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As many states are reducing the frequency of COVID-19 reports, we will only publish COVID-19 updates on Friday.
STRATEGY: Consensus bearish, yet markets resilient = market “whispering” bottom
While consensus remains bearish and pundits warn of dangers ahead, we still lean “bullish” against consensus
With each passing day, when 1H2022 is characterized as “treacherous,” it is increasingly obvious. Think about the threats to equities:
– Bond market is hawkishly confused (messed up yield curve) and bullying Fed
– Fed officials are going full blown hawk-mode (Kashkari yesterday)
– Oil surging
– War headlines depress with today’s threats of chemical and even nuclear attacks
– Yield curve flattening
– Economists say odds of recession nearly 100%
…Markets “whispering bottom” while investors shout “top”
So it is not surprising that equity investors have turned so flat out bearish.
– March BofA Fund Manager Survey showed institutional investor cash matching 2009 levels
– AAII Retail sentiment worst since April 2009
– Investors Intelligence sentiment worst since 2009
– Consumer Confidence shows sentiment worst since 2009
– S&P 500 had a waterfall decline falling 15% in less than 20 trading days
– Our @fundstrat twitter feed is filled with angry investors “yelling at us” (even though we warned 1H would be treacherous)
Yet, equities have been resilient. Yup, resilient.
– not “dead cat bounce” resilient
– stocks surged 4 consecutive days > 1%, a rare feat (@ryandetrick great stats)
– Fed’s Kashkari is full hawk suggesting 7 hikes and markets up
And interestingly, the resiliency of equities is only seen around market bottoms. In fact, take a look at the stats from @CalebFrazen on twitter below. He notes that a 52-week version of the Williams %R became oversold.
– this is the 7th time since 2003 it is this oversold
– 4 of 6 times, it was a multi-year low for NASDAQ
– median 1-year return is 25%
– S&P 500 “plus days” have been gains of 1% or greater, 9 times in a row
– per @ryandetrick this only happened twice in last 15 years
– June 2009 and April 2020
…Bears have far more conviction than bulls = another reason to be bullish
Whoa. Equities are doing something only seen at market bottoms. Yup.
– Not at tops
– At bottoms
The market is “whispering” bottom. Yet, it seems like pundits are calling a top. In fact, many clients are telling us they are waiting for a “washout” — in other words, bears have far more conviction than bulls.
…Buy the invasion still seems to hold
As we noted in prior notes, historically stocks “bottom on the invasion” — this was the case for the 5 previous war actions as shown the chart below:
– Russia-Ukraine war started 2/24
– S&P 500 bottomed on 2/24
– Market internally bottomed on 1/27/2022
– Day % of stocks <200d fell to low for the cycle
STRATEGY: BEEF still works if the market is “whispering” bottom –> Bitcoin (B) + Bitcoin equities (E) + Energy (E) + FAANG (F)
The natural question is if indeed equities are “whispering” bottom, what sectors should investors buy?
– In our view
– Buy stocks where earnings is positively correlated to inflation aka inflation winners
– Buy secular growth where inflation doesn’t hurt EPS and stocks are reasonably valued
– Buy stocks where War highlighted useful of the company’s business.
In our view, our existing strategy of BEEF remains valid. Even in war. Even with inflation. In fact, the last few weeks are strengthening the case for our “BEEF” strategy. That is, BEEF is
– Bitcoin + Bitcoin Equities BITO -0.26% GBTC -4.85% BITW -2.72%
– Energy
– FAANG FNGS 1.48% QQQ -0.45%
Combined, it can be shorted to BEEF.
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 -0.99% AMZN -1.84% NFLX -0.34% GOOG -7.85%
All in all, one wants to be Overweight BEEF
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33 Granny Shot Ideas: We performed our quarterly rebalance on 2/3. Full stock list here –> Click here _____________________________
April 18th important date for “return to normalcy” — TSA potentially to end mask mandate
We mentioned last week that the TSA mask mandate was extended until April 18th. And with COVID-19 cases in rapid decline and severity of cases dropping sharply, we think the rationale for ending the mask mandates is high. Airline CEOs signed letters to the White House yesterday advocating the TSA to end this mask mandate.
– so, for the first time since COVID-19 started, the airline industry is making a strong push to end mandates
– thus, support for ending the mask mandate gaining momentum
– hence, we watch April 18th
…Given retail vacancy rate of 28% in NYC, are labor shortages really due to “shortage of workers”?
I have been noticing many restaurants around NYC with signs asking patrons to be “patient as there is a shortage of workers.” So it is no surprise that many pundits and economists are saying labor markets are so tight the Fed needs to raise rates.
– the logic being
– economy too strong
– raise rates to “slow economic growth”
– slowing economy means job losses
– so tight labor markets are fixed
And that is a logical, as long as US labor markets are truly tight. But if there are other reasons labor markets are tight, raising rates is not going to fix this. For instance:
– are labor markets tight due to COVID-19 fears (leave workforce)?
– taking care of someone with COVID-19?
– due to vax mandates?
– pandemic assistance/ generous unemployment benefits?
We just don’t know. But let me share a data point:
– Midtown NYC retail vacancy rates are still 28% or higher
– meaning about 1 in 3 retail businesses are closed
– about 25% of NYC employment is via retail establishments, including restaurants
Here is my question:
– is NYC economy so strong
– 28% of midtown retail is vacant
– and there is a labor shortage?
Hmmm… not sure wage inflation is due to an overly strong economy.
COVID-19 cases are rising due to Omicron BA.2 but no signs of a rise in hospitalizations
Beneath the national headlines, COVID-19 cases are rising in the US. This started in the Northeast and the 4 states where cases have been perking up are below.
– of these 4 states (NY, NJ, MA, RI) where cases seem to be rising
– only NY and RI are seeing a visible upturn
– but this case rise is not driving higher hospitalizations
– the next set of charts show hospitalizations falling, even as cases could be rising
Hospitalizations in these states are still falling. And as these charts show, the number hospitalized has fallen 85% or more from just 8 weeks ago.
NYC continues to take steps to ease COVID-19 restrictions and now exempt athletes from vax mandate
Mayor Eric Adams announced that city athletes and performers are exempted from NYC vaccine mandates. This is to allow performances to continue without disruption. There is understandably backlash, but given US policymakers are shifting policy away from pandemic to endemic, this shift is consistent with these easing measures. Vaccine mandate rules still apply to city employees.
Many of our clients are aware that BA.2, the “newish” Omicron variant (first seen in Europe) is quickly becoming the dominant strain. As you can see below, its share is rising rapidly in the US and is actually > 50% of cases in NYC.
– BA.2 R0 is estimated to be 60% more transmissible than the original Omicron
– That implies an R0 of 60 to 70 –> yup
– but the healthcare severity seems far lower
– best evidenced by no uptick in hospitalizations, despite rising cases in NYC
…Has Russia lost 50% of its front line soldiers in the Ukraine? The math implies this
When we hear Russia has deployed 150,000 soldiers in the Ukraine, this is not 150,000 fighting soldiers. As many military people know, for every front-line soldier, there are 4 support soldiers:
– 1 frontline soldier
– 4 support, fuel, ammo, logistics, supply lines, etc, cooks
Thus, if there are 150,000 Russian soldiers in the Ukraine, about 30,000 are doing the actual fighting.
– NATO estimates Russian casualties of 15,000-16,000
– Presumably these are frontline soldiers
– Unless Ukraine soldiers are “attacking from behind” and hitting supply lines
This implies about 50% of the frontline soldiers are casualties. Wow.
DATA ON RUSSIA-UKRAINE WAR: Tracking Russia-Ukraine war statistics — 2,685 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.
– Ukrainian civilian casualties
– Ukraine population movements
– Ukraine military losses, except personnel
– Russian estimated losses of personnel and material
Ukraine has lost an estimated 72% of its tanks and 86% of its aircraft
Our data science team, led by tireless Ken, has been tracking the casualties and losses associated with the Russia-Ukraine war. And while Ukraine has staged an impressive resistance, the reported losses of equipment show that Ukraine has lost a substantial share of its equipment:
– by our team’s analysis, using reported data
– Ukraine has lost 1,572 tanks or 72% of its equipment
– Ukraine has lost 113 aircraft, or 86% of its fleet
By these measures, the armament of that army is rapidly depleting. I am not sure if this is a well known fact. But this also highlights why the nation is seeking to replenish its equipment.
With each passing day, Ukraine is experiencing further losses of critical equipment.
The number of casualties is 114 on 3/23, and a total of 2,685 have been reported to the UN.
The flow of migrations out of Ukraine had been steady at about 100,000 to 200,000 per day, but has dropped to around 60,000 per day recently. And a total of 3.7 million have fled so far.
– 55% are entering into Poland
– curiously, 7% or 270k or so, have entered Russia
If one is wondering about reported losses of equipment, we are citing statistics provided by the opposing ministry officials.
– est. 113 Ukraine planes lost
– est. 1,572 tanks lost
– this seems like a lot of equipment
Russian losses are higher
– est. 15,800 Russian soldiers killed
– est. 530 tanks
– est. 108 aircraft
– est. 1,597 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.
POINT 1: 7D Avg daily COVID-19 cases 27,544, down -2,377 vs 7D ago…
All data is as of Wednesday, March 23rd.
Current Trends — COVID-19 cases (past 7 days vs. 7 days prior):
- Total new cases 192,808 vs 209,444 7D prior, down -16,636
- Avg daily cases 27,544 vs 29,921 7D prior, down – 2,377
- 7D positivity rate 3.7% vs 3.7% 7D prior
- Hospitalized patients 16,144, down -20% vs 7D ago
- 7D Avg daily deaths 871, down -27% vs 7D ago
Over the past 7 days, a total of 192,808 new cases (average 27,544 per day) were reported by the state departments of health, down -16,636 (average down -2,377 per day) compared to 7 days prior. Although the total new cases are still falling (slowly), we start to see the case trends in some states creep up. As we noted above, the 4 Northeast states, NY, NJ, MA, and RI, are the first where cases have been perking up. Besides, Colorado and California are also on our “watch-list,” especially given the fact BA.2 is estimated to be 60% more transmissible than the original Omicron. But the good news is that so far we have not seen any significant rise in hospitalization rates in any of the states mentioned above. It could be because the symptoms of BA.2 are milder than the original Omicron. It could also be because of the lag effect in hospitalizations. We will monitor the development closely.
7D delta in daily cases has been flat-ish…
The 7D delta in daily cases below reflects the recent case trend:
– it has been almost negative. But we start to see some positive 7D delta
– the trend has been almost flat over the past 2 weeks – case counts sort of in no man’s land, neither falling as rapidly as before, nor re-surging
All US states are seeing decline in daily cases now… 50 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 (currently all states are seeing cases “falling”. Although case figures in some states (NY/NJ/MA/RI) seem to be edging up recently, it is still early to make definitive call on the case trend in these states
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 death and current hospitalization continue to fall, while positivity rate has been flat…
Below we show the aggregate number of patients hospitalized due to COVID, daily mortality associated with COVID, and the daily positivity rate for COVI
- Net hospitalization and daily deaths have plunged – both have fallen to the pre-Omicron levels. In fact, as shown below, current hospitalization is approaching the all-time low since the pandemic.
- Positivity rate has been flat – partially due to the spread of the BA.2 variant. But in term of the absolute level, 3.7% positivity rate is still relatively low.
POINT 2: VACCINE: vaccination pace has slowed recently… likely due to the improvement in COVID situation
**All data is as of Wednesday, March 23rd.**
Current Trends — Vaccinations:
– avg 0.2 million this past week vs 0.2 million last week
– overall, 29.6% received booster doses, 65.2% fully vaccinated, 76.5% 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 268,773 doses administered, as reported on Wednesday. The vaccination pace continues to fall and now is the lowest level since the mass rollout of COVID-19 vaccines. But it is also understandable that less people are seeking vaccination given the improvement in overall COVID situations..
This is the state by state data below, showing information for individuals with one dose, two doses, and booster dose.
In total, 557 million vaccine doses have been administered across the country. Specifically, 254 million Americans (76% of US population) have received at least 1 dose of the vaccine. 216 million Americans (66% of US population) are fully vaccinated. And 97 million Americans (30% of US population) received their booster shot.
POINT 3: Tracking the seasonality of COVID-19
**All data is as of Wednesday, March 23rd.**
***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.
