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How will Covid-19/Coronavirus Affect my Alternative Investment Portfolio? Part 49: February 6th

Updated: Feb 15, 2021

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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Quick Summary

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:

  1. 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.

  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 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,, 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 avoiddevastating 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