09 Jul 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.
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%.