The Dividend Cafe - Daily Covid and Markets - Tuesday August 18

Episode Date: August 18, 2020

The market was down about 65 points today, but the S&P and the Nasdaq were up, and in fact, the S&P closed at a new all-time high today. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Welcome to the Dividend Cafe, weekly market commentary focused on dividends in your portfolio and dividends in your understanding of economic life. Hello and welcome to today's COVID and Markets podcast brought to you by Dividend Cafe of the Bonson Group. Today's Tuesday, August 18th, and as I think the word has sort of gotten out, we're on our new schedule here. So you did not get a podcast yesterday, Monday, and you won't get one tomorrow, Wednesday. But every Tuesday, Thursday, you'll be getting this COVID and Markets podcast. And of course, Friday is our Dividend Cafe. Every other Monday, we do the national Zoom

video call that we put up on the podcast as well so speaking of the podcast there's a pretty good chance if you're listening to this right now it's because you're getting it in your feed that's how you're getting it since we don't blast this out more than likely you're getting it as a subscription through itunes or spotify or whatever you run through your feed but if you are not that's the way we would love for you to receive our Dividend Cafe podcast is if you could subscribe, easier for you, easier for us and all those things. So let's get on with it. Market today, S&P 500 that is, closed at an all-time high and it just doesn't even really

seem real to say it. Now, the Dow was down 65 points today. The S&P and the NASDAQ were up. The Dow has a little ways to go still to get back to its all time high. You definitely have a little bit of, well, it's more than a little bit. It's pretty historically significant de-correlation between the three major market indices. But regardless, I mean, you can kind of nitpick around it. The, the obvious, um, amazing fact is in the midst of this COVID pandemic and where we were less than six months ago that the S&P has responded the way it has.

And before I get into all the health data that many of you really actually listened for and came here for, I'm a markets guy first and foremost, and I like talking about the market so much more than I like talking about epidemiology. But here's the facts. Going back of the worst 10 plus bear markets in history, anytime we've been down 20% or more, the amount of trading days to a new high. This is now officially the third quickest in history. The market had dropped 27%. Excuse me, 1982, the market dropped 27% and made a new high 58 days later. In 1990, the market dropped 20% on the dot around the Iraq invasion of Kuwait. And then 86 days made a new high.

But here, we are 102 days. And that was after the market had dropped 36% in 31 days. And so it's a big deal, if nothing else, symbolically. But I think that there's a whole lot of other things that are going on in the economy and a whole lot of things going on underneath the currents of the market that are probably more important than the headline. But for now, we'll just enjoy the headline. Let's talk COVID for a moment. A couple of interesting tidbits first. Yale's new saliva coronavirus test, and because I would do pretty much most things to avoid

in my missive or podcast avoiding talking about saliva. I didn't want to get into the story until I understood it a little better. But then Dr. Gottlieb is now kind of all over this, putting it out there himself. And of course, he's been quite pessimistic throughout this whole pandemic. And he is viewing this as a significant development as well. development as well. But the new saliva test is being used in the NBA. It's very quick. It's very cheap. It's very easy. And so in terms of those that are looking for just a mass increase of testing to sort of verify some of the things that they want verified, this is definitely a step in the right direction towards democratization and penetration of U.S. testing efforts. At covidmarkets.com today, there is a really significant chart.

Seeing is believing and seeing in this case will be better understanding. Looking at the COVID tracking project in the Public Health Agency of Sweden to view the deaths per million in New York and the deaths per million in Sweden, and then look at the antibody testing and get an idea as to why that correlation is so high, why their present mortality levels are identical and their present antibody testing is so high, and adding to that argument around herd immunity. And I would add that I'm using the whole country of Sweden in my chart and the whole state of New York. But when you just use the city of New York and the city of Stockholm, you're getting almost 22 percent and almost 16 percent antibody positive testing alone. testing alone. So I believe that getting a better understanding around New York and Sweden and these common ground issues that are also shared in other big cities and more and more places are helping us

to understand where antibodies may be present and therefore, of course, the eventual goal of some sort of immunity impact. I will quote here from Bill Hanage, who's the epidemiologist at the Harvard T.H. Chan School of Public Health. In talking about this very subject, I'm quite prepared to believe there are pockets in New York City and London which have substantial immunity. What happens this winter will reflect that. And so I don't believe the notion, some of the scientists, some of the epidemiologists, some of the doctors who have been very probably talking about the subject, perhaps they're being higher herd immunity. Well, first of all, higher antibody

results than had previously been understood and lower herd immunity thresholds than previously understood. The New York Times running a big story on this yesterday, and now you're seeing folks like the head epidemiologist at Harvard chiming in. We've come a long way, and I hope most of you feel encouraged by that. I know I do. of you feel encouraged by that. I know I do. The International Society for Infectious Diseases has now released a report and conclusions that the mutations of COVID we've seen since February that are certainly more infectious than some of the earlier mutations that they had been studying are indeed much less lethal than initially seen, studied, and feared. And I think this was a topic that initially, if I recall correctly,

I kind of published an Italian doctor who was saying something similar to this earlier in the summer. But now there's a much broader array of scientists that are actually studying the mutation that they do think has proven to be more infectious and might explain some of the higher spread that we've seen. and might explain some of the higher spread that we've seen. And yet they are arguing for a very clearly definable conclusion of lower lethality or severity in this particular mutation. Today's testing, 642, almost 643,000. Yesterday, 648,000.

I'm really increasingly convinced that the lower testing rate, you know, running 600, 700,000 tests versus 800, 900,000 is a direct byproduct of there being a lot less symptomatic people. Pretty hard to get people to go out and take a test for something that they don't even remotely suspect they might have. Initially, there was certainly very legitimate questions as to whether or not it was access, delays, weather, other challenges logistically in getting a test. And I think that now because of the declining positivity rate and the fact that they've worked through a lot of those reporting hurdles and other logistical challenges, I think at this point it is really easy to conclude that testing has gone down because the need for testing has somewhat gone down. Now, I would certainly hope that the access to testing and capacity for testing would not remotely go down, and we'll have to continue monitoring that. But our positivity rate today of 6.29%. Around Florida, there were 9,500 hospital beds in Florida occupied by COVID patients on July 21st. Today, there are 5,500 beds being occupied by COVID patients.

It's a 42% reduction. In terms of case growth, I put a chart at COVID and markets. There were 2,600 new cases yesterday, 3,800 new cases today. So even allowing for some of the spurts and spikes and irregularities and reporting, just rolling averages, you really now see Florida having fallen down the other side of that mountain. Still would like to see that number get into the 1,000s, 2,000s, much lower than it is. But relative to 15,000 and 12,000 and over 10,000 that Florida stayed at for quite some time, this is really a remarkable and very encouraging drop.

Arizona today, speaking of a remarkable and encouraging drop, think about this for a second. Arizona was 21st in the country in new cases yesterday. 21st in the country. And of course, you recall it being the kind of leader of the pack coming out of that summer increase in new cases. Their positivity rate's down to 3.32% last couple of days, but even if you just take all of last week, down to 6%. So really remarkable story continuing there. In California, the governor, Newsom, has confirmed all the backlogged cases and the glitches and technical errors and whatever else are all handled and baked into the data. And as I suspected, the cleanup of the data reflected a better picture, not a worse one. And so it did unfortunately give Sacramento an excuse to delay the reopening clock because they didn't start the clock for some of those counties that may have been eligible by those days that they were cleaning up their limbo.

But in the meantime, the positivity rate across the state is now down to 6.5%. Hospitalizations and ICUs are down about 20% from their peak over a 14-day average. But if you go just on a seven-day average, it's even lower than that. In Orange County, California, you are looking at all the metrics. 6.2% positivity needs to be below 8. Thirty one percent available ICU needs to be ahead of 20. Fifty six percent available ventilators needs to be ahead of 25. Negative hospitalization compounding of 4.8 percent needs to be better than positive 10. But the one metric that they want is a case rate of 100 per 100,000 or lower, and they're at 106. So just think about that, okay?

Out of five metrics, Orange County is just destroying four out of five of them. And then one of them, they're just a microscopic couple inches away, way and that apparently is what's keeping the clock from running and allowing hair salons and gyms and schools and churches and inside restaurants to open. Texas, that kind of faulty positivity rate with their data reporting got cleaned up at what dropped from 16.7% to a still high 11.9% in their new seven-day average version. But the state was using tests received but not processed in their daily test counts. So it was artificially lowering the positivity rate eight weeks ago, but then artificially raising it the last couple weeks as they're throwing in the positives from old cases into the still newly processed tests.

So when you clean up and adjust for that, in a normalized and accurate processed results standpoint, the positivity rate drops to 8.9% on a seven-day average, which is still higher than the country, but meaningfully lower than where Texas had been. I did put a chart up, because I haven't done a lot of individual county work in Texas, but I just fell in love with this chart from Dallas County, directly from Dallas County's Health and Human Services website, showing their decline in hospitalized cases, their decline in non-hospitalized cases, and the rolling seven-day average of the above, showing a mountain where there was a climb up and now a climb down.

And it's wonderful to see. So we've already talked about the stock market today. Other news, natural gas is now up over 10% on the year and up pretty close to 50% from its recent low. And I put a chart up at Covina Markets because September is historically the strongest month for natural gas, on average up over 10% on the month. And October is the second highest month on average for natural gas. And yet here it is making these new highs about to enter what's historically been a strong season. That obviously may not hold up this year.

But you have a pretty meaningful technical bounce for Natty Gas. On the public policy standpoint, I don't know much to say. On the public policy standpoint, I don't know much to say. The Republican majority in the Senate has put forward a little skinny stimulus bill that's aiming to give both sides some of what they want while ignoring some of the larger issues where there is no agreement. It would allow for a $300 a week unemployment benefit, some small business aid, some post office funding and the liability protection. I don't think it's even going to get a response from House Democrats, let alone any kind of vote. In terms of housing, really great data on new housing starts up 22.5% in July, which is the third month in a row of increased new home building. And it's a broken record for me to explain why this housing data has continued to be very strong. Seasonally adjusted rate, by the way, of 1.5 million units was 250,000 more than expected.

I don't have a futures tick up yet, so forgive me. I do believe that we're in a pretty frothy place with markets overall, but we're there for a reason. You have a high multiple because you have a lot of liquidity and a very low risk-free rate that it is priced off of. In the meantime, though, I'd take any question you have for me on the market anytime. Thank you for listening to COVID and Markets. The Bonson Group is a group of investment professionals registered with Hightower Securities LLC, member FINRA and SIPC, and with Hightower Advisors LLC, a registered investment advisor with the SEC. Securities are offered through Hightower Securities LLC. Advisory services are offered through Hightower Advisors LLC. This is not an offer to buy or sell securities. No investment process is free of risk.

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