How will Covid-19/Coronavirus Affect my Alternative Investment Portfolio? Part 36: November 1st
Updated: Feb 8, 2021
Signs show unwanted third U.S. death wave raising its ugly head; Crystal ball: U.S. infections hit record highs and continue to spiral upwards; U.S. State Update: infections and hospitalizations accelerate across record-setting numbes of states; Groundbreaking study finds mask mandates associated with dramatic reduction of Covid-19 hospitalizations; U.S. economy hammered by more record-setting unemployment; Georgia’s bellwether economy: a glimmer of success amid otherwise cloudy to stormy skies; Financial cliff update: senators head home to face their voters with no deal in hand; Shocking 8 million delinquent homeowners could spark foreclosure tidal wave in 2021, larger than the great recession; Millions who can’t afford rent may cause eviction tsunami in 2021; Human trials on Eli-Lilly Covid-19 antibody therapy canceled by feds for ineffectiveness; Safety monitoring committee tells Regeneron to stop using its antibody cocktail on hospitalized patients; Yet another study suggests that antibody defenses to Covid-19 fade startlingly quickly; When will things get back to normal? Fauci predicts mid to late 2021; Update on my portfolio strategy.
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Quick Summary
This week, there was a lot of news on virus-related spread, economic impact, and health and treatment 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.
Signs Show Unwanted Third U.S. Death Wave Raising Its Ugly Head
For the 29th 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 235,453 (versus 229,376 last Saturday morning). Here's a quick summary of what's happened so far:
The first U.S. death wave mainly hit urban areas in the Northeast, started in early March and peaked in early April. Then the country fought it down until early July.
That marked the start of the second death wave, which ran predominantly through the Sun Belt. It peaked in mid-August, before starting falling.
Then since the beginning of October, progress fighting the second wave also stopped, and the U.S. essentially plateaued.
How did things go this week?
Unfortunately, not only was there no progress, but deaths went into reverse with the numbers clearly climbing up. This was a continuation of the trend that we saw at the end of last week. And if it continues, then that means that the country has now entered a third wave of deaths. Unlike the two previous waves, this one is profusely distributed throughout the country, which makes it worse. Still, it’s early, so it’s possible this could be just noise and could reverse itself next week. We’ll be watching this very closely to see.
Crystal Ball: U.S. infections hit record highs and continue to spiral upwards
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. And 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 did virus infections look, this week?
This is a disturbing graph. Not only was there no progress, but new infections are spiking upwards rapidly. And like last week, the U.S. again set unwanted new records for most coronavirus infections since the pandemic began. We’ll take a closer look at what happened in the state section below.
Looking at the broader picture, this means that the third infection wave (which began about four weeks ago) is still uncontained and has continued to strengthen.
As we discussed earlier, this was unfortunately exactly what many health experts predicted. Super-spreader events triggered by Americans not following health precautions on the May 23rd Memorial Day weekend led to the end of all progress in the first wave and triggered the second. And when the same thing happened on Labor Day (September 7th) they warned we could expect a repeat. (See "Forgetting History and Doomed to Repeat It: Will Labor Day Launch the Third Wave, like Memorial Day Kicked Off the Second Wave?" ).
Sadly, 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: Europe Crisis Continues as France and Germany reluctantly lockdown
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 was a good week for South Korea. For the last several weeks, the country has been battling a third wave, which was triggered by an super-spreader event at a church. This week, deaths went down and they also now appear to be in control of their third wave.
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 has been a major factor allowing them to keep their economy open while suffering far less damage than virtually everyone else. And this week again, the South Korean economy continued to remain predominantly open for business.
Meanwhile, Sweden has opted for a lockdown-lite strategy (see part 8). 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.). But, they never went into the full-on lockdown seen in many other countries. And 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 did this week:
This was a bit of an up-and-down week, as Sweden experienced a rise in deaths and then a fall. But their death rate remained low and has come down a lot from where they were previously. So this was good to see.
On the other hand, Sweden's experience is not necessarily 100% applicable to non-Scandinavian countries. One of the main causes of virus spread is through families, and an unusually large number of Swedish households are single-person homes (more than 50%). In contrast, only about one third of households in the U.S. are single-person. And Sweden also has a much larger than usual number of young people living by themselves as well (versus countries like the U.S., which tend to have larger families).
Either way, the biggest problem for Sweden, so far, is that the economic results of their experiment have been dismal.
No economy has been successful staying fully open while allowing the virus to run amok at high rates. And due to Sweden's unusual strategy, the country's death rate up to this point has been stratospheric (versus many other countries that are following more traditional strategies). For example: the country has endured a 6 to 10 times higher death rate than their Scandinavian neighbors with similar demographic advantages. And they have performed 100 to 2000 times worse than top-tier countries like South Korea and Taiwan. (See chart below).
So, due to the uncontrolled spread during much of pandemic, Sweden's overall economic performance has been very poor. The country is expected to plunge into a severe recession this year with GDP projected to be -5.6% in 2020. This is essentially no better than the -5.9% projection for the U.S. In its defense, this would be a bit better than the average -8.1% projected for the Euro Zone. But it's also still an economic failure compared to other countries with models that have controlled the virus well. For example, South Korea is expected to experience only a small blip of a slowdown of less than -1%, which would be 5.6x times less severe than Sweden’s deep recession.
Still, Sweden could turn things around and outperform other countries both economically and healthwise. To do that, they need:
To continue to have success keeping deaths low (which they did this week).
Lots of time to pass, and for other countries to stumble (lose control of the virus and experience a higher level of cases).
If this happens, then in the end, other countries would do worse and it would ultimately prove that Sweden made the right choice with lockdown-lite.
However, there are some impediments to this scenario playing out. 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 to late 2021. If so, then there may not be enough time for Sweden to catch up. But, they are also not completely out of hope. Vaccines and treatments may not end up being effective and/or the virus could mutate and run more rampant than expected in 2021. If so, then the Swedish model could eventually prove itself.
How is Sweden doing, right now? 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 6th week in a row, Sweden has maintained its lead ahead of both the United States and United Kingdom (see more on the U.K. below). So this was good to see.
On the other hand, those two countries are among the worst performers in the world and simply outdoing them isn't that difficult. And Sweden's numbers are still stratospherically bad at about 580 deaths per million (which is about five times worse than the average country in the world).
Compared to its next-door neighbors with similar demographic advantages, Sweden’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. But we will continue to watch Sweden, of course, and see if things turn around.
Across the Baltic Sea, other nations in Europe have been hit by a second wave of deaths. Many health experts said this was the inevitable result of loosening travel restrictions, reopening schools, public weariness/resistance to following health precautions, and also likely due to colder weather. And as the death toll has skyrocketed, authorities have enforced a variety of lockdowns (which we've described in detail in previous weeks).
Spain is a popular travel destination and was one of the first to get hit by the second wave. And they've been battling an increasingly bad situation for more than two months. How did they do this week?
On one hand, deaths have continued to rise. On the other, the rate has been slowing over past weeks. This could mean that virus countermeasures are taking effect, and that they may be getting close to turning things around. Let’s keep our fingers crossed for them and we’ll see next week.
How about the U.K., France, Netherlands and Belgium?
This is a bad chart. All four countries compared here are experiencing accelerating deaths. And if this continues for several more weeks, they’ll eclipse even the record deaths from early in the pandemic (which many had assumed would be the worst that would be seen).
This week, French President Emmanuel Macron said:
“The virus is circulating in France at a speed that even the most pessimistic forecast didn’t foresee. The measures we’ve taken have turned out to be insufficient to counter a wave that’s affecting all Europe.”
He said that ICUs currently have 9,000 patients and, if nothing is done, they will be close to capacity in two months. If that happened, it would trigger hospital overload, and projections estimate that overload would cause the deaths of a staggering 400,000 French people.
On Wednesday, both France and Germany (the two largest countries in the E.U.) announced new nationwide lockdowns for at least a month. Both will be closing bars, restaurants and nonessential services. However, unlike in the first wave, they will be allowing schools and most businesses to continue operating. This is an attempt by French President Emmanuelle Macron and German Chancellor Angela Merkel to strike a balance between protecting public health and striking a debilitating blow to the economy.
U.S. State Update: Infections and hospitalizations accelerate across record-setting numbers of states
For the last several months, we've watched individual U.S. states in order to get insights on what might happen next at the national level. And here's what we saw:
After the Memorial Day weekend (in May), we saw the second wave of infections (and eventually deaths) start in the Sunbelt and then spread to the Midwest and Northeast. 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). And the Sunbelt states made huge progr
Then after the Labor Day weekend (in September) the U.S. reopened schools and cooler weather began in the north. Almost immediately, a third wave began. While this started in just the Midwest and Northeast, it has now spread across every major area of the country. And while earlier waves hit mostly urban areas, this new wave is being led by rural places.
And last week, we saw 38 states showing increased hospitalizations and 14 reporting record highs. This caused public health officials in several areas to plead with the general public to be more careful as they experienced shortages of critical hospital workers. And in many areas, there are now chronic shortages of 29 of the 40 most crucial drugs needed to treat Covid-19.
What happened this week?
Unfortunately, infections and hospitalizations both continued to spike up, as their third waves continued:
As a result, a startling 14 states recorded all-time highs of new infections. And this record number of states also hit that unwanted milestone all at once, which illustrated how the virus is now spreading much wider than ever before.
The states setting new case records included: Arkansas, New Mexico, Wyoming, Colorado, Pennsylvania, Kansas, South Dakota, Illinois, Indiana, Iowa, Minnesota, North Dakota, Ohio and Oregon.
Additionally, Covid-19 hospitalizations increased by an unsettling 10% or more in a 32 different states.
Let's take a closer look at the some of these.
Here’s South Dakota:
Unfortunately, this week, the state again saw escalating new infections and deaths. And once again, both sets of numbers set record highs.
Back in August, we talked about how South Dakota hosted a biker rally that was attended by over 400,000 bikers. Despite warnings by health officials, these attendees were overwhelmingly unmasked and ignored basic virus prevention guidelines.
As one biker said:
“I would rather die than wear a mask. Its a false flag pandemic.”
What was the result of this attitude in South Dakota? Many health officials have expressed dismay over the fact that the U.S. doesn’t have a national test and trace system like other countries do. So we are unable to easily track the repercussions of potential super spreaders events, as others can:
However this week, several economists published a paper describing an ingenious and indirect way to figure out these repercussions. The study, published by the Institute of Labor Economics, described how the researchers used cell phone data to document where the bikers visited and where they came from. (The data was anonymized to protect their privacy). Then they paired this up with data from the Centers for Disease Control and Prevention (CDC) to see the results.
The researchers found that, as many locals had feared, Covid-19 cases rapidly spiked up in the county. A month after the rally, it had increased approximately 6-7 cases per 1000. However, this was only a small part of the overall effect. Most bikers turned out, actually, to be from out of state. So the researchers then tracked what happened when they went back home. And they found that counties with the highest number of biker attendees experienced a 7 to 12.5% increase in Covid-19 cases, versus counties that didn’t.
Even this wasn’t illustrating the total effect, though. The problem with super-spreader events is that they can set up a cascading series of events as each person in the first group of infected people then goes on to infect multiple people, and each one of them infects multiple people, and so on. This is how viruses can spread exponentially ,causing outsized damage with a speed that can be startling.
After looking at the larger picture, the researchers concluded that approximately 250,000 of later U.S. Covid-19 cases could be traced back to that single event. Let’s turn our attention to North Dakota. How did it do this week?
Unfortunately, North Dakota’s week was essentially a mirror image of South Dakota’s. The state experienced escalating infections and deaths and both numbers set record highs.
And as we discussed in previous weeks, some hospitals in the state are experiencing overload and having to transfer patients to other states. That continued this week, and caused North and South Dakota (along with Montana) to now have the unwanted distinction of having the most current covid-19 patients per capita in the nation.
But that wasn’t the only bad news. This week, Christopher Murray, director of the Institute for Health Metrics and Evaluation at the University of Washington announced some stunning additional news:
“North Dakota has the highest Covid-19 death rate per capita in the world right now. At the same time, data compiled from Facebook indicates that the state has the lowest mask-wearing rate in the United States, between 45 and 49 percent.”
On Wednesday, White House Coronavirus task force coordinator Deborah Birx toured the state and offered her own scathing review of mask usage in the state.
“Over the last 24 hours, as we were here and we were in your grocery stores and in your restaurants and frankly, even in your hotels, this is the least use of masks that we have seen in retail establishments of any place we have been.”
Dr. Birx made the remark shortly after participating in a roundtable that included North Dakota Governor Doug Burnham. The governor has refused to implement a mask mandate and has insisted that the decision should be a personal one.
Meanwhile how did Oklahoma do?
It’s starting to sound like a broken record, but Oklahoma experienced the same week as the others: record levels of new infections and deaths.
On Wednesday, the state released new data that showed that it had also shattered new records for Covid-19 hospitalizations. And stunningly, it had done the same thing for 12 of the past 15 weekdays in a row. On Thursday, it again set a new record for hospitalizations with 956. In comparison, the worst of the second virus wave was only 663 in the summer. And the worst of the initial wave was only 560.
On Wednesday, St. Francis, the largest hospital system in Oklahoma, took the unprecedented step of paying for a for a huge, two page ad in the Tulsa World, in which they pleaded with the general public to follow basic virus control guidelines recommended by hope officials. They warned the hospital system is “at a critical capacity,” “headed in the wrong direction,” and “losing ground to a common enemy”:
CEO Jake Henry Jr., said:
“The trend isn’t sustainable for St. Francis. Our folks are just kind of exhausted when they leave their shift after having worn PPE for 12 hours. And we’ve brought in additional nursing staff, but it’s still a stretch as these numbers go up. We thought by using the graphic and letting folks see where we started and where we are today might be a gentle nudge to always wear a mask, wash hands and watch your distance.
Meanwhile, how did Tennessee do this week?
Unfortunately, the state looks like a repeat of the other states we’ve looked at so far. They too experienced rising infections and deaths and set new records for both.
So overall, it was not a great week at the state level. We'll continue to watch them and see what happens next week.
Groundbreaking Study finds mask mandates associated with dramatic reduction of Covid-19 hospitalizations
We've covered numerous studies in the past that have suggested that consistent facemask usage could have a dramatically limit the spread of Covid-19 (and even end the pandemic in as little as eight weeks).
This week, more information came out from a groundbreaking study by researchers from Vanderbilt University. Their home state of Tennessee has inadvertently become a valuable experimental laboratory, due to its somewhat unusual regulatory environment. While the governor of Tennessee has refused to mandate statewide mask usage, he has not prohibited individual counties to make that decision on their own. And so the state is a mishmash of counties that are and are not mandating masks. And this has created a natural experiment, which researchers can use to see the differences between the two methods. The Vanderbilt researchers examined the many hospitals in the states and compared the ones serving counties with mask mandates versus those located in counties that had none. The study has not yet been peer-reviewed, but if it’s accurate, the findings were exciting.
Hospitals in areas where less than 25% of the patients come from counties with mask requirements, have been plagued with 3x more hospitalizations since July 1 (a 200% increase).
In hospitals where 26 to 50% of patients come from counties with mask requirements, hospitalizations have “merely” doubled (a 100% increase).
In hospitals where at least 75% of patients came from counties with mask requirements, hospitalizations are still approximately the same (a 0% increase).
For months, Tennessee Governor Bill Lee has refused to enforce a mask mandate at the state level. He claims “it's a matter of people taking personal responsibility.”
U.S. Economy Hammered by More Record-Setting 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 been much higher than any pre-pandemic week on record.
This week was no different, with 751,000 people newly unemployed. This was down modestly from the 787,000 last week.
Meanwhile, as we've talked about every week for the last several months: "continuing claims" is also a useful statistic to look at within this report. Jobless claims only tell us who lost jobs over the last week, but continuing claims removes the ones who have been rehired. So in theory, continuing claims tells us how many continue to be unemployed right now. In practice though, even this number isn't perfect. The problem is that some people have been unemployed for so long that they've exhausted their unemployment benefits and unhelpfully disappear from view. And the more people who fall out, the more this number will understate the true long-term joblessness. Still, it's better than nothing.
This week, the number fell substantially to 7.76 million versus 8.37 million last week (and 10.02 million the week before). So on one hand, that was a good sign. On the other hand, once again, at least some of the improvement is an illusion. And that’s because some of the change in numbers actually resulted from people who’ve exhausted their federal benefits without being able to get a job. How many of these are there? Well, we know that 387,000 more people are now on the Pandemic Emergency Unemployment Compensation (PEUC) program. This is a program passed by Congress, which gives them up to 13 more weeks of benefits, when state benefits expire. And this increase was