Big Blue Huddle

Quote from: MightyGiants on December 03, 2021, 03:34:55 PM
The market is not having a good day

Nope.

I wonder how much if that is driven by the fact that it's Friday, and that everyone now faces weekend risk with an ongoing concerning story surrounded with a lot of uncertainty. If that is the case, and things are not terribly alarming this weekend with omicron (eg some new finding suggesting it is more virulent than regular covid or an utterly massive spike in cases), you would think things could bounce again on Monday. This has been the pattern at least. That happened last weekend and Monday, for those reasons.

On Omicron's infectiousness:


https://twitter.com/farrmacro/status/1466834183939137538

Quote from: MightyGiants on December 03, 2021, 07:15:51 AM
I have to say, we don't know much about Omicron, but it's pretty has been pretty impressive.  In the span of a week it went from being not even a topic of conversation at Thanksgiving, to "it's all over the US"

Very true. And I certainly don't know that much about it either. My only takeaway so far is that it does not appear to make most people any sicker than they're getting with regular covid, and possibly not even that sick. Granted that's largely anecdotal at this point and not based on a huge sample size. So in no way am I trying to make some declarative statement to that effect.

Even if it's a bit more transmissible, how big of a problem is it if it generally doesn't get people that sick?

Quote from: MightyGiants on December 01, 2021, 02:44:34 PM
Well, the first Omicron case has made it to the US (California).  Initial reports seem to indicate it might be contained and isolated.


As for investing, I am a stock investor, not a stock trader.   I have moved off of individual stocks (for the most part) in favor of ETFs.  There is just too much information we don't know about companies to make me comfortable with investing in individual stocks without a compelling reason.

I thought it was strange that stocks were hit so hard yesterday because of the US case. Did anyone actually think this strain wasn't going to turn up in this country?

It is not hugely surprising the market is recovering today, as that seemed like an overreaction.

Quote from: MightyGiants on December 01, 2021, 01:13:05 PM
Thanks for the article.   Odd that the markets bounced back so quickly

Fully agreed, although (more as a general point) market participants have been trained over a long period now to buy dips very quickly. The overarching stock market sentiment is still just so euphoric that the half-life of any bad news item is incredibly (and often nonsensically) short. People are trained to now think a "dip" is 1-2 days and maybe 2-3%. 

One of these days, and I'm not saying this is necessarily right around the corner, this strategy won't work so well anymore.

Quote from: MightyGiants on December 01, 2021, 07:48:06 AM
I thought Powell's comments were pretty much what everyone expected

In the previous Fed meeting he was pretty clear that he wanted to wrap the tapering up by next June. Yesterday he unexpectedly said they might want to get it done even faster, possibly by a couple of months. A potentially faster than expected drain of excess liquidity from the system threw the market for a bit of a loop.

https://www.nytimes.com/2021/11/30/business/stock-markets-omicron.html

Quote from: LennG on November 30, 2021, 04:20:05 PM
So much for that recovery.

Hahaha. Twist the knife, why don't you.

To be fair, today's bloodbath was more about the hawkish comments from the Fed chair than it was about the vaccine news. S+P futures had rallied pretty much back to flat prior to the Powell comments.

Quote from: MightyGiants on November 30, 2021, 09:00:11 AM
Well I see the gas price problem seems to have resolved itself on this crappy news.  If the vaccine news wasn't bad enough, there is also this

Regeneron Pharmaceuticals Inc's (REGN.O) COVID-19 antibody treatment and other similar drugs could be less effective against the new Omicron coronavirus variant, the company said on Tuesday.

https://www.reuters.com/business/healthcare-pharmaceuticals/regeneron-says-covid-19-drug-could-be-less-effective-against-omicron-variant-2021-11-30/?utm_source=reddit.com

As for inflation, I think one of the biggest drivers beyond Covid related shortages is the change in consumer spending habits.  Supply and demand-   people are spending less on dining out and travel.  That extra money (along with any Covid related stimulus) has given many consumers more money in their pockets and is driving demand on hard goods (that can't be ramped up easily). 


As for Covid, I could see the world going back to pre-vaccine situations and it could take up to a half year to get back to where we are now.  I don't think that is a complete certainty though, and we will learn more in the coming weeks.

No question there are some idiosyncratic (and hopefully temporary) factors driving inflation like the ones you mention, but whatever the precise drivers, it is still the case that it is much more difficult for the central bank to ease monetary policy further in that type of environment. As things stand right now, they are actually moving in the opposite direction by beginning to taper QE.

I am not suggesting there is absolutely nothing they can do, but the economic setup is vastly different than it was when this started. It's just one more thing to put on the list of potential concerns for the market. If things start to get bad again, they won't be able to "kitchen sink" it the way they did in 2020.

https://twitter.com/macroguru9/status/1465680963875311620

Quote from: MightyGiants on November 30, 2021, 08:37:13 AM
When you consider a new variant, there are 3 factors to consider

1)  Does it spread easier than other strains

2)  Does it make people sicker than other strains

3)  Does it resist the vaccine


Right now 1 and 2 are mysteries.   On the other hand the comments from the Moderna CEO has not made markets happy this morning



https://www.reuters.com/business/healthcare-pharmaceuticals/moderna-ceo-says-vaccines-likely-less-effective-against-omicron-ft-2021-11-30/?utm_source=reddit.com

I literally just posted as you did.

I agree that we still don't have any sort of firm knowledge at this point. Signs seem to be pointing that it is not more virulent, but no confirmation obviously. I do think when the CEO of moderna expresses a view and is quoting multiple scientists, as he did, that is not a good sign though.

If people are not getting incredibly sick from this then that is a good thing obviously, but if it is more transmissible and the vaccine doesn't really work on it, then you'll have a multiplier effect of many still getting sick and being hospitalized and dying even though the odds for any one single individual aren't that bad.

Maybe the future of this thing is really more in the therapeutics than in the vaxes. If a new variant is constantly popping up and each time the previous vax doesn't work, then hustling to come up with a new vax just doesn't seem like much of a long term strategy.

Not the greatest this AM in the way of news flow, with the Moderna CEO expressing a lack of confidence in the current vaccines working well against omicron.

It sounds like they can very likely come up with a vaccine that does cover it, but it will take a number of months to get that out to the public in significant quantities, plus the concern is that by the time they get that one out to the public there will likely be a new variant that that new vaccine does not work on. And they'll just be in the same position again.

Playing variant whack-a-mole isn't much of a strategy considering it seems to take at least half a year to get one of these new variant-effective vaccines out.

Not to mention I would guess that lots of Americans will be very loath to get these new jabs the more new ones come out.

I will likely reduce my equity holdings further today. Not because I necessarily think we are headed for some disaster, but I am a bit more concerned than I was the other day and I want a higher cash balance in my portfolio than I currently have.

Another consideration that market participants should have is that the Fed's flexibility to deal with another crisis is much less today than it was in 2020. Right now rates are at zero, inflation is above 6%, and they have just announced the start of tapering of the asset purchase program that involved buying $120 billion a month of bonds. There isn't any room to cut rates unless they want to go to Fed Funds rate in this country which I don't think they do, and they can't easily justify more QE. I wouldn't say their hands are completely tied, but they definitely don't have the same capacity to ease that they did 18 months ago.

I agree with MG's take for the most part. This has my attention, and I am following it closely, but I would not describe myself as "worried" at this stage.

As for the markets, I remain solidly long stocks and have done nothing to change my portfolio based on the Omicron news. I did trim my holding slightly earlier this month, but not significantly. I remain bullish the market.

With that said, I think 2022 will be a much trickier year than 2021. Not so much because of covid (although that's possible), but the setup going into 2022 is completely different from what it was a year ago, when the vaccine was a novel market force, valuations were much cheaper, and there was basically zero risk of the Fed going more hawkish despite what was all but certain to be substantial growth. Those factors are not really there as we start 2022. The stock market may well end 2022 higher than where the year starts, but that is less of a given than it was this year, and either way I doubt a positive year will be nearly as robust as 2021. I also think the dips/corrections will at times be considerably deeper and longer lasting than what we have seen in 2021, where they frequently have not lasted for more than a day or two and very rarely for longer than a week.

Quote from: LennG on November 26, 2021, 05:23:25 PM
Hey, we can make you an honorary Jew and you could then practice for Yom Kippur. If you don't know, it is a day fast, usually about 25 hours with no water, no food, no nothing, so it should be good practice. 

Maybe the next challenge for Squid Games   

Haha.

Actually, I never knew that the Yom Kippur fast meant no water as well. No food for a day is hard enough, but no water is even harder. I would struggle with that. I drink tons of water.

Quote from: Sem on November 26, 2021, 01:59:23 PM
I'm a few episodes in to The Chestnut Man (Danish: Kastanjemanden), on Netflix. It's from the book by the same name, written by S

Quote from: LennG on November 26, 2021, 09:47:17 AM
Interesting premiss Dave.

Since I am of more advanced years than several here there would be no way I would do anything to endanger my health
. i always fast on the Jewish holiday of Yom Kippor so one day is a breeze so 1 million in the bank. I believe with water i could easily
do 2 more days. I might be able to do more but with the stipulations i would quit then take my 3 mil and be perfectly satisfied.

You would not be able to get any such stipulation in this challenge. You could not quit, even if you were willing to forego the $3 million already earned. You would be forced to continue to fast for the duration of the agreed upon time period regardless of whether or not you wanted to quit. There is no "see how it goes" provision with this.

I think a three day time period is a reasonable choice. What's interesting is that answers to this question range all over the place. There are folks who claim they would sign up for as much as 3-4 weeks or more, claiming that (with water) human beings can last for 50-plus days without food.

Then there are those who scoff at the whole premise in the first place and state that they would not agree to even one day of this. I find that answer a bit odd for anyone other than the mega-rich, to whom a few million dollars is of zero significance.

I would probably try to talk myself into something like 5-7 days. There is no question that you can do that without doing any real damage to your body, so it's really a question of mind over matter. The inability to bail out though is tough. If I could accept the challenge at any time, I would consider "practicing" with a few days of no food to see how it went and then doing the challenge later on down the road based on that experience.

72 hours with no food (at minimum) for $3 million tax-free seems like a no-brainer though. I'm pretty sure I have had multiple time in my life where I didn't eat for at least 36-48 hours. I don't recall it ever being that big of a deal. And I think you probably need to shoot for more than that, as $1 mil per day with no tax obligation is pretty serious money. Even if you're crazy rich, that's a lot of money to earn for a short time period and if you didn't need it there are obviously plenty of worthy charities who do.