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What you need to know in ~5 minutes - Dec 14, 2020
Things aren’t looking too good for the economy and while Mr. Market is trying really hard to stay optimistic, a bit of anxiety is starting to set in. On the bright side, we’ve got vaccines and it’s time to start hitting COVID back.
Can I get 2-day shipping on that vaccine?
Time’s up, let’s see the stimulus package!
Okay doc, just tell me straight, how’s the economy doing?
What's going on?
It’s felt like 5 years, and Dr. Fauci said we’ve got to go, they need the vaccine!
US: The FDA approved emergency use for the Pfizer/BioNTech vaccine and HHS announced plans for immediate deployment. The first shipments of 2.9 million vaccines will arrive at distribution centers on Monday and prioritizing inoculation of healthcare workers and residents at long-term-care facilities. On Thursday, the FDA is expected to vote on approving the Moderna vaccine for emergency use which could add 100mm doses through Q1 2021 if approved.
EU: The European Medicines Agency (EMA) has declined to issue emergency approvals and will decide on the Pfizer vaccine by Dec. 29 and Moderna’s by Jan. 12.
China: An emergency program was established to inoculate 1mm people by domestic pharmaceutical companies.
But what does it mean?
After a year that has felt like an infinity (war), we’re in the Endgame now. All focus is on effective purchase and distribution of the vaccines to get us back to normalcy (and hopefully the roaring 20s). It's going to be a LONG endgame as a vaccine roll-out is a massive undertaking for any nation (in India, even the bull semen distribution industry has offered to help in deployment). Keep in mind that economic recovery will lag vaccine deployment as we await job openings to increase and consumers to start spending again.
Mass distribution may take several months and faces a number of obstacles such as needle, freezer, and dry ice shortages in addition to meeting production needs. Furthermore, a recent poll revealed that Rising skepticism may further delay the fight to eradicate COVID as only 61% of Americans would be open to vaccination. In any case, the general public may not receive a vaccine until well into 2021.
When the game’s on the line, winners want the ball. Congress wants a timeout, and we’ll leave it at that.
Jobless claims jumped to 3-month highs signaling the economic recovery has stalled out as COVID cases surge, lockdowns return, oh and winter is here...
But what does it mean?
The shot clock is ticking and Congress has the American people holding their breath hoping for a buzzer beater! On Dec. 26th, 13+ million Americans will lose unemployment benefits without a new stimulus plan. COVID cases are surging, the labor market has lost momentum, and States are issuing containment measures including lockdowns which will result in more layoffs. If the gloomy economic data isn’t enough for Congress to come together as a team, then maybe we ought to have Pelosi and McConnell talk it out on hot wings? If nothing else it would be entertaining, just saying...
Up next on, the economy:
Monday: European industrial production figures
Tuesday: US industrial production figures, Chinese retail sales and industrial production, UK unemployment
Thursday: Bank of England meeting and interest rate decision, Eurozone CPI and US jobless claims
Friday: Eurozone business climate and current assessment
TLDR, look at these:
Retail sales (Wednesday) and jobless claims (Thursday). The jobless claims report will provide further info on the distressed labor market, while the retail sales report will act as a bellwether for how spending behavior has changed. Analysts expect the first dip in retail sales since April as the 2nd wave of lockdown restrictions take their toll.
Fed Meeting: No news is good news here. No policy changes are expected and commentary on a federal stimulus may help pressure Congress to act. Expect the Fed to release a dovish message, advocating for continued low-interest rates and expansionary monetary policy to prioritize short-term job creation and economic growth over longer-term inflationary risks.
Should the UK and EU fail to reach a Brexit agreement by Thursday, the Bank of England (BoE) meeting will focus on the increasing risks of a no deal exit to the economy, potentially comment on increasing stimulus and continuation of low interest rates.
What’s an investor to do?
Yo soy la fiesta? Mr. Market has been partying all month but even he is starting to wonder how much longer he can keep living like this. Every party must eventually end - COVID cases are surging, economic fundamentals don’t look too good, Congress is stalling and Mr. Market’s starting to get anxious.
Contrary to economic data, the S&P had its best November ever. Rising consumer sentiment and long-term economic directionality appear to be driving the market for now, which makes many investors uneasy (some fundamentals would be nice). Investors should be cautious about opening new positions, particularly in pharma and tech due to unprecedented high valuations. Opportunities may arise this week from media headlines surrounding a stimulus, Moderna’s vaccine, retail sales and better-than-expected economic data.
For the curious investor:
The Airbnb, C3.ai and DoorDash IPO’s last week shed light on a “broken” public offering dynamic. While shareholders enjoy huge spikes in early IPO trading, the spike represents a loss for the issuing company as they realize they could have raised more funds if they had priced their equity better. Roblox decided to postpone its IPO, as management allegedly got “scared” it may leave money on the table after seeing the three tech IPOs almost double in their first days of trading.
Aligned with Biden pledging to support the Paris Accord, EU leaders have set a more ambitious target for reducing greenhouse gas emissions by 55% by 2030 and stricter regulations on batteries. There is a long-term opportunity to capitalize on the electric vehicles trend as developed nations aim for carbon neutrality. While companies like TSLA have already spiked, exposure in lithium can be obtained through:
There’s a new commodity trading in the Chicago Mercantile Exchange, water! Although water has been traded for long at spot prices (traded for immediate delivery), it is now possible to trade water futures (traded on delivery of a future date). Futures contracts may help reduce long term volatility during shortages which have become increasingly more common. Consider looking into long-term, diversified exposure in the highly relevant commodity (PHO, DHR, and AWK).
If you’re holding onto any FB shares, keep an eye on the recent antitrust case filed by over 40 states and the Federal Government. The lawsuit aims to break Facebook, Instagram, and WhatsApp into 3 separate companies. Expect volatility as the case develops. It may have a significant impact on FB’s structure, revenues, and future cash flows.
If you didn’t know, now you know
In a Soviet themed election, Venezuelan “President,” Nicolas Maduro, has taken over 91% of the nation’s legislative seats in a corrupt election condemned by over 50 countries including the US. In a democracy turned dictatorship, Maduro took over the Supreme Court and granted his regime the power to control the candidates on the opposition’s ballots. Naturally, he placed his own supporters like his wife and son on the ballots. The opposition boycotted the election, and the people said “why bother?” and didn’t show up (31% voter turnout).
Venezuela is now facing the worst economic and political crisis in modern times. An estimated 8.3 Million have fled the country in what is about to be the world’s largest refugee crisis. The people are suffering from corruption, nationwide blackouts, 44% unemployment, astronomical hyperinflation, food shortages, disease, and government death squads among other humanitarian atrocities. Despite UN efforts, it is still the most underfunded refugee crisis.
We’ve donated $200 to Nutriendo El Futuro (NEF), an NGO run by WTM’s own community member, Samuel Diaz, that provides medical and educational support to those affected. Currently, NEF is working to establish a community kitchen serving malnourished children as a result of the crisis.
Get involved! As little as 10 USD feeds a child for 1 month! Send us your confirmation and we’ll give you a shoutout in next week’s edition!
This summary only covers the surface of the conflict. To read more, click here.
What we’re vibing:
The Queen’s Gambit - Netflix miniseries. Orphan and child chess prodigy, Beth Harmon, pursues the world championship from the Soviets and captures our hearts in the process (Max cried...twice…)
Don’t keep all this goodness to yourself. Share WTM with one friend who needs to read this today! 😁
- Max & Thomas
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This writing is for informational purposes only and the author/s undertake/s no obligation to update this article even if the opinions expressed change. It does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction. It also does not offer to provide advisory or other services in any jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. The author/s expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.