The Dividend Cafe - Daily Covid and Markets - Tuesday July 21

Episode Date: July 21, 2020

The market closed up +150 points today, though the Nasdaq sold off. Energy led the way today, while Health Care & Technology were the losers. As for health data: Case growth Monday was 4.2% lower than Monday of last week. The national percentage of positive tests was down to 7.9%, the lowest in nearly two weeks. 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 the Dividend Cafe of the Bonson Group. Today is Tuesday, July the 21st. We'll go ahead and jump right into it. Markets are closed. The Dow was up 150, 160 points. It had been up more than that earlier in the day. The NASDAQ closed down almost 90 points. It had been up a little bit. And then the S&P was just up a little bit. So today looking the opposite of yesterday and today looking a lot more like several days last week did. But what might be a little bit more interesting is that healthcare

and technology were hit pretty hard today in an up market day, meaning up Dow day, and energy was up substantially, a really big rally in the energy sector. So yeah, I guess if you have enough weird days, you can't call them weird anymore, but today was another weird day. So in terms of the health data, I'm going to dive into a number of different things. A good portion of reporting has already taken place. It's a little bit after five o'clock out here on the East Coast. Case growth on Monday nationally was 4.2% lower than Monday of last week. And the national percentage of positive tests was down to 7.9%, which is the lowest positivity ratio in nearly two weeks. Those are both good news pieces.

I guess I'll just say it every day because I really can't stand the idea of people thinking that I am holding away from the negative news. It's just that the negative news is, first of all, the same every day. And second of all, it really is pretty much exclusively in the one category of case growth. And so, you know, the case growth has improved from a percentage of growth positivity ratio. Yet again, until we see cases dropping back down to 20,000 a day or lower instead of this 50, 60, 70,000 a day, it's not going to be possible to really call it, you know, good news, so to speak. One of the interesting things that has happened the last couple days, and I've highlighted some of my favorite takeaways from this at covidandmarkets.com

today, is that the Health and Human Services Department, which is obviously a branch of the cabinet, a particular part of the executive branch of the federal government, and then the Center for Disease Control, CDC, is an operating component of the Health and Human Services Department. Well, the CDC had a lot of data reporting at its own website, and there was a lot of criticism about their data platform. I think some of it was unfair, but either way, the HHS has taken over the data platform function. And they've put up a whole lot of new charts and new data points that CDC didn't have before. And I, like all the cool kids, spent a couple hours playing with it last night. And what I particularly found, the ICU bed utilization by state. So they put a map of the U.S.

You can do it in a bar chart. You can do it in a spreadsheet. And look at the percentage of ICU beds being utilized across each state. And there were only three states in the country that were even over 80%, and they're right at 80, 84, and what was the other one? And 81% in Nevada. You know, I've been hearing all this 90, 95%. Well, look, state averages do not tell the whole story. And I want to be completely clear about this. If you have a county that's at 90% and another larger county at 60% and your blended average is 70 or over,

that doesn't help the county at 90. And I recognize that. I'm not being disingenuous on the data. I'm just trying to provide a broad overview. And I think when you look at this map, it's fascinating to see the fact that even some of the real problematic states are running in the fact that even some of the real problematic states are running in the 70s, just three out of 50 in the low 80s, and the vast majority of the country in the 40s, 50s, 60s. So you just have a very different picture when you get to look at the map this way. Then the other map I thought was interesting is the percentage of inpatients at our hospitals right now that are there with COVID-19. And obviously, that's been the issue that has jacked up a couple of hospitalization points in Florida, which is at 20%, Texas, which is near 20%, Arizona, which is over 20% and on its way lower, and so forth. And

then you just have a ton of states at 1.9, 3, 4%. And so it just gives you kind of a context of the notion that we have 100% of our hospital beds filled up with COVID patients. Now, here's where the problem is. And I don't know if people want to interpret this as a problem with the virus itself that is a negative data point or interpreted as a problem with some of the policy response or maybe a little bit of both, there are just far too many elective operations and other non-COVID medical-related things that are maybe not showing up in hospital data. And so it's not only having an ancillary health effect, also, of course, affecting the businesses of so many hospitals and medical care facilities. But more than any of that, it is that it leads to health concerns for folks in other areas that may not be showing up on the heavily monitored COVID radar.

Finally, on the case of just this different data from the coronavirus data hub at HHS, look, Massachusetts only had 255 new cases yesterday and only two deaths. New York State, 14 deaths. New Jersey, only 131 new cases. So all three of those states got ravaged with COVID a few months ago. All three have virtually an eradication on their hands now. And yet, you will note in a chart I put at covidandmarkets.com that their percentage of hospital inpatient bed usage is kind of right in line with some of the other troubled states. It's a little bit higher than California, pretty much right in line with Arizona, Georgia, Texas, maybe a smidge lower than Florida. So you see this kind of 70 to 80% range of hospital beds,

and it's applying to states that are having trouble right now, like Florida and Texas, and it's applying to states that are totally eradicated, like New York and Massachusetts. And then you kind of understand that that's just sort of the threshold that these hospitals run at, is about 78% of hospital bed capacity. So I think it provides some useful context and information for you to interpret other data from. I know it seems unimportant to some of you, and maybe not in the more significant data realm, but to the extent that you believe that the return of pro sports has a symbolic significance, if not a direct economic significance, a cultural one. The NBA players are all in this, what they're calling bubble campus in Orlando, Florida, Disney World. Every single player getting tested every single day. Yesterday out of 346 NBA players,

they had zero test positive. We know that Major League Baseball is getting ready to kick off here on Thursday night this week. So I think that these sports things are very likely to be a more significant part of return to American life than people realize. Even without fans in the stands, just having something on ESPN that isn't repeats of a billiards championship in South Korea from 12 years ago will be nice. I don't think I've had my TV on ESPN through all quarantine. I take that back, that Michael Jordan documentary was on ESPN. But anyways, so new cases definitely appear to be peaking. They look like they're coming in today a little bit higher than yesterday, but it's still early. As I'm recording, they're nowhere near where they were yesterday yet,

but I expect just based on what time of day it is, right now we're about 11,000 cases lower on today than we were yesterday. And yet still have you know a couple more hours of reporting from some western states so we'll see either way lower than that trend had been the trend in hospitalizations definitely improving you got a good curve down on newly hospitalized people and I think that trend and positive test may be heading down too. We're going to continue watching that, see that positivity ratio dropping, but the surge in the hard-hit states for hospitalizations definitely is over. Arizona, dramatic turn to the better. Texas, definitely to the better. We got charts to all this effect at covidamarkets.com today. In Florida, there was 12,500 new cases

reported Sunday. It went to 10,500 Monday, 9,400 today. Two caveats, it's only a few days in a row here. Okay, so I want to have a more detectable reversal of case growth in the cards, you know, it'll take a little longer before we can feel good about things. But more than that, I just am so tired of these backlog reporting days where all of a sudden they drop a bomb of an extra, you know, 1,000 or 2,000 cases that pollutes the numbers. And, you know and you have to be prepared for that too. Florida continues to have been a problem on case growth, but it's never hit the hospital capacity constraints that the concerns were present for in Arizona and Texas. It's important to keep in mind. Speaking of Arizona, and this is a couple

things I'll share. Inpatient hospitalizations have declined again. They're down 13.5% from a week ago. The use of ICU beds is down 7.5% from the high a little over a week ago. The use of ventilators is down 13% from the high. I put a chart up showing all the different metrics in line with the inpatient census. Very good numbers across the board. But then the frustration is on the death reporting. They removed 50 deaths from their tolls on Sunday, but then re-added 50 deaths today. And 35% of their death reporting for the last eight days, I mean, it's over a third of the deaths they're reporting have been backlogged death certificate matching. Okay. So there's

no question that daily mortalities increased with case growth in June, July. It's just that that increase on an absolute number was not very much. It was much, much lower than many were fearing and projecting. There's a chart from the good folks at COVID Planning Tools in COVIDMarkets.com providing, from their model, actual date of death mortalities versus the reporting date, and you get a visual look at what's going on in Arizona. And I actually would like to say I hope the rest of the states kind of go this direction in terms of the reversal, and I think that they will. But I don't think that the other states are having the same problem

with some of the mortality reporting that Arizona's having. California, again, it's just such an odd situation because I think that their numbers, and I've just never seen policymakers work so hard to take credit for numbers being worse than they really are. And so we'll see how things play out in California in the days ahead. Orange County is the one I'm able to follow easier, not only because I have more sources in Orange County,

we have more clients in Orange County. The Bonson Group's headquarters are in Orange County. But also their own county website is a little bit more updated, a little bit more impressive, and also updates a little earlier in the day than LA County. There are five thresholds that determine if a county gets on monitoring status. Orange County is already well below the threshold of concern, and these thresholds come straight from the California Public Health Department in three of the five categories. In the other two, they did see improvement both in case growth per

100,000 population and in positivity ratio today. So we will continue monitoring that trajectory. Texas available ICU beds have begun to increase over the last week. Total hospitalizations, beds used by COVID patients has totally flattened over 10 days. So again, some of those really, really doom and gloom projections don't appear to have played out. That does not in any way mean that things did not get sketchy and did not require work and did not require adjustment, but I'm encouraged by the fact that the great people and the great hospital networks in Texas have been able to manage their situation. Give you an idea of what I mean by frustration around death reporting. There were 132 deaths

reported in Florida today. 19 were from today. 110 plus change are from past days. In Arizona, 134 were reported, but only two were dated today. 50 were a putback from 50 that were taken out Sunday. And like I said, the significant amount of death certificate surveillance. So I don't really know what to say. number, that's what we know so far. And that number will end up being a fraction of the total 134 on a daily basis. Okay. So let me move past kind of that normal run around the fact states and some of the other broad data points that we like to go through. I will right now walk you through the technicals and the public policy stuff has got to become a bigger part of the daily missive in the days, weeks ahead, because a lot's hitting the fan out in DC right now as it pertains to the forced stimulus bill. From a market technical standpoint,

pretty much the biggest story that no one's talking about is the weakening of the U.S. dollar, the euro to dollar getting very close to that $1.15 level, which I think if it breaks out from there, you could see a lot more downside to the U.S. dollar. The DXY, which is the dollar to blended currency basket, is down about 4% over the last two months. So you have all the technical setup of a pretty weak US dollar. That's a story probably no one else is talking about that I'm watching closest. The story that I think a lot of people are talking about, and I'm also watching very closely, is this issue of the bubble that has formed in big tech. And if and when we're looking at that sort of breakup of that bubble,

the last two weeks saw more retail fund money flow into tech space as ETFs and mutual funds flowing into tech than any two weeks in history. And right now, the four largest U.S. tech stocks combined are larger than the entire stock market of Japan. I will add no further comment to those two statements. On the public policy front, I think that this issue of the payroll tax cut is going to be the media darling for the next week or so because essentially the media doesn't believe that Trump is fully committed to it. And they know that the Republicans in the Senate are not committed to it unless Trump

becomes committed. There are definitely some White House advisors who are committed to it, first and foremost being my dear friend, Larry Kudlow, who chairs the National Economic Council and not only is a big ideological fan, but is pushing for this very hard. Now, POTUS has said the same, that he wants to see it, but he has said it with a certain, shall we say, hesitation. And I think that has led to the Republican leadership, Senator Majority Leader McConnell's been reasonably silent on it. I think that you look at Senator Thune

and some of the others, they just don't seem to be totally on board. Cornyn in Texas has come out pretty much against it. So really, we have to wait and see if the president's actually gonna make this a sin con non or not. If he does, that could heat up some intensity on the disagreement with Democrats. But if he lets it go, I think you're going to see the media try to poke him for it and make hay around that.

But, you know, all indications are that they're working towards a deal. I just think it's going to take a little time and I'd be very surprised if it's done by July 31. Big day, as I mentioned, in the energy sector, oil and energy, WTI crude closing very close to $42 a barrel. A great chart for those of you covering the housing and mortgage side. Wonderful story in the Wall Street Journal, by the way, about average 30-year fixed conforming rates at an all-time low of 2.98%. The average 15-year conforming dropping below 2.5%. But again, I just put in a chart going back to the 1970s and looking at the downward trend since the high level of the early 80s in both the 30 year and the 15

year and this kind of just you know violent drop over a 40 year period that brought us from 18 percent rates uh down to to two and a half to three percent rates and i guess i will let astute observers determine if they think that trend down in interest rates has had anything to do with assisting housing prices over the last 40 years. Big news in the Fed, the Senate Banking Committee did, on totally partisan lines, approve Judy Shelton, 13 Republicans in favor, 12 Democrats opposed, for appointment to the Fed Board of Governors. Now that means it goes from the committee to the whole Senate. And as long as all Republicans stay in line, they'll have the votes to approve Judy Shelton to the Federal Reserve Board of Governors. But we'll keep

monitoring it till it gets all the way through. I really thought that was dead. And it seems to have come back and be looking like we are going to get a little ideological diversity at the Federal Reserve. So I don't have futures yet. I'm recording a little earlier than normal today. But we do wish you and yours a wonderful Tuesday evening. And we encourage you to reach out to us at the Bonsai Group with any questions you might have. Thank you, as always, for listening to COVID and markets. you might have. Thank you, as always, for listening to COVID and Markets. Please rate us, Dividend Cafe, the podcast player of your choice, five stars or less if we warrant less.

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