How will Covid-19/Coronavirus Affect my Alternative Investment Portfolio? Part 57: July 18th
Updated: Sep 20
Fourth wave of infections arrives in the U.S., spearheaded by a stunningly rapid surge of the more powerful Delta variant; International watch: Israel and the United Kingdom see major hospital surges from Delta; U.S. vaccination ranking plummets from number #2 to #25; Mask mandates return as Delta gains strength; "Many will be scarred for a lifetime." A massive study of 2 million Covid-19 patients finds a stunning one-quarter suffer from long-COVID; The curious case of the ever-dropping effectiveness of the Pfizer vaccine against Delta; Change and update on my portfolio strategy.
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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). Then in February 2021 it moved to bi-weekly updates and in May 2020 it changed to once every month. You can see the links to every article in the series here.
Fourth wave of infections arrives in the U.S., spearheaded by stunningly rapid surge of the more powerful Delta variant
For the 76th 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 624,746 (versus 612,203 on Saturday morning, 6 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 in late April 21st and the country fought it down until early July.
The second death wave started on July 7th 2020. This ran predominantly through urban areas and the Sun Belt. It peaked on August 1st, before falling until early October 2020.
The third death wave began on October 9th, 2020. It was initially led by rural areas and later spread across the entire country. By late October 2020, it had caused acute shortages of critical drugs and key medical personnel needed to fight the disease. Then in November 2020, it caused hospitals to overload in certain areas of the country. These were 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. Then it subsided considerably through June 2021 (along with a rapid increase in vaccinations).
Now, we’re in the newest, most uncertain and critical phase of the pandemic. This is a race: humanity’s vaccines versus the virus’s ability to mutate into more dangerous versions that could evade the vaccines.
So far, humanity has been winning, in the early stages. But the pace of progress is slowing (see next section). Meanwhile, the virus is gaining momentum due to vaccine hesitancy, failure to take health precautions, and the slowness of the global vaccine rollout. And we’ve given the virus plenty of time and evolutionary pressure to mutate and produce dozens of more powerful versions already. The risk is that one mutated version may actually achieve escape velocity and jump the vaccine firewall. If this happens, we may see renewed lockdowns along with damaging economic effects (and potentially even a double-dip recession). And if this occurs, it would be negative to many investments. So, monitoring this situation is our newest focus of this article series.
The latest and most dominant variant is Delta (formerly known as the "double mutant" from India). Delta is a beast because it’s 225% more contagious than the first strain. And it multiplies rapidly and churns out a stunning 1000 times more copies of itself than the original. Indian doctors have reported that in addition to the typical Covid-19 complications and symptoms, Delta has unpleasant new ones. These include: hearing impairment, gangrene (from blood clots), stomach pain, nausea, vomiting and joint pain. And studies have shown that people who have it become infectious to others much more quickly as well (only 4 days versus 6 for the original). Also early studies in England and Scotland suggest it also carries a higher risk (double) of hospitalization.
Delta has also speedily become the most dominant variant in U.S. sequenced tests. How fast exactly? Here's the latest statistics:
This is a shocking graph. Delta has gone from virtually nothing only a couple months ago to 79% of all analyzed sequences.
What effect has this had on infections? Here's the latest:
This is a troubling graph. Clearly, the third wave hit its trough, or low point, a month ago in mid-June. And then after plateauing, the trend is now moving in the wrong direction and rising rapidly. And we are now clearly in the fourth wave.
On Thursday, the Centers for Disease Control director Rochelle Wilensky called this "a pandemic of the unvaccinated." States with high vaccination rates (over 70%, like Vermont and Massachusetts) are doing well. But states where vaccinations are closer to 50% (like Florida, Missouri, Arkansas and Nevada) are seeing sharp increases. And this dynamic can be seen at the county and city/town level as
Typically, infections lead hospitalizations by 1 to 2 weeks. So how are hospitalizations doing?
Right on cue, these started trending upwards about two weeks after infections did. How about deaths? Typically, hospitalizations lead deaths by anywhere from 1 to 6 weeks. So how are fatalities looking?
Already, deaths also appear to show a plateau and uptick.
International watch: Israel and United Kingdom see major hospital surges from Delta
Meanwhile, both Israel and the United Kingdom have higher vaccination rates than the United States (69% and 63% versus 56% respectively). And both were hit with the Delta variant sooner than the U.S.
So both are probably very helpful leading indicators of what the U.S. can expect in the coming weeks and months. How are Israel and the U.K. looking?
Here are new hospital admissions for both:
Unfortunately, these aren't good numbers. Both Israel and the U.K. are seeing massive surges in hospital admissions, similar to levels experienced earlier in the pandemic. And the U.K. is almost as bad as it was in September 2020, when no vaccinations were available. And this is while their economy is still mostly in lockdown!
Boris Johnson, the British prime minister, is staying the course and still plans to reopen on Monday. The media is calling this "Freedom Day" because facemasks will no longer be required, nightclubs and sporting events will be able to function at full capacity and people will no longer be recommended to work at home.
More than 1200 scientists wrote a letter to the British medical journal, The Lancet, criticizing this decision. It warned that this policy could allow vaccine-resistant variants to develop, threatening not only the U.K., but the world.
Modelling data suggest the government's strategy provides fertile ground for the emergence of vaccine-resistant variants. This would place all at risk, including those already vaccinated, within the U.K. and globally. While vaccines can be updated, this requires time and resources, leaving many exposed in the interim. Spread of potentially more transmissible escape variants would disproportionately affect the most disadvantaged in our country and other countries with poor access to vaccines.
It also pointed out that long-Covid effects may cause lasting negative impacts for generations:
Even assuming that approximately 20% of unvaccinated people are protected by previous SARS-CoV-2 infection, this still leaves more than 17 million people with no protection against COVID-19. Given this, and the high transmissibility of the SARS-CoV-2 Delta variant, exponential growth will probably continue until millions more people are infected, leaving hundreds of thousands of people with long-term illness and disability. This strategy risks creating a generation left with chronic health problems and disability, the personal and economic impacts of which might be felt for decades to come.
The scientists recommended doing this instead:
Instead, the government should delay complete re-opening until everyone, including adolescents, have been offered vaccination and uptake is high, and until mitigation measures, especially adequate ventilation (through investment in CO2 monitors and air filtration devices) and spacing (eg, by reducing class sizes), are in place in schools.
However, both businesses and the general public have grown weary of lockdowns. So "Freedom Day" is happening regardless, starting Monday.
U.S. vaccination ranking plummets from number #2 to #25
Initially, the U.S. led most of the world in the percent of its population it had vaccinated. And through most of early 2021, it was a world-beating #2 (behind only Israel).
However, progress has decelerated rapidly due to vaccine hesitancy, while the rest of the world has been accelerating.
As result, the U.S. has now fallen to a mediocre #25 (with 56% partially vaccinated and 40% fully). It's now being beaten by Canada, the United Kingdom, Spain, Germany, China, Chile, Denmark and many others who have all been more successful in vaccinating a larger percentage of their population.
Mask mandates return as Delta gains strength
Last week, Los Angeles County reinstated its mask mandate (including among the vaccinated) to combat the surging coronavirus spread.
Los Angeles County Board of Supervisors Chairwoman Hilda Solis, said the new mandate is in response to Covid-19 case loads that reached 1,900 a day, last week.
“I’m not pleased that we have to go back to using the masks in this manner, but right now it’s going to save lives and that’s what’s most important."
Then, on Friday, health officials in seven California counties (San Francisco, San Mateo, Santa Clara, Sonoma, Alameda, Contra Costa and Marin) urged vaccinated people to wear masks again indoors to prevent the spread of Delta.
Meanwhile, U.S. Surgeon General Vivica Murthy said more mandates may be coming.
"It’s very reasonable for counties to take more mitigation measures like the mask rules you see coming out in L.A., and I anticipate that will happen in other parts of the country too."
On the other hand, the Centers for Disease Control has not changed its guidance on masks and says they are unnecessary for the vaccinated.
This has drawn strong criticism from some, including former Surgeon General Jerome Adam. Jerome himself was criticized in 2020 for initially saying that masks were not needed before doing an about-face. And on Saturday, he acknowledged his mistake. He said his decision at the time was based on science, but that the science had quickly become outdated. And he warned that the CDC was now making a similar mistake by not requiring masks in the face of Delta.
What @CDCgov said [recently] was based on the science & conditions at the time, and amounted to “you’re safe IF you vax it OR mask it.”
Both the conditions (rising cases) & the science (delta variant) changed, but what people heard and held to was masks were no longer needed…
Now you have health officials, cities & counties (eg LA County), & likely soon states issuing guidance in direct conflict w/ the mask guidance @CDCgov issued a month ago.
The sooner CDC says we were wrong, & hits the reset button, the better.
Trust me- I know more than anyone.
Instead of vax it OR mask it, the emerging data suggests CDC should be advising to vax it AND mask it in areas with upwards arrow cases and positivity-- until we see numbers going back down again.
CDC was well intended, but the message was misinterpreted, premature, & wrong. Let’s fix it.
"Many will be scarred for lifetime." Massive study of 2 million Covid-19 patients finds a stunning one-quarter suffer from long-Covid
Most people believe that Covid-19 is a disease that comes and goes in a couple of weeks like the flu. However, as we've discussed in previous weeks, an overwhelming body of evidence has shown that for millions of people, this isn’t the case. Many report long-term debilitating symptoms, such as chronic fatigue, brain fog, sleep disorders, heart abnormalities, etc.. These can last for months and for many have still not ended. And this is now being called "long-Covid."
In mid-June, scientists compiled a study based on the health insurance records from 2 million coronavirus patients. And what they found was that almost one quarter (23%) had suffered or are currently suffering from long-Covid.
Robin Gelburd, president of the nonprofit organization that conducted the study, said:
“One thing that was surprising to us was the large percentage of asymptomatic patients [people with cases that were so mild they had no symptoms] that are in that category of long-Covid.”
Asymptomatic people (who have made up the vast majority of the infected) were afflicted about 19% of the time. And 27% of those with mild or moderate symptoms suffered from long-Covid. And among those who are hospitalized, about half were or are long-Covid patients.
And both young and old were affected as well.
Symptoms included: nerve inflammation and pain associated with nerves and muscles, exhaustion and fatigue, brain fog, migraines, heart abnormalities, sleep disorders, skin problems, intestinal problems and mental health conditions like anxiety and depression.
Dr. Al-Aly, an author of a large study published in April on lingering symptoms in Covid-19 patients, in the Department of Veterans Affairs health system, said:
“Some of these manifestations are chronic conditions that will last a lifetime and will forever scar some individuals and families.”
Some health experts have noted that current U.S. health policy is focused mostly on simply preventing the most serious cases of hospitalization. Preventing the spread of long-Covid is at best an afterthought, and most of the time not even a consideration at all. If such a large number of those infected with Covid-19 end up with long-Covid, including even the non-symptomatic patients, then this may actually be the most damaging part of the pandemic in the long run. And some are saying it would be much wiser to take action now.
Despite this, no such change in policy appears to be happening anytime soon.
The curious case of the ever-dropping effectiveness of the Pfizer vaccine against Delta
Meanwhile, in Israel, the health ministry voiced fears this week that the Pfizer vaccine's effectiveness against Delta has not been as effective as previously believed.
Back in March, a study of 1.7 million citizens found a reassuring 91.2% effectiveness in preventing infection and 99% effectiveness in preventing symptomatic Covid-19.
Then, on June 14, the U.K. Public Health England agency (PHE) published an analysis studying Pfizer versus Delta on 14,019 symptomatic patients. And they found a lower 88% effectiveness for preventing symptomatic infections. This was then lowered even more to 79% by Scottish researchers a month later (after correcting some initial problems). The study found that the jab was still 96% effective against hospitalization. And it did not look at asymptomatic infections (which are key to stopping the spread of the pandemic), nor did it look at those with long-Covid (key to understanding the long-term effects), nor those who died.
Then, two weeks ago, Israel announced that after a Delta outbreak in the country, their data showed that the Pfizer vaccine was only 64% effective at preventing symptomatic and asymptomatic disease and 93% effective at stopping hospitalization and death. If accurate, this would be a stunning development. However, both Pfizer and Israeli health officials were quick to caution that the study was based on preliminary and highly localised infection numbers. And it had other potential methodological weaknesses which needed follow-up work.
So, work on this has continued. And this week, Israel's Health Ministry said that researchers at the Gertner Institute were gathering more data and would be reporting soon.
Unfortunately, they received an update on Sunday. And they currently believe the more accurate numbers are actually lower than the above.
The Health Ministry also theorized that this may be caused by Delta being better than previous variants at breaking through vaccine protection, and that the vaccine’s effectiveness may decrease as time passes.
If the above is accurate, then it would have important public health implications. Even vaccinated people could be spreading Delta (and probably should be masking in public). And if part of the problem is waning effectiveness over time, then a third booster shot might be needed.
And last week, the Israeli Ministry of Health announced that it will now offer a third dose to severely immunocompromised adults.
Regardless of the accuracy of the study, Israel is currently seeing a huge surge in the spread of Delta. And some health experts noted that this is a striking and largely unanticipated development in one of the most well-vaccinated countries in the world.
To fight it, the Israeli government was forced to reinstate its mask mandate for indoor spaces and public transportation, after previously lifting most restrictions just a few weeks ago. Additionally, Israel is expected to soon reenact stricter quarantines for travelers and to revive the recently retired "green pass" system which gives vaccinated people broader access to public events like concerts and movie showings. Also during the week, Pfizer announced laboratory tests showed a third dose boosts Covid-19 antibody levels five to ten times versus the second dose. So this was potentially promising. At the same time, this was just a laboratory test, which may or may not translate into the real world. And scientists don't yet know if it's antibodies or other parts of the defense system that are key in determining effectiveness. Still, it was enough for Pfizer to announce that after gathering more data, they will be asking the Food and Drug Administration for emergency use of a third shot in August.
The CDC pushed back very strongly against Pfizer on the day of the announcement:
“Fully vaccinated Americans do not need a booster shot. The administration is prepared for booster doses if and when the science demonstrates that they are needed.”
Some health experts have wondered out loud if the CDC is setting itself up again for yet another embarrassing U-turn. The agency and current administration have had significant challenges with getting people to take two shots, much less three. Both entities fell short of their prominent July 4th goal of having 70% of adults vaccinated. Unfortunately, by that date, only 67% of the adult population had received their first dose and only 47% of adults had taken their second dose.
And of course, these numbers did not include the large percent of the population that’s under 18 years of age. Currently, of the total U.S. population, including adults and children, only 56% of the country is partially vaccinated, and only 48% is fully vaccinated.
Momentum in vaccinating seems to have fallen off a cliff, thanks to the U.S.’s large vaccine-hesitant demographic digging in their heels.
And as we discussed earlier, surveys of vaccine-hesitant people show that one of their main objections is the idea of having to get additional shots. So some theorized that this may be at least partially behind the strong CDC push back.
Also there is growing political pressure against a third dose being applied internationally from countries who are still waiting for supplies of the first and second doses of vaccine. For example, the World Health Organization (WHO) has howled in protest at the idea of rich countries getting a booster shot before many poor countries can even access the initial regimen.
Update on My Investment Strategy
Every update, 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. And this month I'm making another change since last time (and backtracking a bit).
The great news: By pure luck, the mRNA vaccine technology (which took decades to develop) matured just in the nick of time to be used. And unlike traditional vaccines, it turned out to be remarkably effective against even first and second generation mutations. This (along with a rapid U.S. vaccine rollout) has allowed the U.S. to avoid the 2021 lockdowns that happened in other countries. So many areas of the economy are recovering well. And the U.S. has catapulted from one of the least-enviable positions in the world to one of the most. Additionally, very generous stimulus cushioned what would've otherwise been catastrophic damage for tens of millions.
The not-so-great news: Still there's been lots of long-term structural and collateral damage. At the current rate the unemployment deficit won't be made up until summer of 2022. And U.S. debt levels have skyrocketed to the highest since World War II. But, considering how much punishment the economy took, this is about as good as could've been hoped for.
How it could still go off the rails: At the same time, more problematic variants are evolving and spreading across the world. And the snail-like global vaccination progress will give the virus months to years of time to evolve and jump the vaccine firewall (achieve "escape velocity"). If this happens, it could floor the economy again.
So here's my new strategy:
Previously I had put all new real estate investments on hold (along with any correlated to the business cycle).
But last month due to the improving economy, I felt comfortable investing in these again. And since downside risks still remained, I hedged my bets by not pushing the accelerator all the way to the floor. The deals needed to be exceptional (and have strong downside protection).
However this week I am "hitting the brakes" again on real estate and business cycle correlated deals deals due to the surge of Delta. And I want to see if and how this resolves itself before returning to my previous position.
In past downturns, many good distressed opportunities weren't immediately obvious at the moment of recovery and took a year or two to materialize. So I'm continuing to hold cash for these and keep my eyes open.
My opinions and strategy will change if we get some better or worse new Next Article
"Younger, sicker and quicker (to get worse)": 4th U.S. wave vaults past multiple records, as Delta muscles its way to 95% dominance; Herd immunity: Are we getting close or is Delta moving the goalpost on humanity? Crystal Ball: UK appears to be losing control of its latest wave and Delta causes infections in Israel to soar; New study estimates herd immunity may require "well over 80% and approaching 90%" rates to stop pandemic; How did the experts and pundits get Delta so wrong?; After stonewalling critics for weeks, CDC reverses course and reinstates recommendation for the vaccinated to mask-up; The CDC's inexplicable "see no virus, hear no virus, speak no virus" policy on breakthrough infections comes under more fire; Israel claims Pfizer vaccine’s power wanes quickly over time and also lets through more severe cases too; Poll finds most unvaccinated Americans believe getting the jab is a bigger risk to their health than catching the virus itself; Latest update on my portfolio strategy.