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STRATEGY: Half-full is prevailing since the start of the invasion – Equities have held up fairly well in the face of considerable uncertainty
DATA ON RUSSIA-UKRAINE WAR: Tracking Russia-Ukraine war statistics — 752 Ukrainian civilian casualties so far
Our data science team, led by tireless Ken, is scraping data from several sources to track some high level data around the Russia-Ukraine war.
– Ukraine civilian casualties
– Ukraine population movements
– Ukraine military losses, except personnel
– Russian estimated losses of personnel and material
The number of casualties jumped on 3/2 to 202, but it is less than the 240 on 2/26, and a total of 752 reported to the UN. This is after 5 days of information and could increase because there are simply lapses and lags in reporting.
The flow of migrations out of Ukraine has been steady at about 170,000 to 200,000 per day. And a total of 1.1 million have fled so far.
– 52% are entering into Poland
– curiously, 5% or 50k or so, have entered Russia
If one is wondering about reported losses of equipment, we are citing statistics provided by the opposing ministry officials. Thus, for Ukraine, data from the Russian Ministry.
– est. 62 Ukrainian planes lost
– est. 606 tanks lost
– this seems like a lot of equipment
– I am wondering how many tanks and aircraft are in the Ukraine military arsenal
Russian losses are higher
– est. 9,000 Russian soldiers killed
– est. 217 tanks
– est. 30 aircraft
– est. 900 armored vehicles
Our team says this data is scraped and can be updated daily. So, we will post these figures for now. And that way, we can get a sense for the intensity of the hostilities.
Thomas Hu, of Kyber Capital, also shared this website which is a crowd sourced view of reported activities. There is a lot to the website, and I encourage you to check it out. The website URL is https://maphub.net/Cen4infoRes/russian-ukraine-monitor
For instance, if you click on one of the icons, a verified post is shown. There is geolocation and other data attached.
Hong Kong cases per capita are now surpassing 2X the peak the USA experienced
Hong Kong continues to see a parabolic rise in cases and now the absolute and per capita are pretty staggering:
– HK has a population of 7mm vs 330 million in USA
– HK cases are 38k daily vs 51k in the USA
– on a per capita basis, it is now 5,078 cases per 1mm, or ~2.5X the peak the USA saw (Omicron height)
The surge in cases is so high, that there is discussion that China might be reconsidering its ‘zero case’ policy. There have been multiple reports including the one below from the WSJ.
In fact, things have become so restrictive in Hong Kong, as a result of this recent surge, that Switzerland chartered a flight for its citizens from HK to Zurich. This is essentially an evacuation flight, as airlines are cancelling service to HK
– since HK is closing inbound borders
– there is little logic for airlines to enter HK with empty aircraft and then fly out with passengers
STRATEGY: Equities have held up fairly well in the face of considerable uncertainty
In our conversations with clients, many believe that as long as the uncertainty of Russia-Ukraine war persists, stocks will have no bid. That is, many instinctually argue they cannot see stocks stabilizing until we have a clear path to exit this conflict. History, as we have highlighted many times, would disagree with this. In overly simplistic terms, the path of markets is not solely dependent on the future path of events:
– future path of events is key = future
– equally important is investor expectations of future path = consensus
– investor positioning relative to future path = positioning
– investor risk appetite relative to future path = VIX and sentiment
– policymaker action and reaction to future events = Fed put and fiscal response
So, as shown above, investors seem overly focused on the first driver only. But 4 other factors have an important impact.
– that is why Tom DeMark’s observation “markets bottom on bad news, not good” is key
– that is why Tom Luddy’s adage “less bad = good” is key
In the 2022 context, what this means is that the S&P 500 can bottom well ahead of the Russia-Ukraine conflict bottoming. We believe the odds still favor 2/24 to be the low for 1H2022. We think the probability is more than 50%, maybe 70%-75% but it is not at the “no brainer” level. And this all feeds into our expectation that 1H will be treacherous.
Recent events have improved the probabilities, in our view:
– Fed, in its testimony this week, “pre-released” 25bp for March FOMC meeting
– meaning, the “hike” was this week, and 3/15 is a formality
– the “hike” band-aid was ripped off this week
– Russia progress has been below expectations
– Russia-Ukraine are holding peace talks 8 days into conflict
– Pre-invasion, many pundits expected Russia to be victorious after 8 days
– China is now exploring ways to move off “zero case” policy
Half-full is prevailing since the start of the invasion
And in the face of these headwinds, stocks are still making jagged progress higher. This is consistent with the view of Mark Newton, Head of Technical Strategy at FSinsight, who says that stocks are making a “two steps forward, one step back” progress.
– in short, a “half-full” perspective is prevailing since the start of the invasion
– while pundits cite a litany of market risks
– equities have managed to inch higher
– and VIX falling lower
Thus, our current view is that 2/24 was a bottom, but this remains in the context of our “treacherous” market view of 1H2022.
RISKS AKA WHAT COULD GO WRONG: Most obvious is Russia escalates conflict
In our view, punditry is on full display. Plenty of market pundits are calling for a global recession or Russia to escalate this war and I thought it would be helpful to review the risks:
– Russia elevates the conflict to other nations
– Russia launches a successful cyber attack on the US financial system
– Russia decides to disrupt financial markets or equities by hacking exchanges
– Iran or a hostile nation takes advantage of this turmoil to launch its own incursion
– North Korea decides to do something rogue
I mean, there are many things that could go wrong. Hence, we see 1H as treacherous, but 2/24 as a growing probability of 1H low.
STRATEGY: 2022 theme –> BEEF –> Bitcoin (B) + Bitcoin equities (E) + Energy (E) + FAANG (F)
As for sectors, the pleas by Ukraine and sanctions are strengthening the case for our “BEEF” strategy. That is, BEEF is
– Bitcoin + Bitcoin Equities BITO -0.78% GBTC -0.97% BITW -2.01%
– Energy
– FAANG FNGS 1.35% QQQ 1.15%
Combined, it can be shorted to BEEF.
PS: Homebuilders (Oct – Apr aka Golden 6 months) XHB 1.29%
Why is this making stronger BEEF?
– Energy supply is now a sovereign priority
– this helps Energy stocks
– Ukraine and Russia both want access to alternative currencies
– this strengthens case for Bitcoin and bitcoin equities
– if Global economy slows, growth stocks lead
– hence, FANG starts to lead FB AAPL -0.43% AMZN 3.74% NFLX 1.11% GOOG 0.88%
All in all, one wants to be Overweight BEEF
_____________________________
33 Granny Shot Ideas: We performed our quarterly rebalance on 2/3. Full stock list here –> Click here _____________________________
POINT 1: Daily COVID-19 cases 41,779, down -16,600 vs 7D ago…
Current Trends — COVID-19 cases:
– Daily cases 41,779 vs 58,379 7D ago, down -16,600
– 7D positivity rate 5.3% vs 7.1% 7D ago
– Hospitalized patients 34,725, down -27% vs 7D ago
– Daily deaths 1,608, down -13.8% vs 7D ago
The latest COVID-19 daily cases came in at 41,779, down -16,600 from 7D ago. As the data distortion gradually fades, we have not seen any post-holiday case rise yet and the decline in daily cases continues. The 7D average of new cases has dropped to below 50,000, the lowest level since August 2021. The chart below shows the steady decline in the daily new cases in the recent 5 weeks.
At state level, all states reported lower cases except Virginia, Iowa, Connecticut, Nebraska, and Hawaii. For these 5 states with higher new cases vs 7D ago, the case rises are more like a one-time data fluctuation rather than actual trend reversal. But, we will monitor them closely. Following Arizona, DC also changes the way it reports COVID stats from daily to weekly. As we noted before, this is great news and ultimately, this has to happen as the pandemic transitions into endemic stage. We will see more states lower their frequency of data reporting – from daily to weekday-only, to weekly, to monthly, and eventually not reporting any more.
7D delta in daily cases remains negative. The steady decline persists…
While remaining negative, the 7D delta in daily cases has crept up recently. But, if looking at the case decline in percentage term, we can see the speed of decline has not really slowed much. The steady decline in daily cases persists.
All US states are seeing decline in daily cases now… 42 states have seen daily cases fall over 90%…
*** We’ve split the “Parabolic Case Tracker” into 2 tables: one where cases are falling (or about to fall), and the other where cases are rising
In these tables, we’ve included the vaccine penetration, case peak information, and the current case trend for 50 US states + DC. The table for states where cases are declining is sorted by case % off of their recent peak, while the table for states where cases are rising is sorted by the current daily cases to pre-surge daily cases multiple.
– The states with higher ranks are the states that have seen a more significant decline / rise in daily cases
– We also calculated the number of days during the recent case surge
– The US as a whole, UK, and Israel are also shown at the top as a reference
Daily deaths, positivity rates, and hospitalization rate are falling rapidly…
Below we show the aggregate number of patients hospitalized due to COVID, daily mortality associated with COVID, and the daily positivity rate for COVID
-Net hospitalization and positivity rates have plunged – both have fallen to the pre-Omicron levels
-Daily death finally started to decline after the daily cases peaked for a month. And as you can see below, daily deaths have also dropped rapidly, consistent with we have seen in other metrics.
POINT 2: VACCINE: vaccination pace has slowed recently… likely due to the improvement in COVID situation
Current Trends — Vaccinations:
– avg 0.3 million this past week vs 0.4 million last week
– overall, 28.9% received booster doses, 64.8% fully vaccinated, 76.1% 1-dose+ received
Vaccination frontier update –> all states now above 100% combined penetration (vaccines + infections)
*** We’ve updated the total detected infections multiplier from 4.0x to 2.5x. The CDC changed the estimate multiplier because testing has become much better and more prevalent.
Below we sorted the states by the combined penetration (vaccinations + infections). The assumption is that a state with higher combined penetration is likely to be closer to herd immunity, and therefore, less likely to see a parabolic surge in daily cases and deaths. Please note that this “combined penetration” metric can be over 100%, as infected people could also be vaccinated (actually recommended by CDC).
– Currently, all states are above 100% combined penetration
– Again, this metric can be over 100%, as infected people could also be vaccinated, but 100% combined penetration does not mean that the entire population within each state is either infected or vaccinated
There were a total of 390,259 doses administered, as reported on Thursday. The vaccination pace has slowed from the recent peak of 2 million doses per day in mid-December to ~500,000 recently. The booster dose was the main driver of the vaccination campaign in the winter. However, it seems that the improving COVID case trend across the nation have influenced people’s desire and sense of urgency to get the booster doses. As a result, we have seen the speed of booster shot given has slowed. That said, as more and more states lift their COVID-19 restrictions, we believe vaccination remains a key to support us to smoothly transition back to “Normal”. Therefore, the daily number of vaccines administered is still one of the most important metrics to watch.
This is the state by state data below, showing information for individuals with one dose, two doses, and booster dose.
In total, 554 million vaccine doses have been administered across the country. Specifically, 253 million Americans (76% of US population) have received at least 1 dose of the vaccine. 215 million Americans (65% of US population) are fully vaccinated. And 96 million Americans (29% of US population) received their booster shot.
POINT 3: Tracking the seasonality of COVID-19
***We’ve updated the seasonality tracker to show figures from the last 9 months, from this calendar day, in each of the last two years***
As evident by trends in 2020 and 2021, seasonality appears to play an important role in the daily cases, hospitalization, and deaths trends. Therefore, we think there might be a strong argument that COVID-19 is poised to become a seasonal virus.
The possible explanations for the seasonality we observed are:
– Outdoor Temperature: increasing indoor activities in the South vs increasing outdoor activities in the northeast during the Summer
– “Air Conditioning” Season: similar to “outdoor temperature”, more “AC” usage might facilitate the spread of the virus indoors
– Opposite effects hold true in the winter
CASES
It seems as if the main factor contributing to current case trends right now is outdoor temperature. During the Summer, outdoor activities are generally increased in the northern states as the weather becomes nicer. In southern states, on the other hand, it becomes too hot and indoor activities are increased. As such, northern state cases didn’t spike much during Summer 2020 while southern state cases did. Currently, northern state cases are showing a slight spike, especially when compared to Summer 2020. This could be attributed to the introduction of the more transmissible Delta variant and the lifting of restrictions combined with pent up demand for indoor activities.
HOSPITALIZATION
Current hospitalizations appear to be similar or less than Summer 2020 rates in most states. This is likely due to increased vaccination rates and the vaccine’s ability to reduce the severity of the virus.
DEATHS
Current death rates appear to be scattered compared to 2020 rates. This is likely due to varying vaccination rates in each state. States with higher vaccination rates seem to have lower death rates given the vaccine’s ability to reduce the severity of the virus; states with lower vaccination rates seem to have higher death rates.
