Market Briefing For Wednesday, Nov.11

Tough sledding - primarily for money managers dealing with a shifting focus, because so many had become acclimated to 'group think' concentration solely in the biggest-cap tech and similar (FANG) stocks, or ETF's. Now as we have a bifurcated economy, with the market shifting emphasis, individual stocks are continuing to warrant separate assessment, rather than be tossed into what I, on-occasion, call the easy way of managing portfolios by solely using groups.

A good example at the moment might be the XLC (Communications ETF) that I lamented State Street (for greed?) loading XLC with Google (GOOGL) and Facebook (FB), when at the time AT&T (T), Verizon (VZ) and CenturyLink (CTL) were doing fine, without that extra volatility being injected, which is exactly what happened.

This is a tricky time, both fundamentally, technically politically for sure, and for that matter medically. So the answer to being bullish or bearish on the market does not invite a simple answer. Which market? Growth, value, super-cap or a balance including suppressed small-caps that are likely to advance early in 2021, if they even wait that long. Plus lots depends on the Election standing, because of the chaotic implications if it did not, or for that matter if gridlock (a benefit for Biden as described in detail last night) were not to be sustained.

(Even AG Barr cautions against fanciful outcomes, while investigating.)

Executive Summary:

• A very convoluted market and it should be, given it's hard to conclude the prospects politically (which could be destabilizing on a National scale if it's really a contest intended to throw the Nation off-balance even more).

• Medically the 'breaking point' is being rapidly approached in many towns in the United States, and that itself is traumatic to everyone, the criticism of doctors and hospitals by the President was inexcusable and could (like so much) have been eased by an apology or saying 'I misspoke', but no.

• The collision of flu and COVID, both respiratory infections, is something we warned of (listening to the experts) months ago, and we are not peaking.

• Shame on those trying to focus on politics over health, or denying what is obvious in everyday life in towns all over the Nation, for weeks now.

• California is cracking-down and returning to tougher restrictions, while in Nebraska or parts of Texas, it's becoming a desperate situation rapidly, and Newark New Jersey just imposed a lock-down from now to Dec. 1.

• That was my point about COVID's clearly 'exponential not sequential' rise, which (for now) makes yesterday's celebration more than a 'relief rally' of course (because there is vaccine progress), but premature euphoria.

• Stock markets may recoil in some sectors, because even a few months of dangerously high cases will not just reverse some stocks that soared with a hope the pandemic was nearly over (delusional but only just for now), it should be noted that creamed a lot of stocks working on COVID solutions.

• Those 'other' stocks still are in-play or will be in some cases, while overly priced tech-based stay-home stocks we warned about for some time, will rebound, the handwriting is on the wall about a post-COVID world.

• This was our expectation of shuffles a post-COVID market promises, even if we're only had a glimpse, since that's months off at-best, 'in reality'.

• Concurrently we do expect Pfizer's (PFE) vaccine to get the EUA in days or a couple weeks, and become available to the medical community and of course first responders, then the elderly, perhaps even ..by Christmas.

• This also reinforces my view that we ultimately get into a coordinated or even global economic resurgence, the genesis of which has begun.

• There are many welcomed aspects, including if that means recognition (no matter who is leading things) of cooperative but American-biased trade relationships, which can open a lot of profitable opportunities.

• Meanwhile the near-term 'known unknowns' have to be sorted-out and unfortunately there is insufficient focus on getting stimulus to bridge the gap for many people and insufficient leadership focused on assisting our communities across the Nation in fighting COVID, due to political focus.

• Nothing matters more than the health and well-being of the Country and that directly ties into the stock market in this changing environment.

In-sum: after nearly everyone concluded there was 'visibility' for a post-COVID world (and there is, although the tunnel's end needs a telescope to see it for now), you have a market that shifted somewhat appropriately but with many assumptions that are premature.

That includes this: although Pfizer's 90% efficacy claim was sooner and more potent than they were prepared for, they didn't recognize the possibly superior role of antibody therapeutics in all this. I point out (media hasn't) that both the Pfizer and Moderna (MRNA) formulas changed when they discovered better T-Cell responses in some instances. That's something Heat Biologics has worked on but it has been completely ignored in this swirling COVI-world, and no clear explanation of why their Chief Science guy isn't staying. It washed-out and rallied a bit, like others (including Sorrento SRNE) today.

Meanwhile ICU beds in Paris (for-instance) are 99% full, reflecting the reality, in this time of absurd politics surrounding COVID (largely ending not because of the delusional denial that prevailed, but the new sobriety as those regions for the most-part leading the denials, are now dealing with the very highest COVID case levels, and suddenly that overrides their wishful thinking rationalizations.

I recall back in January and February when we first warned of WuFlu escape risks, and suggested buying PPE (masks and hand sanitizer etc.) quickly, the majority of our readers appreciated (or already knew about the concern), as a handful thought it was fear-mongering. And that helped our existing warnings about the market being toppy, and later led to nailing the March lows. But the interesting aspect is that the deniers of the entire threat generally persisted. (WuFlu was our moniker for Wuhan Flu before 'COVID' was named.)

(LightPath continues acting well, so sharing this chart of where things stand.)

Last night we discussed the 2021 transition year for vaccine distribution, and I was asked how one could presume a 90% protection rate for Pfizer's vaccine if 90% of the population never catches COVID anyway. Well essentially I must presume Pfizer means that 90% of 'trial participants' became immune at least 'in-theory' because they developed sufficient antibodies to avoid symptoms of COVID. However that reminds me vaccines assist the body's own defenses in mounting an immune response, but don't exactly always kill infection (hence sometimes milder cases of flu even after getting a flu shot, but not in all cases a complete avoidance of any symptoms).

That relates as well to my preference (or at least a belief that funding and the focus should increase) for 'antibody therapeutics', with Regeneron being first (after all that's how the President recovered so rapidly, though after-effects, it could be contended, might be present), and now Lilly approved, with Merck and Sorrento pending. Of all of these Sorrento's the one with the lowest dose and highest concentration (meaning less product needed to get desired result with less toxicity presumed as well), but it's in various stages of trial now, and there is no explanation why there's been no data forthcoming from Brazil or Temple University in Philadelphia, where Phase 1 trials are stated occurring.

Sorrento filed a Treatment IND with the FDA yesterday for the 2nd version. I doubt they would do that (STI-2020) unless the first generation shows efficacy since their submission seems largely based data from the first (STI-1499). In fact even though they are 'silent', perhaps this reveals that it must be going a bit well, or what is the point of a concentrated version with full-blown trials.

It's also interesting as the Lilly (LLY) MAB (same category) is not very effective, thus it's been given EUA for early disease, whereas Sorrento believes theirs works for both early and more advanced disease. And even as a preventative. That would take them to the third version, which they intend to be a 'pill'. So with all the criticism (from me too) about the management, I hope they really have it.

A sense of urgency prevails, and we wish Washington would stop the insanity with politics at least long enough to reference the increased suffering so much of the United States is experiencing dealing with COVID. Yes I realize (said so yesterday) that if Pfizer's announcement came two weeks earlier the outcome of the Election might have been different, but as the President likes to say, he can ask Pfizer why they didn't come forth sooner, but 'it is what it is'. Let's not let the American people down regardless of the merit of any legal battles.