mattee2264

I imagine that most young and healthy people won't bother just like with the flu vaccine unless the government finds a way to force people to take it by imposing restrictions on people who aren't vaccinated. Even then they will probably still wait to see what happens to the guinea pigs receiving the first round of vaccinations.

I think it is pretty likely that Europe will experience a double dip recession. Lockdowns have been extended in many countries and I think a lot of the governments are going to follow the UK and basically say "Suck it up for a few more months because once enough people have been vaccinated life will be able to go back to normal". The US might escape a double dip recession but economic data is going to be pretty bad for the Q4 20 and Q1 21. For the most part I agree that because markets are forward looking they will be able to look past a few bad quarters with the expectation of a very strong rebound driven by pent up demand. But I wonder if that changes if it turns out that a) the bad quarters are much worse than expected and b) the rebound is a lot more modest than expected? It takes some time for expectations to meet reality but I can envision a scenario in which declining earnings estimates drive down stock prices. For example Goldman Sachs has recently increased its S&P 500 earnings estimates to $175 for 2021 and $195 for 2022 and have a 2021 price target of 4300 based on 22x expected 2022 earnings. Other investment banks are similarly bullish. If those estimates come down during 2021 you'd expect stock prices to follow to some extent. And if the demand recovery is as robust as markets seem to expect then I think that we could see an inflation shock in the second half of the year. Demand will recover a lot faster than supply thanks to fiscal largesse, pent up demand, and release of cautionary savings. It will take a lot longer for businesses to return to full capacity especially because they will be busy paying off debt and will require greater confidence of a lasting recovery before they are willing to make big investments and hire back staff. Commodity prices are increasing which will feed into costs and prices. While this should only be a temporary phenomenon and demand and supply will return to balance in 2022 it could be enough to change longer term inflation expectations and that has a habit of being self-perpetuating. The Fed will be slow to react due to their new average inflation targeting regime which will probably make things worse. A lot of the seemingly unlimited powers of the Fed rests on the belief that inflation is dead. So when that turns out to be untrue that could reset markets in a big way. Good for value. Not so good for growth stocks and IPOs on nosebleed valuations based on distant cash flows. Big Tech are obviously a big factor in the market and have done the heavy lifting in the incredible rally this year. The acceleration of a secular shift towards remote working and online commerce not to mention the near elimination of their competition by government fiat has more than offset the impact of the economic recession. So they've been Covid-beneficiaries. But you'd expect that starting next year there will be a partial shift in working and spending patterns and that will have an impact on the bottom line. Higher taxes and regulation/fines are also a danger as governments look for deep pockets to help them pay for this year. Also Big Tech are starting to compete with each other e.g. in cloud and entertainment/media and while that doesn't matter so much in a rapidly growing market when market growth slows down you'd expect some price competition to eliminate some of the excess profits. So the medium to long term outlook isn't as bright. But I don't think that will have a significant impact until it translates into earnings disappointments but when that starts to happen as we've seen historically stock prices can take a bit hit. However I think any short term impact will be offset by the further upside that exists in value/cyclicals.

https://www.ft.com/content/4583fbf8-b47c-4e78-8253-22efcfa4903a https://www.nytimes.com/2020/11/25/business/coronavirus-vaccine-astrazeneca-oxford.html Some more doubts cast on the Oxford vaccine data Aside from being a much smaller subgroup the subgroup the 90% headline figure was derived from was made up of people under 55. And it doesn't inspire confidence that the different doses were a result of a mistake rather than study design. And a bit weird they were using a saline drip as the placebo in the Brazil trial. So not sure that would really count as a blinded trial. Also a bit strange the way they combined two separate trials in different countries with different methods into a meta analysis. Hopefully their US study will be a lot more rigorous and give a more clearcut indication of its effectiveness.

Apparently the 90% effectiveness is a result of a dosing error and based on a much smaller sample. The larger study shows a 62% effectiveness. Of course scientists are rushing to come up with theories why the smaller dose works better and will be using those results to win regulatory approval. But perhaps all we are seeing in these initial results (that are wildly exceeding expectations) is sampling error and the true efficacy might be an awful lot lower. All these initial results are based on only around 100 people contracting the disease. Unfortunately with emergency use approval it is a lot harder to continue the trials because of ethical issues which mean you have to give the placebo group the vaccine. But I assume at some point between the vaccine getting emergency use approval and approval for mass use there will be better data ?

Re mask wearing and social distancing I think there is an analogy with the effectiveness of condoms with perfect use as opposed to typical use. I'd imagine in Asian countries you get a lot closer to perfect use than you would in the West. So while part of the solution the best way to achieve reduce transmission is by ruining peoples' social lives through lockdowns. Moderna had much worse side effects in the Phase 2 trials. So it could be dose dependent. I think most people if given a choice would prefer the Pfizer vaccine and especially if they aren't a high risk demographic would probably wait for it. So that could slow the roll-out. I think now it is clear all the vaccines work there will be a much greater focus on safety and speed of roll-out and that uncertainty is going to result in a lot of volatility especially while you have the virus raging in the background. Could end up being a replay of the summer where recovery plays got ahead of themselves before pulling back.

If there is any doubt that NYC isn't still a very big deal just look at the market reaction when NYC closed the schools. All the other tightening restrictions barely moved the needle.

On the assumption that the current vaccine candidates get regulatory approval and are cleared for a mass roll out the next challenge will be logistics and distribution. Which companies are going to benefit from rising to that challenge? Potential ideas are: Lab Corp on the idea that a lot of testing is going to be required to make sure that the vaccine takes and we get antibodies. C.H.Robinson on the idea that they could be involved in some of the logistics e.g. freight/shipping etc. CVS/Walgreens on the idea they could be part of the solution Cigna on the idea that I'm guessing health insurers are also part of the solution. McKesson already distributes a lot of flu vaccines so you'd imagine they'd be heavily involved with Covid distribution And more of a long shot but could some of the airlines get a lot of incremental revenues carrying vaccines? I've had a look at the stocks mentioned above and while they have recovered to pre-COVID highs that was before this market opportunity.

Very interesting. Everything Berkshire Hathaway are doing this year screams "defence". Gas pipelines. Japanese holding companies. Pharmaceuticals. And of course the ultimate defensive investment of all Berkshire Hathaway itself.

How long is the follow up on these trials? You'd expect with coronavirus a lot more prevalent you should be able to get a much larger dataset of infected patients and also get a better indication of whether the degree of immunity tails off over time. Also what is the timeline for the full results. You'd imagine they'd be able to wrap it up fairly quickly now.

Apparently can be stored at room temperature so might allow a faster roll out.

Spain and Italy are trying the localized lockdown approach it and doesn't seem to be working anywhere near as well as national lockdowns imposed by most other major European countries. And Sweden hasn't been spared despite their herd immunity approach.

I think it could be interesting as an indicator of how attitudes to trade have shifted as a result of Covid. Especially in the context of China signing a massive free trade agreement in its region and Biden replacing Trump as President. The initial fear was that coronavirus would accelerate de-globalization. But maybe it could bring the world closer together.

"When we sell something, very often it’s going to be our entire stake: We don’t trim positions." WEB @ the AGM Obviously not quite true when it comes to Berkshire's bank holdings. But should probably give him the benefit of the doubt.

Anyone still following this? A lot of political posturing over the last few months but I think the odds are probably on some kind of skinny free-trade deal that buys time over the next few years to negotiate.

Really it is a power trip for politicians to lock cities down. So if given half an excuse they can't resist. Especially as lockdowns make it easier to get money from the government. Politicians have job security and big houses so their lockdown experience isn't that bad. And once one major city is in lockdown it is easier for other major cities to follow. Tough to figure out how markets will react. I think there has been some of the same complacency as during the first wave and markets will react like they didn't see this coming. So perhaps another shock crash but a lot milder because a) the stuff affected by Covid such as financials, real estate, energy etc. didn't really participate in the recovery b) Big Tech are seen as covid beneficiaries so a flight to Big Tech (in spite of rich valuations) is more likely than a flight to cash c) there will be the expectation of a lot of money printing and generous fiscal stimulus to offset lockdown measures d) the economy has already shown it can rebound pretty strongly when lockdowns lift e) we have a vaccine so this winter should be the last lockdown

I think Buffett has always tried to earn the best in class banks rather than the turnarounds. Even with BAC he initially bought the warrants and only exercised them when their turnaround was well underway and they were in great shape. So Buffett selling WFC just indicates they have a lot of problems. You can probably make a lot of money if they fix their problems. But it doesn't have the certainty Buffett craves. I can't really guess his revised thinking on JPM especially as a year or two he was saying he was dumb not to buy it sooner and set out his thesis quite persuasively: "A business that earns 15% or 16% or 17% on net tangible equity, that’s incredible in a world of 3% bonds. I mean, just imagine that you had a deposit account with JPMorgan that they made a mistake and they gave you 15% on it. And they couldn’t redeem it. What would you sell that account for? You wouldn’t sell it for 100 cents on the dollar. You wouldn’t sell it for 200 cents on the dollar. You wouldn’t even sell it for 300 cents on the dollar. You have an FDIC-guaranteed instrument that would now be at 300 cents on the dollar. If it was 15% on equity, you’d be earning 5% on it, which is way better than Treasuries. Now, if on top of that, your deposit allows you to let your interest compound to some extent, now, that instrument becomes even worth way more. Because if you have an instrument that could compound at 15% for 10 years and use the added capital, that’s worth way more than three times tangible equity at current interest rates, way more.” So do not know really what changed for him.

Surely a quick fix around the corner makes lockdowns more palatable? Lockdowns function as a circuit breaker and stop cases getting out of control and overwhelming the health care system. Social restrictions have limited effectiveness because people break the rules or bend the rules. For example in the UK when we imposed 10pm curfews people started drinking earlier and then after 10pm crowded onto the streets. And lack of political will for national lockdowns increases the chances cases will get out of control. The European approach was pre-emptive lockdowns and while that wasn't popular it has already flattened the curve at quite low case numbers. Delayed action may increase the chances of avoiding lockdown but it also increases the risk of cases getting out of control and longer lockdowns being needed. As we saw already during the first wave complacency is the virus's friend and I think that is Ackman's point here and why he is hedging against a remote but very serious worst case scenario.

Yeah I had the same thought: that a vaccine makes further lockdowns more likely as governments can justify buying time. I don't really get US politics. But my understanding was that lockdown decisions were up to the mayors rather than the President or the President Elect. So does what Biden's coronavirus advisor thinks really carry much weight? Using another lockdown as an excuse to get the massive stimulus they wanted is a bit sneaky though.

https://www.ft.com/content/9697c211-c631-49b6-a91e-ae290fb02c3a Bill Ackman hedging his equity exposure via corporate debt again. Not on the same scale as earlier this year but interesting to read that he is able to get similar terms indicating there is some complacency now that a viable vaccine has been developed. Interesting positioning considering that everyone is piling into equity rotation plays such as financials, energy, travel etc. I agree with his assessment there will be a robust recovery but the next few months will be challenging and perhaps like the summer re-opening fever there will be a pullback as hopes and dreams collide with economic reality. But the difference this time is that there is light at the end of the tunnel which might allow the market to see past a few tough winter months and waiting for a pullback will likely therefore mean paying much higher prices for recovery plays. Thoughts?

https://www.bloomberg.com/news/articles/2020-11-10/-frenzy-for-airline-stocks-spurs-dislocations-in-2-billion-etf I found this interesting regarding the JETS ETF. Record trading volumes. Record call option buying. Short interest now close to 0%. Briefly trading at a premium to NAV. Imagine similar things going on with a lot of other recovery plays people are piling into. I've noticed serious service interruptions on my retail brokerage website and apparentely this is the case for many other retail brokerages as well. I think a rotation into cyclicals is long overdue but wondering if this is a set up similar to the summer when on re-opening fever stock prices of sectors such as energy, airlines, real estate got way ahead of themselves and corrected significantly once the realization set in that the virus wasn't over and there was a long road to a full recovery. I'm not really interested in airlines but energy and tobacco and financials are also getting a lot of inflows and making big moves and it is much more comfortable to be investing when the crowd have lost interest and moved on to the next big trade. So I am trying to decide whether to wait for a pullback given the market has jumped 10% over the last week and over the last few days energy and financials are up around 20% and travel related names a lot more or whether to invest now before good values disappear altogether as momentum and FOMO kick in.

muscleman what is your pullback thesis? I remember from earlier in the thread that you think good news re the virus is bad news for the stock market.

Viking as someone who is also sitting on quite a bit of cash would be great to hear your updated thinking. Vaccine news is very promising but as might not be available for mass distribution for some time doesn't take off the table the possibility of rolling lockdowns until the spring and also might reduce the appetite for a large stimulus bill. And perhaps with a vaccine on the way politicians will be more inclined to play it safe and impose restrictions with the knowledge it will be the last lockdown

Did a bit more reading and yeah only 50M doses estimated to be available by the year end enough for 25M people and that has to be divided between the US, the UK, Canada, Japan and the EU. So it probably doesn't spare us from the possibility of rolling lockdowns through to the spring and you are right it could take some time to build out supply chains to handle the challenges of mass distribution. So the original timeline of mass distribution by summer 2021 might still be the most realistic outcome.

Initial reaction has been a pop of around 10% in energy, 10% in financials and 20-30% in travel related names and real estate. Obviously quite big moves but then again these sectors are still well below pre-COVID levels and had already sold off significantly from the summer when the initial re-opening/V shaped recovery fervour was taking steam and the market is so driven by momentum that there might be a much longer rally before the good news is fully priced in. Of course still some uncertainties re approvals/timing of the roll out. But perhaps there is an opportunity here.

Obviously great news for humanity. What do we think are going to be the market implications? Initial market reaction has been euphoric. Obviously a very effective vaccine that can be rolled out pretty quickly wasn't priced in and should accelerate a return to normal and amazing news for travel related stocks and energy stocks and financials. But on the other hand markets are trading well above where they were a year ago before anyone had even heard of COVID-19. And perhaps markets can no longer count on much fiscal and monetary support now.