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How Will Covid-19/Coronavirus Affect my Alternative Investment Portfolio? Part 25: August 15th

Updated: Feb 8, 2021

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; Number of newly jobless finally drops 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.

(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, a lot of the important developments centered around the second virus wave, the economic effects of the pandemic and latest vaccine and treatment related investments by Operation Warp Speed.

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.

Second U.S. Death Wave Shows Hints of Plateauing

For the 22nd 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 172,132 (versus 164,144 last Saturday morning).

In the previous four weeks, the death rate had stopped its previous improvement and had reversed into a troubling second wave. On the other hand, we saw last week that new infections have started to fade off. This gave hope that perhaps the second wave might be starting to come under control.

What happened this week? Here's how the death curve looked:

Note, the European CDC's chart places the "United States" caption on top of the U.S.'s graph line, which makes it difficult to read the graph. So let's remove that obstacle by zooming in from the start of the second wave to today.

(Another note: what looks like a temporary surge between days 104 and 110 is actually just a statistical aberration that resulted when the CDC changed its accounting methodology and then worked through the backlog caused by that change. So we are ignoring that).

The zoomed-in graph shows that deaths plateaued this week and there was also a tiny drop at the end of the week. If that trend continues, then it's possible we may have hit the crest of the second wave this week, and will see improvements soon. If so, that would be a good thing and we'll continue to monitor.

How are leading indicators looking? 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). These case numbers are not completely reliable due to testing labs' difficulties in many parts of the country with getting results back on time. But they can still provide a clue of what might be happening later with deaths. Here's what they showed this week:

...and again, zooming closer:

The results here look a little mixed. On one hand, there was a slight drop this week, from what turned out to be a plateau last week. So that was good to see. On the other hand, the trend at the end of the week is actually up. If this were to continue, than this could be a sign of an unwanted third wave.

Still, the data is noisy and insufficient to allow us to be certain of a new trend. So we'll watch this next week.

If we are unable to beat down the second wave and/or this turns into a third wave, the overwhelming consensus of economists is that this would sabotage hopes of a quick, V-shaped recovery. Instead, 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).

World round up

How did other countries do this week?

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, South Korea beat down their second wave to almost nothing. And it should be pointed out that the tiny size of their "second wave" would be too minuscule to even count as a wave in the majority of countries, which are dealing with much more severe viral spread. 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 than 50, instructed elderly people to stay home and young people to work remotely, enacting social distancing rules at restaurants, etc.), they never went into the full-on lockdown seen in 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:

They had a mixed week. Early in the week, they looked like they had continued to beat down their death curve. But then later in the week, they rebounded and lost all of the progress that they had made earlier.

Still, their data has been especially noisy in the past, so it's too early to say that this is a start of a new trend. We'll continue to watch.

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 lack 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 cumulative deaths 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:

Unfortunately, Sweden is still looking far worse with a stratospheric number of 572.62 deaths per million, compared to other countries with much lower numbers. And this is because its pandemic ran at an uncontrolled, high rate for a long time. Currently, they have experienced about 10x more deaths than the most similar countries (which are Scandinavia's Finland and Norway). And they have done about 100x worse than South Korea.

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 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 their economic outlook could improve as well. For now, it still looks like they've suffered the worst of both worlds (more damage to the economy and to public health than others). We'll continue to watch and see.

Mixed Progress on Second Infection Wave As Some States Beat It Back While Others Appear to Be Losing Control

Over the last six weeks, we watched as the second wave of virus infections swept the Sun Belt and then spread to other areas of the country. In response, many states put in place virus control measures, including reinstatements of key portions of lockdowns and rules mandating the wearing of masks (in more than 50% of states). How did these conflicting factors play out this week?

Let's start with the good news. Arizona, South Carolina and North Carolina all showed marked improvement on both deaths and infections and continued to beat down their second wave.

On the other hand, Florida had a mixed week:

Infections continued to drop, which looked good on the surface. But as we discussed last week, Florida had shut down many of its testing centers due to a tropical storm. And since it takes five days or more to get back test results in Florida, this artificially depressed last week's data. So next week, we will get a better bead on true infections.

The troubling part of the above chart is that deaths have started rising from their last low point about three weeks ago. Hospitalizations, as well.

This week, Florida made the news for shattering its previous record for weekly hospitalizations, with 3,355 people. Dr. Sadiya Khan, an epidemiologist and assistant professor of preventive medicine at Northwestern University's Feinberg School of Medicine, said:

“These are devastating numbers. In Florida, there has been this ongoing controversy about the severity of the coronavirus crisis...[and] politicization of the issue of wearing masks... Now we’re seeing the results.”

How about Texas?

This is also looking problematic. Infections have dropped, which on the surface looks good. But as we discussed last week, the state has an antiquated and overloaded tallying system that hasn't been able to include all results -- as many as tens of thousands of results -- from antigen tests. (See part 24). So these infection numbers are probably artificially depressed.

And more problematic, deaths appear to have plateaued and are rising slightly. And this week, they set a new high, which is a potentially troubling sign.

This week, Dr. Natasha Kathuria, a Texas ER doctor who works at six different facilities said hospitals are buckling under the strain and care is suffering across the board.

"It's really important to really present the whole picture of how our healthcare system is doing, and it's not doing well. We know how to manage infectious diseases when they are manageable, but when they are no longer manageable — meaning our hospital systems and our healthcare system gets overrun and overburdened with the disease — everybody suffers. And it's not just, 'We've got a lot of COVID-19, and everyone's dying of COVID-19. Patients with cancer are not getting their cancer surgery. People are dying of avoidable, preventable causes of death. [But we're] just doing the basics, just trying to keep people alive as long as we can. We really need to ramp up rapid testing, and I'm not talking about these tests that come back in like seven to 10 days that don't really do much for prevention of spreading this virus on a large scale."

This week, the city of El Paso, Texas, came under criticism after announcing on two different days that they had discovered hundreds of positive cases that were not properly included in the official statistics. The city blamed a contractor hired by the state of Texas called Honu. As a result, the local newspaper, El Paso Matters, announced it considered the city's data to be unreliable and suspended its previous weekly analysis.

Let's take a look at a new state that we haven't investigated before: Kansas. This week, it made the news because people are waiting as long as 14 days in Kansas City to get test results back. To put that into perspective, health experts say that any wait of over 2 to 3 days makes testing useless for both monitoring and controlling the disease.

How does Kansas look?

Even with a case count that is probably artificially depressed due to the testing problems, they experienced a rise this week, and appear to be troublingly close to a new high. This could be a bad sign for deaths in the next 2 to 8 weeks. (It generally takes about 2 to 8 weeks for an infected person to show up as a reported death in statistics, due to differing lengths of time to die, and the delays in recording the death in different areas of the country and depending on the manner of death).

Death numbers have been noisy and, this week, went up significantly before a small drop. It's hard to say where this trend is headed based on the information so far.. So we'll continue to monitor.

How about Georgia?

While Georgia made some slight progress on infections at the end of the week, overall these numbers appear to have plateaued and are roughly back to the same spot where they were about two weeks ago.

Deaths spiked up dramatically this week to a new high, which looks troubling.

Georgia was one of the first states to reopen and was late to shut down. This week, the White House coronavirus tax force warned that Georgia continues to see "widespread and expanding community viral spread" and that current policies are not enough to curtail it. They also "strongly recommended" a mask mandate, which has been staunchly resisted by Gov. Brian Kemp.

Dr. Harry Heiman, a professor at Georgia State University's School of Public Health, said:

"Georgia is very much the poster child for what happens when leadership take a hands-off approach to managing a pandemic."

Georgia's Economic Recovery Continues to Look Very Hobbled

One of the most important questions for investments (as well as for 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 previously looked at This is a service which tracks mobile phone usage to different types of businesses to measure foot traffic.

For four weeks, we tracked Georgia's Covid-19-sensitive industries (foot traffic this week versus the same week one year ago). But last week, we couldn't do this, because the site had not updated its data. And again this week, it's the same.

So we're going to drop that, and instead look at individual businesses in Georgia in four industries: apparel, fitness, dining, and hotels.

For apparel, we'll look at Kohl's. Back in June, it had staged a miracle come-back and year-on-year foot traffic was virtually the same as a year ago. But since then, progress backtracked. How's it looking this week?

The year-on-year foot traffic at Kohl's has improved from last week, but is still a very unhealthy and unprofitable-looking -25.92%.

For fitness, we'll look at Anytime Fitness. They give customers a key to the facility so they don't need the usual large staff of a traditional gym. And we've seen that this has translated into much better performance during this pandemic than a gym like LA Fitness. How did they look this week?

Like Kohl's, Anytime Fitness had done better in June, but since then, their progress is going in the wrong direction. This week, they appear to have continued to stall out, performing slightly worse than last week at -19% year-on-year foot traffic.

For dining, let's take a look at Denny's. They're not known for takeout and so far have done worse than companies like McDonald's, which are. How did they do?

This week, they made remarkable progress and improved dramatically from -33% to -11%. If this continues, then they could be moving into profitable territory.

How about hotels? Here's Holiday Inn Express:

This week, they backtracked to an extremely painful -28% year-on-year foot traffic.

So how's it looking overall? On one hand, Denny's showed remarkable improvement, and if that continues, then they might even return to profitability. On the other hand, most of the other businesses look horribly unprofitable. And the overall recovery of Georgia's Covid-19-sensitive businesses looks very hobbled and weak.

Number of Newly Jobless Finally Drops below 1 Million for a Week, but Snail-Paced Recovery Leaves Little Reason to Celebrate

Before the pandemic hit, the U.S. economy had never experienced a week in which one million people suddenly lost jobs. But, since the pandemic hit, it's been hammered for 19 weeks that way, with no let up.

This week, there was a notable reprieve. The Thursday, the jobs report showed that only 963,000 Americans lost jobs in the last week. So, the country squeaked in under the 1 million mark for the first time. This was also a slight improvement from the 1.19 million last week:

Unfortunately, this kind of snail-paced improvement is unlikely to allow a quick economic recovery anytime in the near future.

Michelle Meyer, head of U.S. economics at Bank of America Corp., said:

"The direction is encouraging, but the level is still high, which means there’s more work to be done. We’re five months after the initial shock in March, and claims at 963,000 are still very much in recessionary territory.”

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 15.5 million, slightly improved from the 16.9 million last week (and the 17 million prior). So at least this number moved in the right direction. On the other hand, the extent of the damage is still devastating. Currently, there are more Americans needing benefits now than at the worst point of the Great Recession. And for another week, those hoping for the type of quick improvement that would support a quick recovery went away disappointed.

Meanwhile, Warner Media announced that on this upcoming Monday it will lay off at least 800 employees at Warner Bros. and HBO.

Consumer Sentiment Stuck At Pandemic Lows

Consumer spending drives the majority of the U.S. GDP, so consumer moods can have a disproportionate effect on the economy. And on Friday, the University of Michigan released its monthly consumer sentiment survey with data through August 12.

It found that consumer sentiment was still depressed in August, and virtually unchanged since the pandemic low back in April.

Additionally, the five-year economic outlook ticked up slightly, but was still at the lowest level since 2014.

Also on Friday, the U.S. Commerce Department released the monthly retail spending report. This kind of spending makes up about one-third of consumer spending (the other two-thirds are from services). And in a welcome breath of fresh air, the report was a good one. While it was weaker than expected, it still showed a rebound to pre-pandemic levels:

So here at long-last, was an economic indicator that has actually experienced a V-shaped recovery.

However, a deeper look into the data shows that the recovery has not been evenly shared. Most of the gains came disproportionately from online sales and grocery stores, which are industries that had not suffered much from the pandemic to start with. But, covid-19-sensitive industries like restaurants and bars are continuing to be significantly depressed:

Stephen Gallagher, chief U.S. economist <