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How will Covid-19/Coronavirus Affect my Alternative Investment Portfolio? Part 39: November 21st

Updated: Feb 8, 2021

Third U.S. death wave continues upwards rise; Crystal ball looking ominous as new infections soar to stunning records; World round up: Sweden locks down harder as Belgium and Netherlands clearly turn the corner (and the rest of Europe shows hints of following); “From Atlanta to Pacific, oh, the flip-flopping is terrific”: Holdout States reverse course and enact lockdowns in the midst of escalating hospitalizations and deaths; CDC recommend Americans stay home for Thanksgiving as Colorado governor advises: “Don’t bring a loaded pistol for grandma’s head”; Georgia’s Bellwether Economy Still On Life Support; Unemployment: Groundhog's Day Continues with Economy Hit yet Again with More Massive Job Loss; Financial Cliff: Will financial chicanery end up being the key that unlocks the gridlock?; Early trial suggests Moderna vaccine 94.5% effective; Pfizer files long-awaited emergency authorization request with the FDA as effectiveness rises to 95% in final results; Pfizer and Moderna vaccine trials criticized by some regulators and scientists for not testing for sterilizing immunity; FDA approves first at-home self-testing kit for Covid-19 as some experts question the usefulness and strategy; A second antibody treatment for Covid-19 is approved by FDA, but again the supply’s too minuscule to change the larger course of the pandemic; Update on my portfolio 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 alot of info on virus spread, economic impact, investment repercussions, as well as more breakthrough news regarding vaccines and treatments.

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.

Third U.S. Death Wave Continues Upwards Rise

For the 30th 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 261,502 (versus 250,000 last Saturday morning). Here's a quick summary of what's happened so far:

  • 1. The first U.S. death wave started in early March. It was overwhelmingly in urbanareas (like New York City in the Northeast). It peaked on April 21st and the country fought it down until July 6th.

  • 2. The second death wave started on July 7th. This ran predominantly through urban areas in the Sun Belt. It peaked on August 1st, before falling until October 8th.

  • 3. Then the third death wave began on October 9th and is currently tracking upwards. Unlike earlier waves, this has been spread across the entire country and rural areas are being hammered worse than urban.

How did things go this week?

Unfortunately, the label on the CDC site is blocking some of the data. So let's zoom in and flip to linear mode to view it more closely. Note that linear mode will make increases look larger, and decreases smaller, than the logarithmic mode, but it still helpful for looking at the trend.

Regardless of the scale used, that’s a virtually straight upward line at the end, and a disturbing graph. This level of explosive increase in deaths hasn't been seen since the dark, early days of the first wave of the pandemic.

Unlike the two previous waves, this third one is widely distributed throughout the country, which many experts say will make it much more difficult to contain and to fight. And as we discussed in late October, this has already caused acute shortages of critical drugs and key medical personnel needed to fight the disease and limit deaths. Still, it’s early and anything is possible. So we’ll be watching this very closely to see what happens.

Crystal Ball Looking Ominous as New Infections Soar To Stunning Records

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?

Even with the label blocking much of the week’s numbers, it’s clear that new infections are not under control, but instead accelerating upward. Let’s zoom in and switch to linear to get a closer look. Again this will make increases look larger than would logarithmic mode, and decreases smaller. But it’ll still be helpful to see the recent trend.

Regardless of the scale, the chart is overall a disaster. Infections are continuing to zoom upward. And once again, new virus cases shattered all previous records, including those from the initial, dark months when the pandemic began. Unfortunately, none of this was a surprise. As we discussed in early September, many health experts predicted this would be the inevitable result of lax behavior over the Labor Day weekend (September 7). And that itself wasn't a difficult prediction to make, since the exact same thing happened after the lax behavior over the Memorial Day weekend (May 23)… which ended all progress against the first wave and triggered the second. (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.

The one silver lining is that the rate of increase decreased ever so slightly at the end of the week, versus the end of the previous week. So perhaps this is the first sign that some of the newer health restrictions are beginning to take effect.

Later below, we’ll take a closer look at what happened at the U.S. state level, to better understand what might happen next. But first, let’s complete our look at the rest of the world for the week.

World Round Up: Sweden Locks Down Harder As Belgium And Netherlands Clearly Turn The Corner (And The Rest Of Europe Shows Hints Of Following)

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 an okay week for South Korea. For the last several weeks, the country has been battling a third wave, which was triggered by a super-spreader event at a church in Seoul. This week, deaths plateaued and then went down slightly. And they are stilllower than they were at the peak of this third wave. So, at this point anyway, the third wave remains under control.

The biggest positive for South Korea is that throughout this pandemic, their rates have been extraordinarily low compared to virtually every other country in the world. (See chart below for comparison to other countries.) 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. How is Sweden doing?

Unfortunately (as I mentioned last week), Sweden is becoming less and less productive to cover in depth every week (like we had been doing previously). Up until recently, they were worth the effort because they had been following a very unorthodox lockdown-lite strategy. And if successful, it might have provided an alternate model for other countries to follow.

But, so far, it's been an failure on multiple fronts. The country has suffered stratospheric deaths per million that are 6-10x worse than Scandinavian neighbors with similar demographic advantages (and 100-2000 times worse than top tier countries like Japan, South Korea and Taiwan). And this has resulted in a catastrophic economic failure (with their economy projected to take a -5.6% pummeling, which is similar to the U.S. and 6x+ worse than top performers like South Korea). Despite this, they still had a faint hope of outperforming other countries if they could keep their deaths low. But, in early November, that hope disappeared with surging infections and deaths. And now they are locking down increasingly each week, and have reached the point where their numbers look much more similar to everyone else’s. You can see more details on the entire Swedish experiment and its results in the November 15 article:

So, Sweden is no longer worth following every week, and instead we’ll only take a peek at them from time to time just to see if anything is changed. They did, however, show up in the news this week, so we’ll briefly touch on that. This week, Swedish Prime Minister Stefan Lofven announced even tighter restrictions in response to the rising infections, hospitalizations and deaths. Lofven announced that public gathering limits have been changed from 50 to 8 people, and warned:

“It is a clear and sharp signal to every person in our country as to what applies in the future. Don’t go to the gym, don’t go the library, don’t have dinner out, don’t have partiescancel!

Meanwhile, the other nations in Europe have been hit by a brutal second wave of deaths. Initially, the continent was bruised badly by the first wave, but used aggressive lockdowns to drive infections and deaths to extremely low levels. So then, countries loosened travel restrictions and reopened schools (despite warnings from many health experts). And, as colder weather hit, the death toll has skyrocketed. So authorities were forced to enact a variety of new lockdowns (which we've described in detail in previous weeks). So how are things going?

First, let’s look at Spain. The country is a popular travel destination and was one of the first to get hit by the second wave. And, in the last two months, they've been battling an increasingly bad situation. But then in the last two week, they plateaued and then dropped, which gave hope that they could be close to getting control of things. How did they do this week?

This week, Spain continued to plateau at the same place they were at last week. So on one hand, this was better to see than an increase. On the other, it would’ve been nice to see more of a drop to clearly indicate that there’s been a turnaround. Still, some countries have had turtle-like turnarounds that ultimately did deliver. So there is still hope that one is happening right now with Spain. We’ll continue to watch them and monitor. How did some of their neighbors in Europe do? Here's the U.K., France, the Netherlands and Belgium.

This is an encouraging graph. Belgium has clearly turned the corner and is heading down. The Netherlands plateaued and also headed down slightly, which was good to see. They may not be too far behind Belgium. The U.K. and France are still experiencing increases in deaths, but at a much lesser rate than last week. And both of them appear to be close to plateauing. So, some countries are looking better than last week, and the continent of Europe also may be on the verge of a turnaround. And if this holds up, it would be great news.

On the other hand, at these high levels of deaths, these countries don’t have too much to celebrate, yet. As an example, on Thursday, the World Health Organization reported that on average, a new person in Europe dies of Covid 19 every 17 seconds. But we’ll continue to monitor them and we’ll see how they're doing.

“From Atlanta to Pacific, oh, the Flip-flopping is Terrific”: Holdout States Reverse Course And Enact Lockdowns In The Midst Of Escalating Hospitalizations And Deaths.

For the last several months, we've watched individual U.S. states to get insights on what might happen next at the national level. And here's what we saw:

  • 1. Second Wave: 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. And the people getting infected were significantly younger than the first wave (many of whom were going to parties and bars). 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 progress and fought the wave back down.

  • 2. Third Wave: Then after the Labor Day weekend (in September) the U.S. also 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 then 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 Also, as discussed in a later section, most of the spread is now being driven by small, casual gatherings like dinner parties, carpools and game nights from lockdown weary (or resistant) citizens. Also, since the wave is spreading much wider spread than before, there are now chronic shortages of 29 of the 40 most crucial drugs needed to treat Covid-19 as well as crucially needed medical personnel in many areas.

What happened this week?

Unfortunately, the hospital shortages continued to spiral further out of control. As of Friday, a pandemic-high record of 80,000 U.S. patients were hospitalized with the disease.

And as a result of the increased load, one in five U.S. hospitals is projected to be facing a staffing crisis in the next seven days.

Health experts warned that a lack of nurses, doctors and other key health workers is dangerous to patients (not just Covid patients, but all patients) who may have to be denied care. And many of these workers have been burning the candle at both ends since March, which has exacerbated the problem and contributed to chronic burnout, high turnover and increased mistakes. And in some serious cases, it’s led to an increase in reports of healthcare worker mental illness and suicide.

Let’s take a closer look at how individual states are doing. How did North Dakota do?

Once again, infections set a record high for the entire pandemic. And deaths also remained elevated. What looked like a potential drop in deaths early in the week turned out to be statistical noise, as it plateaued and climbed upwards by the end of the week. This week, we have access to new state level data on hospitalizations that wasn't easily available previously. And I think this will provide a lot of additional helpful information. So here are the Covid-19 hospitalizations this week, in North Dakota:

We've talked in past weeks about how the hospital situation in North Dakota has spiraled more and more out of control. But, the new graph really makes it easy to see. As we mentioned last week, North Dakota Governor Doug Burgum reacted to the chronic medical worker shortage by enacting extreme CDC emergency measures. Covid-19 positive healthcare workers who are asymptomatic are continuing to work in hospital units. Additionally, those who are believed to be positive, who have not gotten back test results, are also being put back to work.

This week, nurses’ unions pushed back hard and insisted that the governor rollback that decision. And they did so with a frightening and scathing review of the state's and hospitals’ efforts so far:

"Our hospitals and our health care centers across our state are being stretched to the breaking point. Shortages of personal protective equipment have forced many nurses to reuse safety gear intended for single use. North Dakota nurses have been asked to cut corners to make up for the extreme staffing shortages in their hospitals. Nurses are regularly called on to work overtime in specialty areas beyond their training. Because of our failure to respond in a timely manner to the threat of COVID-19 with real, evidence-based mitigation strategies at the state level, we are now desperately trying to play catch-up and find ourselves in a true crisis. Governor Burgum needs to talk with front-line workers and NDNA members for guidance in the state's health care decisions. The governor has so far not reached out to [us]. We need our governor to listen to the voices of nurses and health care professionals in making decisions about COVID-19 in our state."

So far there has been no response from Gov. Bergum. However, he did make a completely different, but very notable announcement. For months, he has loudly refused to follow the recommendations of health officials and mandate the use of masks. But late Friday night, shortly after the state again reported that North Dakota once again leads the nation in infections per capita, he announced on TV:

“Our situation has changed, and we must change with it.”

Starting today, the state will have a mandatory statewide mask mandate. Masks must be worn inside businesses, indoor public spaces and outdoors in public where social distancing can't be maintained. Those who violate this will be fined up to $1000 for the first offense. Bars, restaurants and event venues will also be required to cut capacity and most afterschool activities will be placed on hold.

Meanwhile how is Texas looking?

Unfortunately, both infections and deaths climbed rapidly this week. Infectionset new records for the entire pandemic, and deaths set new records for the second wave.

How about virus hospitalizations?

Sadly, hospitalizations climbed rapidly as well. And they are starting to approach the highs of the second wave, during which some Texas cities had to order trailers to store the dead bodies, because the morgues ran out of room to hold them. And unfortunately, there are already loud echoes of those dark days. El Paso County has been especially hard-hit, and this week, its leaders called in refrigerated trucks to hold corpses after the morgues have filled beyond capacity. And currently, the labor shortage is so severe that the tragedy has drifted into the absurd. The city has confirmed they’ve been forced to hire prison inmates to load Covid-19 victim corpses into refrigerated trucks (paying them $2 per hour). A spokesman for the El Paso County Sheriff said that their work will "end when the National Guard arrives". However, El Paso County Judge Ricardo Samani said ominously:

“It has not been confirmed that they would be able to take over the demand that we have at this time”.

Meanwhile, Texas officials at all levels and branches of the state are bitterly divided on how to best handle the rapidly escalating crisis.

As an example, Judge Ricardo Samaniego issued a stay at home order, which followed the recommendation of health officials and closed nonessential businesses. But, this ran afoul of Texas Governor Greg Abbott's statewide restriction that forbade local areas from making their own rules. And on Friday, a state appeals court-backed Attorney General Ken Paxton overrode the county order.

Afterwards, Paxton gloated and said:

"[Judge Samaniego] is a tyrant who thinks he can ignore state law. [We will not let] rogue political subdivisions try to kill small business and holiday gatherings."

In response, Samaniego pointed out that half of the patients flooding the county's health systems have coronavirus and many are being sent out of state for care due to lack of capacity. And he retorted:

“Here we are, in a really critical situation and he [Attorney General Ken Paxton] says, ‘People, you can go to Thanksgiving’!? It's just a complete disregard for our situation.”

Meanwhile, how is Utah looking?

These are horrific graphs with rapidly escalating cases and deaths. And both are setting new pandemic-wide records. How are hospitalizations looking?

That's also a very unnerving graph. And all too predictably, swamped Utah hospitals warned this week that they may have to ration healthcare if this continues.

For months, Governor Gary Herbert, had refused to follow health official recommendations and had blocked a mask mandate. But last Sunday, he reversed course, and said face coverings will be required statewide in public settings and for people within6 feet of anyone outside their household. This action drew howls from certain business advocacy groups. Jason Brandt, president of the Oregon Restaurant and Lodging Association, claimed:

“We were already hearing from members they were concerned about what another shutdown would do to their chances of staying open. These new rules will trigger an unknown amount of permanent closures.”

Dr. Eddie Stenehjem, an infectious disease physician at Intermountain Healthcare, offered a different perspective on the restrictions:

“Our hospitals are still bulging at the seams. We still have the highest amount of COVID-19 transmission that we’ve ever seen. Family members should be very worried that they’ll catch COVID-19 if they gather in groups, because our community rate is so high that if we gather with people outside of our homes, that is an incredible way to amplify the transmission of COVID-19. And we’re currently at 93% capacity in our ICUs, which is above that critical threshold of 85%.”

And he made a dire prediction:

Add in holiday gatherings, and the state will see more cases and hospitalizations that we just don’t have the room or the capacity to manage.”

How did Iowa do this week?

Unfortunately the state set weekly records for both new infections and deaths. How did hospitalizations do?

Ouch. That’s an awful looking graph with record highs. And early in the week, Iowa doctors and scientists issued dire warnings. As hospitalizations skyrocketed, hospitals have become overwhelmed, causing them to ration critical care and scarce drugs. And as a result, there is not enough to treat every patient. University of Iowa epidemiologist Eli Perencevich said, early this past week:

Sunday morning in the hospital. It’s happening. Hospitals filling. ICUs are filled. Rationing critical care resources and treatments. Nurses and doctors staring at each other in disbelief. We know. This bloody sucks.”

He also warned that, at current growth rates, the game of “passing the patient” to another hospital can’t be played forever:

“The sickest patients are going to need ICU services, yet of those 17 hospitals we only can send those patients to two hospitals, and it won’t take long for those to fill up.

For months, Iowa Governor Kim Reynolds has resisted recommendations for a mask mandate. Even in July, when a leaked White House document said the state needed a mask mandate, she retorted and mocked:

“No, I’m not going to mandate masks. I trust Iowans. I believe in Iowans. There’s no way to enforce it... So it’s just kind of a feel-good.”

This week, in a dramatic 180° turn, Reynolds announced a mask mandate.

“It’s up to all of us so that the worst-case scenarios I just described don’t become reality.” The mandate requires people over the age of two to wear a face covering when they are indoors and will be within 6 feet of people who were not members of their household for more than 14 minutes. However, the rule is fairly limited and comes with a plethora of exceptions. And some health officials criticize these as ineffective, half-way “feel-good” measures. Under the exceptions, people are free to continue unmasked in all schools and colleges, gyms and churches. Additionally, masks are not required in restaurants and bars.

Meanwhile how is South Dakota looking?

Not good. Both infections and deaths increased from the previous week and are at pandemic highs. How are hospitalizations?

That’s also a very distressing chart.

As of Thursday, several South Dakota hospitals reported they had no remaining open beds for adults in their ICUs, including Sanford USD medical center (Sioux Falls), Monument Health (Rapid City), St. Mary’s (Pierre), Prairie Lakes (Watertown) and Sanford Aberdeen.

Jodi Doering, an emergency room nurse in South Dakota, said:

"It’s like a horror movie that never ends."

And she also described surrealistic scenes of large numbers of sick Covid-19 patients refusing to believe the disease is real or deadlyeven up to the point of their own death:

“[We] have Covid-19 patients who need 100% oxygen breathing assistance and who will also swear they don’t have [the disease]. Some patients prefer to believe that they have pneumonia or other diseases, not Covid-19, despite seeing their positive test results. Their last dying words are, ‘This can’t be happening. It’s not real."

South Dakota Governor Kristi L. Noe has continued to refuse to enact a mandatory mask mandate and other health measures recommended by medical experts. And as of this week, she so far has not reversed course.

Meanwhile, Illinois announced this week that virus hospitalizations hit a record. And Governor JB Pritzker announced casinos and museums will close, gyms will stop having indoor classes, and bars and restaurants will not have indoor service. Retailers will have to reduce capacity by 25%.

Increases in cases and hospitalizations that used to take weeks are now happening in days. This is not a stay-at-home order, but the best way for us to avoid a stay-at-home order is to stay home.”

Ohio Governor Mike DeWine announced a curfew from 10 PM to 5 AM to clamp down on retail establishments that are enabling spread of the virus.

“We know that if we reduce the number of people we come in contact every day with, we reduce the chances of getting the virus. We’re not talking about closing any businesses as we did then, but what we are asking every Ohioan to do is limit your contact."

In California, Governor Gavin Newsom announced Monday that he’s pulling the state’s “emergency brake” and reverting back to restrictions similar to the spring shutdown.

Meanwhile, Michigan announced a three week closure of colleges, high schools, workplaces, and in-person dining. And Washington announced that indoor social gatherings with people outside one’s household are now prohibited along with indoor dining at all restaurants and bars. Additionally New Jersey and Philadelphia also announced new restrictions.

CDC Recommend Americans Stay Home for Thanksgiving as Colorado Governor Advises: “Don’t Bring a Loaded Pistol for Grandma’s Head”

Meanwhile, many health experts are worried about the upcoming Thanksgiving holiday. As we talked about last week, much of the spread in this third wave is happening in small private groups, where people drop their guard and incorrectly assume they’re safe. This is pretty much an exact description of the typical American Thanksgiving holiday. Additionally, many students will be returning from colleges and universities for the holiday. These have the potential to exacerbate the situation by becoming a primary source of viral spread in their own households and surrounding communities.

As a result, on Wednesday, the Centers for Disease Control (CDC) recommended that Americans stay home this year for Thanksgiving. Erin Sauber-Schatz, who leads the CDC’s Community Intervention and Critical Population Task Force, said:

“The safest way to celebrate Thanksgiving this year is at home with the people in your household.”

Then, on Thursday, the CDC updated their guidance, suggesting that Americans limit in-person contact and not travel. The CDC's COVID-19 Incident Manager, Henry Walke, said:

“What’s at stake is basically the increased chance of one of your loved ones becoming sick and then being hospitalized and dying."

The CDC is recommending against travel during the Thanksgiving period.”

Governor Jared Polis of Colorado was even more blunt about the possible repercussions of a poor personal choice:

“The more family members that make the decision to self-quarantine, the more likely you're not bringing a loaded pistol for grandma's head.”

Georgia’s Bellwether Economy Still On Life Support

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 about 6 months.

How are they doing? Since there's no official government or state data on this, we've previously looked at This is a service which tracks mobile phone usage to different types of businesses to measure foot traffic. 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 Applebee’s. This is a fast-casual restaurant and would be expected to do better in a recession, versus a higher-priced fine dining restaurant. How is it doing?

Unfortunately, Applebee’s is at a painful -12.5% footfall versus last year. Since restaurants generally have high fixed costs and low profit margins, this is highly unlikely to be profitable. For retail, let’s look at Kohl’s, which is a value retailer that might be expected to do better in a recession than a more upscale retailer.

Although Kohl’s improved from last week, they’re still at a very uncomfortable-looking -17% footfall versus last year.

For fitness, let’s look at Anytime Fitness. This is a nontraditional fitness club where members have a key to the facility. So customers can visit anytime and minimize their contact with others. And this should be an advantage for them over more traditional chains during a pandemic.

Disappointingly, what looked like a chance for a recovery last week turned out to be statistical noise. And they returned to an unprofitable-looking -14% footfall this week (versus last year). Finally, let’s look at hotels. Holiday Inn Express is a budget hotel that would be expected to do better in a recession than a more expensive, middle-of-the-road one.

On one hand, they are looking bad at -9.5% footfall versus the previous year. On the other hand, this is still improved from two weeks ago (although worse than numbers that approached recovery a couple weeks before that). So they seem to be very up-and-down.

Overall, Georgia’s Covid-19 sensitive industries don’t look healthy and still appear to be mostly on life support.

Unemployment: Groundhog's Day Continues with Economy Hit yet Again with More Massive Job Loss

Unemployment has historically been one of the most reliable indicators of when the U.S. has entered a recession and when it’s left one. So that's why we examine it very closely, every week. And unfortunately, over the last 29 weeks, the economy has been hammered week after week by massive levels of new unemployment. This week was no different, with 742,000 people newly unemployed. This was an increase from the 709,000 (adjusted results) newly unemployed last week.

So at this point, we’re eight months into the pandemic. And yet are still getting weekly job losses that are more than three times the pre-pandemic level. Back in June, virtually no one expected the continuing damage to be lasting this long. 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. This week, the number fell to 6.37 million (6.79 million last week). So there was modest improvement, but it was still disappointing to those hoping for a more meaningful drop.

In practice though, even this number isn't perfect (and may make things look rosier than they really are). The problem is that at this stage of the recession, 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.

When that happens, people are added to a new program passed by Congress in the stimulus law called the Pandemic Emergency Unemployment Compensation (PEUC) program. And this gives them an additional 13 weeks of benefits. Again, this may also understate the true joblessness, because if a person stays unemployed for those 13 weeks, then they will disappear from this statistic as well. But even though it’s not perfect, it’s still helpful to look at. And we know that this week, the number on that program grew by 233,000 to 4.38 million.

Regardless of the interpretation of these issues: once again, those hoping for a quick improvement in support of a V-shaped recovery were disappointed.

Meanwhile, there were more signs of additional pain to come.

  • 1. The New York Metropolitan Transportation Authority (MTA) runs the buses, rails and subways for a population of 15 million people and serves about one-third of the mass transit users in the United States. But, during the pandemic, ridership has plummeted. And even under the rosiest projections, they aren’t expecting to recover to even 80% of pre-pandemic levels until 2024. So the MTA announced, this week, that it will be eliminating 9,300 jobs, which is about 13% of its workforce. It's also slashing a startling 40% of subway, bus and rail routes, and increasing ticket prices to attempt to stop the bleeding.

  • 2. Southwest, an airline that has suffered millions of dollars inlosses since the pandemic began, warned that 403 mechanics and other employees will be laid off in January if they can't reach agreements with the unions. This would be the second round of layoff notices in just two weeks.

Meanwhile, the overwhelming consensus of economists across the political spectrum is that sustained economic growth is unlikely unless the virus can be controlled and new stimulus passed:

“It’s alarming, to put it mildly. If this spreads and governments are forced to go back to lockdown measures, this very fragile recovery is sure to fail.
Everything that is happening now, the risk of a resurgence in COVID-19 as well as policymakers walking away from stimulus negotiations — those two factors are what my team had feared would happen.”

And she warned that without improvements on those fronts, the country is likely to suffer a larger recession than it would have, and setting itself up for a dreaded “w-shaped” double-dip recession:

Without improvements on either front, a bigger economic contraction is likely. It wouldn’t be as large as what we experienced in the first half of the year, but it would be a double dip.”

Over the last several months, Congress and the president have not been able to agree on additional stimulus. To see what happened this week, see the next section.

Financial Cliff: Will Financial Chicanery End Up Being the Key that Unlocks the Gridlock?

As we've discussed over the last several months, there's a huge but invisible problem with the economy that's largely unrecognized by the general public. But an overwhelming consensus of economists, analysts (across the political spectrum) and policymakers at the highest levels (including the Federal Reserve) all agree it's essential we find a solution to it. And if we don't, millions of Americans and businesses are destined to fall over a financial cliff with devastating long-term consequences. If this happens, then we may suffer a debilitating double dip recession (the dreaded "w-shaped recovery"). And investors in many alternative investment asset classes (including certain real estate sectors) could be caught up in a world of hurt.

This financial cliff is caused by several things:

  • 1) Impending collapse of crucial safety nets: On December 26, 10-12 million people who lost jobs due the crisis are scheduled to lose critical benefits they're currently depending on. These were provided by two government programs created by the stimulus package passed by the government earlier in the year. The first is the Pandemic Emergency Unemployment Compensation (PEUC), which gives workers, who've been unemployed so long that they've exhausted state unemployment benefits, an additional 13-week lifeline. The second is the Pandemic Unemployment Assistance (PUA) for workers in the gig economy who are otherwise unable to get the same benefits that traditional workers receive when they lose their jobs. If they don't get any additional help, the damage to the economy will be severe, immediate and potentially long-lasting.

  • 2) Foreclosure and rental eviction tsunami: in January 2021, moratoriums on evictions and foreclosures are scheduled to expire. If this happens, then a tidal wave of 8 million delinquent homeowners are set to be foreclosed on and lose their homes (dwarfing the worst of the Great Recession). And millions more delinquent renters (owing an estimated $7.2 billion by the end of the year) will be evicted, as well. As an example, at the beginning of the month, 14 million renters said they had little to no confidence they'd be able to pay, and were at risk of losing a place to live.If the tsunami is allowed to occur, then it would have a devastating effect on real estate and the wider economy.

  • 3) Student loan resumption: The CARES Act suspended payments and interest on $1.7 trillion in student debt during the pandemic. And the Federal Reserve estimated this saved borrowers from paying about $7 billion a month. But on January 1st, this protection is scheduled to be lifted and payment will become due. If this is allowed to occur, it has the potential to exacerbate the other two issues.

All of these things could be solved by Congress and the President agreeing to pass a new stimulus law. However, over the last several months, efforts to do that have been stymied by enough twists and turns to write a novel. (And for those interested in reading that book, you can see all the gory details in the November 15 article).

Wells Fargo economist Mark Vintner summed it up this week, saying:

“You still have a lot of people that are unemployed… We’re still 10 million down, and a lot of those jobs that haven’t come back are in the lower income spectrum, in leisure, hospitality and restaurants. Those people are still going to be unemployed for quite a while; they could use anything to help them. With this spike of cases, there’s a need for the federal government to do something else in way of stimulus. “

And Federal Reserve Chairman Jerome Powell has also called for stimulus in multiple speeches:

“There is still a long way to go. . . . The expansion is still far from complete. Too little support [i.e. stimulus] would lead to a weak recovery, creating unnecessary hardship for households and businesses. Over time, household insolvencies and business bankruptcies would rise, harming the productive capacity of the economy, and holding back wage growth. … [And] a prolonged slowing in the pace of improvement over time could trigger typical recessionary dynamics, as weakness feeds on weakness. …All of us lived through the years after the global financial crisis, and for a number of those years, fiscal policy was very tight. Further support [i.e. stimulus] is likely to be needed to avoid further spread of the virus and help individuals who, with the expiration of the CARES Act payments, are seeing their savings dwindle.

So what happened this week? First, let’s get a quick summary of where things stood at the beginning of the week:

  • 1. One political party (which we’ll call the "large stimulus party") controls the House of Representatives and passed a $3.5 trillion stimulus bill. They later downsized it and passed a $2.2 trillion bill.

  • 2. The other party (which we'll call the "small stimulus party") controls the Senate. Its leadership proposed a $1 billion plan, but could not get enough support from its own members to pass a bill. This was downsized to $500 million, but so far also has insufficient internal consensus to pass a bill.

  • 3. The White House has held a variety of positions, from less than $1 billion to higher than $2.2 trillion. However, with the loss of the recent November election, it withdrew from negotiations the following week (after previously taking the driver's seat). So this meant that negotiations would be left completely up to Congress.

  • 4. The President-elect is from the large stimulus party and is scheduled to be sworn in on January 20. He expressed his support for the $2.2 trillion bill.

  • 5. Control of the Senate will be determined by two January 5th Senate seat runoffs in Georgia. If the small stimulus party wins at least one seat, then nothing will change and they will retain control. On the other hand, if the large stimulus party wins both seats, then a $2.2 trillion - $3.5 trillion stimulus law is expected to be a slam-dunk. Currently, analysts believe the most likely scenario is that seats will be split between the two parties which would result in no change in the lack of new stimulus. However, this is unpredictable and we'll continue to monitor it.

Yesterday, though, a potential breakthrough in the current logjam occurred.

One of the biggest impediments to an agreement is that a large number of the small stimulus party’s Senators are unwilling to support any stimulus at all. And some of these had previously pledged to not increase spending without matching tax reductions. However, tax reductions would be unworkable in the current situation (where the U.S. Treasury is already expected to be severely strained from the loss of income from so many business losses and unemployed workers). So this has contributed to the deadlock.

This week, Treasury Secretary Mnuchin announced that he was instructing the Federal Reserve to return $580 billion of unspent money. This had been previously allocated for coronavirus aid including federal loan guarantees, small business help and other relief programs, but is so far unused. This drew howls of protest from the Federal Reserve, which said it needed the money in case more aid becomes necessary if the pandemic continues to strengthen. However, in the end, Secretary Mnuchin prevailed and the Fed surrendered the funds.

Then, Secretary Mnuchin and the Senate leader of the small stimulus party turned around and announced they would "repurpose" this $580 billion for a new stimulus package. The idea is that this was a “free” $580 billion that was already allocated. So no one could object to using it because it’s not considered new spending.

And some political analysts said this could indeed give sufficient political cover for small stimulus Senators to reverse their position.

At the same time, some government budgetary experts pointed out that technically this concept is accounting chicanery. That's because the nonpartisan Congressional Budget Office (CBO) had previously assumed that the loans would be repaid in full, in the original budget. So, moving the money around like this doesn’t produce any additional savings (which could otherwise be argued to be "free" to be re-spent). And under congressional budget scoring conventions, this is not free money. If Congress passes a law to use it, it will be duly recorded as an additional spending of $580 billion. At the same time, few expect the general public to notice the machinations behind this. So, the oddness of the accounting would be unlikely to make it any less effective politically.

A little later, Secretary Mnuchin announced that the White House would restart stimulus talks with the House Leader of the large stimulus party. So perhaps this little bit of creative accounting is what the process needs to get jumpstarted. We’ll see what happens next week.

Early Trial Suggests Moderna Vaccine 94.5% Effective

This week, there was more good news from science. Moderna announced that its vaccine candidate was found to be highly effective in early results from final phase 3 human trials. This makes it the second vaccine to reach this stage (with Pfizer doing it just last week with their vaccine).

The announcement claims that early results show the vaccine is 94.5% effective. This was slightly higher than even the 90% effectiveness claimed by the Pfizervaccine announcement from last week. And both were stunning positive surprises to analysts who had expected a far lower effectiveness based on animal trials and other early signs.

We've covered the Moderna vaccine in great detail in past articles. But as a reminder, it uses the same radical, new mRNA technology as the Pfizer vaccine shot, which has never previously passed the approval process before. And the first analysis from a 30,000 volunteer trial found that the vaccine prevented virtually all symptomatic infections of Covid-19. Only 5 people who received both doses of the vaccine got sick from the virus, versus 90 in the placebo group.

Unlike the Pfizer release last week, Moderna provided a lot more data that analysts could dig into. And these results promisingly showed that the vaccine was effective in preventing the most serious Covid-19 infections, as well. So this was a good sign. None of the 5 vaccine-takers who got the disease suffered from a severe case. In comparison, 11 of the 90 who received the placebo did.

The trials need 151 people to catch the disease before they can be concluded. And if they continue to show success, the company expects to seek emergency use authorization from the U.S. Food and Drug Administration (FDA) shortly after. Moderna claims that if this happens, it could manufacture 20 million doses by year-end (which would be enough to vaccinate 10 million people). It had previously received $955 billion in funding from taxpayers via Operation Warp Speed to develop the vaccine. And it would receive an additional $1.53 billion for the 20 million doses.

The other advantage the Moderna vaccine has over Pfizer is in distribution. The trials found that it can be safely held in a standard refrigerator for up to 30 days, which makes shipping and storage relatively easy. The company also claims it can be preserved in a standard freezer for up to six months for additional flexibility. In comparison, Pfizer's vaccine has to be stored at a very chilly -94°F. And this requires an expensive logistical network to be built out to accommodate it. If the Pfizer vaccine is stored in a normal refrigerator, it quickly degrades (in about five days). However, the Pfizer vaccine does have one small advantage over Moderna. Its two doses are given only three weeks apart versus four weeks for Moderna. And this is what ultimately allowed Pfizer to release its results a week earlier.

If both Pfizer and Moderna are successful, the two companies together say they expect to produce 40 million doses by the end of the year. This would be enough to cover 20 million people. In comparison, there are over 335 million people in the United States. So this will not be enough to bring the end of the pandemic anytime soon.

Since there are currently about 17 to 20 million health workers, they are expected to get their shots first. Next up would be the most vulnerable: the elderly, those with underlying conditions, etc. Dr. Anthony Fauci, the head of the U.S. infectious disease effort, predicted that the first portion of the general population might get access to a vaccine at the end of April 2021. Still, the ultimate success of any vaccine in stopping the pandemic can’t be fully predicted in advance. A lot will depend on large numbers of the public accepting vaccination, and currently there’s a lot of skepticism that will need to be overcome. But if this happens, Fauci predicts there could be a return to normalcy (and elimination of mask mandates) by as early as Q3 or Q4 of 2021. However, even at this point, none of this is inevitable, and significant hurdles remain. For example, both Pfizer and Moderna have been criticized by some regulators and scientists for not testing for whether they only protect the vaccine taker or if they also stop them from spreading the disease. The latter is called “sterilizing immunity” and without it, the vaccines are unlikely to stop the pandemic. See later section for more on this.

Pfizer Files Long-Awaited Emergency Authorization Request with the FDA as Effectiveness Rises to 95% in Final Results

And this week, there was more good news on the vaccine front. Pfizer received final results on the phase 3 trials of its mRNA vaccine candidate. And the effectiveness rose from 90% to 95%. Both would've been excellent results. But the new one now puts it on par with the 94% shown by Moderna's early results (see previous section).

The FDA approval process could take at least three weeks as the agency probes the trial data along with outside advisors.

This itself is a highly expedited timeframe. In the past, the FDA took, on average, about eight months to review past vaccines before approving them (ranging from four months to a year):

Part of the reason is that some of the safety and quality control steps that the agency normally takes, are allowed to be skipped this time around. For example, usually the FDA would collect the results of the company's quality testing, as well as samples that the agency itself would then test to ensure they meet U.S. standards, before the dose is released to the public. But the emergency use authorization allows them to skip this. Additionally, the FDA would normally be required to inspect the manufacturing plants ahead of vaccine authorization to ensure the manufacturers are creating quality products. The emergency use regulations also allow that to be bypassed as well.

Taking the shortcuts will speed up the process of hitting the short-term goal of early vaccine release. But, it’s possible they could end up being detrimental to the long-term goal of getting as many people as possible trusting the process so that they will get vaccinated. FDA Commissioner Stephen Hahn said, earlier this week, that if emergency authorization is granted, they will post additional documents related to its review to:

Contribute to the public’s confidence in the agency’s rigorous review of scientific data and the appropriate use of authorized products.”

Pfizer and Moderna Vaccine Trials Criticized by Some Regulators and Scientists for Not Testing for Sterilizing Immunity

Assuming the Pfizer and Moderna vaccines prove to be effective, it will be a major advancement and achievement for modern medicine. And this is something that is cause for celebration around the world.

At the same time, some have pointed out that in the rush to get the trials finished as quickly as possible, some important data hasn’t been gathered.

For example, in order to speed up the trial process, the drug manufacturers skipped some steps that would normally have been done. For instance, to make the trials more convenient for the participants, they did not require weekly Covid-19 tests. These are unpleasant, and a weekly test requirement would probably have lengthened the time it took to get the necessary numbers of volunteers. Instead, patients were only swabbed on vaccination days and if they reported symptoms.

But as a result, there’s now no way to know if these vaccines simply protect the vaccine taker or also stop them from spreading the disease. The latter is called "sterilizing immunity" and is important to know. That’s because sterilizing immunity is necessary for the vaccines to be effective in stopping the pandemic. And if these vaccines don’t have that, they are unlikely to end the pandemic. But since this was untested, we have no idea whether the vaccines do this or not.

We do know that monkey trials of the Pfizer, Moderna and AstraZeneca vaccines were not successful in producing sterilizing immunity in the animals. On the other hand, vaccines that are still in testing from Johnson & Johnson, Novavax, and another candidate from Pfizer were able to do this. But then again, animal trials don’t always translate into the same results in human trials. So the ultimate effects on humans are still unknown.

As a result, some regulators and scientists are calling for Pfizer and Moderna to do more (and for other companies to improve their own trial protocols).

The Director of Research at the European Union's Regulatory Agency for Medicine (the European Medicines Agency or EMA) is Sam Fazeli. And he wrote an opinion piece in Bloomberg this week, saying:

"Trials that show vaccines prevent Covid-19 symptoms haven’t established whether they also prevent transmission of the virus. That’s a problem. ... At this point, the only way to find out whether vaccines confer sterilizing immunity is by doing another trial. Given the stakes involved, this might be warranted. Meanwhile, companies that are about to start a late-stage trial, such as Novavax, have the time and opportunity to include weekly swab tests in their protocols. ... Meanwhile, where does that leave us? It’s clear we’ll all be better off withvaccines than without them, but if the virus can still spread and possibly mutate, then we can’t let our guard down, even when shots are distributed. Absent widespread adoption of the vaccine, our best defense remains mask-wearing and other mitigation efforts, as well as rigorous testing and tracing regimes to better identify and stifle outbreaks. The vaccine news has been much better than anyone dared to imagine, but without knowing even more about what the vaccine can do, the hard work is still ahead of us in the war against Covid-19.”

FDA Approves First At-Home Self-Testing Kit for Covid 19 as Some Experts Question the Usefulness and Strategy.

Last week, the FDA approved the first test that can be taken at home to detect Covid-19. The agency issued an emergency use authorization for Lucira Health's rapid-result All-In-One Test Kit. It's expected to cost around $50 and require a prescription.

Unlike some other Covid-19 tests, which require people to mail the sample to a centralized testing facility, this one is both fully self-administered and provides results at home in 30 minutes or less. The patient self-collects a sample swab in a vial, which they put into a test unit. Then a light-up display shows the results.

The test is a molecular assay, which detects the virus genetic material and is considered to be highly reliable. This could end up being an important difference versus antigen/antibody tests, which have proven to be less accurate than first hoped. Still, the test was definitely not perfect. They tested more than 100 people from diverse backgrounds, positive test results were correct 94% of the time and negative results were correct 98% of the time.

Lucira says there will be limited availability as the company builds up manufacturing. Only about 50,000 - 100,000 will be available each month. And due to the shortage, it will not be authorized for use on asymptomatic people without symptoms (who are considered to be one of the primary spreaders of the disease). National access to the kit is not expected until early spring of 2021.

Michael Mina, is a Harvard epidemiologist who's advocated widespread use of cheap, rapid tests in the pandemic was notably unimpressed. And he said that the tests were likely to have "limited value" and were only a “very, very small step.”

"The new product’s cost, complexity to manufacture and limited early availability are among the factors that will curtail public health applications. [And] why, why, in the middle of November, does anyone need a doctor’s prescription to get a Covid test? These tests could have allowed Thanksgiving to happen normally if they were widely accessible."

A Second Antibody Treatment for Covid 19 is Approved by FDA, but Again the Supply’s Too Minuscule to Change the Larger Course of the Pandemic.

This week was a great one for positive medical announcements. And adding to the heap of good news, Regeneron announced that its antibody cocktail treatment for the virus (REGN-COV2) was approved by the Food and Drug Administration for emergency use. REGN-COV2 was most famously used on the President when he contracted the disease in October (before trials were fully completed).

In past articles, we've covered this treatment in great detail. It uses a technology called monoclonal antibody therapy and is very similar to the Eli Lilly antibody cocktail, which received emergency FDA approval in early November.

Similar to that drug, it's only authorized for mild to moderate Covid-19 (as both ended up producing negative outcomes on those with severe versions of the disease requiring hospitalization). Patient must be at least 12 years of age to take it.

The company expects to have enough doses to treat 80,000 patients by the end of this month, and 300,000 total patients by the end of January. In contrast, more than 2.8 million Americans have been infected with the disease in the first three weeks of November alone. So, the supply will be minuscule in comparison to the need. And these numbers aren’t enough to make a significant impact on the course of the pandemic.

For this reason, many health experts such as U.S. infectious disease chief Anthony Fauci, are calling these antibody treatments "bridges" to the most likely sources of ending the pandemic... vaccines.

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 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 will be both 85%+ effective as well as manufactured and distributed in large enough quantities to immediately treat everyone in the U.S. who wants and needs it, until well into 2021. If either 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 U.S. 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). Then as the Q3 data unfolded week after week I predicted we would see strong double-digit growth but also disappointingly short of the amount needed to break even to where things were before the pandemic. Ultimately both happened: 33.1% increase from rock-bottom but still -3.5% year to date (similar to the worst of the Great Recession at -4%) Going forward I unfortunately believe that all of the easy gains are gone the rest will be a long, tough slog. Q4 will bring us up modestly but it will still come up short of the amount needed to "break even" to where we would have been in Q4 without the pandemic (and thus short of a true V-shaped recovery). And then unless we get more stimulus or extension on eviction/foreclosure moratoriums, Q1 of 2021 will be brutal and might even be bad enough to cause a double dip recession.

  • 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. And now, even the later May projections, which maxed out at 200,000 dead, have proven to be too optimistic. Tens of millions more people than expected have lost jobs. The stimulus and unemployment aid was enormous, but had 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 3rd wave (from school openings, Labor Day and cooler weather) can be controlled and kept small. If this happens... 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) lockdown, 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 push towards 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. And 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 very 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.

  • Strategy:

    1. No new investments in real estate or any asset classes that are correlated with the unemployment or the business cycle until there is more clarity about the unknowns concerning the virus and the upcoming financial cliff.

    2. Invest in assets that are coronavirus resistant (and uncorrelated with the business cycle). That includes:

    3. Music royalties (which can actually do better in lockdowns due to increased streaming).

    4. Life settlements (which actually perform better when people are dying faster and in any event aren't directly tied to the business cycle).

    5. Litigation finance (which performs based on winning or losing cases, and also isn't directly tied to the business cycle).

    1. 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).

      1. 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.

    2. 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.

Next Article

How will Covid-19/Coronavirus Affect my Alternative Investment Portfolio? Part 40: November 28th

No Thanksgiving break from virus as third death wave continues surge; Crystal ball looking ominous as new infections soar to stunning records; World round up: U.K. And Netherlands recent progress looking more like a head-fake while world-leading South Korea stumbles; State Roundup: Even more lockdowns come, while some claim it’s too little too late; Georgia’s bellwether economic recovery: 20+ weeks of dismal disappointment; Financial cliff: December surprise in the making?; AstraZeneca vaccine’s rollercoaster ride from hero to zero in under a week; Large number of vaccine skeptics may make ending the pandemic difficult; Pandemic causes extreme mental health crisis with 3 in 4 U.S. young adults struggling, and a quarter “strongly considering” suicide; Update on my portfolio strategy.

Read next article



About Ian Ippolito
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Ian Ippolito is an investor and serial entrepreneur. He has been interviewed by the Wall Street Journal, Business Week, Forbes, TIME, Fast Company, TechCrunch, CBS News, FOX News, USA Today, Bloomberg News,, CoStar News, Curbed and more.


Ian was impressed by the potential of real estate crowdfunding, but frustrated by the lack of quality site reviews and investment analysis. He created The Real Estate Crowdfunding Review to fill that gap.

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