The DOW and Pandemic disconnect

The DOW Industrial Average stock index reached 30,000 yesterday, a new record high. Trump claims credit, of course. 

The markets are a good forward-looking indicator of the economy (or they were) and as such, any immediate movement is a reflection of near to mid-range expectations, and trends provide a forward-looking expectation of medium to longer-term economic performance. A rising market used to indicate an expectation of a generally growing economy.

And yet we know that the US economy is in deep trouble. Pandemic trouble coupled with long-term small to medium-sized business trouble. The promised V-shaped recovery is petering out and will return to a more 'normal' recovery. Wall Street and Main Street have rarely been so out of sync.

So why the jump to record-level valuations?

Of course, the stimulus that has been and continues to be pumped into the markets to avoid a crash decoupled Wall Street from Main Street some time ago. So the significant jumps over the past two weeks can and should be seen as market (and therefore the investing class) expectations that there will be greater certainty under a Biden administration, and therefore medium to longer-term plans can be made, and investment programmes confirmed.

It begs the question of why, with the need for ongoing stimulus and 8%-10% federal budget deficits, the markets think the future is so bright. 

The answer is that the US economy has passed the point of being able to fix its systemic debt problem, and any attempt to do so will simply destroy the markets, killing large and medium-sized companies (the small companies are barely holding on already) and that will wipe out any hope of an employment recovery, plunging the US into a multi-year depression. Therefore with an adult in the White House, and an economic team that is willing to tell him hard truths, the markets are betting that the stimulus will keep on rolling.

It begs the question of where the markets would be today without the constant meddling-by-tweet and bogus trade wars of the past four years? 

Still the pandemic continues to build. 

There can be no doubt, and history will declare (and so will any who are looking at this even now and into the coming year) that Trump’s personal response and the craven enablers in the Republican party, and directly contributed to a disaster in the US. 

Meanwhile, US Covid-19 deaths are at a seven-day moving average of 1640 deaths, a number that was last seen on May 12th (as a seven-day moving average). The first time that the rate was that high was as the pandemic was building force (as it is again) on April 7th. There were 34 days between the first time the average was above 1650 and the first time is dropped below 1650. 

If those numbers provided a pattern and an expectation for now, then we will not see the numbers reach this level again for another month. Certainly the numbers could already have peaked, but that is not what the seven-day moving average is telling up. With up/high days and lower/dropping days, the seven-day moving average continues to climb.

The same is happening with new cases. The seven-day average is still rising, at 176,000, even though there are occasional ‘down’ days, usually at the weekends. The three-day average is on another downward wave, but the latest number are not encouraging. Hospitals are becoming overloaded again, and National Guard troops are being called in to deal with the numbers of corpses in Texas.

 

Across the country, the cases are still growing and growing fast. And we are being warned that the coming winter will make matters even worse, with people being cramped inside, and when they go to places where others are or have been, the need to retain the heat will necessitate recycled warm air, increasing the risk of contagion. So for the US, there is little hope that the next weeks will see any actual peak in cases, and certainly little hope that there will be any sustained drop in the number of new cases. Unless, of course, Trump is able to continue to reduce the total number of tests being performed, and thus artificially holding down the number of cases.

Yes, still there is no meaningful response from the Republicans.

All they can do is look on now, still afraid of Trump and his ability, they believe, to destroy their political futures, by calling them out as disloyal. Even now. 

So Amerika has to wait, and hope that Biden and his team will be ready on day-one to implement effective measures. Certainly, the roll-out of vaccines will already be underway before Christmas, but the general population will not be seeing vaccinations until mid to late-January. First will be the front-line workers in healthcare, and then their families, and then the elderly, and then those at most risk. Only after those have been vaccinated will the general population be able to be vaccinated. That will probably not happen until February or later, depending on how fast the Biden team can push, or how much of their programme can start before he is sworn in. (By stealth of course, because Trump will “burn it down” if he sees any tangible support for Biden that is actually is able to interrupt).

Here in Greece things seem to be moving in the other direction, though it will take another week before we can have any confidence. 

The bad news is that the seven-day moving average number of deaths continues to rise, and is over 80. There was a high last week of over 100 deaths in a day. The hospitals are overwhelmed, and in Thessaloniki and the north, 99% of ICU beds are occupied. The military is building a field hospital on the grounds of the Military Hospital here in Thessaloniki, providing an additional 50 (ICU?) beds at least.

Two private clinics have been requisitioned, adding 200 beds to the total available in the public system in Thessaloniki. Hopefully, these will be enough, but I very much doubt it with the steep rise in cases through November. 

Thessaloniki is the epicentre, with over 600 new cases yesterday, reaching more than 14,500 cases in Thessaloniki in total, in November only.

Characteristic of the rapid growth of the virus is the fact that in October - the month in which the spread of the coronavirus had already begun - Thessaloniki had recorded 4,027 cases while in September it had only… 422 cases, a number that is now exceeded daily by the city. In less than two months, Thessaloniki jumped from 422 cases to 14,517, proving the aggression of the new virus. It is noted that in total, since the beginning of the pandemic at the end of February in Thessaloniki, 20,334 cases have been recorded.

https://www.typosthes.gr/ygeia-epistimi/covid-19/234679_koronoios-paramenei-ypo-piesi-me-607-nea-kroysmata-i-thessaloniki

Across Greece, the numbers of new cases are coming down, which if a good thing to see. However, this may be illusory for the same reason as the US, we are entering ‘real’ winter. The article also said that the optimum temperature for the virus is 8 – 10 degrees Celsius (of 48 – 50 Fahrenheit). 

If there is good news it is that the seven-day moving average of new cases is heading downward. Not much yet, but definitely, a peak, if only a week old. We will need much more time to see that it is a real peak and fall, which will be problematic with the winter conditions. But the lockdown here is in its third week, and that is about the time it takes for the asymptomatic contagious cases to spread as far as they can, then begin to die off. After all, if the virus cannot reach someone, then it cannot infect them.

So while cases continue to rise rapidly, the speed of rise has slowed down a little. But the numbers are still increasing, and that continues to drive the need for more beds.

The latest news this morning is that we will be in lockdown at least until December 6th, which is another two weeks. I would not be upset if it were another week after that, to really limit the potential spread. 

The spread cannot be halted by the lockdown; we still need to buy food and go and feed the stray cats. And we are not alone. The entire city must have some limited interactions, even if more limited than ours. And our interactions are limited. We do not move more than about 100 meters from the building, and even then we enter any building with caution, checking that there are not many people inside and that there is plenty of ventilation via open window and doors. The pet-shop is a good example. The front door is open all the time, and upstairs there is a pet grooming station with its window open. Hopefully, this is providing enough airflow to reduce the risk of spread. 

And masks are obligatory, and for the most part, are now being worn property. For the most part. There are still too many people who think that they cannot speak through a mask, so pull the mask down to talk, and then usually to talk too loudly.

But lockdowns work, and this one is already reaping some rewards in peaking infections. I hope.