Market Briefing For Wednesday, Aug. 4

'Subject to mandate' seems to be a catch-phrase these days, mandates to fly, to eat, to drink in a pub, to go to a show, and even to govern New York (of course that last one was an effort at humor, amidst a controversial backdrop).

I considered not mentioning it, but my fence-sitting regarding vaccine ended. I got the Pfizer (PFE) shot yesterday, had a mild fever and it continues today (100.4 if I read it right minutes ago), so I mention it because I actually will be fairly brief with tonight's Briefing (if that's even possible for me).

As to what motivated me? And might matter to many of you that also had any degree of COVID. Several things including 'long COVID', horror stories including a Physician's Assistant telling me that aside 'natural immunity' from COVID, the vaccine can give another layer of protection, also 'some people' see lessened effects in the long-run. Then I learned there is not much research but there is a thing called 'Oral COVID', which relates to weaker gums and teeth issues.

In fact (it's depressing) the more I read the more I learn almost all practices in medicine are encountering long-COVID-related effects. Typically doctors send patients to neurologists and so on, and guess what shows up on an MRI? Most often nothing. Pain or tingling (in my experience) gradually wane. I also realize how far this has to go for broader understanding, as dentists and even dermatologists and certainly primary physicians, largely look for symptoms of what's known, not what's unknown.

Or put another way: doctors are trained to see common things commonly. So that means they see rare things rarely. Basic diagnosis needs slight revision.

So it's an infernal situation I'm trying my best to sidestep future effects of, and so far mostly so good (dentist in the morning). The market also searches for a mandate to decide which stocks will do well. Some like UPS that got hit from lower shipping (UPS)after the heart of the pandemic ebbed (and needs to not return like the lock-down we had, just can't do that), or Clorox (CLX) because nobody's still guying lots of wipes, and restaurants are dicey, sort of like 'tossed salad', the shares bounce around depending on prospects.

If state governments bring back more restrictions, the pseudo-lock-downs will return, but most states won't go that far (well a couple will). Most will rely on a more-informed business and consumer world to have responsible discretion (I know, one can hope, right?). There will be no big lock-up, we won't have it but that doesn't mean we don't have a slowdown unless or until .. 'peak COVID'.

Executive Summary:

  • The time-frame of August-September is historically the riskiest season for declines, more so September than August, but circumstances vary.
  • Circumstances now are dependent on COVID / Delta more than 'yields' or earnings, all of which have minor intervening influences.
  • Some hibernating perma-bears are emerging again, because they know odds favor some sort of decline, hence excessive prophecies of doom.
  • We are likely to get a shakeout, especially in big-caps, with restrictions a few places (like New York and Los Angeles) have imposed on economic life, making a difference, even if many states or DC doesn't mandate that.
  • Enough is being mandated, for-instance I got my first vaccine shot (with a bit of reaction likely because I had COVID and my system remembers it).
  • At the same time two studies I read suggest if you had COVID all you need is a single shot with the 2nd giving no additional immunity (well, an official 'card' from CDC won't show a 2nd shot or explain natural immunity's role), hence that's sort of a 'blackmail' mandate to get an unneeded shot.
  • There is Government overreach, which may be understood in a crisis, but the nuances are frequently missed, such as I just noted, bureaucrats.
  • So opposition to mandating too much without respecting limitations or at least a nuanced understanding of millions of survivors, is understandable.
  • Maybe if amateur stuff in the way they handle things were refined a bit, it might be easier to move forward, they could start by correcting vaccine as a 'shot', because it won't last a lifetime or even years, although memory of the disease will be long-lasting (really, in cells) for those who had it.
  • Incidentally, pro or con mandates etc., is less relevant than what happens if this doesn't work, or what happens if it does succeed, you have Florida reaffirming no mandates and that gets into politics, if it doesn't work there is a greater risk to the Country and the market, if COVID were to win (or did it already in a sense, but humanity will persevere and get through this).
  • Amidst all this, you likely get peak COVID, how/when it unwinds is variable.
  • I 'forgot' to mention London's Imperial College and the University of Chicago were among those working on a report most don't want to hear, it's that people who recovered from COVID may have a 'substantial' drop in intelligence.
  • As usual that's not the whole story, any who did not lose taste or smell (I did not by the way), it would appear the virus didn't get to the brain, and this won't apply, otherwise if it did, on-average they say 4 points IQ loss is likely, I noted this before as Dr. Gottlieb mentioned lost gray matter.
  • Finally Sorrento (SRNE) announced a MOU (memorandum of understanding) with the National Government of Mexico's health agency INMAGEN, for Clinical Development of COVID-19 Diagnostics, Therapeutics and (note) Multivalent mRNA-Based Vaccines Against SARS-Cov-2 (COVID 19),
  • This is the first time I've seen reference to Sorrento relating to mRNA vaccines, which delves into the territory of what Pfizer & Moderna (MRNA) have done, if so it's conceivable they're working with a pharma in that field.
  • Of course mRNA vaccines are at the heart of certain cancer efforts, so although I wasn't aware, it's possible they already had work in the area.
  • Speaking of mandates, the Infrastructure Bill 'mandates' new cars will have 'drunk-driving' detectors, similar to what police already use, and it's a newer version of the 'pullover coffee cup warning' Mercedes etc. use.
  • Elsewhere, there was another attack (perhaps digital hijacking - a first) in the Persian Gulf, six large ships lost control at the same time, manually got it back, this 'should' be a major story, as how does that happen (likely all were on GPS based autopilots and got hacked... Iran?).

(We're closer to 80% herd immunity, statisticians for some reason - perhaps a part of mandating vaccines or pressure to get it - tend to exclude percentages of likely never-diagnosed or tracked individuals, and 'all' that survived COVID. It's a combination of these that has a few pondering 'peak COVID' sooner. Plus once low-dose MaB's - pills, nose drops etc.- arrive few will prefer vaccines.)

In-sum:

Chartists are besides themselves decrying S&P megaphone patterns and 7 steps (sounds like an AA meeting or something) and stumble outlooks of course for the Dow Industrials, or emphasizing that the NDX (QQQ) has the same risk. They even make comparisons with 1929. I see more than that.

Well, they fail to note the benign behavior of the broad market exclusive of the handful of leadership momentum stocks, and the ETF concentration impact, a factor that did not exist in 1929. There were 'pools' (eventually mutual funds of course) and yes there was 'concentration' heavily in a few stocks. I've outlined the comparison before, with one big difference: 'after' the 'Roaring 20's' not so much while they are in the early stages, with this 'hurricane eye's respite' that preceded the other side of the (COVID or cytokine) storm hitting.

These super-bears are marketing fear and risk. I have tried to evaluate stocks overall in a balanced way, and discouraged shorting or mass liquidation, since it made no sense to 'fight the Fed' or 'fight the trend' from our March 2020 low.

But of course that's well over a year ago, and this isn't bargain-day for S&P or NDX, and I too am looking for some sort of selloff probably this month. Given a lot of company (they have often been naysayers all the way up, not us) we'll continue being circumspect and not try to 'tell' the market what to do. I'd rather listen to the messages of the market, which say it's very neutral despite what, at a superficial glance, is a dramatically extended S&P, NDX, and mostly DJI.

Disclosure: This is an excerpt from Gene Inger's Daily Briefing, which is distributed nightly and typically includes one or two videos as well as charts and analyses. You can subscribe ...

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