Good News In Α Terrible Time

Forget GME, Positive Developments in the Fight Against Covid are the Real Big Story

Here’s a useful stock tip.  When everyone is focused in one direction — *cough*GameStop*cough* — sometimes it’s a good idea to raise your head and take a look around.  

So, in totally other news, some very important things are happening in the battle against covid.  Let’s start with a scary headline from the New York Times

This is the nightmare, a world in which vaccines can’t control covid-19, one where we’re trapped in long term lockdown waiting for the virus to burn its way across the planet.

However, the article’s infographic told another story:

Look at the right-hand side of both graphs.  One way or another, they show vaccines putting a massive dent in covid case numbers by this summer. Huh? That’s a good thing, right?  

We live in upside-down times, and one of its weirder features is the lethality of good news: suggest that things might be getting better in the battle against covid, and you risk feeding the anti-masking, covid-is-a-hoax, conspiracy theory nut-bar narrative. In a plague year, encouraging optimism can literally kill people.  Not to mention that sounding hopeful can make you come across as a MAGA-hat-wearing whack job.  For those in the news business there isn’t much room to maneuver; if you’re a reasonable and humane journalist, you’re going to adopt a stance of cautious pessimism.  And so when it comes to the news about the virus, every silver lining has a cloud.  

Exhibit A: remember the reaction to the discovery that a sixth dose could be coaxed out of Pfizer’s vaccine vials?  This was reported in many corners as A Bad Thing, not just because it takes a special syringe to do the final extraction, but because big pharma would use this as an excuse to reduce their deliveries of new vaccine units. I get it, but at the same time maybe we’re overthinking this one? I might be missing something, but isn’t this just a case of more is more?  

Look, here’s what I’m driving at: to get a proper sense of how the battle against covid is progressing, it’s necessary to look beyond editorial tone.  My goal here is not to engage in baseless optimism.  Fear mongering is also out. All I want to do is take  a (relatively) quick tour of recent covid developments in an attempt to sort out where we stand and where we’re going:

  • Everywhere you turn, there’s a politician expressing outrage about the lack of vaccines, and rightfully so. But this isn’t only a story of vaccine shortage.  Governments at the municipal, state/provincial, and federal levels have been putting massive effort into rolling out additional vaccine sites, and finding qualified people to staff them.  Like here. And here. And even here. This is good news wrapped in a thick coating of frustration and understandable impatience.  We all want more vaccine. While we wait, though, the organizational push to set up inoculation sites is quietly resulting in the delivery network getting stronger with every passing week. And that’s a positive development because... 

  • And then there’s Johnson & Johnson.  On Friday it reported an overall effectiveness rate of 66%, which looked pretty disappointing against the 90%+ results of Pfizer and Moderna.  J&J’s stock fell, and the general covid gloom got a tiny bit thicker.  I wish that rate had been higher, who doesn’t?  But to write off this vaccine would be a huge mistake.  There are some impressive numbers underneath the overall result.  Most importantly, among those who got the shot worldwide — and that includes South Africans exposed to one of the worst variants — no one died and no one was hospitalized. No one!  Come on, that’s amazing.  The vaccine was also 85% effective in preventing serious disease in all countries included in the study, not just the US.  Side effects were minimal, without the allergy worries of the messenger RNA vaccines.  And don’t forget that this is a one shot product that can be stored in a regular fridge for months.  A booster is being discussed that could bring effectiveness closer to the other vaccines.  Plus, J&J is already at work updating their recipe — well, you know what I mean — to attack the UK and South African variants.  

  • Bottom line: by my count, 500 million doses are on the way to the US by the end of June (100 million of which should be the single-dose J&J product).  

  • A recent study has found that post-infection immunity to covid lasts at least 8 months, quite possibly longer.  Meanwhile, a numberof studiesare suggesting that the number of people who’ve contracted the disease is much larger than testing stats suggest. According to Donald G. McNeil Jr. — the New York Times’ covid specialist and an all-round sensible and smart guy — most epidemiologists think you should multiply the official number of infected by four in order to get the real total of those who’ve contracted the virus.  The bottom line is that as many as 100 million Americans have already had covid.  As staggering and sad as that number is, it must be factored in, along with the vaccination rate, in order to figure out how close we are to herd immunity.  I also wonder whether the infected number — which will include a meaningful percentage of people who were sceptical of masks and social distancing — contains an outsized percentage of those who are hesitant to get inoculated.  In other words, they will contribute to the immunity rate even without getting a shot.  In any event, on a pure statistical basis, we’re closer to a tipping point of immunity than the raw vaccination rate would suggest.  

  • The virus is doing its Darwinian thing and spitting out mutations.  This sounds scary — it is scary — but Dr. Fauci has confirmed that the already approved vaccines will still have good effectiveness ratesagainst the UK and South African strains. Also, the higher the level of immunity in the population, the less the virus will be able to reproduce, and so will generate fewer variants. Worries about a new strain should become less acute as vaccination rates improve.  Scientists are also working on creating booster shots that will address variant strains.

I want to make two things absolutely clear:  First, it is imperative that everyone continue to wear masks and practice social distancing and anti-viral hygiene.  Today, as I write this, the virus is rampant.  No amount of hope for the future can be taken as license to slacken our efforts to beat covid. Yes, there is reason to be hopeful. Yes, the vaccines are coming.  Yes, good weather will help.  But look, you have to keep wearing your mask, and keep up with the social distancing.  It’s working and it’s keeping you safe.  

Second, there are still risks.  Real ones.  Vaccine production might run into difficulties.  Bad news, or even negative unfounded rumours, could goose fears among the population that the vaccines are somehow unsafe.  Another viral variant could appear that is more vaccine resistant.  It could happen.  But right now the preponderance of the facts that can be gleaned from the news suggest that such events are possible, not necessarily likely.  Sure, the situation could take a turn for the worse.  We are still in the battle.  As investors, we have to accept that we are living with uncertainty and risk, and make our best decisions in that environment. 

So where do we stand?  The story of covid has been a shameful one of warnings ignored and science spurned.  Too many people have suffered terrible illness.  Too many have died.  For many, their health and lives could have been spared had we just listened to the experts and acted on what they said.  It can feel naive to be hopeful, but there are real reasons to suspect the next few months will see radical progress against covid. This is bolstered by the professional and science-based approach of the current US federal administration.  The adults are in charge now in the States, and it’s not a coincidence that things are showing early signs of looking up.  

A return to normal will be an enormous shot in the arm economically. But it’s much more difficult to figure out what it will mean for the market.  The optimistic view is a simple one: everyone is going to be happy and spending the cash they’ve saved while in lockdown.  The general euphoria will send stock prices upward.  But there’s also a pessimistic version: the recovery in prices took place last spring and summer.  There’s no room for the FAANG stocks to run; the bounce back already happened and you missed it. Besides, trading stocks was something we did to kill the time while we were alone and bored.  Folks are going to want to be outside.  The popular imagination will move on and leave investing behind.

Which will it be? I’m not sure, but maybe both?  The most popular stocks may not be affected that much by the end of lockdowns, but certain others may.  In particular, businesses in the travel and leisure sector could see radically improved prospects.  There’s also the possibility that the speculative tinge of the current market might not have entirely disappeared by then, which could give whatever catches the eye of wallstreetbets an extra lift.  More concretely, you might remember that back in November, so-called value socks enjoyed a fantastic month, one in which investor money briefly rotated out of FAANG and into so-called value stocks, most of which were cheap because of covid impacts on their businesses.  That didn’t hold, but it does suggest one possible route for the market to take should the good news come to fruition.

Or maybe not.  Truth is, no one knows for sure.  One thing is certain, though.  It would be a mistake to think that the current state of affairs will be permanent, or even long lasting.  As more people become vaccinated — and have some way to demonstrate that they aren’t at risk of infection any more — they’re going to demand a return to their old lives.  I’ll be one of them.  I want to travel again.  I want to see my family. I want to hang out at our local coffee shop. I long for a ball park hot dog and an overpriced Pepsi. The future is coming, and I can hardly wait.   

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This newsletter is for information and entertainment purposes only. Mostly entertainment, to be honest. It does not constitute investment advice. Think for yourself already! The author may or may not hold positions in the investments discussed.