2021 and Our Obsession with Vaccines
I recently shared these thoughts with clients. The focus is on markets and your investments. Maybe you'll find it helpful.
2020’s finally done. Looking back, markets did tell a story – but it’s not one that’s based on logic, values, or really any other rational metrics traditionally used to judge asset prices. A quick example: The S&P was up over 16% for the year. While not a reflection of current economic strength, some pundits claim it predicts future strong economic growth. Well, if that means stronger than the economic disaster that was 2020, maybe. But perhaps a research tidbit from Goldman Sachs tells a more revealing story. Published by Reuters, Goldman Sachs Investment Research presented a chart claiming that “the entire rally from March’s lows has happened outside of market hours.” Simply interpreted, the increase of 60% + in the S&P since the March collapse was engineered by the buying of futures in the overnight markets, when trading volume is light and easily manipulated. Such stealthy albeit forceful manipulation hardly provides a reliable indication of future economic activity!
The story for 2020 appears to be one of irrational exuberance and manipulation – a toxic combination.
Now it’s 2021. The whimsical New Year’s e-card we recently sent out shows 2020’s “upside-down world flipping to a “right-side up” 2021. Let’s hope. But hope is decidedly not a good investment strategy. So, we’re not counting on a “flip” in the economy. And without a pretty quick and dramatic flip, it’s hard to justify the elevated prices of our current stock market. Indeed, Jeremy Grantham, founding partner of institutional money manager GMO, one of the preeminent investment managers of the late 20th/early 21st century, succinctly summarizes where we are now: “The long, long bull market since 2009 has finally matured into a fully-fledged epic bubble. Featuring extreme overvaluation, explosive price increases, frenzied issuance, and hysterically speculative investor behavior, I believe this event will be recorded as one of the great bubbles of financial history, right along with the South Sea Bubble, 1929, and 2000.” Sheesh!
Familiarity with Grantham and those prior historical events makes it’s hard to imagine a more alarming assessment of the imminent future of the stock market. With this in mind we tip-toe into the New Year. On the other hand, just as we were about to send out our Quarterly Report, it now seems the Biden team will ascend to both the White House and Capitol Hill. With their promises of even more massive “stimulus” beyond the record-bashing Fed money printing we’ve seen since Fall 2019, it could very well push the day of reckoning off another, maybe, 12-18 months. So, tiptoe as we might, we need to also be prepared now for not only the further blowing up of this already gargantuan bubble, but, eventually, an even more damaging reversal. As you read our more specific portfolio comments below, know that we’ll carefully consider weigh this new wrinkle as events unfold.
One more thought for 2021, and its not focusing exclusively on markets.
Why are we so obsessed with "the vaccine"?
It seems everyone out there, including some smart folks we read, are counting on "the vaccine" to "save" us. It could be that they're right: that the various vaccines will be distributed to everyone (or close to it) and that this will be the one way to stop COVID and re-fire the economy and return our lives to whatever "normal" will be in a post-COVID world. I guess.
But what if it doesn't? What if these vaccines aren't as effective as advertised (by the companies, by the way). What if side-effects proliferate more than the few anecdotal stories we read about? Are we all going to run and hide again? Is the world going to slide into terminal or permanent Depression?...etc., etc.
What about prophylaxis and treatment? Why haven't these received both the dollars and the attention, vs. vaccines? One obvious answer is money. Follow it and you can see that big pharma is making boatloads of it producing vaccines. The opposite holds for prophylaxis and treatment, especially those drugs that have been around for ages, are off-patent, and cost very little. I'll skip what they are here. It doesn't take much digging to find a couple or a few. The reason I'm skipping specifics is I'm not a doctor, a researcher, nor do I have any formal training in this area. So I don't want to pass on specifics that might not be correct or beneficial. But they're out there.
With that said, our family has been using prophylactic items since the outbreak. And we've recently picked up a few more items that could be helpful to treat one or more of us if any of us get COVID - which none of us has gotten so far. I have some level of confidence that we're doing something to help ourselves. And we're not obsessing on vaccines.
Besides, even if the vaccine approach proves to be exactly as advertised, and this all ends some time in 2021, what happens the next time one of these viruses blows out or proportion? Will we repeat the whole debacle again as we await the next "savior" vaccine?
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