The Dividend Cafe - Daily Covid and Markets - Wednesday July 8

Episode Date: July 8, 2020

Futures were modestly positive all of last evening and into my morning wake-up. They turned negative a few hours before the market opened and bounced around pre-market. The market opened up a bit, then dropped a few hundred points, then bounced around throughout the day, and rallied into the close to end up +177 points on the day. Not a huge day one way or the other, but some intra-day volatility (as usual). 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 is Wednesday, July 8th, and here is my daily missive on all things COVID and markets. The Dow ended up up almost 200 points. I think we're up 177 today. I have a chart of the intraday movements at COVIDandmarkets.com.

But the futures were modestly positive last night and then were negative a bit this morning, bounced around a little. And then you had a decent amount of intraday volatility today. We were down a few hundred points and rallied. And so, you know, all things being equal, it's kind of a normal day these days. Let's see, made back about half of what it was down yesterday. So still a pretty sizable move up on the week after that huge move higher on Monday. But let's just jump into the health data

because I have quite a bit of it today. And this is definitely a day that you can't be content to be a podcast listener. You're going to have to go to covomarkets.com because of the sheer volume and magnitude of some of the charts and links and things we've provided for you there. It's very clear to me that the issue of schools reopening is becoming the newest political fight on the COVID front. And so, you know, with that new conversation topic out there, it's really become the new COVID topic as well, even divorced from the politics. I have really no interest at all in engaging it as a political issue. And frankly, I think that's just going to complicate it on what really should be a very

simple issue from a medical and scientific standpoint. I'm watching it very closely because I do believe there's a high correlation between schools reopening and the trickle-down effect to mom and dad returning to work and other societal functions normalizing in concert with the overall, you know, into like a virtuous cycle. In other words, these things all feeding together what could either become a virtuous cycle or a vicious cycle from an economic reopening standpoint. So the school's opening is a significant issue. And what I've done at COVID Markets today is provide you the Brookings Institute work, evaluating Denmark and Finland's experience in reopening schools. A letter from 1,500 doctors of the Royal College of Pediatrics and Child Health in the United Kingdom pleading with UK authorities for schools to reopen. Provided a study from the National Institute for Public Health in the Netherlands, the

global case they're making for schools reopening. the Netherlands, the global case they're making for schools reopening. The American Academy of Pediatrics is a leading voice intensifying support for schools reopening and providing research to that effect. And then finally, some work that Brussels had published back in May when Belgium litigated the subject themselves. And then I've provided it before, but there's a republication of the position paper from the Hospital for Sick Children, which is a research arm out of University of Toronto, arguing for safe reopenings as vital to the holistic health of children as well. So I think there's something like six or seven really interesting tools at covidandmarkets.com today related to the issues of schools reopening.

Everyone lived up to expectations. There was absolutely no mention from the various media outlets and thought meters and whatnot at some of the increases that were reported in deaths yesterday, particularly Arizona, where it added 88% to the actual number, their backlog of reporting. And now here today, they reverted to the mean of their seven-day average. And I put a chart at Covina Markets showing you the date of death reporting, the seven-day average, and then the date of reporting.

because there's a delta, you know, between when the deaths are happening and when they're getting reported because of this very funky thing of lags in some of the reporting that distort the numbers. But basically, you continue to see on a seven-day average, date of death, extremely low mortalities in Arizona, thank God. Case growth itself is slowing as well. Extremely low mortalities in Arizona, thank God. Case growth itself is slowing as well. Now, you know, I don't know how high numbers are going to end up getting. It seems to all of a sudden be making kind of lower and lower numbers, but it's still pretty elevated. The case growth is still up there, but the difference is the testing has just absolutely exploded.

difference is the testing is just absolutely exploded. But the, you know, when you talk about the deaths rising, you got to look to the log scale when you see a graph or a chart, and it looks as if there's some verticality in the number moving. Sometimes it's moving by like from 35 to 40. Okay, so it's a very low number, especially in a state with tens of millions of people. And all of a sudden it's gone up by five people, but on a chart that move higher can kind of look more dramatic. And I find it very silly that an investment professional like myself is having to share this data with you, but I continue to see this sort of disingenuity in so many reputable media accounts of what's happening that I feel it necessary to set the record straight. Certainly this rebound in testing is continuing and the case growth,

I think, will continue for a bit. But, you know, we're watching the hospitalization and mortality numbers very carefully. And in the meantime, the new case curves are starting to bend as well. And we put some charts to that effect at today's COVID markets. Cases, by the way, were up 31% yesterday versus the Tuesday of last week. And so that sounds pretty bad, but testing was up 33% yesterday versus Tuesday of last week. So those are the kinds of numbers that I really think are very important to understand if one wants to gain an apples to apples understanding of what's going on and any outlet,

any source you're reading that is reporting case growth without telling you whatever the testing numbers around it are, look, it's entirely possible, as is the case with a couple states, that testing has gone up, but case growth has gone up even higher. I'm not suggesting that every time testing increases are reported, that it means the case growth number is diminished. It just simply means the two numbers, if you don't have both numbers, you don't have a number because it's the rate, the proportion of the number to the other that matters, that gives it efficacy. So that's the approach we're taking. Have a new chart of the significant trend down over the last two or three weeks of new cases in Sweden. And the significant trend down of new deaths in Sweden that has now been going on for almost two months.

And if you don't feel like you've been getting a ton of reporting around it, join the club. One of the most interesting charts that I came across, and this is straight from the CDC, by the way, their vital statistics charts. I think, first of all, it gives an incredible sense of gratitude for the absolute horror that we have not suffered with COVID as it pertains to infant mortality and babies, children, toddlers, all the way up to people that are into their 40s, where what we have here is the 1918 Spanish flu deaths by by age group and then next to that the

kovat deaths by age group and what you see is essentially invisibility of kovat deaths all the way at each bracket of age all the way up to the high 40s and still pretty darn low throughout the 50s and into the 60s. And where we start getting closer is the ratio with people in their mid 70s, late 70s, and then of course, 85 and over. But the massive amount of deaths that were taking place in the Spanish flu over 100 years ago of babies is just horrifying to even look at. that it's done not only from a health and mortality standpoint, the tragedies of those who have lost loved ones, and obviously the economic damage and social and cultural damage

done throughout our society. But being able to avoid that kind of death carnage to our little ones is something that I guess I just don't want to take for granted. As it pertains to the fact states of Florida, Arizona, California, Texas, really I mentioned before Arizona mortality. I also put up a chart of the Maricopa County cases by age. It's ground zero for them. It's ground zero for them. And I really, really think it's important to understand the reason that we're not seeing worse medical outcomes in Arizona is where you see the very, very, very slight tick up of people over age 65 and the parabolic just straight line up pickup starting at around middle of June of people between the ages of 20 and 40. Obviously a healthier and more resilient

demographic, but you're seeing is believing. It's really amazing. And then maybe the most data-filled chart, but the most important chart to really buy in to my belief that there is a concerning growth of cases, particularly in some of these states, Florida, Arizona, Texas, California, and yet the comparisons to New York, New Jersey from the peak of the COVID moment in March, April, when we look at cases and we look at positivity ratio and we look at medical resource depletion, and most importantly, when we look at lost human life, that these comparisons are unforgivable, just unforgivable. So we have a chart that will show you the new cases, the percentage positive, the hospitalizations, all these different percentages on apples-to-apples basis so you can gauge for yourself. Mark, so I'm going to close the book there on the health data. A lot of links, a lot of charts.

I hope you find it interesting and helpful. In terms of market technicals, the internal strength of the market has certainly broken down in recent weeks. Markets have still been moving higher, but instead of having like 98% of our companies in S&P 500 be above their 50-day moving average. We're now down to 65%.

So the ongoing strength is being applied to a slightly less amount of companies than it was at the peak. Now that's inevitable. By definition, you can't continue to have every company making new highs. So the breadth has decreased, not in a catastrophic way, but just in line with the consolidation you would sort of expect. What's interesting though, from an internal momentum standpoint, is we're about 99% of companies in the emerging markets that are above their 50-day moving average. And it does appear that we have a consolidation going on in the emerging markets space. I'm going to write about this more at Dividend Cafe on Friday this week regarding some of the tactical situations in the emerging markets world. I still am a little intrigued as to why the VIX, now it dropped about four and a

half percent today, but the VIX isn't, you know, 28, 29, that's not low. So the fear index is still up there. And that I think is at tension with this idea that stocks are supposedly in some form of euphoria or excessive confidence. The truth is somewhere in between. Okay, public policy front. I did talk to two sources today, very entrenched. I don't mind saying one is in Congress and one is in the White House, that they do believe a second round of PPP is likely to come that will allow for companies to tap that well a second time,

but that this revised PPP facility that will end up probably being part of stimulus 4.0, not standalone legislation is going to have more strings on it. That there's optics right now that everyone is, is not liking regarding the companies that took PPP funds. And so they want to get some of that rectified. What else? Oil and energy.

Just see covormarkets.com. A little update on where inventories came in. Oil sitting right, it moved up from 40-ish to $41 a barrel. I don't know. It's pretty surreal for me to be seeing oil at 41 right now. And, uh, I'm going to leave it there. Cause if I get into the fed stuff, I'll go on forever. Um, so I already made the point though, COVID markets.com today, a lot more than I'm giving you here in the podcast, but I hope you got what you wanted out of this listening experience.

Thank you for listening. Come back to us anytime with questions. And thank you, as always, for both reading and 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. Thank you. Tyrion. The data and information are provided as of the date referenced. Such data and information are subject to change without notice. This document was created for informational purposes only. The opinions expressed are solely those of the Bonson Group and do not represent those of Hightower Advisors LLC or any of its affiliates. Hightower Advisors do not provide tax or legal advice. This material was not intended or written to be used or presented to any entity as tax

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