Buy the Reflation Rumor and Sell the Recovery News?

Published on
January 20th, 2021
Duration
27 minutes

Tony Greer – “When the Bond Market Speaks, I Like to Listen”


Buy the Reflation Rumor and Sell the Recovery News?

Daily Briefing ·
Featuring Jack Farley, Max Wiethe, and Ed Harrison

Published on: January 20th, 2021 • Duration: 27 minutes

Real Vision managing editor Ed Harrison joins editor Max Wiethe to update his views on how yield curve steepening is affecting equity markets and his three potential outcomes for the reflation trade. Harrison and Wiethe also debate whether the reflation trade is a “buy the rumor, sell the news” scenario and tee up Real Vision’s big content campaign for February where we attempt to answer the question, “Is Everything a Bubble?” In the intro, editor Jack Farley reviews price action and analyzes Morgan Stanley’s latest earnings report.

Comments

Transcript

  • WG
    Wesley G.
    21 January 2021 @ 18:42
    Ed, I was a planner for assisting DHS with the pandemic influenza plans @ 15 years ago. Viruses mutate constantly and about 98% of the mutations are inert. Of course, that 1 to 2% can be vicious! That is why we they create a new variant for influenza every year just to make sure we stay with it. The most important thing I learned was that viruses that move to animals and then back to humans have been the mutations that have been the most deadly over the recorded history (which is very short for medical knowledge) and not the standard mutations among and between humans. Unless I hear something where this virus has jumped to pigs, chickens, or other animals in a third world location where humans live in close quarters with their animal, I am not concerned. I recommend the book The Great Influenza. The author does a great job in giving the history of the great flu of 1917 to 1919 as well as explaining the science behind it as a way of showing how they had a very minimal understanding of viruses at that point in history and how that aided it in ravaging the world.
    • EH
      Edward H. | Real Vision
      22 January 2021 @ 00:53
      Great book by John Barry. Read it years ago. As I recall, he mentioned mutations as a factor in spread
  • dj
    dennis j.
    22 January 2021 @ 00:47
    To cut to the chase, can we all assume we'll all get a version of covid in the next 3-5 years? The fact that viral error correction does not appear robust (hence multiple variants) reflects what we see with the flu. Roughly effective for 30% of strains in a given year. The variants that survive the vaccine, proliferate. Over time, more contageous but less virulent should win out (not good to kill the host in the race of viruses).
  • RM
    Russell M.
    21 January 2021 @ 00:30
    Counter to Ed's vaccine theory that variants will make vaccines ineffective. This is true because they are all designed to inject virus spike proteins into the blood. If the virus mutates the spike protein or has some other mutation to counter the vaccine, it would affect the effectiveness of the vaccines. But, there is another solution to Covid other than vaccines. It's the treatment approach. There a treatment, leronlimab, for which the developer, Cytodyn, will announce the results of its FDA approved pivotal Phase 3 trial. https://www.clinicaltrials.gov/ct2/show/NCT04347239?term=leronlimab&cond=Covid19&draw=2&rank=2 The prior investigational use of the drug strongly suggests that it will be effective to treat moderate to critical patients. The method of action is NOT to attack the virus itself. Rather it interferes with virus' method of creating havoc in the body which is to use the CCR5 receptors on lungs and other organs to create a cytokine storm driven inflammation. Scientific peer reviewed publications demonstrate that leronlimab occupies those CCR5 receptors and prevents the Covid virus activating them without suppressing the immune system. With leronlimab occupying the receptors first, the virus can't whip them up into an inflammatory state. This allows the body's own immune system to strongly attack and eliminate the Covid virus. The point is, if the results of this leronlimab trial are strong, and there is a very good likelihood they will be, then anyone who gets Covid and has symptoms could be given leronlimab to prevent progression of the disease to a more serious state. Virus mutations won't matter. So long as the virus acts through the CCR5 receptor to inflame the organs, leronlimab will work. In that instance, Covid 19 would be no greater risk than a cold or flu. If you get sick, you get a shot and go back to your normal life. Life could get back to normal in a matter of 6-9 months, however long it takes to manufacture sufficient dosages.
    • JM
      Jason M.
      21 January 2021 @ 02:11
      You writing a book buddy?
    • RM
      Russell M.
      21 January 2021 @ 07:10
      I am surprised at the uniformly negative responses. This drug could change the course of the pandemic and therefore investing environment. If you are considering real possible economic outcomes, with FDA approval likely within several weeks, you would want to track this one.
    • EP
      Erewhon888 P.
      21 January 2021 @ 12:02
      Any thoughts on the treatment whose mention is deprecated? https://www.marc.cn/2021/01/ivermectin-the-bridge-to-the-covid-19-vaccine.html
    • RM
      Russell M.
      21 January 2021 @ 15:15
      Ivermectin is an antiviral. it attacks the virus itself. I don't think it work very well with Covid. Completely different method of action than leronlimab which prevents the virus from causing inflammation of the lungs etc..
  • BB
    Boyd B.
    21 January 2021 @ 02:04
    Where's your amaryllis, Ed?
    • EH
      Edward H. | Real Vision
      21 January 2021 @ 13:21
      Nice eye. My wife took it!
  • LF
    Lydia F.
    21 January 2021 @ 11:44
    There might be some hope for concerns about current vaccine and varian Y501 - however it is inevitable that with more mutations we will need to reformulate vaccines much like we need to do against the flu - the question is how often does it need to change and how quickly will this change occur. This also highlights some of the limitations inherent in the underlying premise of the vaccines that the spike protein was the target - there are likely to be other targets that need to be incorporated into future vaccine designs. Characteristics of immune response to previous infection with COVID vs response from vaccination is different vis a vis extent of immune response that recruits more than just antibodies including T-cells and other mechanisms that have yet to be determined - Paul Offit gives a really great discussion on the UCSF grand rounds preso which I recommend in general to keep up on all things SARSCov2 [ https://youtu.be/jlM7mHamx1w ] cautious optimism from a pre-print - one can only hope....yet there are limitations - https://www.biorxiv.org/content/10.1101/2021.01.07.425740v1.full - from the study conclusions vis a vis pfizer vaccine BNT162b2 "A limitation of this finding is that the Y501 virus does not include the full set of spike mutations found on the rapidly spreading strains in the UK or South Africa.3,4 Nevertheless, preserved neutralization of Y501 virus by BNT162b2-elicited human sera is consistent with preserved neutralization of a panel of 15 pseudoviruses bearing spikes with other mutations found in circulating SARS-CoV-2 strains."
  • YL
    Yassine L.
    21 January 2021 @ 11:21
    Risk of fat tails are widely and immensely mosunderdtood and misquantified... saying that an event is 10 std deviation or 30 std deviation and thus inpredictable is just complete bs. They are just using the wrong model (bell curves etc). If you see an event that is 4, 5 std even that makes the likelihood that your data follow a bell curve extremely extremly low... uncertaintainty is not priced in at all in the us equity market especially!
  • JS
    John S.
    21 January 2021 @ 05:03
    It will be great if we could leave the video go to exchange and continue listening to video just an idea
    • CK
      C K.
      21 January 2021 @ 07:55
      Yes! Or have a floating video continue to play when you navigate away from the main video page. Of course you can just open a new tab too. Another important upgrade in my view is to the comments section to bring it up to speed to the exchange comments. If you comment under a video you get no notification when someone reacts or responds to your comment. Likewise if you respond to someone’s comment so that kills the potential for spontaneous conversation. Here’s another idea - why not move the whole platform under the exchange? Videos and their comments can just be one more update in your feed, similar to the videos posted by the community. You can then “follow” the various show channels and get notified of a new video upload...
  • CW
    Chase W.
    21 January 2021 @ 06:46
    From AP, references what Ed mentioned about virus variants and vaccines: Some COVID-19 mutations may dampen vaccine effectiveness Scientists are reporting troubling signs that some recent mutations of the virus that causes COVID-19 may modestly curb the effectiveness of two current vaccines, although they stress that the shots still protect against the disease. Researchers expressed concern Wednesday about the preliminary findings, in large part because they suggest that future mutations could undermine vaccines. The research tested coronaviruses from the United Kingdom, South Africa and Brazil, and was led by Rockefeller University in New York with scientists from the National Institutes of Health and elsewhere. A different, more limited study out Wednesday gave encouraging news about one vaccine's protection against some of the mutations. One way vaccines work is to prompt the immune system to make antibodies that block the virus from infecting cells. The Rockefeller researchers got blood samples from 20 people who had received either the Moderna or Pfizer vaccine and tested their antibodies against various virus mutations in the lab. With some, the antibodies didn't work as well against the virus -- activity was one-to-threefold less, depending on the mutation, said the study leader, Rockefeller’s Dr. Michel Nussenzweig. “It’s a small difference but it is definitely a difference,” he said. The antibody response is “not as good” at blocking the virus. Earlier research established that the two vaccines are about 95% effective in preventing COVID-19 illness. The latest findings were posted late Tuesday on an online website for researchers and have not yet been published in a journal or reviewed by other scientists. Nussenzweig is paid by the Howard Hughes Medical Institute, which also supports science coverage at The Associated Press. The university has applied for a patent related to his work. The coronavirus has been growing more genetically diverse, and scientists say the high rate of new cases is the main reason. Each new infection gives the virus a chance to mutate as it makes copies of itself. Recent variants, or versions of the virus that emerged in the U.K., South Africa and Brazil seem to spread more easily and scientists say that will lead to more cases, deaths and hospitalizations. The new variants do not seem to cause more serious disease but their ability to eventually undercut vaccines is a concern. E. John Wherry, an immunology expert at the University of Pennsylvania, said the Rockefeller scientists are “among the very best in the world" at this work and their results are concerning. “We don’t want people thinking that the current vaccine is already outdated. That’s absolutely not true,” he said. “There’s still immunity here ... a good level of protection,” but the mutations “do in fact reduce how well our immune response is recognizing the virus.” The news comes at “a really important time in the pandemic,” said Dr. Buddy Creech, a vaccine specialist at Vanderbilt University, “We’ve got an arms race between the vaccines and the virus. The slower we roll out vaccine around the world, the more opportunities we give this virus to escape” and develop mutations, he said. Dr. Matthew Woodruff, an immunology researcher at Emory University, agreed. “This is going to be kind of a slow walk of evolution. We’re going to have to have tools that slowly develop with it,” such as treatments that offer combinations of antibodies rather than one, he said. Dr. Drew Weissman, a University of Pennsylvania scientist whose work helped lead to the Moderna and Pfizer vaccines, said the antibody findings are worrisome, but noted that vaccines also protect in other ways, such as spurring responses from other parts of the immune system. The new work involved only 20 people and not a huge range of ages or races, “and all of that matters” in how generalizable the results are, he said. On Wednesday, Pfizer and its German partner BioNTech reported a second round of reassuring findings about its vaccine against one of the variants. Earlier this month, Pfizer and researchers at the University of Texas Medical Branch said that the vaccine remained effective against a mutation called N501Y from new variants found in the U.K. and South Africa. Likewise, there was no sign of trouble when they tested some additional mutations. The latest work tested all the mutations from the variant from the U.K. at once rather than one-by-one. Tests from 16 vaccine recipients showed no big difference in the ability of antibodies to block the virus, the researchers said in a repor t. Pfizer didn’t immediately comment about the Rockefeller findings, but its chief scientific officer, Dr. Philip Dormitzer, previously said next steps include testing the vaccine against additional mutations found in the variant from South Africa. Moderna and AstraZeneca, which makes a different type of COVID-19 vaccine used in some countries, also have been testing how their vaccines hold up against different mutations. If the virus eventually mutates enough that the vaccine needs adjusting — much like flu shots are altered most years — tweaking the recipe wouldn’t be difficult for vaccines made with newer technologies. Both the Pfizer and Moderna vaccines are made with a piece of the virus genetic code that is simple to switch. It’s “wishful thinking” to believe that first-generation vaccines will be enough, or that vaccines alone will solve our problems, said Mayo Clinic vaccine expert Dr. Gregory Poland. “We are shooting ourselves in the foot by allowing unmitigated transmission of this virus” and not doing “common sense” measures such as mandating mask-wearing as some other countries are doing, he said. “How can the bars and restaurants be full? It’s like ‘what pandemic?’ We’ve reaped the seeds we’ve sown," he said.
  • VR
    Vladimir R.
    21 January 2021 @ 04:44
    Great convo gents! Water-cooler for wonks!
  • MG
    Matthew G.
    21 January 2021 @ 04:07
    Love the push back from Max. Would love to see more of that in these.
  • NI
    Nate I.
    21 January 2021 @ 01:31
    If you want some Knightian uncertainty, read about antibody-dependent enhancement and it's history with all previous coronavirus vaccine attempts going all the way back to 1960. Then think about the testing that was skipped in the Operation Warp Speed roll-out. This paper at the The Proceedings of the National Academy of Sciences is a good primer. https://www.pnas.org/content/117/15/8218
    • JS
      John S.
      21 January 2021 @ 04:02
      Yes this an the perma frost bacterias and viruses... catastrophic for humanity. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7136688/
  • JS
    John S.
    21 January 2021 @ 03:58
    I hope that the vaccine work against the variances. I know is hope, but we have biological reasons to think that they work. At least more reasons to work than not to work. By the way I am selling the biden inauguration. https://www.google.de/amp/s/amp.dw.com/en/biontech-pfizer-vaccine-likely-to-protect-against-highly-infectious-uk-variant/a-56284614
  • DN
    Douglas N.
    21 January 2021 @ 03:12
    How about resolving the ongoing economic impact of Covid by turning down the dial on the fear-making machine and going back to living life? This world was likely fashioned with the best intentions, but it wasn't the only possible world, and is arguably far from the best one. That would be an example of thinking outside the box. Sadly, the slices of humble pie required would be too large to be practicable.
  • MC
    Michael C.
    21 January 2021 @ 00:21
    RV interviewed these guys. Financial bubbles have never had a formal definition, though, and they are diabolically difficult to identify without the benefit of hindsight. A new book, "Boom and Bust: A Global History of Financial Bubbles," by finance scholars William Quinn and John Turner of Queen's University Belfast in Northern Ireland, helps clarify the muddled thinking on the topic. 3 legs of a bubble are marketability, money/credit, and speculation. Marketability...in 2000, it was low trading costs, under 10 bucks, to trade. Now it's portability with "no" brokerage fees. Money/credit. Margin debt did not decline in March 2000 so it was a "correction". Margin debt is at record levels. Speculation...many signs...put/call ratio, Shiller/CAPE, SP500 Price/sales ratio, % of Russell 2000 companies with no earnings, etc. But the trigger/spark isn't known till after the fact. It's what you don't see that kills you..grin. Managing it as discussed in today's briefing is difficult. Rebalance on some basis when equities exceed a given % of the portfolio, continued portfolio pruning (sell losers and underperformers), etc. Key is not to lose capital so one is there when the markets become more favorable. But as Mike Green has pointed out indexing has pulled the good, the bad, and the ugly along, the dogs don't get sold, and the marginal buyer along with liquidity has pushed markets well above Feb 2020 and one could argue the dot.com era.
  • RY
    Roger Y.
    20 January 2021 @ 23:42
    Risk = deviation from expected returns.
  • DP
    Divyesh P.
    20 January 2021 @ 23:16
    "I may be the host but we all know who sets the schedule"...brilliant!