How will Covid-19/Coronavirus Affect my Alternative Investment Portfolio? Part 40: November 28th
Updated: Dec 13, 2020
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; Economy slammed by increasing levels of newly jobless as more analysts fear double-dip recession; Financial cliff: December surprise in the making?; AstraZeneca vaccine’s rollercoaster ride from hero to zero in under a week; Large numbers of minority 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.
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This week there was alot of info on virus spread, economic impact, investment repercussions, as well as more 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.
No Thanksgiving Break from Virus as Third Death Wave Continues Surge
For the 31st week in a row, the United States battled the coronavirus called SARS-CoV-2, which causes the Covid-19 disease. Due to the Thanksgivingholiday, many sources did not report all of their data consistently through the week. But as of Saturday morning, the official death toll had climbed to 261,502 (versus 271,192 last Saturday morning). Here's a quick summary of what's happened so far:
The first U.S. death wave started in early March. It was overwhelmingly in urban areas (like New York City in the Northeast). It peaked on April 21st and the country fought it down until July 6th.
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.
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?
Again, many sources did not report data towards the end of the week. Despite this, deaths clearly rose from the beginning to the end of the week, as the third wave continued.
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?
Again, many sources didn’t report data at the end of the week due to the holiday. And despite this, deaths were still higher at the end of the week than the beginning. And clearly, the third infection wave is continuing.
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 last 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. This week’s data is too wonky to analyze, so we’ll look at this next week.
Further 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: U.K. And Netherlands Recent Progress Looking More like a Head-Fake while World-Leading South Korea Stumbles.
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 one of the worst weeks for South Korea in a long time. 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, though, deaths accelerated. So things are still not under control. And currently they are only just a little lower than they were at the peak of this first wave.
Still, the biggest positive for South Korea is that (at least so far) 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, it’s only productive to cover Sweden’s developments once a month now (versus every week like we had been doing for months). There used to be hope that their unorthodox lockdown-lite strategy might prove itself as a successful alternate model for other countries to follow. But after a recent surge of infections, hospitalizations and deaths, they’re reversing course and becoming much more similar to others. And so far, the strategy has resulted in worse economic damage and stratospheric deaths (versus the top countries). So, we’ll look at them again in another two weeks.
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 in the last couple weeks, they finally peaked and deaths mercifully dropped off a little bit. This gave hope that they might finally be getting control of things and turning the corner. How did they do this week?
Unfortunately, this week progress stalled out at a high level of deaths. So this was disappointing and not what Spanish authorities hoped to see.
How did some of their neighbors in Europe do? Here's the U.K., France, the Netherlands and Belgium.
Unfortunately, the Netherlands also backtracked this week. Over the last few weeks, they looked like they had turned the corner by plateauing and heading down, but their deaths are up once again.
And the United Kingdom also lost ground. Last week, they showed signs of slowing their upward climb, but instead of building on that this week, they instead accelerated. On the other hand, France maintained its slowdown from last week (although deaths still increased). And Belgium alone held the line and continued to benddown the death curve.
So this was a mixed week and a big letdown from the broad-based progress last week. But we’ll continue to monitor them and we’ll see how they're doing.
State Roundup: Even More Lockdowns Come, While Some Claim It’s Too Little Too Late
Normally, in this part of the weekly review, we look at state-by-state data. And this is helpful, because it can give a sneak preview of what will happen at a national level next. However, since so many states didn’t report data due to the Thanksgiving holiday, this deep-dive will be postponed until next week. Instead, we’ll go right to the high level developments this week.
And this week, additional mayors and governors from both political parties made unilateral attempts to slow down the virus spread by implementing numerous types of lockdowns and safety measures. Newark implemented a voluntary lockdown. Ohio enacted a mask mandate. Vermont prohibited all houseguests. And Denver's Mayor pleaded for residents to stay home for the next month, while acknowledging:
"I know this is hard. I know you hate this."
Despite these localities’ about-faces, many health experts remained skeptical and critical of the strategy and the timing. The program director at the Dartmouth College Center for Global Health Equity, Anne Sosin said:
“Most governors are trying to fight a forest fire of infection with garden-hose measures, and they aren’t even aiming at the right targets or starting at the right time."
And Toby Phillips, who is responsible for collecting endemic responsibilities from 190 countries as the executive director of the Oxford Covid-19 Government Response Tracker, said:
"The moment for acting early with a fast response has passed.
We consider 'early' movement to be when a state or country has no more than 40 new cases per day per million in its population. Once the number goes over 200 cases per million, that's considered 'maximum risk'. The United States is now over 500 cases per million.
And he also pointed out that neglecting the health crisis can be bad economic policy.
“The most expensive way to deal with the virus is to delay the pain until the point when you have to put the economy into a lockdown”
Meanwhile, the virus continued to spread widely across all areas of the country, with the least populated areas continuing to get hammered the worst:
Georgia’s Bellwether economic recovery: 20+ weeks of dismal disappointment
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've watched them week by week across all of Georgia's four primary Covid-19 sensitive industries: restaurants, retail, fitness, and hotels. How’s that gone over the last six or seven months? We've seen different sectors moving back and forth during that time, as well as different individual businesses in those sectors. But overwhelmingly, results have ranged from disappointing to dismal. And while there have been occasional spurts of improvement to celebrate, these have almost always been quickly followed by disappointing backtracking.
So at this point, the Georgia experiment has failed to achieve its goal of a V-shaped recovery. And so, I'm calling a halt to the weekly monitoring of the state and will only be checking in monthly. So, we will look again in three weeks.
Economy Slammed By Increasing Levels of Newly Jobless as More Analysts Fear Double-dip Recession
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 778,000 people newly unemployed. This was an increase from the 742,000 last week (and 709,000 the week before).
So for the second week in a row, not only was there no improvement but things moved in the opposite direction and deteriorated further. And at eight months into the pandemic, we’re 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 last 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 6.07 million (6.37 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 466,000 to 9.15 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.
Catherine Mann, global chief economist at Citigroup Inc., said:
“The continued weakness of the labor market is something that is going to drive the whole economy down. At the same time, solid sectors like manufacturing are going to keep us from being in official recession, but it’s going to be very grim."
Eliza Winger, economist at Bloomberg, had similar thoughts, but was less optimistic:
“If claims continue to move higher in the coming weeks, the chances of the U.S. economy tipping back into a contraction will intensify.”
Meanwhile on Wednesday, the University of Michigan released its final November reading of consumer sentiment. It again was 76.9, which was the weakest in three months. Analysts noted that the slump neatly coincided with the pick-up in virus infection rates.
Later in the day, the U.S. Commerce Department released a report on U.S. household spending. Since consumers are the main driver of the economy, their behaviors can have a significant effect on growth. And the report showed that incomes dropped more than forecast due to a large decline in government stimulus from early in the pandemic. Savings also fell for the sixth month in a row:
By Thursday, more economists were voicing concerns about a dreaded double-dip recession. Such a W-shaped recovery has not been seen in the U.S. since the early 1980s. JPMorgan Chase's top economist, Michael Feroli, said,
“The data show more loss of consumer spending momentum than we had been anticipating, and this happened even before the spread of COVID-19 intensified early in November. If the virus weighs on activity and leads to business closures — temporary or otherwise — we think that related layoffs would show up. [This would] shrink economic activity in the first three months of 2021 by some $50 billion. That translates into an annualized drop in gross domestic product of about 1%."
Michelle Meyer, a top U.S. economist from Bank of America, said:
"We expect COVID cases in the U.S. to continue to rise — and ‘containment measures’ to increase. We see a stalling out of the economy next year.”
And Mark Zandi, chief economist of Moody's Analytics, said,
"We expect the economy to shrink at an annual rate of 1.5% — the equivalent of a $25 billion drop in national income per month — in the first quarter next year."
Financial cliff: December surprise in the making?
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:
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.
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.
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.
Here’s the very quick summary:
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.
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.
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.
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.
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.
Then last week the Treasury Secretary pulled $580 billion of unspent stimulus funds from the Federal Reserve. Although budget rules say that these cannot be considered new money, it’s expected to provide enough political cover for the small stimulus party senators to claim that this is not new spending and the support stimulus bill.
This week, the parties continued to negotiate. And political analysts held out the slim hope that some form of stimulus may be attached to an upcoming December 11th spending package. This law has to be passed to stop a government shutdown, and some speculated the unemployed might get anywhere from $250-$600 a week.
Meanwhile, the U.S. Census Bureau reported that the financial cliff is intensifying.
The latest survey found 17.8 million adults are behind in rent or mortgage payments. Even more ominously, 5.8 million are "very likely" to face eviction or foreclosure in the next two months alone. And unfortunately, the problem isn't localized to any one area, but is widespread across the country:
AstraZeneca Vaccine’s Rollercoaster Ride from Hero to Zero in Under a Week
Early in the week, AstraZeneca and the University of Oxford appeared to have fantastic news. They announced that their cheap-and-easy-to-make coronavirus vaccine had passed early stage III trials and was shown to be 90% effective. Only a few weeks ago, most thought this incredible level of success was the stuff of dreams and stardust: an unreachable fantasy. And such results would have put the AstraZeneca vaccine on par with the equally stunning results of both the Pfizer and Moderna vaccines (See November 21st article). But, unlike the latter vaccines (which use a newer mRNA technology), the AstraZeneca vaccine uses an older technology, which doesn't require ultracold storage and is much easier to distribute.
So, stock market investors cheered and the world celebrated at the thought of this third vaccine entering the fight. "Get yourself a Vaccacino!" quipped an exuberant British tabloid, after pointing out that the vaccine would cost less than a cup of coffee.
But others were more skeptical. First, the company followed the precedent set by Pfizer and Moderna and released very little usable information for others to analyze. So the company was criticized for not releasing more complete results. John Moore, a professor of microbiology and immunology at Weill Cornell Medical College, said, "The press release raised more questions than it answered.”
And, Natalie Dean, a biostatistician and an expert in vaccine trial design at the University of Florida, said:
“I just can’t figure out where all the information is coming from and how it’s combining together. AstraZeneca and Oxford get a poor grade for transparency and rigor when it comes to the vaccine trial results they have reported.”
But even the little information that was there made many people scratch their heads.
First, they showed the trial results were not from a single trial like Pfizer and Moderna had done. Instead, they were stitched together from a trial conducted in the U.K. that started in May and another one in Brazil that started in June. And the two trials were substantially different from each other (which can be a scientific “no-no”). For example, they used different dosing schemes and different control injections. This Frankenstein-like combination of two different trials caused some scientists to raise a red flag and say the study will most likely need to be redone.
On top of that, the results only reported information on certain subgroups within each trial. And one of them omitted a subgroup in Brazil that included almost half of the people in the trial in that country. This gave the impression of picking and choosing the data, and raised another big yellow flag for many.
Finally, the results themselves were strange. Two different dose sizes were tested: a pair of shots at full strength and a pair at reduced strength. And surprisingly, the full strength shots did worse and had only a very mediocre 62% efficacy. Meanwhile, the half dose was reported as having the 90% efficacy that was reported in the dramatic headline.
This, on its own, would be surprising and counterintuitive. But many times, scientifically sound studies have revealed unexpected results. So on its own, it wasn't damning.
However, shortly afterwards, the head of AstraZeneca’s non-oncology research and development, made a startlingly candid admission. His name is Mene Pangalos, and he said:
“The reason we had the half-dose is serendipity.”
He went on to explain that at the time, the company was only administering full doses and had gotten a modest efficacy readout of around 62%. But then, they noticed that quite a few people in the U.K. were having much milder side effects than expected (such as much less fatigue, headaches and sore arms).
“So we went back and checked ... and we found out that they had underpredicted the dose of the vaccine by half. So we decided to continue with the half dose and administer the full dose booster shot at the scheduled time."
This nonchalant explanation immediately set off alarm bells with many scientists. How could a well-run trial make such a basic mistake? And if the techniques were that sloppy in this example, then were other mistakes also made? But the studies turned out to have an even bigger problem, as well. Out of the 23,000 participants reported in the Monday press release, only 2,800 volunteers got the half strength dose for the claimed 90% efficacy. And in comparison, Pfizer tested 43,000 participants and Moderna 30,000. Many scoffed at the idea that 2,800 people provided a sufficient testing ground on which to declare results.
A spokeswoman for AstraZeneca, Michele Meixell, said the trials “were conducted to the highest standards.”
At the same time, others had a different take. Geoffrey Porges, an analyst for investment bank SVB Leerink, said:
“I think that they have really damaged confidence in their whole development program.”
As AstraZeneca's shares plummeted, the company claimed the mistake had been done by a contractor. And Pangalos elaborated:
"The reality is, it could end up being quite a useful mistake. It wasn’t putting anyone in danger. It was a dosing error. Everyone was moving very fast. We corrected the mistake and continued on with the study, with no changes to the study, and agreed with the regulator to include those patients in the analysis of the study as well."
Professor Moore retorted that this still didn’t address the issue of declaring results on a very small population:
“The only way they’re going to find out is by specifically and deliberately testing this serendipitous observation. The onus is on them to prove the speculation.”
Then the next day, Moncef Slaoui, the head of Operation Warp Speed (which is the U.S. initiative to fast-track virus medicines) pointed out another problem. The participants who got the half-strength dose were all 55 years or younger. So, the elderly population group, which is one of the most vulnerable and important to test, was not even examined.
For many analysts, that was the final nail in the coffin.
Geoffrey Porges concluded:
"The company highlighted results from a relatively small group of volunteers in the trial and is unlikely to get U.S. approval based on a lack of diversity among participants."
Despite this, Ruud Dobber, head of Astra Zeneca’s biopharmaceuticals business unit, claimed the jury is still out:
“I think it’s far too early to speculate about how regulators will react.”
Large numbers of minority vaccine skeptics may make ending the pandemic difficult
Vaccines still have some significant hurdles to overcome if they are to end the pandemic. First, we don't know if any of them have the sterilizing immunity necessary to stop the spread of the disease. The vaccines that lack sterilizing immunity will only protect the vaccine-taker from getting seriously sick, and will not stop that person from spreading it to others.
Second, a significant percent of the population would need to take the vaccine to achieve herd immunity. But, polls have shown that many Americans are extremely resistant to this idea.
This week, a new survey was released, the largest and most rigorous done yet.
And it found that only 30% of Latino adults believe the vaccine will be either mostly or completely safe. And even fewer black adults felt the same way (14%).
Minority acceptance of vaccines could be a crucial factor in turning around the pandemic. As we've discussed in past weeks, minorities (including Blacks, Hispanics, Asians, and Native Americans) often live in closer quarters than other ethnic groups and tend to have more customer-facing jobs. And so they have been hit disproportionately hard by the virus and have died at significantly higher rates than other groups.
Alexandre White, an expert at Johns Hopkins University who studies the sociology and history of epidemic response, explained the resistance:
“On one hand in this country, you have the anti-vaxxers and the unfounded disinformation they push.
But what you see from minorities is a hesitancy that is quite rooted in historical reality. [. . .] Black women were used for gynecologic research, experimentation and sterilization."
Additionally, many African-Americans are still scarred by the memory of the unconscionable health experiment-gone-wrong that was conducted by the U.S. government on black Americans in Tuskegee, Alabama.
In 1932, federal health authorities put out flyers advertising "free blood tests for colored people." But, without the volunteers’ knowledge, the doctors were testing for the venereal disease syphilis. In all, 399 men were detected with syphilis, but not told what they had (despite the fact that the disease can be spread to others as well as lead to blindness, deafness, mental illness, heart disease, bone deterioration, collapse of the central nervous system and death). Instead, they were simply told they had “bad blood.” And later, when a treatment for syphilis became available (penicillin) the men were not given access to it (so that they could be studied for untreated syphilis).
And so echoes of that ghastly experiment reverberated this week, in the feedback that the FDA received on the vaccines and read aloud at a hearing. Black Americans said things like:
“I firmly believe that this is another Tuskegee experiment.”
“I would not be first in line and I would want to see some data.”
“We are not going to be guinea pigs again.”
Unsurprisingly, the vaccine survey found that knowledge of the Tuskegee experiment was a significant predictor for whether a black respondent would be unwilling to take the vaccine or not.
Howard University President Wayne A.I. Frederick, a physician, said it will take a concerted effort to overcome this understandable distrust.
“The best messengers are going to be influencers from within their own communities. And very clearly, personal physicians from minority communities are going to be very important in this effort.”
Pandemic Causes Extreme Mental Health Crisis with 3 in 4 U.S. Young Adults Struggling, and a Quarter “Strongly Considering” Suicide
Meanwhile, the Centers for Disease Control (CDC) published a study this week showing that the pandemic is causing a mental health crisis across the nation. While all age groups have been affected, young people are having the most difficult time.
As an example, a shocking three out of four young adults (18-24 years old) are struggling with at least one mental health problem (such as anxiety and depressive disorders, trauma, stress disorders or substance abuse).
In comparison, only 15.1% of those 64 and under are under the same kind of stress.
And while those seriously considering suicide has increased across all groups, as well, again younger adults have been hit the hardest. The young adults suffering from suicidal thoughts have skyrocketed from 10.7% to 25.5%.
“[Covid has] created a sense of fear and anxiety for everyone. It’s something that none of us have ever experienced, and here we are six months later and we’re still living with that sense of uncertainty. In the short-term, most people can manage anything, but as it becomes longer, whether it is financial stress or the lack of socialization for young people and not being able to build milestones, achieve things in their life, I think we are going to see more of an impact.
She also advised:
When dealing with young adults exhibiting signs of depression, one of the worst things you can do is discount their feelings. It’s so important first to listen and then to support. [I've] heard from many young people that they did try to tell their parents, who told them they should just “get over it.” If it is, in fact, depression, the person can’t just snap out of it so we can’t expect them to. Telling children to 'just get over it' can also perpetuate the misconception that depression is a 'weakness, or it’s not a big deal.' And while it may be tempting for parents to try and 'take care of it' on their own, the best thing they can do for their children — as well as their own mental health — is to seek professional help early on as it is much easier to treat something if it’s emerging."
If you or someone you know is considering suicide, you can contact the National Suicide Prevention Lifeline (a network of 160 U.S. crisis centers) at:
or text “STRENGTH” to the Crisis Text Line at 741-741
or go to suicidepreventionlifeline.org
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 jut small 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 winter of this year. And with some luck, we could even have more than one. Unfortunately, it's also unlikely it will be 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.
No new investments in real estate or any asset classes that are correlated with the unemployment or the business cycle until there is more clarity about the unknowns concerning the virus and the upcoming financial cliff.
Invest in assets that are coronavirus resistant (and uncorrelated with the business cycle). That includes:
Music royalties (which can actually do better in lockdowns due to increased streaming).
Life settlements (which actually perform better when people are dying faster and in any event aren't directly tied to the business cycle).
Litigation finance (which performs based on winning or losing cases, and also isn't directly tied to the business cycle).
Invest in coronavirus "portfolio insurance" (i.e. an investment that would be expected to do better the longer coronavirus continues or if it gets worse).
N95 Mask Manufacturing Company. If the pandemic should disappear tomorrow (which I personally am not counting on), I would be happy to take a small loss here given that the rest of my portfolio would be doing extremely well. On other hand, if Covid-19 doesn't disappear and things go as I expect (or worse), then this investment could provide a welcome profit boost and improve my diversification.
Continue to hold cash and be patient for dislocated and distressed opportunities. The worse the economic damage, the more chance there will be for those once-in-a-generation or once-in-a-lifetime opportunities.
My opinions and strategy will change if we get some better or worse news on the science side or in some of the other X factors. For example, a new stimulus law could shift things in a more positive direction. And, as I mentioned above, the virus getting out of control again in large areas and forcing large lock-downs a second or third time, could easily make things worse.