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.
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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 parties – cancel!”
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 deadly… even 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."
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 Placer.ai. This is a service which tracks mobile phone usage to different types of businesses to measure foot traffic. And we will look at Georgia's four primary Covid-19 sensitive industries: restaurants, retail, fitness, and hotels.
So in the category of restaurants, let's take a look at 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.