Herd Immunity

Monday was a dark day on Wall Street. That may be a bit hyperbolic, but I suppose what I would note is that for an hour or so, things looked to be on the brink of unravelling in earnest, when the Dow was down more than 800 points.

A perfect storm of factors conspired to weigh heavily on sentiment with just a week to go until the most consequential election in modern US history.

Stocks trimmed their worst losses but still fell the most in weeks amid second wave virus concerns, geopolitical tensions, a burgeoning currency crisis in Turkey, and generalized angst around stalled stimulus talks. It was, in short, an inauspicious start to a data-heavy week. It looks as though the 50-day moving average will once again be called upon to do its patriotic duty.

“The increased case counts in Europe and the US suggest the second wave of the pandemic is well underway and the ramification for the real economy remain unknown — to put it diplomatically,” BMO’s Ian Lyngen, Ben Jeffery, and Jon Hill said, in a characteristically incisive and entertaining afternoon piece. “To suggest this is an unknowable unknown would be to emphasize the obvious and any attempt on our part to skew the odds in either direction would be more akin to snowballing down the slopes versus being out over our skis,” they added.

God bless them for their humility — being out over my analytical skis has never stopped me from prognosticating, that’s for sure.

Anyway, Treasurys rallied the most in roughly two weeks, bull flattening the curve and serving notice that crowded short bets and expensive hedges against higher yields may be, at the least, an example of the market becoming too confident in a narrative that assumes i) a return to pre-pandemic normalcy across developed economies, and ii) big, imminent fiscal stimulus in the US.

Naturally, the dollar rose as the risk-off mood proliferated, exacerbating the situation. Gold was not “your hedge” on Monday. Shiny yellow doorstops were essentially unchanged on the day, despite steep losses for risk assets.

The surge in US virus cases (which recently topped 83,000 in a single 24-hour period) is hitting counties with outsized 65-and-over populations. That’s bad news considering the elderly are the most at-risk demographic cohort.

As Bloomberg notes, citing the CDC data used to construct the simple chart above, “counties with the largest 65-and-over populations are now recording on average 18.9 daily cases per 100,000 residents, 67% higher than a month ago.”

Steve Mnuchin and Nancy Pelosi failed to reach a compromise (again) on Monday, underscoring the protracted stalemate inside the Beltway. Apparently, testing and tracing language is still an issue. “We continue to eagerly await the Administration’s acceptance of our health language,” Pelosi’s spokesman said, in a tweet.

“Today, we are waiting for an important response on several concerns, including on action to crush the virus,” Pelosi told colleagues, in a letter. “Ten days after Secretary Mnuchin went on CNBC to declare that he was accepting our testing plan, the Administration still refuses to do so.”

There’s not much to add here, so I’ll give the last word to (you guessed it) Stephanie Kelton…


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5 thoughts on “Herd Immunity

  1. The Bill can not have the sort of language that attempts to mitigate Covid as that is not aligned with Republican platform. Unless Democrats want to raise the white flag on Covid also, no bill.

    1. Let’s hope the coin flip on taking the Senate falls in favor of the Democrats. It’ll define the Biden presidency in an unfortunate way if the Senate remains in Republican control.

      Regardless, at this point, best case scenario for getting stimulus into the economy is mid-February. That’s a long enough way into the future for yields to start to have second thoughts, to turn around and start heading to zero.

  2. That passage from Kelton is amazing. She is really good. Wow. I was thinking of it in terms of “austerity,” like the kind that occurred during the Great Depression prior to Roosevelt and in Europe off and on for the last 20 years. Her wicked smart look at this as economic herd immunity is gonna stick.

    My grandfather used to use the word “bstards” to describe people who acted against the best interest of a business relationship or who just scrwed you because they could get away with it. He was Goldwater then Reagan conservative. He’d be hissing and spitting now if he were still alive to see what the b*stards had done.

    1. To be clear, my grandfather spoke with a mild accent of someone who served in WWII and was from NYC. I was just watching a clip of the tight senate race in the US state of South Carolina. I want to make sure no one would confuse my grandfather, and his Goldwater-Reagan leanings, with a white, Confederate Southerner, who some might perceive as a closeted individual.

  3. Bearded Man – Herd immunity quotes from “They Live”

    They are dismantling the sleeping middle class. More and more people are becoming poor. We are their cattle.

    The poor and the underclass are growing. Racial justice and human rights are non-existent.

    We could be pets, we could be food, but all we really are is livestock.

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