WHAT WILL HEADLINES READ IN 60 DAYS?

The increase in coronavirus cases is dominating headlines.  Can I suggest the fight as to who first receives the vaccine becomes more explosive than the increase in cases and even more divisive than the social justice issues that have recently torn the country apart?

According to Bloomberg there are over 100 potential vaccines in phase II or phase III clinical testing in 12 countries.  Seventeen are deemed “very promising” in the next 60 days. It will be impossible to manufacture 8 billion vaccines in quick order.

Economic nationalism is surging. Will Germans openly revolt if a German company is granted approval for a vaccine and the company exports some of the vaccine to Spain?  This is the same issue in the US amplified by today’s calls for social justice.

In the US, will the elderly have first dibs?  What about first responders and frontline medical workers?  What about the inevitable calls levied by Black Lives Matters that racism will be involved in the decision as to who is vaccinated first.

Wow!

This issue can be political dynamite.

Are these concerns justified?

In today’s hyper polarized culture, where journalism and truth are questionable, where mob rule is now the norm, where rational conversation and compromise is virtually nonexistent, I think the concerns are justified.

In my view the 2020 election is perhaps the most significant election in at least 2 generations.  The vitriol and animosity will rise to levels perhaps not experienced in years but quoting Winston Churchill “democracy is the worst form of government except for other forms that have been tried from time to time.”

Radically changing topics, I have commented that almost all fail safe trading strategies—cross correlation investing, factor investing, short long and market neutral, algorithmic trading, etc.—are now failing miserably with marquee funds and managers shutting down and leaving the industry.  The only strategy that is working is buying five or six mega sized companies that everyone owns.

Apple is now 43% of Berkshire Hathaway’s’ stock portfolio.  Wow!  Buffet once commented “diversification is protection against ignorance, it makes little sense if you know what you are doing.”

As widely known, Apple is the biggest company in the world, its share price surging over 40% during the second quarter.

We are living in incredible times.  There is a distinct possibility the federal deficit will increase by $10 trillion to $30 trillion in nine months, the result of planned and passed stimulus. It has already increased by $5 trillion in three months.   Money supply is surging around 80%.  Typically, money supply is around the inflation rate.  There is ample evidence and evidence that such dramatic fiscal and monetary actions cause inflationary growth and higher interest rates.  Ten year treasury yields are hoovering around all-time lows of 0.64%.

Will the headlines read in 60-90 days  “Riots occur over Covid Vaccine…The 10-year yields over 2% on inflation fears.”

Farfetched?  Who ever envisioned today’s headlines four months ago?

What will happen today?

Last night the foreign markets were up.  London was down 0.53%, Paris up 0.13% and Frankfurt up 1.35%.  China was up 1.39%, Japan up 0.40%  and Hang Sang up 0.31%.

The Dow should open nominally lower ahead of weekly jobless claims, rising coronavirus cases and increased odds of an available vaccine in the intermediate future.  The 10-year is up 4/32 to yield 0.65%.

 

The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. The information contained herein has been compiled from sources believed to be reliable; however, there is no guarantee of its accuracy or completeness. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. The material provided in Daily Market Commentaries or on this website should be used for informational purposes only and in no way should be relied upon for financial advice. Please be sure to consult your own financial advisor when making decisions regarding your financial management. Members of FINRA and SIPC, Capitol Securities Management is a privately owned full-service retail brokerage and investment advisory firm headquartered in Richmond, Virginia. For nearly 30 years, we have been serving the needs of our investors. Today, more than 200 Capitol Securities Management investment professionals and support staff serve approximately 18,000 customer accounts from Southern Florida to the New England coast.