Weekly Market Comment September 25 2020
Silicon Valley choked on forest fire pollution
So far, September has been a month to forget. Rising coronavirus cases, a scattered economic recovery (strong in some areas, tepid in others), and a correction in tech stocks has made for the worst September in nine years. And on the West Coast, a return to quarantining indoors - this time prompted by incredibly dangerous air quality, didn’t help.
While stocks have defied gravity since March, a re-test in the context of a recovery is historically normal. It’s concerning but not cause for alarm.
On the virus front, Johnson & Johnson announced it started enrolling a phase 3, 60,000-person global clinical trial for a single-dose vaccine, the 4th would-be Covid-19 trial to enter the final stage of FDA study. Results are expected early next year. A break-through on any front is much needed, as daily cases in France and the U.K. hit records and our own case count in B.C. has tended to clock north of 100 per day. One such break-through may be the realization that a lack of interferon may be a significant difference from those whose immune systems handle the disease in stride and the subset of deathly ill Covid-19 patients who fair much worse. Dozens of studies are now underway to see if boosting interferon levels in patients early may help avert a life-threatening turn for the worse later.
Here’s what financial opioid addiction looks like
This week, the nonpartisan Congressional Budget Office warned that the U.S. government’s debt double the size of the economy over the next 30 years that could cause issues with US government bonds or impair ability to borrow abroad. It adds pressure to what has already been a drawn-out disagreement over terms of a second bailout. The death of RBG, once confirmed by a congressional vote of 93 to 3 in a bygone era, are fanning the partisan flames, making a stimulus agreement all the more difficult to achieve. Talks between Pelosi and Mnuchin are ongoing, the latest iteration of which looks to be about $2.4 trillion worth of spending (about $1 trillion less than the one passed in May).
Oil makes for a slippery slope
Oil and gas related stocks took it on the chin after the underlying commodity prices fell materially. Excessive supply is the bulk of the challenge, not necessarily a weakening of expected demand (expectations for which were already re-set lower post-Covid). Libyan crude oil has return to the world market as they reopened three ports for export, thanks to a political truce that put their civil war on hold.
The irony of lower global demand is that the consumer has embraced SUVs, as illustrated by Europe’s love affair with the larger format cars. You’d think those little streets of theirs would favour little cars! In fact, auto makers face fines for their success at selling SUVs because it runs counter to the EU’s carbon-dioxide emissions targets. If only the will of the people was consistent.
- Airbus unveils hydrogen designs for zero-emission flight
- Northland Power founder gifts $250 million to the University of Toronto to support advances in human health and healthcare
- The stunning decline of Exxon, as explained by the Wall Street Journal (podcast)
- Elon Musk finally reveals his grand plans to revolutionize the battery
- Goldman says risk of delayed U.S. election result overestimated
- Cornell psychiatrist gives Biden advice on how to debate Trump
- Jonathan Kay: B.C. NDP succumbs to the leftist battle over identity politics
Musings Beyond the Markets
Early in her career and well before joining the Supreme Court as the second woman to ever do so, Ruth Bader Ginsburg won five of the six cases she argued in front of the court as an attorney. Her strategy of convincing the then all-male court that gender discrimination was not only wrong but unconstitutional, as per the 14th amendment which legally guarantees equal protection to all citizens. But her strategy was to defend the man’s rights to equal protection, as she did with the stay-at-home father who expected the same maternity leave rights that woman were afforded. This was unheard of at the time and, by convincing the judges to uphold his rights, they upheld the right for all. She did the same with a widower who fought against being denied survivor benefits because of a sexist Social Security provision that viewed woman as secondary providers of the household, even when they were not. Ginsburg secured Supreme Court victories that proved women were also capable of being primary breadwinners of the family.
In Craig v. Boren in 1976, Ginsburg helped convince the Supreme Court to invalidate a law that said women were allowed to buy beer at the age of 18 but men had to wait until they were 21. Arguing against the women’s early privilege, she yet again was able to get the court to rule that men and women should be treated equally under the law.
Fighting for women’s rights by fighting for men’s rights was nothing short of a genius strategy.
Ever the trailblazer even after death, RBG is the first woman and Jewish person in America to lie in state in Washington.
Word of the Week
perfunctory(adj.) – (of an action or gesture) carried out with a minimum of effort or reflection. “You can tell by the applause: there’s perfunctory applause, there’s light applause, and then there’s real applause. When it’s right, applause sounds like vanilla ice cream with chocolate sauce.” – Skitch Henderson