How will Covid-19/Coronavirus Affect my Alternative Investment Portfolio? Part 34: October 18

Updated: Feb 8, 2021

U.S. progress fighting second death wave continues to fizzle out; World round up: Spain may be turning the corner, while rest of Europe skids further out of control; State round up: virus surges further and faster across multiple U.S. regions as winter approaches; How the U.S. pandemic is fundamentally changing: more widespread and more rural; Georgia's bellwether economy finally shows slow improvement, but ominous clouds may loom on the horizon; No rest for the weary: economy takes yet another hit from more massive unemployment; Financial cliff update: one step forward and one step back; History suggests U.S.'s November election unlikely to change total real estate returns; The grueling health battles of Covid-19 "Long Haulers"; Study suggests Covid-19 might live for weeks in winter on cash, touchscreens, door handles and grab rails; Johnson & Johnson's vaccine trial halted for safety concerns as it becomes second adenovirus-based vaccine to go into "time-out"; Eli Lilly's Covid-19 antibody treatment becomes the third medicine halted due to safety concerns; Pfizer joins Moderna in targeting late November for Covid-19 vaccine emergency-use approval; Study finds first generation vaccines are "unlikely" to end the pandemic or get us to herd immunity; Update on my investment strategy.




(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, there was a ton of new virus-related economic and health info.


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 Fighting Second Death Wave Continues to Fizzle Out


For the 27th week in a row, the United States battled the coronavirus called SARS-CoV-2, which causes the Covid-19 disease. And as of Saturday morning, the death toll had climbed to 223,681 (versus 218,685 last Saturday morning).


Nine weeks ago, the U.S. turned the corner on the second wave of deaths, and wrestled it down lower for six weeks. Then, three weeks ago, progress stopped and deaths ominously plateaued. How did things go this week?



For the fourth week in a row, the U.S. made no progress. And virus deaths remained stuck on the same plateau.


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 long-term damage to both 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. In fact, some states are not reporting all of the positive tests (specifically, the antigen tests). But they can still provide a clue of what might lie ahead with deaths.


How do virus infections look, this week?



For the fourth week in a row, infections moved in the wrong direction and increased. So for yet another week, the third wave continues to gain strength.


As we discussed earlier, a third wave was expected by many. Back in May, Memorial Day weekend ended up triggering the ceasing of all progress against the first death wave and ultimately kicked off the second. And many health experts warned that Labor Day (September 7th) could be a repeat if people didn't take better precautions. (See "Forgetting History and Doomed to Repeat It: Will Labor Day Launch the Third Wave, like Memorial Day Kicked Off the Second Wave?" ).


Unfortunately, so far they've been right. Still, we don't know what size this wave will be, or how long it will last. So, we'll continue to watch.


World Round up: Spain May Be Turning the Corner, While Rest of Europe Skids Further Out of Control


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 week was down and up. But overall, they appear to have turned the corner on their third wave and are now beating it down. Still, it's early, so we will continue to monitor.


Either way, the biggest positive for South Korea is that even at their highest and worst peak in all of their death waves, their rates have been extraordinarily low compared to virtually every other country in the world. (See chart below for comparison to other countries.) And this is been a major factor allowing them to keep their economy open and suffer far less damage than everyone else.


Meanwhile, Sweden has opted for a lockdown-lite strategy (see part 8). So the hope is been that if this works well, it might be a workable model for other countries looking to cope with the virus.


Note, Sweden has actually implemented some lockdown measures and applied the 3 T's: 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. Additionally, they have more recently added extensive testing, contact tracing and micro quarantine rules. For example, when a person tests positive, they and their entire family are required to quarantine for 5 to 7 days (although school children receive an exemption). Many point out that these kinds of rules would be difficult to implement in some other countries (like the U.S.).


Still, they also never went into the full-on lockdown seen for various stretches of time in many other countries.


So how is Sweden doing? Here's how they look this week:




Sweden started the week with an uncomfortable bump up, but then ended about the same as last week.


Some of Sweden's achievements are most likely due to unique advantages that other countries can't duplicate. That includes an extraordinarily large number of people who live alone, are young and have no children (versus countries like the U.S., which contain a lot more families).


And when compared to other Scandinavian countries, which have similar demographics, Sweden's road to this point has been extremely bumpy. Their death rate has been many times worse than those neighbors. And it's even been many times worse than poorer countries who have controlled the disease well (and who lack all their built-in advantages). However, Sweden has hoped that if they continued to push down their death curve, they eventually might be able to make up their deficit.


How is Sweden doing there? 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 are the numbers this week:


For the fourth month in a row, Sweden has maintained its lead ahead of both the United States and United Kingdom (see more on the UK below).


On the other hand, those two countries are among the worst performers in the world. So simply outdoing them isn't that difficult. And Sweden's numbers are still stratospherically bad at about 580 deaths per million. This is about five times worse than the average country in the world.


And again, when 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. Also, 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 on deaths, 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 (which is what happened with the U.S. in the graph above).


The final 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 Sweden has suffered the worst of both worlds (receiving more damage to both its economy and its public health than have others). We'll continue to watch.


Meanwhile, in Europe, health experts had previously warned a second death wave was likely to occur, due to the loosening of traveling restrictions, reopening of schools, and public weariness/resistance to following precautions, and possibly also as a result of cooling weather.


And sure enough, the second wave hit numerous countries across the continent, which has caused them to tighten restrictions again. As we discussed in previous weeks, this tightening has included locking down cities that have been affected, restricting specific industries, reducing movement and requiring stronger adherence to antivirus guidelines.


Among the first to get hit was the popular travel destination of Spain. And they've been battling an escalating second wave for two months. How did they do this week?



For the third week in a row, virus deaths in Spain appear to have plateaued. So at least they aren't increasing, even though they remain at record highs for this wave. So perhaps Spain is finally getting on top of things. We'll see how things look next week.


Meanwhile, here's the U.K. and France:



Both had very bad weeks with escalating deaths.


On Wednesday, French President Emmanuel Macron said, “Our intensive care wards are under unsustainable pressure." He also announced a state of emergency and a 9 PM to 6 AM curfew for Paris and eight other big cities. The goal is to try to curb private parties and gatherings by young adults, believed to be one of the biggest sources of spread.


Meanwhile in the U.K., authorities announced that Londoners would be banned from socializing with other households in any indoor setting, starting midnight on Friday.


Meanwhile, the Netherlands also saw an escalation in second wave deaths:



On Tuesday, Netherlands Prime Minister Mark Rutte announced that new infections had topped 7,000 per day and the country was being put on "partial lockdown" for a minimum of four weeks. All cafés, restaurants and bars are now shut down, and mask wearing is now obligatory in all indoor public spaces and schools.


Across Europe as a whole, the pandemic continued to escalate in multiple areas:


Unfortunately, this wasn't a good week for Europe, and the pandemic continued to grow in multiple areas across the continent.


And in the week ending in October 11, the continent hit a record high for number of weekly infections since the pandemic began with almost 700,000 cases.


Jonas Schmidt-Chanasit, a virologist at the Bernhard Nocht Institute in Hamburg, said:

Parts of Europe have lost control. Authorities are no longer able to influence the spread of the virus.”

One example might be the Czech Republic:



They went into a strict lockdown early in the pandemic, and this kept deaths at very low levels. But, when the second wave hit, authorities reacted much more slowly. Despite surges more than a month ago, they didn't act until last week to close cultural and sport facilities. And as deaths continue to mount, they announced this Wednesday that bars and schools are closing as well.


Andrej Babis, the prime minister of the Czech Republic, warned on Thursday that the situation is “catastrophic” and that the country was running out of time to put adequate healthcare infrastructure in place. “We urgently need to build spare capacity. The forecast is not good.”


Almost 10,000 new infections were reported in the country on Thursday, which is the most since the pandemic began. And nearly half of all confirmed infections there have been recorded in the past two weeks.


State Round Up: Virus Surges Further and Faster Across Multiple U.S. Regions As Winter Approaches.


For the last 15 weeks, we've closely watched individual U.S. states to get insights into what might happen next at the national level. First, 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 reinstatements of key portions of lockdowns and rules mandating the wearing of masks (in more than 50% of states).

The Sunbelt states made huge progress, but this was accompanied by surges in the Midwest and Northeast. And in the last couple of weeks, the virus has been surging amid school re-openings, the Labor Day weekend and, perhaps, the colder weather in the north).


What happened this week?


Unfortunately, it was a bad one. A total of 44 states and the District of Columbia reported higher infections than a month ago, in mid-September. Wisconsin, Illinois, Ohio, Indiana, New Mexico, North Dakota, Montana and Colorado all set unwanted records for highest new infections. And unlike the early pandemic, which was confined to coastal cities, the virus is now spreading fastest in rural communities in the heartland. However, few regions appear to be completely spared.


Let's start with Wisconsin:



This is an ugly graph, where everything is going wrong. New virus infections are escalating rapidly. And unlike last week, deaths are also now clearly at record highs as well.


In Wednesday, in a scene reminiscent of the early pandemic, Wisconsin opened a field hospital on the grounds of the Wisconsin State Fair Park outside of Milwaukee. Eventually, this will be able to treat more than 500 patients. The state has also implemented new public health measures in recent weeks.


Wisconsin Department of Health Services secretary-designee Andrea Palm said on Thursday: “We know that this is going to get worse before it gets better. Stay home. Wear a mask. Stay six feet apart. Wash your hands frequently.”


Meanwhile, here's what happened to Montana:



This was also a bad week for Montana. Like last week, new infections continued to climb. But, this week, deaths clearly hit a new pandemic high as well.


Early this week, Yellowstone County, which is the state's most populous county, reported 98 percent of the inpatient beds were occupied. The next day, they reported a record 301 patients hospitalized by Covid-19.


How about Illinois?



Illinois also set a record high for new infections in the pandemic. Unlike the previous two states, at least deaths are lower than in the initial pandemic wave. But on the other hand, they are still climbing and moving in the wrong direction.


How about North Dakota?



Last week's doubly bad trend continued with escalating infections and deaths in North Dakota.


Renae Mock, director of Bismarck-Burleigh Public Health, said on Monday that North Dakota has only about 20 intensive-care unit beds available. And some rural facilities have had to send patients to other states.


However, North Dakota Governor Doug Burgum did not announce any course changes and instead chose to focus on the positive. He emphasized the state’s 7% positivity rate, as “an achievement compared to many, many other states that have never been in the spot to have this low of a positivity rate and have their economy open.”


How about South Dakota?



South Dakota suffered another bad week, with both record levels of new infections and deaths. And they now lead the nation in Covid-19 hospitalizations per capita.


Despite this, South Dakota Governor Kristi Noem claimed this week that "the results have been incredible." She credited the success to the fact that the state “didn’t take a one-size-fits-all approach."


How did Wyoming do this week?



Like other states, infections continued to escalate. On the positive side, deaths continue to stay plateaued.


However, unless hospitalizations get under control, that could also change quickly. And, State Health Officer Alexia Harrist said this week that:

"The effects are straining a health-care system that also has to treat patients with illnesses other than the coronavirus. It’s important to remember that many of Wyoming’s hospitals are small, with just a handful of beds available for the most seriously ill patients."

Hospitalizations tend to be a leading cause of death, and they are ticking up, not just in Wyoming, but across the country:



For example, on Sunday, Indiana, North Dakota, Montana, Utah and Nebraska reported record high numbers of coronavirus-related hospitalizations.


How the U.S. Pandemic is Fundamentally Changing: More Widespread and More Rural


Meanwhile, the spread of the pandemic has fundamentally changed from the way it was even a few months ago. Here is a cumulative region by region graph that shows how the virus has surged and ebbed through different stages of the crisis in different areas:



The original infection wave from the early pandemic was driven by the Northeast (New York and New Jersey) before it subsided. Then, the second wave was driven by the Sunbelt (South), before it also subsided. And now, the third spike is caused by all areas in concert experiencing an increase.


Other things are also different about this wave. Originally, it was the big cities that were hit most by viral infections, but that has changed and now rural America is driving them:



In the United States, cities are strongholds for one political party, while rural America is a voting bastion for the other. So unsurprisingly, the same correlation is also occurring when the data is viewed through a lens of political party control. And the situation has completely flipped from earlier on:



William Schaffner, an infectious disease specialist at Vanderbilt University, said:

“If you take a look from 30,000 feet, most states have rising case numbers with no downward trends to be seen. That is troubling as winter approaches. All of us anticipate Covid is going to increase this winter.”

Michael Osterholm, director of the Center for Infectious Disease Research and Policy at the University of Minnesota, had an even more dire prognosis:

“We are arriving at the Covid-19 perfect storm. The current increases are only the start of a long winter ahead. One bright spot is that hospitals have become far more adept, and have more tools available to treat the virus... And increased testing is catching more cases early... “[But] We’re just getting started. And how bad it’s going to be is dependent on how the population responds. Right now, up to a third of the public doesn’t believe this is real; they believe it’s a hoax.”

Georgia's Bellwether Economy Finally Shows Some Slow Improvement, But Ominous Clouds May Loom On The Horizon


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 also allowed to reopen. So they've effectively been open for almost 6 months.


How are they doing? Since there's no official government or state data on this, we've previously looked at Placer.ai. This is a service which tracks mobile phone usage to different types of businesses to measure foot traffic. And we will look at Georgia's four primary Covid-19 sensitive industries: restaurants, retail, fitness, and hotels.


So in the category of restaurants, let's take a look at Burger King. This is a fast food/low-cost restaurant with considerable drive-in business. So it would be expected to do better in this recession versus a higher cost/non-drive-in oriented restaurants. How is it doing?



On one hand, year on year foot traffic is only -9%. While in a typical recession, this would be considered pretty bad, this is a lot better than many others are doing. So this is a relatively decent result. Still, restaurants are low profit margin businesses with many fixed costs. So an approximate 10% reduction in revenue would be expected to be extremely painful. And, improvement has been choppy. If they can improve a little bit and maintain it, that would be huge. But on the other hand, they so far have not been able to regain the same improvement that they had achieved back in early June. We'll continue to watch them and see.


Let's take a look at retail with Barnes & Noble. This is a bookstore, which might be expected to be suffering at the hands of online bookstores during a pandemic. Here's how they look:



Unfortunately, they are at a very painful and unsustainable looking -29% foot traffic versus a year ago. Sadly these numbers are at bankruptcy-inducing levels.


Next let's look at fitness with Crunch Fitness. This is a discount gym that would be expected to be doing better than other higher cost gyms in a recession. Here's how they look:



On one hand, year on year foot traffic was an unpleasant -11%. And in a low margin, high fixed cost business, this does not look like a comfortable result. On the other hand, we've seen other gyms absolutely decimated. So in comparison, things could be a lot worse. At the same time, they most likely still need to improve to get to profitability. And the current trend of the last several weeks is getting slightly worse (instead of getting slightly better) versus the best performance in early September.


How about hotels?


Holiday Inn Express is a discount hotel that we would expect to be doing better than higher cost alternatives in a recession. Here's how they did:



This is a pretty decent result at only -4% foot traffic versus a year ago. If they could simply maintain this, then they might be in pretty good shape.


So, while there is still considerable pain, this overall has been the best-looking results we've seen for the entire pandemic. On the other hand, the wildcard factor is always present, in the up and down swings of the virus. Getting Covid-19 under control is generally key to improving business. And, surging infections and deaths are usually bad for business, as customers stay away. Here's what Georgia is currently looking like:




Until recently, Georgia has been doing relatively well, with decreasing infections and deaths. However over the last couple of weeks, infections have started to increase. (This is similar to what we've seen across the country. See previous section).


So, Covid may or may not present an obstacle in the upcoming weeks. We'll continue to monitor and see.


No Rest for the Weary: Economy Takes Yet Another Hit from More Massive 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. That's why we examine it very closely every week. And unfortunately, over the last 26 weeks, the economy has been hammered over and over again by massive levels of new unemployment. And each week has set records, each higher than any previous week before the pandemic.


This week was no different, with 898,000 people newly unemployed. Not only was there no improvement from the previous week, but it was actually slightly worse than the 840,000 who lost jobs last week.



However, as we mentioned last week, some of the data was not completely up-to-date. For the third week in a row, California, which is the largest state in the country, didn't report any data to the Department of Labor. This was intentional, so they could catch up on a backlog of filings and improve their systems. So, this week they again repeated the numbers from before this hiatus. And many analysts believe this has the effect of making them look artificially lower. We'll see, next week, when California comes back online.


Meanwhile, as we've talked about every week for the last several months: "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. One small caveat, though, is that some people have been unemployed for so long that they have exhausted their state benefits and fall out of this count. The more people that fall out, the more this number will understate the true long-term joblessness.