How will Covid-19/Coronavirus Affect my Alternative Investment Portfolio? Part 54: April 10th
Updated: 3 days ago
U.S. progress on third death wave sputters and reverses; Crystal ball: signs continue to show fourth wave of infections; Change of focus for this article series: The critical race against time (humanity’s vaccines vs. the evolving virus); Europe holds tenuous line against more contagious and deadly variants; Philippines’ hospitals overwhelmed by tsunami of patients, while also battling new “mutation of mutation” variant; India spirals out of control as hospitals go into crisis mode amid mask-weary public and new “double mutation” ; Mutant watch; Mutant Watch Part 2: U.K. variant is now the dominant U.S. strain; Mutant Watch Part 3: top U.S. coronavirus advisor warns U.K. variant’s presence is a “category five hurricane” and could spur new lockdowns (despite vaccines); Economy pummeled by fresh wave of new unemployment as Federal Reserve warns of threats of continued viral spread and mutations; EU regulators say AstraZeneca's coronavirus vaccine is linked to rare brain clots; Good news: Pfizer and Moderna vaccines are effective for at least 6 months; Update on my portfolio.
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This article is part of a multi-article series that's been published regularly 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). And then in February 2021 it moved to bi-weekly updates. You can see the links to every article in the series here.
U.S. progress on third death wave sputters and reverses
For the 63rd 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 574,840 (versus 561,142 on Saturday morning, two weeks ago).
Here's a quick summary of what's happened so far:
The first U.S. death wave started in early March 2020. 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 2020. This ran predominantly through urban areas in the Sun Belt. It peaked on August 1st, before falling until October 8th 2020.
The third death wave began on October 9th, 2020. It was initially led by rural areas and later spread across the entire country. This made it more difficult to contain and fight than earlier waves. By late October 2020, it had caused acute shortages of critical drugs and key medical personnel needed to fight the disease and limit deaths. Then in November 2020, it caused hospitals to overload in certain areas of the country. When overload happens, hospitals are forced to deny care to incoming patients (both those infected with the virus and uninfected) resulting in higher deaths than necessary. This wave peaked in late January of 2021 and began to subside in mid-February 2021.
The last time we checked, results were mixed. The first week, deaths had dropped and then in the second week, they plateaued.
This time around, the results are still mixed, but more negative. Deaths dropped slightly in the first week of April, and then reversed and actually jumped back up to where they were previously.
So obviously, this wasn't great to see. On the other hand, the data can be noisy. So it's premature to declare this as the definitive end of the third wave of deaths (and beginning of the fourth). We'll continue to monitor and see.
Crystal ball: signs continue to show fourth wave of infections
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?
In the last two weeks, infections moved in the wrong direction and increased. And unless things turn around by the next update, the country has most likely entered into a fourth wave of infections.
Change of focus for this article series: The critical race against time (humanity’s vaccines vs. the evolving virus)
Most people in the U.S. now believe that we’re either close to or, in fact, at the end of the pandemic. They believe that all the country needs to do is coast along the home stretch (of vaccinations). And then, a return to the pre-covid good times of 2019 must be both right around the corner and inevitable. And while virtually all health experts, economic experts and policymakers are publicly focusing the country on that goal, a growing number of them are also warning that this may be a very oversimplified point of view. Each week, more signs indicate that we aren’t actually coasting in the home-stretch at all. Instead, we’ve only just started a new and potentially critical phase: a race against time. And so this week, this series is changing its focus: What is the race against time? On one hand, vaccinations are moving forward, holding the promise of establishing "herd immunity" and ending the pandemic. This happens when a virus can no longer find enough susceptible people to infect, and then it peters out. Scientists don't yet know the "magic percentage" of people that would need to be vaccinated (or previously infected) to do this for Covid-19. But the current consensus is that it’s probably somewhere in the 60 to 80% range.
On the other hand, almost a third of the U.S. population currently says they will not take the vaccine. So unless this changes dramatically, this refusal alone may make herd immunity impossible. But even if this issue can be overcome, there’s a still larger challenge.
The longer the virus is only “half-crushed,” the more evolutionary pressure we put on it, to evolve into more dangerous mutations. And if a mutation evolves that’s resistant to vaccines (called “achieving escape velocity”), then the country and world will be in for a new round of hurt. And many economists, policy experts and regulators say that the new damage could mount for months (or even years). Throughout 2020, a broad consensus of health experts and pundits claimed that harmful mutations were highly unlikely. As we covered in past articles, most claimed that the coronavirus’s genetic code was too fragile to remain viable after a mutation. So mutations would weaken the virus rather than strengthen it. Unfortunately, 2021 came along and defied the predictions. And the new year brought not just one but several mutations. All of them developed independently and many use different strategies. But all are either more contagious, more deadly and/or more resistant to antibodies and vaccines than the original. (See “mutation watch” in later sections). So far, humans are winning the race because most vaccines continue to be effective. But there are some problems looming ahead on the race track as well. First, the rollout of vaccines is slow and only partial. For example, even in the U.S. (which leads the world), children aren’t currently expected to be vaccinated until 2022. And poorer countries are expected to fare worse. Due to numerous challenges, world-wide vaccine coverage is not currently expected to occur for another 7 years (2028). (Although this is based on current vaccination rates and production is expected to increase dramatically at the end of the year)
And on top of this, large percentages of people are either refusing to follow health recommendations to control the virus or have gotten tired of doing so.
So, all of these factors are putting pressure on the virus to mutate, and/or giving mutations more opportunities to spread. And those things increase the chance of the virus achieving “escape velocity.” If this happens, many health experts believe we could be battling the virus’s mutations for months or years longer. And most economists and policy experts believe the negative economic effects of this would be crippling.
So, this series will now shift its focus to mostly:
The latest scientific news on mutations and vaccines.
The spread of mutations (and what’s working and what isn’t).
Public opinion polls on vaccines
So let’s kick it off by taking a look at the rest of the world.
Europe holds tenuous line against more contagious and deadly variants
Europe was one of the earliest continents to get hit with the first wave of the virus. And during the summer and fall of 2020, it was the poster child of success by bringing deaths down to low levels (even while other countries, like the U.S. and Brazil, suffered a crippling second wave). But, in late 2020, Europe was hit with more powerful mutations, and it suffered its own second death wave. In response, many countries were forced to enact strict lockdowns (as severe as the beginning of the pandemic). And while economically crippling, these worked in pushing down the second wave.
However, more recently, even that progress has halted. And some countries, like Italy, are clearly in a third death wave. Meanwhile, the entire continent gave signs, per our last article, of potentially heading in that direction, as well. What happened this week?
Unfortunately, Italy’s deaths continued to rise. And meanwhile, former standout Germany also experienced a troubling spike. The continent as a whole experienced slightly rising deaths and then a plateau. So this was neither a catastrophe nor very good news. Meanwhile, what about infections (which are usually a leading indicator of deaths)?
This is mostly positive news.
After a week of rising European infections, last week they fell. Germany also experienced the same thing. Italy did as well, although then it backtracked and rose again.
On the other hand, Spain is clearly in the middle of a new surge, which is not yet under control. We’ll continue to watch them and see.
Philippines’ hospitals overwhelmed by tsunami of patients, while also battling new “mutation of mutation” variant
Meanwhile, in Southeast Asia, the Philippines reported a new variant of concern (called “P.3” or “B.18.104.22.168”). Geneticists say it’s an example of a global “mutation of a mutation,” having started with a Brazillian mutation (which is the ancestor of the infamous Brazilian P.1 variant, which is more resistant to antibodies and vaccines than the original). And like P.1, the Philippines mutation contains the same spike protein mutations. However, according to Dr. Maria Rosario S. Vergeire at the Philippine Department of Health, the Philippines variant goes further with additional mutations that may increase “transmission, virulence and [the chance of] ‘immune escape.’” Further studies are already underway.
In the meantime, the Philippines is now battling an intense surge. How is it looking this week?
Unfortunately, deaths this week skyrocketed to pandemic highs. The Philippines is facing a humanitarian crisis as its hospitals overload. Vice President Leni Robredo, said on Facebook:
“Many have already died inside tents outside hospitals, waiting to be admitted to the ERs, in ambulance while in transit, at home without receiving any medical help.”
As oxygen tanks and hospitals beds have run short, relatives of the infected are now reporting on social media that they’re purchasing oxygen tanks on the open market and treating them at home. Manila resident Jomarlo Moreno said he shelled out 3,500 pesos for the equipment for a family member. And he added:
“We are lucky that we have the resources. What about others who do not?”
Manilla hospitals are so overrun that even ex-President Joseph Estrada was unable to get a hospital bed. Instead, he spent the night in an emergency room and was later admitted to the intensive care unit. His son reported that he is now on a ventilator as his pneumonia has worsened.
Meanwhile, this week, the country came under criticism from the World Bank for its poor response to the crisis. World Bank’s chief economist for the East Asia and Pacific region, Aaditya Mattoo, said:
"[The Philippines] highly decentralized health system, and lockdowns that were super draconian but porous, made for a disastrous combination. [They] incurred the economic distress without getting the containment benefit. That contrasts with countries like China and Vietnam, which moved swiftly to smarter containment measures involving testing and tracing.”
Senator Francis Pangilinan claimed that the Philippines:
"is at risk of a humanitarian crisis that will overwhelm the country and wipe out families unless the government steps up testing, tracing and treatment efforts".
India spirals out of control as hospitals go into crisis mode amid mask-weary public and new “double mutation”
Next, let’s look at India. As we discussed in the last update, the Indian Health Ministry announced a new “double-mutant,” which they believe "confers immune escape and increased infectivity." But it was unclear how widespread this variant was. How is India doing this week?
This is a very bad chart. Deaths have skyrocketed and are close to pandemic highs. As recently as February, India had hit a record low in Covid-19 cases. But now the consensus of epidemiologists is that a lack of physical distancing, lagging compliance with mask mandates and possibly new variants are all contributing.
Meanwhile, the new wave has overwhelmed hospitals around the country and put extreme pressure on intensive care unit beds and essential drugs.
This week, Mumbai announced it had only 3% of ICU beds remaining. On Friday, a doctor at a state-run hospital reported that it had run out of both ICUs and oxygen beds. On Friday, Mumbai also announced that it was enacting a strict weekend lockdown to attempt to contain the outbreak.
Shuchin Bajaj, a director at the Ujala Cygnus Group of Hospitals, which runs 14 hospitals across North India said this wave feels very different than the early pandemic:
“The impact is ten times what it was last year. This time, it seems to be affecting younger patients.
It’s going to be a horrible next two months.”
Additionally, India's once vaunted vaccination effort is faltering. Originally, the country had planned on manufacturing so many vaccines at this point, that Prime Minister Narendra Modi was going to export Covid-19 vaccines to other countries as a diplomatic foreign policy strategy. But last month, he announced that all vaccine exports are now restricted, as supplies in the country had run low. And then on Friday, 100 vaccination centers in Mumbai were forced to abruptly shut down, due to vaccine shortages. Initially, some government officials claimed the information was false, but were quickly overridden by hordes of angry voters posting pictures of locked doors on social media.
The biggest surprise story of 2021 has been the emergence of more powerful and dangerous mutations. In 2020, most health pundits predicted the odds of this happening were extremely unlikely. But now it seems that every week, another new and concerning variant is discovered.
And as mentioned above, the longer the world only "half crushes" the virus, the more evolutionary pressure we put on it to evolve further. If it mutates into something that is resistant to vaccines (achieves "escape velocity"), then the country and the world will probably suffer months (or even years) of more health and economic damage.
Here’s the updated latest list of the major, most-studied variants of concern that have sprung up around the world. Even after omitting lesser studied variations, the list has grown from 4 to 10 variants in just four weeks. 1) U.K. variant (B.1.1.7): studies found it is 50 to 70% more contagious than the original strain, and has a 30% higher chance of killing its victims. It has also been linked to a higher infection rate in children in the U.K., Italy and Israel.. But further studies are ongoing to determine if this is true cause-and-effect or just coincidence.
Another study also found that two doses of the AstraZeneca Oxford Covid-19 vaccine were ineffective in preventing mild to moderate infections of this variant.
2) South African variant (B.1.351): studies found it’s 50% more contagious than the original, can re-infect people who recovered from the original, and reduces the effectiveness of current vaccines "by a small but significant margin." More definitive human trials are underway.
3) Brazil variant (P.1.): studies found it’s more contagious than the original strain (but poor data from Brazil makes quantifying the amount difficult). Also, it’s documented as capable of reinfecting people who recovered from the original (who thought they had immunity).
4) California variant (L452R): studies found it’s 20% more contagious and showed “moderate but significant resistance to antibodies generated by vaccines and previous coronavirus infection (reducing their effectiveness by about 50%).”
5) New York City variant (B.1.526): contains the “EEK” mutation (E484K), which (when studied in other variants) was highly resistant to the Regeneron monoclonal antibody treatment (rendering its effectiveness "either impaired or abolished"). The "EEK" mutation has also been found to lower vaccine effectiveness 3.4x. Researchers concluded that most likely the New York City mutation shares similar characteristics.
6) French variant: has evolved the ability to evade detection by “gold-standard” PCR coronavirus tests. As a result, the World Health Organization has labeled this a variant of concern, which they’re tracking closely.
7) India variant (B.1.617): India’s Health Ministry announced it has detected samples of a new "double mutant." It’s the first variant to combine two problematic mutations, E484K (from Brazil and South Africa variants) and L452R (from California and India), into one package. And they believe this “confers immune escape and increased infectivity." However, it’s too early for studies to have been done on this combined-mutation variant, so this is only a theoretical analysis based on what each of these mutations have done in other studies. This week, researchers announced the double mutant has now been found in eight countries including the United Kingdom, Singapore, Australia and the United States (in California).
8) Angola variant (A.VOI.V2): this week, a team of researchers published a study that has not yet been peer-reviewed. This variant was discovered in the samples of three people who flew to Angola from Tanzania. If the report is accurate, it bristles with more mutations (34) than any other strain previously identified. That includes 14 in the spike protein, and others that are believed to help escape immune response as well. Researchers are studying it further.
9) Philippines variant (called “P.3” or “B.22.214.171.124”): As mentioned above, geneticists say it’s an example of a global “mutation of a mutation,” having started with a Brazillian mutation and evolving from there. And while it shares many of the common spike protein mutations in the infamous Brazilian P.1 variant (which is more resistant to antibodies and vaccines than the original), it goes several steps further. The Philippine Department of Health believes these additional mutations may increase “transmission, virulence” and the chance of “immune escape.” Further studies are already underway.
Mutant Watch Part 2: U.K. variant is now the dominant U.S. strain
Back in February, we discussed the fact that many health experts believed that the U.K. variant (b.1.1.7, which is more contagious and deadly and may possibly be more harmful to children) would probably become the dominant one in the U.S. by late February or March. However, when the time came, it was difficult to tell if this was happening or not. And that’s because the U.S. had chosen to forgo developing the kind of robust genetic testing capabilities that other countries had. And many health experts warned the country was “running blind” during a crucial, new phase of the pandemic.
However, in late January, the country did an about-face and has since invested millions into developing this infrastructure. And this week, some of the fruits of that became visible when CDC Director Rochelle Walensky reported the latest news. And unfortunately, the new variant has definitively become the dominant one in the U.S. And Walensky said:
“It [the U.K. variant] is the most common lineage, period. These trends are pointing to two clear truths. One, the virus still has a hold on us, infecting people and putting them in harm’s way and we need to remain vigilant.
And two, we need to continue to accelerate our vaccination efforts.”
Mutant Watch Part 3: top U.S. coronavirus advisor warns U.K. variant’s presence is a “category five hurricane” and could spur new lockdowns (despite vaccines)
This week, Dr. Michael Osterholm (who sits on the U.S. coronavirus advisory board and is director of the Center for Infectious Disease Research and Policy at the University of Minnesota), announced that the U.K. variant (B.1.1.7) may be changing the rules of the pandemic on us. He said:
“The new variant is between 50% to 100% more infectious than previous strains and causes more severe illness about 55% of the time.
[And] vaccination alone won't curb rising cases in the next six to eight weeks. There isn't a country in the world right now that has seen a big increase in this [variant] that is not locking down.
We really are in a category five hurricane status … We're going to have to reconsider what we're doing.”
However, many states continue to relax restrictions, in response to overwhelming complaints from outraged and/or restriction-weary voters.
Osterholm also added that while there’s no definitive proof yet that kids are more susceptible to this variant, the data so far is concerning:
“This B.1.1.7 variant [seems to infect] kids very readily.
Unlike the previous strains of the virus, we didn't see children under eighth grade get infected often, or they were not frequently very ill. They didn't transmit to the rest of the community… B.1.1.7 turns that on its head."
He went on to explain that 750 Minnesota schools have reported the variant in just the last two weeks. And called dealing with the mutant, a "brand-new ballgame."
Osterholm also warned that if current trends hold up, school closures may be coming in the summer as well.
Economy pummeled by fresh wave of new unemployment as Federal Reserve warns of threats of continued viral spread and mutations
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 51 weeks, the economy has been hammered week after week by massive levels of new unemployment. This week, 770,000 people were newly unemployed. This news was essentially unchanged and slightly worse than the 728,000 people newly unemployed last week.
Federal Reserve Chairman Jerome Powell warned that infections continuing to rise would be problematic for the economy.
“Cases are moving back up here, so I would just urge that people do get vaccinated and continue socially distancing. We don’t want to get another outbreak; even if it might have less economic damage and kill fewer people, it’ll slow down the recovery.”
Meanwhile, Minneapolis Fed President Neel Kashkari was asked to identify the biggest risk to the economy at this time. And in a virtual speech for the Economic Club of New York, he said:
"The biggest risks that I see to the recovery are these variants.
One variant now thought to be dominant in parts of the United States [is believed] to easily infect younger people. If daycare centers and schools need to be closed in response to the spread, that could strain families and set us back. That’s not my basecase scenario, but that’s what the healthcare experts that I consult with are warning me about."
St. Louis Federal Reserve Bank President James Bullard said that, with all the uncertainty, it would be unwise for the Fed to change its course now:
"The Fed should not even discuss changes in monetary policy until it is clear the pandemic is over. We have to get the pandemic behind us first. There are still risks, and things could go in a different direction.”
EU regulators say AstraZeneca's coronavirus vaccine is linked to rare brain clots
Meanwhile, the European Medicines Agency (EMA) released a report this week confirming that there’s a link between AstraZeneca's Covid-19 vaccine and "very rare" but also potentially dangerous "clotting events" in the brain and abdomen.
The AstraZeneca jab has been rolled out to numerous countries since February. But there has also been a small but growing number of reports of previously healthy people developing an unusual clotting problem. Most are women in their 30s and 40s and experience it within days of being vaccinated by the AstraZeneca jab. And the patients develop both a large number of clots and a low platelet count, which is a highly unusual situation.
The committee reviewed 62 cases of reports of cerebral venous sinus thrombosis and 24 cases of splanchnic vein thrombosis. And they concluded the chance of experiencing the side effect was approximately 1 in 100,000 people. And 18 of these cases resulted in death.
Ultimately, the EMA concluded that the benefits of vaccination outweigh the risk of clotting. But the agency recommended that people under the age of 30 years be provided other vaccines, if available.
Then on Friday, two new studies came out on how the vaccine causes these clots. Both were published in the New England Journal of Medicine by researchers in Europe.
Both studies found that people getting the vaccine have a higher level of antibodies directed against a cluster of immune related cells. And these clusters include platelets, which help blood to clot during injuries. So the antibodies stick to the platelet complex and form dangerous clots, which can block blood flow in veins and arteries. The researchers are referring to the condition as "vaccine-induced immune thrombotic thrombocytopenia."
Good news: Pfizer and Moderna vaccines are effective for at least 6 months
Up to this point in the pandemic, one of the big question marks about vaccines is how long they might remain effective.
And in the last two weeks, both Pfizer and Moderna announced some good news.
Both companies announced recent studies showing that their RNA vaccines were effective for six months after the second dose. Pfizer achieved a 91.3% effectiveness, while Moderna achieved 94.1%.
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. The vaccine rollout is accelerating quicker than originally expected (at least in the U.S). At the same time, the spread of the variants, the continued resistance of sizable percentages of the public to taking the vaccine, and/or unwillingness of continue to take health precautions remain troubling X-factors that could push the virus to evolve and jump the vaccine firewall. So 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 until early or mid 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 extensions on eviction/foreclosure moratoriums. So I am not afraid of an immediate double-dip recession as I was at the beginning of the year. On the other hand, millions are still unemployed and many important areas of the econcomy are comatose. And I'm concerned about the mutated variation making the partial lockdowns we have now ineffective and causing significant economic damage. So, if things go the wrong way, I'm concerned we might 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 faster spreading mutations 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 mutated strains). 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 are triggering 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 better). If so, then the third-stage boost would be faster.
Investments: It would be great if we end up being in the home-stretch to recovery. But if we aren't, and the negative scenarios play out, then it might 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. At the same time, I think there could also be an opportunity to purchase dislocated and distressed assets at favorable pricing and significant discounts.
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 mutations 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.