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Weekly Market Comment: August 7, 2020

Removing the “panic” from “pandemic”

During a pandemic, we feel compelled to update clients and investors on progress on finding medical solutions. This week, the relatively small player Novavax released strong preliminary study results for its unique protein-based vaccine which they derive from moths. One study had 56 volunteers take the experimental vaccine, all of whom produced high levels of antibodies and no dangerous side effects (the worst was a sore arm). The other study involved vaccinating monkeys with various versions, some were able to stimulate enough antibodies which in turn completely eliminated any trace of the later injected virus from their lungs and noses.

Novavax is only in Phase 1 and has a lot more work to do but one virologist who is not involved with the company said “this is the first one I’m looking at and saying, ‘Yeah, I’d take that.’” It’s also worth noting that Novavax did manage to stick-handle a protein-based flu vaccine past Phase 3, so it wouldn’t be a first for them.

All of these attempts at finding a vaccine could still fail but it’s clearer than ever that a solution is likely forthcoming. Markets sure seem to believe it.

more than 165 coronavirus vaccines
(New York Times)

Inflation expectations are rising

According to Equifax, the percentage of U.S. credit-card accounts in arears by a month or more has dropped from over 2.5% to closer to 1.5%. Credit card spending is down 10% from a year ago, a far smaller drop than the 40% seen in March.

More spending, along  with all the money printing from monetary and fiscal authorities, has stoked expectations for inflation. Google searchers for the word “inflation” has skyrocketed since May. Gold, widely seen as an inflation safe-haven, hit record highs, smashing through its peak seen back in 2011. Treasury inflation-protected securities (TIPS) saw new highs.

Ishares Tips Chart


Expectations for more inflation makes sense, considering the above and things like retail sales and services PMIs in many parts of the world have returned to some semblance of growth. To be clear, inflation readings remain generally tepid, but a lot of market-based signs are expecting it to heat up.

This is positive for our outsized Legacy positions in physical gold, which is not only a hedge against inflation but of market fear and panic, too.

Musings Beyond The Markets

Beirut, already rocked by economic and humanitarian challenges due to Covid-19, general mismanagement, and a civil war where it is often said neither side won, experienced one of the most breathtaking accidents we’ve ever seen captured on video. Almost seven years ago, a Russian owned cargo ship carrying 2,750 tons of ammonium nitrate ended up being offloaded to storage facilities in Beirut’s port after the ship failed safety tests and its owner refused to pay port fees. The crew, mostly Russians and Ukrainians, were left stranded on the ship for over a year. “We’ve been here since October, with cargo of ammonium nitrate, an explosive substance, in the hold,” the captain had told the Ukrainian Sailor newspaper. “We’ve been abandoned, living with no wage on a powder keg for the last 10 months.”

Thanks to an incompetent local government, obdurate court system, local bureaucracy and the irresponsible ship owner who walked away from $200,000 of unpaid wages, many dozens of citizens died and at least 5,000 people were injured when the powder keg finally went off, as witnessed by amateur videos such as this and this. The spark of the explosion was believed to have been caused by repairs being done on the warehouse.

Such explosions have happened in the past, so the risks were not unknown.

Noteworthy links


Word of the Week

pandemic (n.) – an epidemic of an infectious disease that has spread across a large region, for instance multiple continents or worldwide, affecting a substantial number or people. A widespread endemic disease with a stable number of infected people is not a pandemic. Widespread endemic diseases with a stable number of infected people such as recurrences of seasonal influenza are generally excluded as they occur simultaneously in large regions of the globe rather than being spread worldwide. Throughout human history, there have been a number of pandemics of diseases such as smallpox and tuberculosis. The most fatal pandemic in recorded history was the Black Death (also known as The Plague), which killed an estimated 75–200 million people in the 14th century. The term was not used yet but was for later pandemics including the 1918 influenza pandemic (Spanish flu). Current pandemics include COVID-19 and HIV/AIDS.

spanish fle wear a mask
California, 1918, during the 2nd wave of the Spanish Flu:

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