Trading and investing corona wave 2 - it’s starting

[FrugalSaver]

Somehow rioters are immune it seems but the media is starting to bang the drum loudly of cities and stares shutting back down, hospitals filling up, record deaths and positive tests, etc

Will they succeed?  Will they be vindicated?

This is all about making money and epidemiology.

Can the fed save our 401k’s?

[Jack0Life]

Yeah I feel like the 2nd dip that everyone has been talking for weeks is coming.
Unemployment and riots, no problem. Fed warnings and rates going back up in 20 states, yup problems.
Lets see how the market reacts.

[londonstache]

I think we could plausibly see a range of possible outcomes:

1) Limited spike: Which means we need to review the epidemiology on transmission, particularly outside as opposed to inside;
2) Higher spike: Leading to a second lockdown, with likely lower compliance and harder to govern¹;
3) Autumn 2nd wave: A higher incidence ratio as temperatures drop and we enter the usual viral season, coinciding with more people spending time indoors.

Any version of 2) and 3) lead to a difficult set of policy choices. Do you opt for a second shutdown and potentially put several businesses who were struggling into a permanent death spiral? This creates issues of poverty which also drives morbidity. Or do you keep the economy largely open knowing it will cost lives? I am however encouraged by the experience of my colleagues in Denmark (I work for a Danish company) who have managed to reopen a lot of society without a rise in infection rates.

Purely considering an investment perspective I've been in a fortunate position as I work in a reasonably bombproof sector. As long as we stay healthy I'm certainly in the net winner category. Additionally I plowed in as much as I could into my brokerage account when the markets dropped and have made out like a bandit since. I am not discounting a second wave or drop and starting to build a cash reserve that I can throw at the market if we do get a proven second wave, at which point I expect the market to drop like a stone again.

¹Based on a UK perspective as I don't think we have the 'social will' for a prolonged second shutdown.

[waltworks]

Death rate is 1/3 of what it was at the US peak (so far).

I mean, nobody knows, but your 401k will be fine in the long haul.

-W

[facepalm]

Somehow rioters are immune it seems but the media is starting to bang the drum loudly of cities and stares shutting back down, hospitals filling up, record deaths and positive tests, etc

Will they succeed?  Will they be vindicated?

This is all about making money and epidemiology.

Can the fed save our 401k’s?

Nope. This is all about market chatter.

Vindication? My portfolio does not care.

If you want to make money, the best course is to determine your AA and stick to it. Ignore the short term news cycle. Ignore what happens in the market day-to-day.

[Buffaloski Boris]

I don’t know what is going to happen with Covid, however I think it’s pretty safe to say that the ongoing US response will underperform as compared to that of other first world countries. It doesn’t really change my views on US equities:

-they’re pricey compared to history and other countries.
-the market capitalization is overly concentrated in a handful of mega companies.
-there are irrational levels of speculation.
-owning them exacerbates US currency risk.
-there is more political and tax risk in the US than investors seem to be pricing in.
-much of the value is being backstopped by Fed intervention.

 I don’t think I could come up with a strategy to time my purchases of international equities based on what the US does or doesn’t do with COVID. Maybe I’m missing something?

[MustacheAndaHalf]

Somehow rioters are immune it seems but the media is starting to bang the drum loudly of cities and stares shutting back down, hospitals filling up, record deaths and positive tests, etc

Will they succeed?  Will they be vindicated?

This is all about making money and epidemiology.

Can the fed save our 401k’s?

Nationwide peaceful protests are not "rioters".  They are exercising 1st amendment rights, and seeing governments and businesses make changes in response.

I believe the current new positives are 20k/day, which is down from a prior 30k/day.

[GoCubsGo]

I don’t know what is going to happen with Covid, however I think it’s pretty safe to say that the ongoing US response will underperform as compared to that of other first world countries. It doesn’t really change my views on US equities:

-they’re pricey compared to history and other countries.
-the market capitalization is overly concentrated in a handful of mega companies.
-there are irrational levels of speculation.
-owning them exacerbates US currency risk.
-there is more political and tax risk in the US than investors seem to be pricing in.
-much of the value is being backstopped by Fed intervention.

 I don’t think I could come up with a strategy to time my purchases of international equities based on what the US does or doesn’t do with COVID. Maybe I’m missing something?

Aren't those first 4 bullets pretty much the same situation we've been in the past 5 years or so?  The US market has outpaced international equities handily during that time.  It sure sucked having 10-15% of my equity allocation in IEMG and IEFA (international and emerging) and watch it massively underperform the past 5 years.  Totally agree on the Fed backstop and potential political risk but man it gets harder and harder to hang on to my international exposure.

[HPstache]

Somehow rioters are immune it seems but the media is starting to bang the drum loudly of cities and stares shutting back down, hospitals filling up, record deaths and positive tests, etc

Will they succeed?  Will they be vindicated?

This is all about making money and epidemiology.

Can the fed save our 401k’s?

Nationwide peaceful protests are not "rioters".  They are exercising 1st amendment rights, and seeing governments and businesses make changes in response.

I believe the current new positives are 20k/day, which is down from a prior 30k/day.

I don't understand what your point is on correcting protests vs. riots?  Clearly both were happening... looting as well.

[Indexer]

Wave 2... did we even finish with wave 1?





Source for both pictures: https://blogs.wsj.com/dailyshot/2020/06/15/the-daily-shot-risk-off-sentiment-is-back-as-concerns-about-covid-19-progress-resurface/

NY & NJ had an initial wave and their lock downs got that under control. The other 48 states, as a group, are still in their first wave. The lock downs delayed the peak, but with everything reopened plus protests the rate of new infections is bound to start rising again.

[Buffaloski Boris]

I don’t know what is going to happen with Covid, however I think it’s pretty safe to say that the ongoing US response will underperform as compared to that of other first world countries. It doesn’t really change my views on US equities:

-they’re pricey compared to history and other countries.
-the market capitalization is overly concentrated in a handful of mega companies.
-there are irrational levels of speculation.
-owning them exacerbates US currency risk.
-there is more political and tax risk in the US than investors seem to be pricing in.
-much of the value is being backstopped by Fed intervention.

 I don’t think I could come up with a strategy to time my purchases of international equities based on what the US does or doesn’t do with COVID. Maybe I’m missing something?

Aren't those first 4 bullets pretty much the same situation we've been in the past 5 years or so?  The US market has outpaced international equities handily during that time.  It sure sucked having 10-15% of my equity allocation in IEMG and IEFA (international and emerging) and watch it massively underperform the past 5 years.  Totally agree on the Fed backstop and potential political risk but man it gets harder and harder to hang on to my international exposure.

Yeah, I'd actually say all of them have been an issue for the last 5 years. The last couple points have been more apparent of late.   

What to do depends on where you're at.  If you need something else to balance your portfolio that might change your strategy.  I'm pivoting from cash.  Given that I have plenty of time and room to diversify, which is the least ugly right now?  For me it's international. YMMV. 

[Buffaloski Boris]

Wave 2... did we even finish with wave 1?





Source for both pictures: https://blogs.wsj.com/dailyshot/2020/06/15/the-daily-shot-risk-off-sentiment-is-back-as-concerns-about-covid-19-progress-resurface/

NY & NJ had an initial wave and their lock downs got that under control. The other 48 states, as a group, are still in their first wave. The lock downs delayed the peak, but with everything reopened plus protests the rate of new infections is bound to start rising again.

That second graph is really interesting.  Wasn't the idea to flatten the curve?  Looks like we did exactly that.

[MudPuppy]

@Buffaloski Boris we STARTED flattening the curve. We didn’t finish the job.

[kenmoremmm]

isn't the only cv-19 # that matters the # of deaths?

[MudPuppy]

Is this a time that text poorly conveys sarcasm?

[American GenX]

Wave 2... did we even finish with wave 1?

Exactly.  The caseload has never dropped in my area.   And I've also heard so-called experts say it's just a continuation of the first wave.

[Buffaloski Boris]

@Buffaloski Boris we STARTED flattening the curve. We didn’t finish the job.

It looks to me like it isn’t going to go down further. Until we get population level immunity or a vaccine. The genie is out of the bottle. 

[kenmoremmm]

Is this a time that text poorly conveys sarcasm?

when i look at the NYT summary, they have the 14-day change in new deaths at -25%. that seems relevant if one subscribes to the theory that the actual number of people infected is on the order of magnitude of 10-20x greater than the number of positive cases.

[HPstache]

isn't the only cv-19 # that matters the # of deaths?

I think so.  Or I at least think that is the most accurate measure.  But it is also a trailing indicator, so that sucks.

[MustacheAndaHalf]

Somehow rioters are immune it seems but the media is starting to bang the drum loudly of cities and stares shutting back down, hospitals filling up, record deaths and positive tests, etc

Will they succeed?  Will they be vindicated?

This is all about making money and epidemiology.

Can the fed save our 401k’s?

Nationwide peaceful protests are not "rioters".  They are exercising 1st amendment rights, and seeing governments and businesses make changes in response.

I believe the current new positives are 20k/day, which is down from a prior 30k/day.

I don't understand what your point is on correcting protests vs. riots?  Clearly both were happening... looting as well.

I'm not trying to score political points, but want to point out the lack of accuracy.  Calling everyone "rioters" is both inaccurate (most are peaceful protesters) and out of date (protests got more peaceful over time).  When you say "both are happening", you're making a 50/50 equivalence that is also not accurate - it's more like 99%+ are peaceful protests.  Someone not accurately summarizing the situation, regardless of politics, has a much higher risk of making mistakes when investing, in my view.

In my view, the media find things that attract viewers.  If President Trump says something outrageous, they report it.  If there's 10 looters and 50,000 peaceful protesters, they show the looters.  The media exaggerates what's interesting, giving a distorted view of reality.  To me, summarizing the situation in the same terms the media might use suggests a distorted view, and that can impact investing.

[hodedofome]

I am long and strong US equities, and specifically tech stocks. I don’t believe there will be a second crash like there was earlier this year, even if we get a second wave, which I don’t expect. The market overreacted and will not act like that again. It will not be fooled twice. And the Fed is propping up this market well, don’t fight them.

Getting rid of my international exposure years ago was one of the best decisions I’ve made. The broad international funds are heavy in Japanese and European stocks, it’s basically all the fund. Do I want exposure to shrinking populations? Heck no. Give me something where the population (and therefore economy) is growing. They have negative interest rates over there for a reason...

I don’t care how cheap those stocks are, I’m not touching them. Cheap will continue to get cheaper as their populations shrink.

[waltworks]

Assuming the study holds up, we have an effective treatment (or, at least, something that reduces mortality by 25% or so) now. More treatments will be found, and there's a decent possibility of a vaccine fairly soon. Deaths have been declining for quite a while (lagging indicator, but still a good thing) in the US even as the economy has restarted. Projections of fatalities were off by at least an order of magnitude.

There's been a ton of good news. I predict there will be more.

I honestly don't get the gloom and doom stuff at this point.

-W

[Buffaloski Boris]

I am long and strong US equities, and specifically tech stocks. I don’t believe there will be a second crash like there was earlier this year, even if we get a second wave, which I don’t expect. The market overreacted and will not act like that again. It will not be fooled twice. And the Fed is propping up this market well, don’t fight them.

Getting rid of my international exposure years ago was one of the best decisions I’ve made. The broad international funds are heavy in Japanese and European stocks, it’s basically all the fund. Do I want exposure to shrinking populations? Heck no. Give me something where the population (and therefore economy) is growing. They have negative interest rates over there for a reason...

I don’t care how cheap those stocks are, I’m not touching them. Cheap will continue to get cheaper as their populations shrink.

One of my favorite graphics showing the best performing asset classes each year:

[ChpBstrd]

Wave 2... did we even finish with wave 1?





Source for both pictures: https://blogs.wsj.com/dailyshot/2020/06/15/the-daily-shot-risk-off-sentiment-is-back-as-concerns-about-covid-19-progress-resurface/

NY & NJ had an initial wave and their lock downs got that under control. The other 48 states, as a group, are still in their first wave. The lock downs delayed the peak, but with everything reopened plus protests the rate of new infections is bound to start rising again.

That second graph is really interesting.  Wasn't the idea to flatten the curve?  Looks like we did exactly that.

But then we couldn't sustain that level of restriction, so now we're opening back up.

[Buffaloski Boris]

Wave 2... did we even finish with wave 1?





Source for both pictures: https://blogs.wsj.com/dailyshot/2020/06/15/the-daily-shot-risk-off-sentiment-is-back-as-concerns-about-covid-19-progress-resurface/

NY & NJ had an initial wave and their lock downs got that under control. The other 48 states, as a group, are still in their first wave. The lock downs delayed the peak, but with everything reopened plus protests the rate of new infections is bound to start rising again.

That second graph is really interesting.  Wasn't the idea to flatten the curve?  Looks like we did exactly that.

But then we couldn't sustain that level of restriction, so now we're opening back up.

And we aren't going to keep up anywhere near the level of restriction heading forward.  There isn't the tolerance for it in the culture: Americans just don't do obedience well. Particularly over a long stretch of time. If you go back and take a look at the arguments for the shutdown in March*, it was to build the levels of PPE, to give us time to figure out some treatments, and to avoid overwhelming the medical system. The goal was not to prevent the population from ever getting the virus. It was to stretch out the timeline.     

*(I strongly supported the shutdown at the time)

[frugaldrummer]

Despite the study, dexamethasone is no miracle cure. It does reduce the death rate in ventilator patients by a fraction. Less helpful in non-ventilator patients and may not be helpful at all in outpatients. It’s a useful piece of info that may save some lives but it’s no cure.

More important info is studies over the last 6 weeks showing a strong association between vitamin D deficiency and severity of Covid disease. If true, we might be able to lower the ratio of severe infections  to milder cases just by making sure everybody has adequate vitamin D levels.

[waltworks]

25% is a big fraction. I agree that it's not a "miracle cure" but medicine mostly doesn't work that way IRL.

-W

[lost_in_the_endless_aisle]

Wave 2... did we even finish with wave 1?





Source for both pictures: https://blogs.wsj.com/dailyshot/2020/06/15/the-daily-shot-risk-off-sentiment-is-back-as-concerns-about-covid-19-progress-resurface/

NY & NJ had an initial wave and their lock downs got that under control. The other 48 states, as a group, are still in their first wave. The lock downs delayed the peak, but with everything reopened plus protests the rate of new infections is bound to start rising again.

If you plot NY & NJ versus the European countries, it will look very similar. If there is not a second wave in the hardest hit areas then it will suggest that something like this might be at play and herd immunity has been reached (20% cumulative infection rate + 50% of people naturally immune due to T-cells = 70% not susceptible to spreading the virus).

[Indexer]

If you plot NY & NJ versus the European countries, it will look very similar. If there is not a second wave in the hardest hit areas then it will suggest that something like this might be at play and herd immunity has been reached (20% cumulative infection rate + 50% of people naturally immune due to T-cells = 70% not susceptible to spreading the virus).

In summary, the article is saying that people who've had a common cold coronavirus recently enough that their immune system remembers it might have resistance to Covid.

This reminds me of something I was reading about a month ago. With some similar viruses exposure to one virus in a family provides some resistance to other viruses in the same family. In layman's terms, the immune system recognizes the new virus as being similar to the virus it fought off in the past and it starts fighting back sooner than if it had never seen the first virus. A great example of this is small pox and cow pox. Before small pox vaccines became a thing, farmers would bring cows with cow pox into town so people could touch the cow with their elbow(keep reading, it'll make sense), and catch cow pox. Cow pox was pretty mild to a human, left a rash/scar on the site of infection (that's why they chose the elbow), but if that person ever got small pox they were likely to have a very mild case. The immune system recognized small pox as being similar to cow pox and jumped into action before small pox could do serious damage.

It is possible that recent exposure to the very common & less dangerous coronaviruses would provide resistance to Covid19. It would also help explain why ~50% of people infected with Covid19 have no symptoms.

The million-lives question is whether those 50% can still get other people infected. If they can then that isn't true herd immunity. It's actually the complete opposite, instead of slowing down the virus (herd immunity), they would be accelerating the virus because an infectious person living a normal life will likely come into contact with more people than someone who is at home sick.

According to various studies, asymptomatic carriers of Covid could be responsible for 10-40% of the spread of the disease. My takeaway from that is that their immune systems might be catching it fast enough to prevent them from getting really sick, but they could still be passing it to vulnerable populations.

[lost_in_the_endless_aisle]

If you plot NY & NJ versus the European countries, it will look very similar. If there is not a second wave in the hardest hit areas then it will suggest that something like this might be at play and herd immunity has been reached (20% cumulative infection rate + 50% of people naturally immune due to T-cells = 70% not susceptible to spreading the virus).

In summary, the article is saying that people who've had a common cold coronavirus recently enough that their immune system remembers it might have resistance to Covid.

This reminds me of something I was reading about a month ago. With some similar viruses exposure to one virus in a family provides some resistance to other viruses in the same family. In layman's terms, the immune system recognizes the new virus as being similar to the virus it fought off in the past and it starts fighting back sooner than if it had never seen the first virus. A great example of this is small pox and cow pox. Before small pox vaccines became a thing, farmers would bring cows with cow pox into town so people could touch the cow with their elbow(keep reading, it'll make sense), and catch cow pox. Cow pox was pretty mild to a human, left a rash/scar on the site of infection (that's why they chose the elbow), but if that person ever got small pox they were likely to have a very mild case. The immune system recognized small pox as being similar to cow pox and jumped into action before small pox could do serious damage.

It is possible that recent exposure to the very common & less dangerous coronaviruses would provide resistance to Covid19. It would also help explain why ~50% of people infected with Covid19 have no symptoms.

The million-lives question is whether those 50% can still get other people infected. If they can then that isn't true herd immunity. It's actually the complete opposite, instead of slowing down the virus (herd immunity), they would be accelerating the virus because an infectious person living a normal life will likely come into contact with more people than someone who is at home sick.

According to various studies, asymptomatic carriers of Covid could be responsible for 10-40% of the spread of the disease. My takeaway from that is that their immune systems might be catching it fast enough to prevent them from getting really sick, but they could still be passing it to vulnerable populations.

All good points. The critical factor--notwithstanding asymptomatic spread possibilities in the partially immune--is that it implies we require a much lower cumulative prevalence for herd immunity.  If true, this would be great news overall as we should expect far fewer total infections and deaths than our baseline assumption of a population that is initially 100% susceptible.

It should also be noted that transmissions seems to be highly variable. If R0 is ~2.5 but most people spread it to zero or one person while a small number spread to 2-10, that would also be good news. I've read some accounts arguing this is in fact the case, as it was with SARS (many possible causes: different parts of the respiratory system resulting in variable viral shedding, overall different bodily viral loads, differences in behavior that can spread virions more effectively [e.g. loud talking, singing], differences in social behavior resulting in differences in number of close contacts encountered, etc.). Also, if super-spreaders are more likely to interact with each other, we should expect infections to spread through those super-spreaders very rapidly early in the epidemic, after which, the virus has only the below-average spreaders to work with; R will crash in that scenario much faster than expected, even if no new preventative measures are taken. All other things being equal, this sort of overdispersion in R will lower the cumulative infection prevalence required for herd immunity.

All very speculative, of course, but is hard to reconcile the various data trends unless something like the factors above aren't crucial parameters in this pandemic. I might be too much of an optimist though!