OMG Omicron

[Jolly Blue Giant]

Omicron - love the name - sounds like a warrior group out of Star Wars or a secret energy source the galaxies are fighting over.

Some people have huddled down in fear, while others go about business as usual. Me...it's business as usual. I got my J&J booster shot last week and haven't even had a cold in a few years now (knock on wood). The biggest problem I have with it is that it caused my portfolio to crash 4.9% last Friday as the market is made up of an awful lot of skittish folks - any negative news and BAM...sell, sell, sell. 

Luckily, today's market has recovered most of my losses from Friday's selloff so I think the scare is over

Anyone worried about this latest COVID variation/mutation? 

[MightyGiants]

I am concerned about Omicron but we simply don't know enough about it to be "worried".   I have always appreciated as long as people were getting sick from Covid there was always a chance that another variant even worse than Delta could arise.  In fact, with so many people still getting sick, I guess it was almost inevitable.

That said, we simply don't know enough about this new one.   It will be a few weeks before we have a handle on exactly what the issues with the new variant are.    I will say that it's troubling how quickly the new variant has spread around the globe and those that study viruses seemed concerned about where the mutations are and how many there are.  Still, how bad it is is yet to be determined.   Worse case, this causes a major setback for a few months and the drug manufacturers cook up a new vaccine that works against it (assuming the current ones are not all that effective). 

The travel ban from southern Africa is prudent, but I don't think it will buy us more than a couple of weeks (at best)

In terms of how I feel, I have some cash that I am ready to use to buy on a dip.   After researching what I could learn about, I didn't buy any new stocks or funds this morning, which I guess best sums up my level of concern at this point.

That said, I a going about my life and this variant is just something I am keeping an eye on. 

[Jolly Blue Giant]

There were a lot of dip opportunities if you don't mind risk. In 20:20 hindsight, I should have sold every stock I own on Wednesday evening and poured all that money into Moderna - then sell it at the end of today's market closing...LOL

Too bad I didn't have the foresight to see that coming. At least I'm back to square one after today.

[MightyGiants]

I believe it's considered conventional wisdom that it's impossible to time the dip or the peak.  I am waiting for a panic dip where I feel the move is an overreaction.   

[Bob In PA]

Do you mean the "Xi" virus?  After all, this is the 14th recognized virus.  Oh, I forgot... science never gets political.   

[MightyGiants]

Do you mean the "Xi" virus?  After all, this is the 14th recognized virus.  Oh, I forgot... science never gets political.   

Actually, this is the 13th variant and the 13th letter is nu.   

[DaveBrown74]

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.

[MightyGiants]

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

SYDNEY, Nov 30 (Reuters) - The head of drugmaker Moderna (MRNA.O) said COVID-19 vaccines are unlikely to be as effective against the Omicron variant of the coronavirus as they have been previously, sparking fresh worry in financial markets about the trajectory of the pandemic.

"There is no world, I think, where (the effectiveness) is the same level?.?.?. we had with Delta," Moderna Chief Executive St

[DaveBrown74]

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.

[DaveBrown74]

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.

[DaveBrown74]

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

[MightyGiants]

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.

The drugmaker said further analyses are ongoing to confirm and quantify this potential impact using the actual Omicron variant sequence.

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.

[DaveBrown74]

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.

[Bob In PA]

Actually, this is the 13th variant and the 13th letter is nu.

Rich: I believe you, but that generates the same question, in a different light.  Why didn't they settle on calling it the "Nu" variant?  Why skip a letter (or letters)?  Any ideas?  Thanks.  Bob

[MightyGiants]

Rich: I believe you, but that generates the same question, in a different light.  Why didn't they settle on calling it the "Nu" variant?  Why skip a letter (or letters)?  Any ideas?  Thanks.  Bob

Bob,

In the context of our conversation, why is the name of the new variant so important to you????   Maybe you should go back to the same people who told you about "xi" and ask them why they "forgot" about "nu"