How will Covid-19/Coronavirus Affect my Alternative Investment Portfolio? Part 29: September 13th
Updated: Sep 19
U.S. progress battling second death wave is slow but increasing; World round up; Major stall-out continues in all seven of the planet's largest economies; Escalating virus infections continue in the Midwest (with perhaps a glimmer of hope for a turning point); economy again gets no respite as it's pummeled by massive new unemployment; The financial cliff: more empty showmanship and still no results; "You want herd immunity? You can't handle herd immunity!": the chilling story of Manuas, Brazil; Scientists say "nyet" to test results from Russia's claimed Covid-19 vaccine; Yes, Covid-19 is probably an intestinal disease as well; You can't catch Covid-19 from refrigerated food, right? New study says "not so fast"; Update on my investment strategy.
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As usual there was a lot of new economic and health information this week. And unlike the last two weeks there was a big pickup in new information about the virus.
This article is part of a multi-article series that's been published weekly since the pandemic began back in March 2020. It started with three introductory articles on the virus and its effect on the economy and on alternative investment classes. 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. Progress Battling Second Death Wave is Slow but Increasing
For the 26th 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 197,675 (versus 192,146 last Saturday morning).
In comparison, in early March, pandemic models predicted only 100,000 to 200,000 Americans would die from the disease. Currently, there seems to be no sign that the disease is letting up. As a result, the country is likely to hit 200,000 mark next week and keep going.
Additionally, many statisticians and health analysts believe that certain anomalies suggest that the official death toll is an undercount. If so, then this grim milestone may actually already have been reached/surpassed.
Four weeks ago, the U.S. finally turned the corner in battling a second wave of deaths. How did that go this week?
The labeling makes it difficult to read, so let's zoom in:
Deaths continued to drop and, this week, it appears to be a slightly steeper drop than last week. So that was positive and good to see. On the other hand, the week ended with a bump up in the wrong direction. But that occurred over such a small time-frame that it could also be just statistical noise. We'll see what happens next week.
Either way, deaths still remain higher today than they were at the trough of the first wave.
If we're unable to make clear progress and deaths remain high, then 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.). This 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).
Since this is potentially so important, let's take a look at one of the leading indicators of upcoming deaths: virus infections. Virus infections tend to lead deaths by 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 lie ahead with deaths.
How do virus infections look, this week?
This is roughly similar to deaths. Infections are coming down, but at a slower rate. And they are still higher than the previous trough. So while not positive, this at least was better than last week when progress had ground to a complete halt. So we'll continue to watch and see.
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. 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 was not the best week for South Korea, as they are clearly in a third wave. This wave may have been the inevitable result of the surge of 400 infections that were traced back to a church in Seoul.
The one positive is that their death rate is so extraordinarily low that, compared to other countries, this is still a great result (see chart below for comparison to other countries). At the same time, if they completely lose control of the third wave, they won't continue to be stay in the top tier forever. So we will continue to monitor to see how they do.
Meanwhile, Sweden has opted for a lockdown-lite strategy (see part 8). While they have enacted some lockdown measures (they've shut down grade schools, prohibited gatherings larger than 50, instructed elderly people to stay home and young people to work remotely, enacted 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:
This was not a great week for Sweden, as they gave up all of the gains they had made in the last two. Still, their deaths tend to be more volatile than others, so we'll see how they do.
Sweden's road to 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 worse than other countries in general (who lack these advantages). However, they have hoped that if they continued to push down their death curve, they eventually might be able to make up their deficit.
How did Sweden's cumulative deaths look this week? To see, we need to look at deaths per million. Again: unlike raw deaths, this puts countries of different sizes on an equal playing field. Here's how they did:
Unfortunately, their numbers are still stratospherically bad at about 583 deaths per million. Compared to its next-door neighbors with similar demographic advantages, it's doing almost 6 times worse than Denmark, almost 10 times worse than Finland and 12 times worse than Norway. And compared to the best-of-show countries, it's almost 100 times worse than South Korea and almost 2000 times worse than Taiwan.
Many health experts believe we will likely get an effective vaccine/treatment later this year, and perhaps a rollout to wider populations sometime in mid-2021. If so, then there may not be enough time for Sweden to ever catch up. On the other hand, the Swedish model could still prove itself if other things happen. It's possible we may not get an effective medicine; and/or the pandemic could mutate, leading it to run wilder than expected in 2021; and/or other countries may stumble while Sweden doesn't. We'll continue to watch.
The other big issue for Sweden to overcome is that lockdown lite has thus far failed 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 against the virus, then their economic outlook could improve as well. For now, it still appears that they've suffered the worst of both worlds (receiving more damage to its economy and its public health than have others). We'll continue to watch and see.
Meanwhile, in Europe, some health experts had previously warned that the dropping of travel restrictions would cause an additional wave of virus infections and deaths. And last week, we looked at one country in particular that was alarming: Spain. How does that nation look this week?
This week, Spain continued to rise, early in the week, before falling near the end. However, at this early point, it's too early to conclude that this is a turnaround, as it could simply be noise, as in previous weeks. So we'll watch them next week.
Also this week, another country came into the news: Brazil. One city in the Amazon Rainforest is believed by scientists to possibly be the first to achieve herd immunity. More on this in detail below.
Major Stall-Out Continues in All 7 of the Planet's Largest Economies
Meanwhile, how are the different major economies across the world handling the pandemic? This week, Bloomberg Economics put out a report on the seven most advanced (the G-7), which includes the U.S., Canada, the U.K., Germany, Italy, and Japan. And they created it with mobile data from Google and other high-frequency data sources and here's what it showed:
Unfortunately, none of them are showing a V-shaped recovery, and all are significantly below March levels.
In the top tier are Japan and Germany, which are doing the best. They are stalled out at about -20% versus the pre-pandemic peak. In the second tier are France and Italy, which are at about -30%. Bringing up the rear are the U.S., the U.K., and Canada, which are at about -40%. (which is about twice as bad as the leaders).
The pattern of all seven countries strongly suggests that the easy gains appear to have already been made, and the road forward is getting increasingly difficult. Joachim Fels, a global economic adviser at Pacific Investment Management Co., said, “We have seen peak rebound. From now on, the momentum is fading a little bit.”
Tom Orlik, chief economist for Bloomberg, concluded: “High-frequency data paints a picture of a rapid rebound in the second quarter, and a stall -- with activity still well short of pre-virus levels -- in the third."
When asked what could turn this around he said: "There’s scope for further gains. If the U.S. did as well as Germany at containing the virus and getting back to work -- for example -- that would be a significant positive. To get back to pre-virus normality, a vaccine is required.”
However, there are currently no plans in the U.S. to implement any of the aggressive 3 T-s of virus control (testing, tracing and treatment) that Germany has used. So if Orlik is accurate, normalcy will indeed take a vaccine.
And if so, then, as discussed in previous weeks, there's no guarantee it's even possible to create a successful vaccine. As mentioned above, many health experts are hopeful we may see one or more effective vaccines later this year, and a rollout to the nation by mid-2021.
Warwick McKibbin of the Brookings Institution and Australia National University reiterated this week that such a process would not be instantaneous. “You have to get quite a lot of the population vaccinated before the economic costs start to come down." His model claims that the virus may end up costing the world economy about $35 trillion through 2025.
Escalating Virus Infections Continue in the Midwest (with Perhaps a Glimmer of Hope for a Turning Point)
For the last ten weeks, we've closely watched individual states to get insights on what might happen next at the national level. We saw the second wave of infections (and eventually deaths) start in the Sunbelt and spread across the country. In response, many states put in place virus control measures, including re-instatements of key portions of lockdowns and rules mandating the wearing of masks (in more than 50% of states). And in the last three weeks, we saw Sunbelt states make huge progress in reducing infections and eventually deaths. However, this was accompanied by surges in the Midwest and Northeast, along with warnings that school re-openings might cause additional increases.
What happened this week?
Here's West Virginia:
On one hand, Virginia hit new record highs for both infections and deaths. So that was discouraging. On the other hand, both also dropped off at the end of the week significantly. It's possible that could be noise or maybe they hit a peak and are coming down. There's no way to tell for sure right now so we will just have to continue to watch and see.
How about North Dakota?
Essentially, they look similar to West Virginia. Both infections and deaths hit a high but then fell off quite a bit. So it's possible a peak was reached as well. It's too early to tell for sure though and we'll continue to watch.
This week, Iowa appears to have turned the corner on infections, which are heading down. Let's hope this turned out to be a peak. On the other hand, deaths went down and up and down. So the trend there is hard to interpret. And we'll have to wait until next week to get more clarity.
Kansas also had record highs with new infections this week, but then a sharp drop. Perhaps they have also hit their peak. Deaths on the other hand continue to rise, which was a negative.
We'll see how these evolve, next week.
Economy Again Gets No Respite As It's Pummeled by Massive New Unemployment
Unemployment has historically been one of the most reliable indicators of when the U.S. is entering a recession and when it has recovered. So that's why we look at it so closely every week. And unfortunately, over the last 23 weeks, the economy has been hammered over and over again by massive levels of new unemployment.
This week was no different, with previously unthinkable numbers of new people losing jobs: 844,000.
As we talked about last week, the Labor Department made a change two weeks ago in how they calculate seasonal adjustments. They did this to make it more accurate, but as a result it throws off comparisons to what happened earlier in the pandemic. This is the first week after that change, allowing us to compare accurately to the previous week. And as a result, we can accurately say that this week was worse than last week (when only 881,000 became unemployed). So that was disappointing.
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 within 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 continue to be unemployed right now.
This week, continuing claims rose slightly to 13.4 million (from 13.3 million the week before). And there are still more Americans unemployed than at the height of the Great Recession.
Many economists feel it is unlikely we will see a quick, V-shaped recovery without much faster progress. Rubeela Farooqi, chief U.S. economist at High Frequency Economics, said:
“It is especially concerning that the pace of layoffs has not slowed more materially even though the economy has reopened more fully, and more and more businesses have come back online. The risk now comes from another round of virus outbreaks in coming weeks. The labor market remains at risk of permanent damage which will prolong the path back to pre-pandemic levels.”
Meanwhile, consumer spending makes up the lion's share of the U.S.'s GDP (about 70%) and is a key engine of the economy.
And this week, the Bureau of Economic Analysis put out a report showing that spending appears to be tapering off rapidly (the opposite of what's needed for a quick, V-shaped recovery):
The previous record rise in May, was caused by temporary government stimulus, which has so far not yet been renewed. (See "financial cliff" below for the latest developments on this.)
Matthew Luzzetti, chief U.S. economist at Deutsche Bank AG, said:
“We should not underestimate how critical fiscal stimulus has been for the ... recovery that we’ve had so far. We’ve gotten many of the easy gains of this recovery as we’ve reopened, but as we’re looking forward after that initial bounce, things get much tougher from here.”
The Financial Cliff: More Empty Showmanship and Still No Results
As we've discussed over the last several weeks, tens of millions of unemployed and underemployed Americans are either falling off or teetering on the edge of a huge financial cliff. And if it's not resolved well, there could be significant pain for them, the economy, and also businesses and investors in virtually every alternative investment asset class (especially real estate and private equity).
Why does this cliff exist? Well, so far, the economy has taken unprecedented damage through record-setting unemployment. But, this has been mitigated by the $3 trillion Covid-19 stimulus package passed by Congress at the beginning of the pandemic. Unemployed workers got an extra $600 per week. Many citizens got free stimulus checks ($1200 per adult and $500 per child). And governments at the federal, state, and local levels passed moratoriums on evictions and foreclosures that let unemployed people stay 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. Zach Parolin, a researcher at Columbia University, estimates that together, these programs stopped 17 million people from dropping below the poverty line.
But, more recently, there's been a huge problem. The $600 unemployment payments expired a month ago, the stimulus payments were a one-time event, and many of the moratoriums have ended as well. And unfortunately, the two political parties and the president were unable to come to agreement on a new law.
So an executive order was passed that aimed to mitigate a small part of the damage (such as paying the unemployed an extra $300-$400, depending on the state). But it was done via what's most likely an unconstitutional hack. The program itself has been plagued with logistical problems causing the majority of states to say they have not yet been able to make any payments to those in need.
And, this week, several states announced that they were told by the federal government that the funds have already run dry for the program. So they are expected to be shut down this week (which is a little bit sooner than some expected).
So things on that front are not going well. How about in Congress? Realistically, that's where a solution must originate, since the executive branch does not have the authority to spend money. And one political party had previously passed a $3.5 million bill, which was rejected by the other. So the original party reduced their amount to $2.2 trillion, but the other party would not budge above $1 trillion, and so nothing happened.
This week, the party that wants the smaller price-tagged bill, crafted and introduced an even smaller bill for $500 billion-$700 billion.
However, Senate rules require at least 60 votes to advance a bill to the floor for a final vote. Since the chamber is split, this meant such a bill would require bipartisan approval to even get that far.
And in addition to being worse than the previous (already rejected) offer, the bill also contained several "poison pills" that were known to be unacceptable to the other side. These include tax breaks for private school costs and universal blanket protection for all companies from employee lawsuits over Covid-19 exposure. This caused some to believe that the bill was not a serious attempt at legislation but an example of political showmanship.
Predictably, it failed to achieve the 60 votes necessary to advance to the floor and died an unceremonious death. After the vote, Congress adjourned for the weekend.
So once again, nothing happened. Some political analysts believe that pressure to come up with a compromise will increase as we get closer to the election. Others believe that the best hope for a new law will come in January, after the election most likely reshuffles the dynamics.
"You want herd immunity ? You can't handle herd immunity!": The chilling story of Manuas, Brazil
Herd immunity to a virus happens when a lot of people have taken a vaccine and become immune, or when many have caught it and the majority recover and achieve immunity. Either way, when enough people are immune, the virus can't easily find new hosts to infect, and it then tends to die down on its own.
Herd immunity doesn't happen with every virus, though. For example, common colds mutate too quickly to be affected in this manner, which is why we continue to deal with them year after year.
When herd immunity is possible, the percent of the population that must be immune, in order to stop the virus from spreading to others, can vary widely (from 40% to 70%+).
Obviously, a safe vaccine is the preferable way to stop spread. Catching Covid-19 and not recovering is both the main risk of the "solution" of non-vaccine-produced "natural" herd immunity, and also the main risk of the problem that herd immunity's supposed to solve. Not recovering is what most people aim to avoid in the first place. Some sacrifice is involved in the letting unstemmed infections take their natural course.
However, since we don't yet have an effective vaccine (and it's remotely possible we may be unable to create one) some people have suggested we need to seek natural herd immunity as a strategy.
Instead of trying to fight the virus, why not let it spread to as many people as possible? This would cause the virus to eventually stop spreading on its own. How big (or small) would the sacrifice involved, in such a strategy, be? How many people would die or suffer permanent damage?
The overwhelming majority of health experts claim that such a strategy would result in massive deaths that the country would find unacceptable. So they typically have condemned the natural herd immunity idea as both ineffective and unethical. And if such a health crisis occurred, it would cause even more serious economic damage then we've already sustained.
On the other hand, those in favor of letting the virus run loose, usually quote different statistics, which they claim show that very few people would actually die and the economy would be just fine.
The Brazilian city of Manuas has given us an answer. The city is located in the middle of the Amazon rainforest, and never imposed any lockdown, any strict social distancing rules, or any enforcement of facemasks.
Additionally, Brazilian leadership has voiced loud skepticism for the need for such measures. This includes Brazilian President Jair Bolsonar, who claimed the disease is just a "little cold" and taunted aides who wore masks with sexual orientation slurs (before catching the disease himself).
Perhaps unsurprisingly, Brazil has suffered from the second largest number of coronavirus infections in the world (second only to the United States). And on a deaths per million basis (which is a more fair comparison because it puts countries with different populations on the same playing field), they are also one of the worst in the world (and even a little bit worse than the U.S.):
As a result, the virus has run unchecked in Manaus for many months. And now, some scientists believe the city may be the first one to have experienced herd immunity.
Why do they say this?
After deaths peaked in May to catastrophic levels, they've subsided and are now a fraction of what they used to be.
Additionally, infections appear to have dropped hugely from the peak as well.
So, while the virus is by no means gone, this dramatic reduction has occurred without any new lockdowns. So this could mean that they have indeed hit herd immunity.
On the other hand, other scientists have pointed out the drop could be caused by other reasons. Regardless of what the government does or doesn't do with lockdowns, citizens may have changed their behavior voluntarily when they see a lot of other people dying. If so, then the reduction may actually be caused by people individually choosing to be much more cautious, rather than by herd immunity.
However, no scientific study has been done to determine if individuals' behavior is or is not changing. So for the moment, at least, some scientists believe herd immunity is most likely.
If Manaus has indeed achieved herd immunity, then the results are very interesting.
First, antibody testing has shown that only about 20% of the population was found to have antibodies from the disease. This is far lower than the 40 to 70%+ that is typically believed necessary for herd immunity.
But, as we saw in previous weeks, recent studies strongly suggest that antibodies decline rapidly after a couple of months. And some people never develop immunity via antibodies, but rather by T-cells. If those studies are correct, than 20% is almost certainly an undercount of the actual number of recovered immune citizens, and would probably explain the deficit.
But if Manaus has indeed achieved herd immunity, then the most illuminating thing is the price it cost in human lives to get there. And the answer is horrific.
A skyhigh 3,300 people out of 1.8 million have died (or about one in every 500). This translates to an off-the-charts death rate of about 1,833 per million. If the United States were to experience the same death rate, then 650,715 people would die (or more than 3x the number that have died already).
As a result, Manaus' morgues have overflowed, dead bodies have been piled into refrigerated trucks, and drone footage of mass burial plots has gone viral:
Physician Geraldo Felipe Barbosa of the Pan American Health Organisation said:
"We have paid a very large price to get here. This was not a strategy. It was a tragedy."
Scientists Say "Nyet" To Test Results from Russia's Claimed Covid 19 Vaccine
Last month, Russian President Vladimir Putin claimed with great fanfare that Russia had become the first country to create a vaccine for the disease. He dubbed the drug Sputnik V in reference to the Russian satellite Sputnik, which beat the U.S. to orbit back at the start of the space race in 1957. And Putin claimed he knew firsthand that the vaccine was "quite effective" in establishing immunity, because his own daughter had taken it. Additionally, other high-profile Russians like nationalist politician Vladimir Zhirinovsky and Moscow Mayor Sergei Sobyanin also claimed they took it as well.
However, outside health experts were almost universally skeptical that a vaccine could truly be safely tested in such a short timeframe. And political analysts speculated that Putin, a former KGB agent, may have been using the vaccine for political propaganda, rather than to address the actual health crisis in his country.
In response, the Gamaleya Research Institute (which developed the vaccine in coordination with the Russian Defense Ministry) pushed back and said it would release the test results proving it did work.
This week, more information came out. Phase 3 human trials are beginning this week. The vaccine was financed by Russia's sovereign wealth fund (the Russian Direct Investment Fund), and they claim that if trials go as expected, they will be able to manufacture up to 500 million doses per year. In the meantime, the vaccine is already being made available to teachers, doctors and key workers who want to take it.
However, some teachers unions have voiced unease at the speed at which the vaccine was put out. And, this week, a dozen international scientists reviewed Russia's claimed phase 1-2 test results and were not impressed.
These had previously been published to the prestigious Lancet journal, but according to the scientists, contain a number of "improbable" things that call into question their accuracy.
For example, nine out of nine volunteers that were supposedly challenged with the vaccine somehow ended up with identical antibody titres at days 21 and 28. The researchers concluded that the probability of this happening in reality was "highly unlikely." The same thing happened for 7 out of 9 volunteers challenged with a variation of the virus. And 8 out of 9 other experimental data points that would be expected to be random were exactly the same. Additionally, the scientists claimed the cellular response data was even more fishy and deemed "even less likely."
On top of all this, they say the data that was given was "incomplete" and inadequate to prove effectiveness.
Yes, Covid-19 is Probably an Intestinal Disease As Well.
As we talked about in previous articles, many scientists in the early pandemic incorrectly believed that Covid-19 was a mere respiratory disease. However, the ACE2 cell receptors that it targets exist all over the body and not just in the lungs. And now it's known that it actually attacks a stunning variety of organs, including the heart, the kidney and the brain. And it also attacks numerous systems, including blood vessels and neurological systems. This has led more scientists to begin to believe the stories from the thousands of formerly healthy "long haulers" who claim that the disease has caused them long-term, debilitating chronic fatigue, extreme memory loss and other neurological disorders.
But so far, there haven't been many studies about the gastrointestinal tract. Back in May, a study suggested that viruses collected from the stool of a Covid-19 patient were viable and were able to infect cells when put into a petri dish.
But, this left a lot of unanswered questions. How many infected people end up with a stool infection? And, does the stool infection disappear when the respiratory infection is gone or does it linger long after?
This week, a Chinese study of 73 patients probed further into those questions. They singled out 15 of the patients for closer study (which is a small number). Out of that group, about half also had a Covid-19 gut infection. Interestingly, they found that most had no typical symptoms of such infections, such as nausea, diarrhea and other digestive distress.
But what was particularly shocking were the results of the tests. The stools of multiple patients continued to test positive even after traditional Covid-19 PCR tests (which are administered by a swab deep in the nasal passages) claimed they were negative. One patient's stool test was still positive 30 days after his traditional test went negative.
At this point, it's unknown if these viruses in the stool, found so long after infection, were viable and able to infect others, or not. The researchers used surrogate biomarkers, which they believed indicated they were viable. But this is not 100% proof. So they are planning additional testing to probe further. But if it is accurate, then the testing we are doing now may be prematurely determining that people are free of the disease, leading to many people inadvertently contributing to the ongoing spread.
And either way, it suggests that infections may be much more widespread than formerly believed.
Siew Chien Ng, Assistant Dean of Medicine and Associate Director of the University’s Centre for Gut Microbiota Research, said, “We used to think of SARS-CoV-2 as just a pulmonary or respiratory disease. But over the last couple months, a lot of evidence has emerged that SARS-CoV-2 also affects the intestinal tract.”
The scientists who released the report also say that the U.S. Food and Drug Administration has reached out to learn more about stool testing. So perhaps we may see more of that in the future.
You Can't Catch Covid-19 from Refrigerated Food, Right? New Study Says "Not So Fast"
Numerous health experts have claimed that Covid-19 cannot spread via food. However, the Food and Drug Administration and CDC are a little more circumspect. Currently, their websites both say the exact same thing:
"Currently there is no evidence of food or food packaging being associated with transmission of COVID-19."
Some scientists are starting to wonder about this. In June, an outbreak of Covid-19 in the Chinese capital city of Beijing was traced back to the seafood handlers at the Xinfadi Seafood Market.
And health officials found heavy traces of the virus on the chopping boards of salmon fish handlers. Ultimately, China’s Center for Diseases Prevention & Control Chief Epidemiologist, Wu Zunyou, said the agency "highly suspected" salmon was the source, and the country promptly cracked down on both local and foreign food supply sources.
Seafood trade groups in the United States and Europe howled and cried foul. The National Fisheries Institute, a trade group representing the U.S. seafood industry, warned:
“Do not be misled by sensational reports. The facts are clear. ... Simply stated, there is no connection between seafood and COVID ... It is likely that a worker was the source of contamination.”
The group also circulated comments made by the former head of the U.S. Food and Drug Administration, Scott Gottlieb, who went further and said:
“The idea it hitched a ride on fish is highly implausible. I mean it is absurd. I can’t see any plausible scenario where this virus rode in on a salmon.”
This pushback did not prevent China from ultimately blocking imports from 56 companies located in 19 different countries, where they claimed workers were believed to have suffered Covid-19 outbreaks. And soon after, the outbreak was squashed, and the noise around the controversy died down.
Until now, there hasn't been very much scientific study on this issue. For example, salmon is usually refrigerated to almost freezing before it is shipped. Can the virus even survive that process? And if it can, then how long could it possibly survive in such harsh conditions?
This week, a study was published that looked at all of these questions. Researchers at South China Agricultural University and Guangdong Academy of Agricultural Sciences studied salmon that was chilled to 39°F (which is roughly the temperature at which it's typically transported). The study has not yet been peer-reviewed. But if accurate, then researchers found that the virus not only survived the frigid temperatures, but still remained completely viable after an amazing eight days.
In comparison, other studies have shown that the virus can quickly become unviable in just a few hours in high heat conditions. So, this suggests the refrigeration may actually help preserve the virus, rather than hurt it. And if accurate, this would be consistent with previous studies suggesting the virus is remarkably resistant to cold temperatures.
The researchers also speculated that perhaps it wasn't coincidence that the two earliest known outbreaks of the disease also occurred in seafood markets. The first recognized outbreak of Covid-19 that happened in late 2019 was traced back to the Hunan Seafood Market in the central Chinese city of Wuhan. Then, another outbreak in early 2020 was also traced back to the same market. But at this point, the line of reasoning is just conjecture.
Regardless, if the study is accurate, then the virus can definitely live for long periods of time on food. And refrigeration doesn't immediately kill it (and in fact may be more helpful for the virus, while warmer temperatures thwart/kill the virus). So the researchers also recommended stricter inspection and detection of Covid-19 as a new protocol for all fish.
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 have only minor changes and my strategy is essentially the same as last week.
Treatment: I believe chances are good that 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, until well into 2021. If that happens, then it will not be enough to super-charge the economy right away. And, there may potentially be a huge quality-of-life difference between the treatment-haves and treatment have-nots. This will be divisive and will exacerbate existing tensions and conflicts between rich and poor countries. And it's likely to cause considerable instability in "have-not" countries that could easily cause unexpected global consequences, not just for themselves but also for the U.S. and the world.
Recession? When the U.S. was first hit by the virus many pundits claimed the US economy was so strong it would have little to no effect (or if it did then it would rebound quickly and things would be back to normal in a jiffy). But, after looking at all of the micro data week after week, I said I couldn't see any way the country could avoid plunging into a technical recession (two consecutive quarters of negative GDP growth). Ultimately that happened (-5% in Q1 and -32.9% in Q2). Going forward I believe Q3 will show strong double digit growth. But this will be only because it's measured relative to the chasm of Q2 (i.e. an almost 40% plunge from 2019). And it will come up disappointingly well-short of the amount needed to "break even" to where things were back in January (and well short of a true recovery).
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 virus spreading in the U.S. in any meaningful way. Virtually no one came close to imagining that lock-downs would occur in May. Hundreds of thousands more people have been killed than originally projected. Tens of millions more than expected have lost jobs. The stimulus and unemployment aid was enormous, but has too many unexpected holes and didn't get into the hands of millions who needed it the most. States reopened, but were forced to backtrack. Many businesses have reopened, but customers are staying away. 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/or third waves of the virus. Unfortunately, this is looking more and more likely. My slim hope is that the second wave can be controlled. But if this can be maintained, avoiding a third wave from school openings, Labor Day and cooler weather... and if 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 three-stage combo-shaped recovery that starts off (1) quickly, 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 return, 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 third stage and an accelerated recovery. But this most likely won't be a straight-V recovery, because it will most likely take time to ramp up production and delivery to enough Americans to get herd immunity (not until well into 2021). 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 depend 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 a newer type that can be scaled up more quickly or is more effective). If so, then the third 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 will 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 sub-sectors 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.
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.
Invest in assets that are coronavirus resistant (and uncorrelated with the business cycle). That includes:
Music royalties (which can actually do better in lock-downs due to increased streaming).
Life settlements (which actually perform better when people are dying faster and in any event isn't directly tied to the business cycle).
Litigation finance (which performs based on winning or losing cases and also isn't directly tied to the business cycle).
Invest in coronavirus "portfolio insurance" (i.e. an investment that would be expected to do better the longer coronavirus continues or if it gets worse).
N95 Mask Manufacturing Company. If the pandemic should disappear tomorrow (which I personally am not counting on), I would be happy to take a small loss here given that the rest of my portfolio would be doing extremely well. On other hand, if Covid-19 doesn't disappear and things go as I expect (or worse), then this investment could provide a welcome profit boost and improve my diversification.
Continue to hold cash and be patient for dislocated and distressed opportunities. The worse the economic damage, the more chance there will be for those 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 in some of the other X factors. For example, a new stimulus law 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.
US surpasses 200,000 deaths, as progress on second wave ominously grinds to a halt and reverses; World Round Up; Last week's glimmer of hope fades as Midwest loses control of second wave; Georgia's anemic economic recovery continues; When will the hammering stop? Economy forced to endure more record unemployment; Shocking 60% of business closures since March are now permanent; Financial cliff update: finally some slim hope for a compromise?; Update on my investment strategy. View next article