week, seven people were infected including a staff member. Then after using contract tracing to determine who had spent more than 15+ minutes within 6 feet of these people, 116 people had to be sent home to quarantine.

Despite what happened, School District Superintendent Lee Childress was undeterred. During a Facebook Live broadcast on Tuesday, he claimed he had no plans to reverse course. “Just because you begin to have positive cases, that is not a reason for closing school.” He claimed that the district would start midday temperature checks. The school already had already put in place temperature checks at arrival as well as scrutiny for coughing, difficulty breathing and loss of smell. But these had not stopped the outbreak from occurring.

In Georgia, masks are optional and administrators claim they allow students to exercise the personal responsibility to remain socially distanced. But this week, pictures across the state of the first days of school went viral, showing throngs of students crammed together in violation of CDC guidelines.

At Etowah High School, more than 100 maskless students crowded together for the traditional first-day photo.

And the same thing happened at Sequoyah High School.

A student at North Paulding High School shared a picture showing many unmasked students backed up in overcrowded hallways and in close proximity to each other.

And, another student from North Paulding posted a similar photo:

The previous week, multiple football players at the high school had tested positive for the disease and a teacher had previously resigned over safety concerns.

After the North Paulding pictures were posted on the Internet, they went viral, and the school suspended the students who had shared them. School principal Gabe Carmona then made an intercom announcement that any student found criticizing the school on social media would face discipline.

Hanah Watters, age 15, was one of the students who was suspended and said:

"I took the photos to raise awareness of how the school ignorantly opened back up. Not only did they open, but they have not been safe. Many people are not following CDC guidelines because the county did not make these precautions mandatory."

After the school system was intensely criticized by the public for the severity of its actions against students, their suspensions were overridden by Georgia state Superintendent Richard Woods. On Friday, he issued a written statement that said, "I want to encourage our districts and schools to operate with transparency, and to ensure that students and staff are not penalized for expressing their concerns."

Meanwhile, many other schools have decided to go the opposite route and start the year with remote-only classes. Last week, we talked about how some of the largest school districts in the country, including Los Angeles, Atlanta and Houston, are starting the year completely online:

This week, the third-largest public school system, Chicago Public Schools, also said it would begin with fully remote learning only. The decision happened after surveys of parents found that large portions were "not yet comfortable sending their children to school". Classes there will start on September 8. And then on November 9, the district will reassess if it's safe to open to hybrid learning in the second quarter, or not.

Meanwhile in Florida, Gov. Ron DeSantis and the Florida Department of Education moved in the opposite direction.

Initially, the Hillsborough County Public School District (which is one of the largest in Florida and eighth largest in the nation) held a public hearing and surveyed parents on how they should open. After doing this and consulting with health professionals (who noted that the county had more than double the recommended 5% positivity rate), they voted to go online only.

However, on Friday, the state said it would not allow the county to exercise that option and would penalize the district tens of millions of dollars if they did not offer in-person schooling.

Eli Lilly Announces Phase 3 Trials of Covid-19 Antibody Drug for the Elderly

Eli Lily announced that it will soon be in final phase 3 human trials of its new Covid 19 antibody drug in nursing homes. A vaccine may not be effective in many elderly people, who are often hit hardest by the disease. So an effective antibody treatment may be especially useful for this otherwise uncovered population.

The drug was co-developed with Canadian start-up AbCellera Biologics, and the antibody doses were isolated from one of the first Covid-19 patients who recovered from the disease in the U.S. The trial will involve 2,400 patients from nursing homes across the U.S., who either already have the disease or are vulnerable to exposure.

If successful, the company plans to manufacture more than 100,000 doses by the end of the year.

It's also working with the Chinese biotech firm Shanghai Junshi Biosciences to develop another antibody candidate.

Johnson & Johnson Is Awarded $1 Billion by Operation Warp Speed For 100 Million Doses of it's Covid 19 Vaccine

Last week, we discussed how Johnson & Johnson's human addenovirus-based vaccine candidate performed well in animal trials. And we also talked about how it has the potential to perhaps be a single shot vaccine. If testing reveals it works this way, it would be much cheaper and less logistically complex to distribute en-masse compared to many alternatives.

This week, the company announced that as long as the trials are successful (which are starting in September), the U.S. government will award them $1 billion to purchase 100 million doses. Additionally, the U.S. has the right to acquire up to an additional 300 million doses later on.

The Department of Health and Human Services says these would be made available at no cost at certain government-designated locations around the country. Additionally, healthcare providers might also provide the shot (and would be allowed to charge a fee for administering it).

The U.S. government awarded the money via Operation Warp Speed. This is a program that intends to dramatically accelerate the testing, manufacturing and ultimate delivery of an effective vaccine or treatment. And Johnson & Johnson had previously received a $456 million award from OWS, bringing its total take to $1.456 billion.

In addition to J&J, Operation Warp Speed has also announced investments in Moderna (up to $500 million), the AstraZeneca/Oxford partnership (up to $1.2 billion), Regeneron (up to $450 million), Novavax ($1.6 billion), CDMO Emergent BioSolutions ($628 million for manufacturing space), Sanofi (previously up to $30 million), Merck & Co. and the Pfizer/BioNTech partnership ($1.95 billion).

Relief/NeuroRX Treatment Appears to Dramatically Turn-around Critically Ill Covid 19 Patients

This week, a partnership between the Swiss company Relief and the U.S.-Israeli company NeuroRX announced some potentially transformative news. Its emergency treatment for critically ill Covid-19 patients (RLF-100) appears to have dramatically reversed the disease in 15 critically ill patients with respiratory failure.

The company describes a 54-year-old man was given the drug: he had initially received a double lung transplant in the hospital (which his body rejected) and then contracted Covid-19. The man had gone into extreme respiratory failure and had needed to be placed on a ventilator.

As we've discussed previously, even with all of the advances we've made to date against the disease, about one-third of people who go on the ventilator still end up dying (see part 19):

However, this seriously compromised man ended up recovering in a remarkable four days. And, the company claims 14 other patients also made remarkable recoveries from dire respiratory failure.

RLF-100 (also known as Aviptadil) is a synthetic form of natural peptide called Vasoactive Intestinal Peptide (VIP) that is known to protect lung tissue. According to NeuroRx CEO Jonathan Javitt, the drug works against the disease by inhibiting the dreaded "cytokine storm". This is an overreaction by the immune system to the disease, which causes the body to attack itself and is believed to be one of the major causes of Covid-19 deaths.

Javitt says:

"The SARS-CoV-2 attacks the body by entering the small population of Alveolar Type II cells in the lung. [And] without Type II cells, the lung cannot transmit oxygen. We know from 50 years of scientific research that VIP binds specifically to the Type II cell and protects that cell against cytokines (inflammatory molecules) and a wide array of toxic and infectious injuries.”

RLF-100 was granted emergency use by the FDA is also in the middle of a combined phase 2 and phase 3 human clinical trial.

If it passes those trials, it would be the most dramatically effective treatment for severe cases of Covid-19 that has been discovered by science to date.

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 some small updates and changes but fundamentally it's the same as last week.

• Treatment: I believe chances are good we'll have an effective medicine 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. Unfortunately, it's also unlikely it can be manufactured and distributed in large enough quantities to immediately treat everyone who wants and needs it. If that happens then it will not be enough to super-charge the economy right away. 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 between rich and poor countries.

• Recession? 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.

• Shape of the recovery: In part 14, we talked about how the shape of the recovery (V-shaped, U-shaped, swoosh-shaped, W-shaped, L-shaped, combo-shaped etc.) will have a huge effect on the ultimate outcome of many different investments. So far, pretty much everything that's happened has been much worse than the consensus expected. Pretty much no one saw the lock-downs coming back in February. More people have been killed than originally projected. 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 millions who need it the most. States are starting to reopen but most individuals are still choosing to stay at home anyway. So unfortunately, I don't think a quick, V-shaped recovery is going to happen. I would love to be wrong. I'm getting more and more concerned about a very damaging "W", which could come from the second and third waves of the virus. Unfortunately this is looking more and more likely. My slim hope is that as of this week, some of the worst hit second wave states are seeing improvement in deaths and infections. So if this can be maintained, a 3rd wave avoided from school openings and the US government also passes a generous stimulus law, then the worst effects of the additional waves could be mitigated. That's a lot of "if's"...so we'll see. And I'll continue to monitor the data very closely. Currently, I still believe we will have a 3 stage combo-shaped recovery that starts off (1) quick as the first "easy" industries and companies come back online (i.e. v-shaped). But (2) this will peter out as the more difficult ones are unable to and a slow swoosh will become apparent. If we get a second (or third) lock down then this step (2) will become W-shaped and more painful. Then in fall/winter, (3) I believe we will probably see a treatment and/or vaccine. And if we do, then that would be the trigger for the 3rd stage and an accelerated recovery. But this most likely won't be a straight-V up recovery because it will probably take time to ramp up production and delivery to enough Americans to get herd immunity. So the boost will be slower and smaller at first. Also if the first generation medicines are significantly less effective than 100% (which many health experts believe will be the case), the boost will be even smaller. (All of this will depends on which treatment makes it that far...which we don't know at this point). But we also could get a little lucky (for example, if the successful vaccine treatment is of a newer type that can be scaled up more quickly or is more effective). If so the 3rd stage boost would be faster. If I'm wrong, and we don't get a treatment or vaccine this year, then the economic damage caused by long-term job loss and wage cuts will most likely be severe and further exacerbate (and slow down) whatever type of recovery we do get. That would probably be ugly for the majority of all investments. So let's hope we don't have to find out how that scenario would play out.

• Investments: If the above is roughly 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 dislocated and 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.

• Strategy: 1) No new investments in real estate or any asset classes that are correlated with the unemployment or the business cycle until there is more clarity about the unknowns concerning the virus and the upcoming financial cliff. 2) Invest in assets that are corona-virus resistant (and uncorrelated with the business cycle). That includes: - 2a) Music royalties (which can actually do better in lock-downs due to increased streaming). 2b) Life settlements (which actually perform better when people are dying faster and in any event isn't directly tied to the business cycle) 2c) Litigation finance (which performs based on winning or losing cases and also isn't directly tied to the business cycle). 3) Continue to hold cash and be patient for dislocated and 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. And, as I mentioned above, the virus getting out of control again in large areas and forcing large lock-downs a second or third time, could easily make things worse.

Next Article

Part 25: August 15th weekly update (and latest update on my personal strategy) Second U.S. death wave shows hints of plateauing; Mixed progress on second infection wave as some states beat it back while others appear to be losing control; Georgia's economic recovery continues to look very hobbled; Newly jobless finally drop below 1 million for a week, but snail pace recovery leaves little reason to celebrate; Consumer sentiment stuck at pandemic lows; The silent small business massacre; Economic recovery in most advanced economies stalls with U.S. near the bottom; Financial cliff update: another week goes by with no relief; Shocking one third of american renters say they will miss their august payment without help; Stock market soars and comes within whisker of record high. "mission complete" or "sucker's rally"?; Wearing a neck gaiter may be worse than no mask at all; Operation Warp Speed awards up to $1.5 billion to Moderna for covid 19 vaccine candidate; Update on my portfolio.

Part 25: August 15th weekly update (and latest update on my personal strategy)