How will Covid-19/Coronavirus Affect my Alternative Investment Portfolio? Part 49: February 6th
Updated: Feb 15
Third U.S. death wave continues to plateau, but not yet showing signs of hoped-for turning point; Crystal ball: Third U.S. infection wave continues to fall; State Roundup: More relief for beleaguered hospitals as new infections continue to drop; No let-up on economic pummeling, as U.S. hammered yet again by massive levels of new unemployment; All hopes for V-shaped recovery dashed as latest jobs report shows U.S. economic recovery almost completely petering out; Financial cliff: "Large stimulus" party flexes new effective-majority in the Senate and preps to pass $1.9 trillion pandemic-aid and stimulus bill; S&P report claims that stimulus will be necessary to lessen or avoid a double dip recession in 2021; Senior housing occupancy in Q4 drops again and plummets to lowest levels on record; Russian scientists post new study claiming Sputnik V Vaccine is 91.6% effective; When will life go back to normal? Israel's rapid vaccination program could result in herd immunity in just two months, but majority of world may struggle for dismal 7.5 years.; Did we inadvertently create the new super-contagious mutants by using ineffective convalescent plasma treatments? Case study suggests we might have.; Update on my portfolio strategy.
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This week there was a flood of new information on virus spread, economic impact, investment repercussions, the financial cliff and the virus itself.
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 to plateau, but not yet showing signs of hoped-for turning point
For the 54th 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 official death toll had climbed to 472,991 (versus 447,558 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 spread 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 began tracking upwards. Unlike earlier waves, this was led by rural areas (although it later spread across the entire country and surged in all areas).
How did things go this week?
This was another moderately positive week for U.S. deaths, which stayed plateaued for the third week in a row. So this was better than the Methodical climb over the last several months. But on the other hand, deaths remained elevated at uncomfortable pandemic highs. And, so far, there has been no definitive move downward. The previous tops of the first and second waves had already shown a definitive drop at this point (this far into the wave). So until that peak happens (and is sustained), there's a risk that this isn’t the turning point, but just a pause in the journey to higher deaths. So we'll see what happens.
Unlike the two previous waves, this third one is widely distributed throughout the country, which many experts say makes 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. Then in November and December, we talked about how this is causing hospitals to overload in certain areas of the country. When this happens, hospitals are forced to deny care to incoming patients, both those infected with the virus and uninfected. And not only do more people die of Covid-19 unnecessarily, but others (via heart attacks and other completely unrelated problems) die unnecessarily, too.
In response, many states have enacted varying lockdowns which may start to kick in and change the trajectory. And vaccines are also being rolled out which are expected to eventually stop the spread.
But, lurking behind this is the threat of new mutated strains, which may prove much more difficult to contain than the original. And the longer it takes to finish-off the virus, the more new mutations we may see.
So we’ll be watching all of this very closely to see what happens.
Crystal ball: Third U.S. infection wave continues to fall
If we're unable to make clear progress and deaths remain high, then the overwhelming consensus of economists is that this would sabotage hopes of a quick, V-shaped recovery. Instead, the recovery would assume a different shape (W-shaped, U-shaped, etc.). This would be slower, involve more long-term damage to both health and economy, and potentially cause problems for some or many consumers, businesses and investments. (See part 14 for more information on the possible "recovery shapes" and their ramifications).
Since this is potentially so important, let's take a look at one of the leading indicators of upcoming deaths: virus infections. Virus infections tend to lead deaths by anywhere from 2 to 8 weeks (depending on how long it takes someone to die and how long it takes their particular location to report the information). These case numbers are not completely reliable due to testing labs' difficulties, in many parts of the country, with getting results back on time. And some states are not reporting all of the positive tests (specifically, the antigen tests). But they can still provide a clue of what might lie ahead with deaths.
How did virus infections look this week?
This week brought some more welcome news as infections dropped for a third week in a row. This is the largest and longest drop since the third wave started, several months ago.
At the same time, despite the drop, the virus is still spreading at extremely high levels (far in excess of the worst of the second wave). And many economists believe that until viral spread is brought down to a low level, a broad, sustainable economic recovery cannot begin.
Still, the progress from previous weeks remained very welcome.
World round-up: Europe finally lowers deaths caused by newer more contagious strains, but the strict lockdowns required may prove difficult to duplicate in places like the U.S.
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 -3.5% hit to GDP).
However, in recent weeks, South Korea has been experiencing a third death wave that's been more difficult to control. And while this wave is minuscule compared to other countries’, South Korean officials are still very concerned and have announced stricter lockdowns. Recently, the country also discovered the presence of the new mutated strain of the virus (which spreads more quickly and may be more difficult to contain). There’s no way to know how widespread it is. But if it becomes widespread, then it may make partial lockdowns much less effective than before.
How are things going now? This week, South Korea looked like this:
This was another good week for South Korea. For the fourth week in a row, deaths have dropped. And they appear to have firmly put a lid on their third wave.
This week, South Korean officials made moves to limit travel during next week's Lunar New Year holiday and preempt it from becoming a superspreader event. The Health Ministry repeated advice for people to stay home and switch family visits from in-person to virtual:
Trains will only be allowed to sell window seats, and passenger vessels will only be allowed to operate at half-capacity. Officials also strengthened sanitation, installed more thermal cameras at train stations, bus terminals and airports. Travelers are required to be masked at all times and are prohibited from eating food at highway rest areas. Private gatherings are still not allowed to include more than five people, and restaurants and other businesses are fined if they accept larger groups.
Meanwhile, how’s Sweden doing? We used to look at Sweden’s stats in depth every week, because it was following an unorthodox lockdown-lite strategy. And the hope was that it might prove itself as a successful alternate model for other countries to follow. But after a recent surge of infections, hospitalizations and deaths, they’ve reversed course and their strategy is becoming much more similar to others. And so far, lockdown-lite has resulted in worse economic damage and a stratospheric death toll (versus the top countries). So we switched to a one-month schedule, and now it’s time to look again:
Since last time, Sweden has had a significant surge in deaths. However, this week, deaths declined for the second week in a row. So that was good to see.
At the same time, one of the main problems with Sweden’s approach previously has been a catastrophically high death rate compared to the rest of the world. So how is that comparison looking this month? To examine that fairly, we need to look at deaths per million people (because raw deaths unfairly penalize large countries over small ones). Here are the numbers this week:
So, Sweden has improved a little bit, faring a bit better compared to the United States, than it was before. On the other hand, a lot of things are still essentially the same. Currently:
Bottom third: Sweden still is in the bottom third of the world (with other laggards like the United States and United Kingdom).
Much worse than the average country: it's done 4.3x worse than the average country in the world.
Much worse than other Scandinavian countries: compared to Scandinavian neighbors who have the same demographic advantages (large number of single households and skewing younger) it's done 2.5x worse than Denmark and 15.7x worse than both Norway and Finland.
Much worse than the top performers: when compared to the average Asian country, it's done 32x worse. And when compared to top-tier countries like South Korea, it's done 52.8x worse.
And so far, the country has taken about as bad an economic hit as others who have not suffered the same kind of death toll.
So, things are still essentially the same this month as last. And we are now going to move to a two month schedule before examining them in detail again. 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. But then, countries loosened travel restrictions and reopened schools (despite warnings from many health experts). And, as colder weather hit, the death toll skyrocketed. So authorities were forced to enact a variety of new lockdowns (which we've described in detail in previous weeks). And in many countries, this began to work to bring the virus under control. But then, many countries suffered a relapse at the start of 2021 when hit by new, mutant strains that are much more contagious than the original version, and more difficult to stop. As hospitals overloaded, this forced many of them to enact economically crippling, full lockdowns.
So how did things go this week?
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:
This wasn't a good week for Spain, as deaths continued to climb. But on the other hand, the pace has slowed down dramatically. And perhaps this might be a sign that they will turn the corner in the future. We’ll keep our fingers crossed and continue to watch. How about Portugal? Last week, we saw that many of their hospitals were completely overwhelmed. How are they doing?
This week brought Portugal some very welcome news: a small drop in deaths. If the country can keep this up, they may have reached a turning point. We'll see next week.
Now let’s look at the U.K., France, the Netherlands and Belgium:
Of the four, France had the worst week. Deaths continued to climb and the country still hasn’t managed to get control over the mutated strains in the third wave.
On the other hand, Belgium continued its remarkable string of weekly decreases. And while it has suffered a much higher death per million rate than many others in Europe, it has so far avoided a relapse from the spread of mutated strains. Previously, the country had closed bars, cafés, restaurants, gyms and cinemas while making work from home obligatory. Additionally, anyone who travels outside the country and does not quarantine and get tested must pay a $300 fine.
On Friday, Belgian officials announced that they would loosen restrictions mid-month and allow the reopening of hairdressers, beauty parlors, zoos and campsites.
Meanwhile, both the Netherlands and the United Kingdom also had good weeks with deaths dropping.
The U.K.'s drop was especially welcome, since this is the first progress the country has shown since it was hit by the new, mutated “U.K. strain” (which is approximately 50% more contagious and, by some reports, more deadly).
The country remains in strict lockdown until at least February 22. Schools are closed and people must stay home (other than exceptions: if work cannot be done from home, essential shopping and medical appointments). Pubs and restaurants are closed, but take-out is allowed. Once a day exercise is allowed, if it’s in an open, public place with only one other person. People are not allowed to meet socially unless they live together or form a support bubble. And travel around the U.K. and outside of it is prohibited unless it is essential.
Also, the laws have teeth: people who break the rules are fined. For example, the penalty for attending a house party of more than 15 people is 800 pounds sterling (about $1098). And the organizers are fined £10,000 (about $13,736).
This U.K. variant has been projected by the CDC to become the dominant strain in the U.S. by late February or early March. And some analysts warily noted that the strict lockdowns that appear to be working successfully in the U.K. might be difficult to replicate in a country like the U.S. (where resistance to even more basic restrictions is high in some areas).
So the interplay of all these factors is something that we'll be watching closely in the coming weeks.
State Roundup: More relief for beleaguered hospitals as new infections continue to drop
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:
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 those afflicted by 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.
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 was led by rural places . This caused 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.
Then, last week came the first reprieve, with multiple states appearing to peak.
What happened this week?
The Covid Tracking Project puts out a very helpful map showing the locations of hotspots in the U.S. Here’s what it showed this week.
So let’s take a look at the three worst-hit states, and start with South Carolina.
This was a very good week for South Carolina, with all three statistics (new infections, hospitalizations and deaths) all falling. Let’s hope they keep it up.
How about Texas?
This was also a good week for Texas. Infections continued to drop for the third week in a row along with hospitalizations. And for the first time, deaths dropped as well.
How about Arkansas?
Arkansas also had a good week. Just like Texas, infections and hospitalizations have been dropping for a few weeks. And this week, for the first time, deaths dropped as well.
So, this was the best-looking week for state data in five months (since the third wave started back in September). And this brought some welcome relief to overstressed and beleaguered health workers in hospitals.
At the same time, some health experts warned this may not mean final victory over the virus. As we discussed in previous weeks, many expect new, more contagious mutations to become widespread by late February and early March. If that happens, this may change the game completely and cause another wave (as happened in Europe). And if that does occur, then the U.S. will be forced to make a difficult choice: either allow hospitals to overload from a tsunami of new cases, or reenact economically crippling strict lockdowns.
We’ll continue to monitor and see.
No let-up on economic pummeling, as U.S. hammered yet again by massive levels of new unemployment
Unemployment has historically been one of the most reliable indicators of when the U.S. has entered a recession and when its left one. So that's why we examine it very closely, every week.
And unfortunately, over the last 46 weeks, the economy has been hammered week after week by massive levels of new unemployment. This week 779,000 people were newly unemployed. This was a brutally high number but also a noticeable improvement over the 875,000 people newly unemployed last week.
So at this stage, we’re 12 months into the pandemic, and still getting weekly job losses that are more than three times the pre-pandemic level (216,000 in February of 2020). Back in June, few expected the continuing damage would ever last this long.
The economist for the job website, Indeed.com, Ann Elizabeth Konkel, said:
“Total initial claims fell, but the magnitude is still a huge problem. We continue to see the effect of the coronavirus on the labor market. At no point has it let up.”
All hopes for V-shaped recovery dashed as latest jobs report shows U.S. economic recovery almost completely petering out
This week, the much-anticipated nonfarm payroll report came out. And, some were hoping for an improvement over last month’s anemic recovery. Unfortunately, they were disappointed in the recovery, which has now gone almost comatose with just a scant 49,000 jobs added. Private payrolls rose by a measly 6000, and were held back by job cuts in retail, trade, transportation, warehousing, leisure and hospitality.
Some of those industries have been relatively immune to job cuts, so far. So the report warned that the damage may be spreading to other sectors. Bloomberg economists Carl Riccadonna, Yelena Shulyatyeva and Eliza Winger said:
“The January data raise concerns that the weakness which was assumed to be concentrated in sectors like leisure and hospitality may be more widespread.”
And according to newly revised data, that came along with the report, 9.3 million jobs were lost in 2020. This means that a mind-blowing 40% of the unemployed (a little more than 4 million people) have now been out of work for 27 weeks or more. The director of the Center for Workforce Development at Rutgers University, Carl Van Horn, said:
"The long-term unemployed are not working and they’re not spending.
[And] a smaller workforce means a smaller economy that produces fewer goods and services.
[Also], the long-term unemployed have a much tougher time finding jobs. That means a large group of Americans may have less income and spending power for years, even after the pandemic and its short-term economic effects are over."
Financial cliff: "Large stimulus" party flexes new effective-majority in the Senate and preps to pass $1.9 trillion pandemic-aid and stimulus bill
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 that 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: this spring, 10-12 million people who lost jobs due to the crisis are scheduled to lose critical benefits they're currently depending on. These were provided by two government programs (the CARES Act in mid-2020 and extended by the second stimulus passed at the end of 2020). The first safety net 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 24-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. Both of these programs expire on March 14, 2021. If that happens and these workers don't get any additional help, then the damage to the economy would be severe, immediate and potentially long-lasting.
2. Foreclosure and rental eviction tsunami: on March 31st 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 12 million more delinquent renters (owing an estimated $70 billion in back rent as of 1/23/2021 and $25 billion more in utilities as of 12/2020) will be evicted, as well. If the tsunami is allowed to occur, then it will have a devastating effect on real estate and the wider economy. The December 2020 stimulus act allocated $25 billion in rental assistance towards this and was a step in the right direction. But analysts said it’s “not enough to avoid eviction crisis”.
3. Hard-hit restaurants and bars left out in the cold: for reasons we've discussed in past weeks, neither of the two previous pandemic aid laws were effectively able to help out restaurants and bars. Some analysts calculate that, if unaddressed, this will "leave millions more out of work."
4. Not enough funding for crucial transit industry: the December 2020 stimulus act allocated $14 billion to help but this is less than half of what the transit industry needs to avoid “devastating service cuts and layoffs”. And the loss of service could cause negative economic repercussions across the wider economy.
5. $600 Stimulus checks criticized for being insufficient for the unemployed.
6. No aid for U.S. states hammered by covid-19 bankruptcies and layoffs:
In the past, there has also been another issue: Student loan payment 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. And originally this was set to expire in January. However, last week, it was extended to September 1st. So this was good news and makes it a much less urgent issue (and we are taking it off the list for now).
So, what actions are being taken to prevent the financial cliff, currently? Last week the new President proposed a $1.9 trillion stimulus package, which included spending for all the above issues. But initially this was panned by the opposing party (which we will call the "small stimulus party"). But this week, ten moderate members of the small stimulus party proposed a smaller package totaling $618 billion. The counter-proposal said that:
Stimulus checks would be dropped from $1400 to $1000 per person and phase out at lower incomes.
Unemployment insurance would be reduced from $400 a week to $300 a week.
Pandemic aid to schools (to assist them in reopening) would be slashed from $170 billion to $20 billion.
Childcare aid would be reduced from $40 billion to $20 billion.
There would be no pandemic-aid to state and local governments.
The two sides met at the White House, which both sides said was cordial and receptive, but no agreement was reached.
Later in the week, the President said he would come down on the $1.9 trillion price tag and could agree to lower income phase-outs for stimulus checks. But he held firm on the amount of $1400 for the stimulus checks, which he regarded as a campaign promise. In response, the small stimulus party moderates balked at this, which put things at an impasse.
So the next day, the large stimulus party prepared to use the budget reconciliation to pass the original $1.9 trillion package. As mentioned previously, this allows certain bills to pass the Senate with just a simple majority. And this is something that the large stimulus party can now do completely on their own and without any help from the opposition party (with 50 unanimous votes plus the tiebreaker vote of the Vice President).
On Thursday, the Senate debated passing the blueprint necessary to kick off this process. And after 15 hours of overnight debate concerning various amendments, the Senate passed it in the early hours of the morning, 51-50 (with the vice president casting the tiebreaker).
The leader of the large stimulus party in the House then expressed confidence about passing a corresponding bill there. And she predicted it would be passed back to the Senate for final reconciliation in two weeks. As mentioned above, there is a looming deadline of March 14 before unemployment benefits expire. When asked about this, the large stimulus party House leader said it would be passed by then, "absolutely without any question”.
We'll continue to watch and see how this evolves.
S&P report claims that stimulus will be necessary to lessen or avoid a double dip recession in 2021
Meanwhile, S&P Global published an analysis of what they believe will happen to the economy under different scenarios. They analyzed what would happen to gross domestic product (GDP) if no stimulus is passed, a small stimulus is passed, or a large stimulus is passed. The analysis used average Congressional Budget Office (CBO) multipliers for the effects of stimulus, which is taken from a nonpartisan source and considered to be a conservative approach. Here were the conclusions:
Without stimulus, S&P forecasted a double dip recession starting in early 2021.
On the other hand, the small stimulus party package would improve the outlook. While not quite averting a double-dip in early 2021, the dip would be minimized and brief. And trendline growth would be reestablished as quickly as late 2021.
And the large stimulus party plan would result in no double dip and bring the U.S. GDP back to pre-crisis levels even earlier (by the second quarter of 2021). And it would lower their estimated risk of recession over the next 12 months to just 20-25% (near the bottom of the range).
Both stimulus scenarios showed that the effects were short to medium-term only and forecasted growth returning back to the baseline in a few years.
Senior housing occupancy in Q4 drops again and plummets to lowest levels on record
The National Investment Center for Seniors Housing & Care (NIC) reported the Q4 results for the industry. And they found that U.S. occupancy decreased 1.3 percentage points and hit a record low. Measured from the peak in the first quarter of 2020, occupancy fell by a painful 6.8 percentage points.
The chief operating officer of NIC, Chuck Harry, said:
“The COVID-19 pandemic has impacted move-ins and move-outs across senior living properties.” Move-ins slowed as operators enacted moratoriums to keep residents safe and as safety protocols limited new leasing activity, while move-outs have been affected as residents moved to higher-acuity care settings.”
NIC’s chief economist, Beth Burnham Mace, summarized the economic picture, saying:
"Senior housing occupancy declines were less pronounced in the fourth quarter than the previous two quarters, though the fourth quarter decline is still quite large from a historic perspective. And the surge in COVID-19 cases following Thanksgiving and Christmas suggests further disruption lies ahead. That said, the recent distribution of the vaccines should soon provide some relief.”
Russian scientists post new study claiming Sputnik V Vaccine is 91.6% effective
This week, Russian scientists published a study in the prestigious British medical journal, The Lancet, about phase 3 human trials of the Russian Sputnik V Covid-19 vaccine. The report said the results are only “preliminary.” But if they hold up, the vaccine has an impressive 91.6% effectiveness. And that would rival the effectiveness of the two top vaccines that have been approved so far: Pfizer (95%) and Moderna (94.1%).
The Sputnik V vaccine comes with a colorful history. Back in August of 2021, Russian President Putin boasted that the country had created the "the world's first Covid-19 vaccine" which also enjoyed "high efficacy and safety.” And it was then distributed to thousands of at-risk Russians. However, the move drew immediate and virtually universal condemnation from the scientific community, because it had been tested on only 76 people at the time.
Arthur Caplan, the director of medical ethics at NYU School of Medicine, said:
“This is a violation of Basic Vaccinology 101. What they are doing is dangerous and grossly immoral.”
Francois Balloux, a geneticist at University College London, said:
“This is a reckless and foolish decision. Mass vaccination with an improperly tested vaccine is unethical. Any problem with the Russian vaccination campaign would be disastrous both through its negative effects on health, but also because it would further set back the acceptance of vaccines in the population."
Svetlana Zavidova, a lawyer who heads the Association of Clinical Research Organizations in Russia and has worked in clinical trials for 20 years, said:
“It's ridiculous. I feel only shame for our country. Accelerated registration will no longer make Russia a leader in this race, it will only expose end users of the vaccine, citizens of the country of the Russian Federation, to unnecessary danger.”
Then in September 2020, Russian scientists posted a study claiming to prove that the vaccine was highly effective. Like the most recent study, this one was also posted in the prestigious Lancet and was also peer-reviewed beforehand. But many scientists pointed out that the claimed results contained a dizzying array of "highly improbable" data that made it "highly unlikely" to be accurate.
9 out of 9 volunteers that were supposedly challenged with the vaccine somehow ended up with identical antibody titres at days 21 and 28. Many outside scientists concluded that the probability of this happening in reality was "highly unlikely."
The same thing allegedly happened in the titre numbers of 7 out of 9 volunteers said to have been challenged with a variation of the virus.
8 out of 9 other experimental data points that would be expected to be very different were reported as allegedly being exactly the same.
Additionally, many outside researchers claimed the cellular response data was even more fishy and deemed "even less likely" to be true.
And then, on top of all this, outside experts said the data that was given was "incomplete" and inadequate to prove effectiveness.
(For more, see September 13th article: "Scientists Say "Nyet" To Test Results from Russia's Claimed Covid 19 Vaccine" ).
So, some greeted the latest claims with skepticism, reserving judgment until at least the full data is presented. And thanks to the doubts surrounding the previous studies, some may still have lingering questions concerning the newest data’s accuracy even after full results are published. Unfortunately, these kinds of questions may be difficult for the publishing scientists to ever fully address. For example, peer-review can only catch poorly-done fraud (while well-executed fraud evades censure). Truly verifying the results would require a third-party to replicate the entire trial (which is something that’s highly unlikely to be done by anyone). So this may hang a permanent cloud over the results.
Ironically, even if Sputnik V ends up being completely vindicated, Russia' vaccine strategy appears to have unintentionally shot its own vaccination campaign in the foot.
A Gallup poll of 1500 Russians found that they are among the most skeptical in the world about taking a coronavirus vaccine. Just 30% said they believe most of their compatriots would take a vaccine if it was widely available and claimed to be safe and effective. Only three other countries in the world had more skeptical respondents: North Macedonia at 28%, Bosnia and Herzegovina at 27%, and Bulgaria at 27%.
Health experts noted that, with such widespread resistance, the country is unlikely to gain the compliance levels necessary to achieve herd immunity via a successful vaccination campaign.
When will life go back to normal? Israel's rapid vaccination program could result in herd immunity in just two months, but majority of world may struggle for dismal 7.5 years.
This week, Bloomberg announced they’ve built the world’s biggest database of Covid-19 shots administered throughout the globe. And based on the estimated need of 75% coverage to achieve herd immunity, they've made predictions on when life will return to normal (based on current progress levels):
Israel leads the world, and is headed to hit 75% coverage in just two months.
The U.K. is in second place and is projected to achieve herd immunity in just seven months.
The U.S. is also doing extremely well. It’s currently in third place and is expected to hit the tipping point just before the end of the year (11 months).
However, the rest of the world is a different story. Even developed nations like Italy and France are currently on track to go through a brutal slog of 3 to 4 years. And the average country is projected to take a depressing 7.5 years.
At the same time, these projections are based purely on what's happening now. And if and when new vaccines come online (and/or new production) than the time frames are expected to accelerate. And Bloomberg will be continuing to update their calculator as the situation evolves.
Did we inadvertently create the new super-contagious mutants by using ineffective convalescent plasma treatments? Case study suggests we might have.
This week, British doctors released a fascinating report of what happened when they spent 102 days treating a cancer survivor for Covid-19.
The patient was treated with both remdesivir and convalescent plasma. And twice a week testing found that neither was effective in reducing his viral load. Sadly, the patient died at the end, but the results were nonetheless eye-opening.
The researchers found that the Remdesivir had little effect on the patient's virus population. But, the convalescent plasma did.
Soon after receiving the plasma, the population experienced large, dynamic shifts. This included the evolution of mutation that modified the key spike protein, which the virus uses to infect its victims. And when these mutations were tested, they gave evidence of being highly problematic and less susceptible to the neutralizing antibodies that normally kill the original.
Senior author Ravindra Gupta, who is a professor of clinical microbiology at the Cambridge Institute of Therapeutic Immunology and Infectious Disease, said:
“When the virus has a chance to sit in one person for a long time and replicates for weeks and months, it learns how to fight the immune system. It’s all about pressure on the virus.”
The modifications to the spike protein weren't exactly the same as those in the new U.K. mutation (which is 50% more contagious and perhaps more deadly than the original as well). But researchers noted that they had numerous similarities. And Gupta said:
“It just illustrates that someone like him is probably patient zero."
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've made minor changes and my overall strategy is essentially the same as last week.
Treatment: Back in May many health experts said we wouldn't get a vaccine for at least two years. But, after I saw unprecedented amounts of resources being thrown against the virus week after week (and their successes), I felt this was overly pessimistic. And on May 21st, I said I thought the chances were good that we would have one vaccine by winter (and with luck we might get two). It turns out the world has been very lucky and we ended up with two right before the end of the year. And in early 2021 more are potentially set to come online. Unfortunately, as I also predicted in late May: these can't be manufactured and distributed in large enough quantities to immediately treat everyone. Most in the U.S. will have to wait well into 2021). So this 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 well short. For Q4, it looked to me like easy gains were gone and the rest would be a long, tough slog. So I predicated it would be up modestly but it would still come up short of the amount needed to "break even" to where we would have been in Q4 without the pandemic (and thus well short of a true V-shaped recovery). Ultimately both were correct (Q4 was up 4% but year to date was -3.5% and the worst yearly performance since 1946) What about 2021 Q1? Thankfully we have now gotten more stimulus and some brief extensions on eviction/foreclosure moratoriums. So I am not as afraid of immediate double-dip recession as I was just a couple weeks ago. On the other hand, the stimulus itself falls short in many important areas such as restaurants and bars, rental assistance, transit, student loans etc.. And I'm very concerned about the mutated variation making the partial lockdowns we have now ineffective and causing significant economic damage. So, without further stimulus (and a little bit of luck), I'm still concerned we could still have 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. And now we have a faster spreading mutation that could cause significant economic harm. So unfortunately, I still 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 (including by the mutated strain). Unfortunately, this is looking more and more likely. My slim hope is that the 3rd wave can be controlled and kept small. If this happens... and if the US government also passes additional 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. [2/7/2021 update: That is exactly what happened:]
If we get a second (or third) lockdown, then this step (2) will become W-shaped and more painful. So it's a race between vaccines vs. new mutant strains. Effective vaccines will eventually trigger the third stage and an accelerated recovery. But this most likely won't be a straight-V recovery, because it will 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. And there are obstacles to this that could slow it down more including bungles with distribution, reluctance of people to take the vaccine, no evidence so far that the approved vaccines will actually stop spread to others ("sterilizing immunity") etc. But, we also could get a little lucky (for example, if we get a successful vaccine treatment that is a newer type that can be scaled up more quickly or is proven to works bette). If so, then the third-stage boost would be faster.
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) could come under heavy stress. Some 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.