Covid & Markets Missive – Weekend Edition Sept. 27

Dear Valued Clients and Friends –

Welcome to the last ever weekend version of the COVID & Markets missive.  I have a lot to say about the wrap-up of this COVID & Markets communique on Tuesday, in our final edition, so I will save those sentiments for then.  In the meantime, we cover testing, therapeutics, Japan’s herd immunity, the truth about hospitalizations, Florida, pregnancies and so much more in today’s missive.

Don’t forget to join us for tomorrow’s national video call at 11amPT/2pmET.

COVID Health Information

  • Huge increase in testing over the last few weeks – with the average jumping a couple hundred thousand tests per day.  Cases are no longer rapidly declining, but flat-lining or modestly increasing.  And yet, the positivity ratio is flattening or dropping.  In other words, the increased testing is merely catching more previously undetected [asymptomatic/mildly symptomatic] cases, not indicating more overall cases.
  • “Serious/Critical” cases in the U.S. – 14,093; “Active” cases in the U.S. – 2,560,066.  Percentage of cases classified as Serious/Critical: 0.55%.
  • U.S. testing per capita is now 313,000 per 1 million of population, slightly less than Israel and the U.K. and significantly more than Australia, Spain, New Zealand, and nearly double Germany and Italy, etc.  It is well more than double than that of Switzerland and Sweden.
  • If one of the great stories of the last couple months has been the significant increase in effective treatments for those with the virus (and I assure you, it has been), there is a potentially really promising development in our understanding of interferon, and how the virus has worked to dis-engage one of the human body’s best defenses against the virus in the early stage of infection.  I could unpack all this for you more, but this article does a great job explaining both the risk and the opportunity.
  • The CDC has provided ongoing data that I think will be useful in identifying vulnerable groups to help create smart targeted policies.

  • Belgium last week and Spain this week have announced a shift in case definition to require symptoms of the coronavirus.  They were previously focused, like the U.S., on PCR positives but have decided to more optimally leverage resources and attention around those who are sick.
  • On one hand, the idea that 27% of women ages 15-49 “hospitalized with COVID” are pregnant really is indicative that roughly, well, 27% of hospitalizations of women 15-49 related to COVID are not from COVID, but from their pregnancy.  However, there is something potentially frightening about the idea of a COVID positive woman delivering a baby, obviously, so it was a truly wonderful to read the Oxford University Press for Infectious Diseases Society publish the work this week from nearly a dozen Ph.D scientists that there was no evidence at all of any maternal infection to babies within eight weeks of birth, thank God.
  • There have been two stories of Japan throughout COVID, and I am distraught that neither have really been told.  The first was their miniscule level of cases in “wave one,” and the second is the minimal level of severity in “wave two.”  A new study has demonstrated that Tokyo was, in fact, far more infected than previously believed, and yet, with a very high infection rate and very old population, had one of the lowest death rates in the world.  Seroprevalence now sits at 46.8%, so herd immunity seems to make a lot of sense as an explanation of the collapsing cases and low fatality rate.

Today’s testing data shows over one million tests done Friday and Saturday, and over 800,000 on Sunday, with a positivity rate of just ~4.8% over the weekend.

*The COVID Tracking Project, Sept. 27, 2020

Key State Update

  • Florida
    • Governor DeSantis on Friday re-opened a significant part of Florida’s economy, officially declared “phase three” for the state, and blocked the imposition of fines at a local level for various activities.
    • Florida today reported ten deaths.  Cases were below 2,000.
    • Part of the reason for policy easing in Florida can be seen in this magnificent chart reflecting Palm Beach COVID hospitalizations.  The drop from 670 in the July peak to 116 today is a 83% reduction.

  • New York/New Jersey
    • Their ER visits for CLI (Covid-like illnesses) are at levels not seen since October of 2019, about 4-5 months before COVID was a thing.  The same is true of the New England region.  The regions where hospitalizations are higher are the regions where infection thresholds have thus far been lower.
  • California
    • Statewide the positivity rate sits at 2.9%.
    • There has been a 60% increase in available ICU beds since late July
    • Average COVID hospitalizations are down 61% from the high, and have dropped 3% or more each day the last seven days.
  • Texas
    • The hospitalization and ICU data in Texas tells the entire story up one side of the mountain and down the other side.

*College of Natural Sciences, University of Texas COVID-19 Consortium, Sept. 27, 2020

* Worldometers.Info, Sept. 27, 2020

Public Policy

If indeed we do end up getting a 4th stimulus/relief bill done, I believe it will be the discharge petition threat around a new PPP bill that House Minority Leader, Kevin McCarthy, made which made it possible.  The fear that 20 Democrats would vote for it without Speaker Pelosi’s support (I suspect there were more than 20) is a risk she does not want to take.  The idea of PPP relief/re-load coming with adequate House Dem support and total bipartisan Senate support would not look good, and would indicate weakness in House leadership.

Speaker Pelosi and Secretary Mnuchin are speaking again, and though I believe the clock is ticking, and there is little (no?) room for more stalemates, it is now not out of the question.  Speaker Pelosi on the morning talk shows this morning seemed the most ready to deal I have seen in months.

Oil and Energy

Active rigs last week increased by six, according to Baker Hughes, four oil and two gas.  This was, I believe, the first weekly increase in rigs in a long time.  The Frac Spread Count was up about 5% last week, a measurement of well completion crews (as opposed to active well drilling).

Housing Market

The percentage of mortgage loans in forbearance is at its lowest level in five months, and that drop from 8.6% to 6.9% has come entirely as voluntary agreements have been made between borrower and lender.  I fear for what looms for these 6.9% and remain adamant this was a policy mistake, but believe voluntary workouts to avoid delaying a worse outcome later is a good resolution.  We need more of it.

*Strategas Research, Daily Macro Brief, Sept. 24, 2020

 

We will send the replay of the national video call on Monday late day, the final COVID and Markets missive on Tuesday, and the first ever DC Today on Thursday, followed by weekly Dividend Cafe Friday.

Futures opened an hour ago and are pointing up ~100 points in the Dow …

Be well, be safe, be free.

With regards,

David L. Bahnsen
Chief Investment Officer, Managing Partner
dbahnsen@thebahnsengroup.com

The Bahnsen Group
www.thebahnsengroup.com

This week’s Dividend Cafe features research from S&P, Baird, Barclays, Goldman Sachs, and the IRN research platform of FactSet.

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The Bahnsen Group is registered with HighTower Securities, LLC, member FINRA and SIPC, and with HighTower Advisors, LLC, a registered investment advisor with the SEC. Securities are offered through HighTower Securities, LLC; advisory services are offered through HighTower Advisors, LLC.

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About the Author

David L. Bahnsen

FOUNDER, MANAGING PARTNER, AND CHIEF INVESTMENT OFFICER

David is a frequent guest on CNBC, Bloomberg, and Fox Business and is a regular contributor to National Review and Forbes. David serves on the Board of Directors for the National Review Institute and is a founding Trustee for Pacifica Christian High School of Orange County.

He is the author of the books, Crisis of Responsibility: Our Cultural Addiction to Blame and How You Can Cure It (Post Hill Press), The Case for Dividend Growth: Investing in a Post-Crisis World (Post Hill Press) and his latest, Elizabeth Warren: How Her Presidency Would Destroy the Middle Class and the American Dream (2020).

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