Coronavirus: India's 2nd Wave

I last wrote about India and COVID-19 in January. At the time, an assumption was that 60% of the population might have already come down with COVID-19. I was a touch skeptical of those claims as the deaths per million were just really low and didn't make sense when compared to a 60% infection percentage. Yes, India has a young population of just 28.4, but Mexico has a similarly young population of 29.2 and their official deaths per million were 10x that of India's.

Those of us interested in COVID-19 beyond the borders of the United States know that India is now in a very strong second wave. The articles that I read partially point the finger to the Hindu's Kumbh Mela pilgrimage as being a super-spreader event. This would seem to align with the United States having a major wave occurring after Thanksgiving and Christmas. There is also the fact that India is going through a political campaign season (might sound familiar to Americans) and that society was opening up after the first wave.

What is the current news coming out of India?

Own 'Double Mutant' Variant

NPR (Apr 24) reports:

Officially, the variant is called B.1.617, but many people and media outlets (including NPR) have referred to the variant as the "double mutant." That's because B.1.617 has two key mutations that have cropped up in two other infamous strains.

. . . But, [Kristian Andersen at Scripps Research Institute] says, no one knows for sure if B.1.617 is more transmissible and thus driving India's surge. "We also know the B.1.1.7 [the variant first detected in the U.K.] is circulating in India, and we know that P.1. [the variant first detected in Brazil] is also circulating there, too. So they could also play a role in this surge. We simply don't have the data yet."

. . . There are also signs that people who have already had COVID-19 can be reinfected more easily with this strain, [Cambridge University's Ravi Gupta] wrote, especially over time, as their natural immunity wanes. These reinfections may be driving this second, explosive surge in India.

Even though we've been hearing all about this mutant strain, it looks like it isn't the only variant driving this second wave. The article seems to go with the assumption that there was a high infection rate in the first wave as they appear to push the idea of reinfections. This NPR article might be considered to be a worst case scenario write-up.

The Current Situation

Time (Apr 23) reports:

Every day, more than 2,000 people in India are dying with COVID-19, according to official numbers—and experts believe that number is a dramatic underestimate. Three health officials who asked to remain anonymous told me they believe that the daily number of COVID-19 deaths in India has already crossed the 10,000 figure.

Coronavirus: Iran in a 4th Wave

Back in October 2020, I wrote about a dire forecast that 300,000 Iranians could die from COVID-19 by March 2022. Per Worldometer, the current number of deaths are over 70,000. No doubt, those deaths are significantly undercounted. Unfortunately, Iran is in the midst of a deadly fourth wave that resulted from the Persian New Year holiday. This fourth wave in raw numbers appear to be the worst wave in terms of confirmed cases, but we should note that based on Our World In Data daily testing is more than double what occurred in the third wave (Oct-Dec range) so more cases are being identified. On the other hand, ABC News (Apr 22) reported that hospitalizations peaked at 20,000 in the third wave and have topped 40,000 with a possibility of going to 60,000 in this fourth wave. So that is a sign of how bad this wave is. Yet another caveat; however, is that Iran is dealing with the UK variant, which might be the reason why hospitalizations are up.

Here are some news reports regarding what is happening in Iran:

Associated Press via Yahoo (Apr 18) reported:

After COVID-19 cases broke record after record earlier this month, the Health Ministry reported 21,644 infections on Sunday, bringing the total count over 2.2 million. Hospitals are rapidly filling across the country, particularly in the capital. Authorities reported 130 deaths in Tehran alone, according to Mohsen Hashemi, head of the Tehran municipal council. The single-day death toll nationwide reached a peak of over 480 last November.

Is Speculation a Bit Rampant on Wall Street?

With Wall Street near record highs, one has to wonder if this is driven by fundamentals or speculation. In late January, we had GameStop speculation by the Reddit / Robinhood crowd. Considering that it is still at an elevated stock price, one has to wonder if speculation is still playing a role in that stock. 

Then in late March, we had the Archegos Capital Management fiasco, which sent ViacomCBS stock plunging from the mid-50s to the mid-40s. It also impacted Discovery, Baidu and Tencent. CNBC (Mar 27) reported on the situation that had occurred on Friday, Mar 26:

Some of the severe selling pressure in select U.S. media stocks and Chinese internet ADRs on Friday was due to the forced liquidation of positions held by the multibillion dollar family office, Archegos Capital Management, according to a source with direct knowledge of the situation.

Archegos Capital was founded by the former Tiger Management equity analyst, Bill Hwang.

Now what is interesting is how two different banks dealt with the situation as they had dealings with Archegos.

CNBC (Apr 6) reported about the impact to Credit Suisse, which didn't fair too well.

It took a charge of $4.7 billion as a result and now expects a first-quarter pre-tax loss of around $960.4 million.

Investment Bank CEO Brian Chin and Chief Risk and Compliance Officer Lara Warner will step down from their roles with immediate effect.

Credit Suisse on Tuesday announced several high-level staff departures and proposed a cut to its dividend as it weighs heavy losses from the Archegos Capital saga.

CNBC (Apr 6) reported on Morgan Stanley, which did fairly well:

Morgan Stanley had the consent of Archegos, run by former Tiger Management analyst Bill Hwang, to shop around its stock late Thursday, these people said. The bank offered the shares at a discount, telling the hedge funds that they were part of a margin call that could prevent the collapse of an unnamed client.

But the investment bank had information it didn’t share with the stock buyers: The basket of shares it was selling, comprised of eight or so names including Baidu and Tencent Music, was merely the opening salvo of an unprecedented wave of tens of billions of dollars in sales by Morgan Stanley and other investment banks starting the very next day.

Morgan Stanley dumped $5 billion in shares. The loss they took isn't mentioned other than they gave a discount on the shares. Maybe they lost $500 million or less? 

The question to me is who acted more ethical here: Credit Suisse or Morgan Stanley? Sure, two high level executives lost their jobs at Credit Suisse and they might have to cut their dividend, but they kept the losses internally. Of course, was taking the losses intentional or just someone deciding not to put in a few extra hours of overtime sending out e-mails, calling people up, etc etc to spread out the losses.

Meanwhile, Morgan Stanley pushed what I would assume would be the majority of the losses on hedge funds. CNBC mentions that some of the hedge funds feel "betrayed." On the other hand, Zerohedge (Apr 7) points out that these hedge funds are dubbed "equity capital markets strategies, which means they "don’t have views on the merits of individual stocks. Instead, they’ll purchase blocks of stock from big prime brokers like Morgan Stanley and others when the discount is deep enough, usually to unwind the trades over time." I would think that Morgan Stanley is guilty of a lie of omission. But again, they sold to hedge funds that specialize in buying discounted shares. Also, I'm sure they'll send some business to those hedge funds to help them recover their losses.

Anyways, back to the rampant speculation that is in the title of this post. Archegos Capital is an example of what is a called a family office being over-leveraged. How many other such entities get taken down?

Problems of the Wealthy: New York City Condo High Rise Problems

The New York Times (Feb 3) has an interesting article (at least for me) about living in one of the tallest residential buildings in the city. The building at 432 Park Avenue is 1,400 feet and was built for the ultra wealthy. There are some potentially long-term (some are probably short-term) problems with the building:

Six years later, residents of the exclusive tower are now at odds with the developers, and each other, making clear that even multimillion-dollar price tags do not guarantee problem-free living. The claims include millions of dollars of water damage from plumbing and mechanical issues; frequent elevator malfunctions; and walls that creak like the galley of a ship — all of which may be connected to the building’s main selling point: its immense height, according to homeowners, engineers and documents obtained by The New York Times.

Coronavirus: Lab Leak Part 3

This is part 3 of my look into the COVID-19 lab leak hypothesis. If you're interested in reading the other blog posts, you can read part 1 here and part 2 here. 

Interestingly, one of the more prominent voices when it comes to the potential that a lab leak is behind the COVID-19 pandemic is Scott Gottlieb, former commissioner of the Food and Drug Administration. In February, he put forth this theory three different times on CBS' Sunday morning news program Face the Nation. It should be noted that he believes a zoonotic explanation is most likely, but he doesn't discount the possibility of a lab leak. 

The first time he voiced this opinion was on February 7th.

I'll start first with a quick exchange between Maria Van Kerkhove of the WHO and Face the Nation host Margaret Brennan.

MARIA VAN KERKHOVE, PhD (World Health Organization COVID-19 Lead/@mvankerkhove): Hi, Margaret. Thanks for having me.

MARGARET BRENNAN: You're an epidemiologist. You specialize in zoonotics, which means you know a lot about how these viruses jump between species like COVID did. These new variants, you've described them as a combination of mutations all at the same time. What does that mean?

Oil Supercycle Starting in 2021?

The Financial Times (Feb 15) has an argument about oil heading into a supercycle:

"We’re going to be short of oil before we don’t need it in the years to come,” JPMorgan’s head of oil and gas, Christyan Malek, told clients on a conference call last week. “We could see oil overshoot towards, or even above, $100 a barrel.”

Veteran Goldman Sachs analyst Jeffrey Currie, who was a key voice in oil’s last supercycle between 2003 and 2014, told the Financial Times he believes there are real risks that oil trades in the $80 range “or even higher this year”.

Comments from European Oil Majors: shifts away from oil and oil supply gaps

The IEA recently estimated that if oil investments stay at 2020 levels until 2025, the world could see oil supplies drop by nearly 9 mb/d by 2025. I don't think that means they expect a 9 mb/d supply gap, but that is a daunting drop in supply.

Per OilPrice (Feb 10), Total appears to up the IEA forecast:

"We have seen in 2020 how OPEC managed to bring back market discipline. We've seen the cracks in the US shale model, and we've seen a continued underinvestments in the oil industry as a whole," [Helle Kristoffersen, President, Strategy and Innovation at Total] said.

The market needs new oil projects, considering the fact that many producing oilfields will see natural declines in production, the executive said.

Arclight Cinemas and Pacific Theatres Calls It a Day

I do love the movies and have done some movie reviews on this blog such as John Wayne's The Searchers. Just as theaters in Los Angeles were starting to open up (I personally wasn't planning on going to a movie theater until I got my vaccination shots) the Los Angeles Times (Apr 12) brought some bad news about the Los Angeles movie going experience. The owners of the Arclight Cinemas and Pacific Theatres have decided to not reopen and left this message behind:

“After shutting our doors more than a year ago, today we must share the difficult and sad news that Pacific will not be reopening its ArcLight Cinemas and Pacific Theatres locations. This was not the outcome anyone wanted, but despite a huge effort that exhausted all potential options, the company does not have a viable way forward.”

The LA Times reports:

Although it is not clear what ultimately forced Pacific and ArcLight to throw in the towel, the economic pressures have been especially tough on smaller regional chains. 

Coronavirus: Mexican Citizens Flying to Texas for Vaccinations

Per Worldometer, one might argue that COVID-19 in Mexico is following a similar trajectory as in the United States. Cases peaked during the holidays and then declined, but are basically plateauing at pre-holiday levels. Will Mexico or the United States get hit with another wave of cases? Based on vaccination rates, it looks like the chances are higher in Mexico versus the United States.

How bad are vaccinations going in Mexico? Well, I came across a couple articles that discussed this. 

Associated Press via the LA Times (Feb 4):

Desperation mounted in Mexico on Thursday as the country runs out of COVID-19 vaccines, a government registration website crashed for a third straight day and restaurant workers protested virus restrictions they say are driving them into poverty.

. . . Mexico has received only about 760,000 doses of the Pfizer vaccine, and has only about 89,000 of those left, many of which are earmarked for second shots.

It expects to get more Pfizer doses by mid-month, and as many as 400,000 Sputnik shots by the end of February, but they won’t be enough to vaccinate even the country’s 750,000 front-line health workers and represent a drop in the bucket for Mexico’s population of 126 million.

How California Is Dealing with the Rental Crisis

CalMatters (Feb 16) has an article up regarding those in California who have been unable to pay their rent. Currently, those behind on their rent have until June 30th to catch up before facing eviction (it was previously January 31st). The article focuses on an unemployed tech worker who lived in a $5,400 per month apartment with a friend. The two of them now owe $43,804. Interestingly, he was able to move into a new apartment with his "partner" (I'm assuming this means another individual other than his friend) and they're only able to pay 25% of their rent. Part of me is like, "Why did someone rent an apartment to them in the first place?" 

JDSUPRA (Feb 11) has some details about how evictions are to work in California:

Additionally, no tenant can be evicted after June 30, 2021, if they pay 25% of the rent owed from September 2020 through June 30, 2021, either monthly or in a lump sum before the final day it is due and attests they face a financial hardship due to the pandemic. Landlords can recoup the remaining balance owed after June 30, 2021, but may not use nonpayment of rent as a basis for eviction.

Coronavirus: How to Deal with Late Rent Payments

One side affect of the pandemic that I've thought about is what is the right rent policy when it comes to those who have become unemployed due to COVID-19 and can't pay their rent. I lean towards the libertarian point of view when it comes to government and economics, but a pandemic that has stopped the ability of many to work has to result in some leniency it terms of government involvement -- at least for me.

The LA Times (Feb 2) has an article up about the issue of rent payments.

Renters across the nation are dipping into 401(k)s, taking on higher-interest debt, and scrambling for risky, essential-worker jobs to pay the rent. Research from Moody’s Analytics and the Urban Institute estimates 9.4 million U.S. renter households owed an average of $5,586 in back rent, utilities and related late fees as of January, for a total burden of $52.6 billion.

If one has a large 401(k) plan, I could see the case for dipping into it to pay your rent. My definition of large would be maybe in the $500,000 or more range. I'm not sure it is fair to just have your landlord take the hit or have the government cover you. Due to the CARES Act, a person could withdraw up to $100,000 from a 401(k) in 2020. I don't know if that was extended into 2021, but hopefully the government did so. If you're taking on debt, well that seems to be financial suicide and one should just depend on the moratorium on evictions.

Southern California: City Corruption in Maywood

For those who have lived in Los Angeles county for a few years, I'm sure you remember the situation at the city of Bell and the political scandals that occurred there. The LA Times reported on the scandal starting in 2010. One part of the story was that Maywood outsourced municipal services to Bell. Now I don't think that is necessarily a bad thing to do. Economies of scale should work when you're talking about such small cities. The problem, of course, was that it wasn't all above board. Now over a decade later the story continues with a focus on Maywood. The Los Angeles Times (Feb 4) reports:

Los Angeles County prosecutors announced bribery and corruption charges Thursday against Maywood’s former mayor and a slew of ex-city officials and vendors after a years-long probe into allegations that city leaders engaged in pay-to-play practices, misused public funds and twisted the tiny city’s purse strings for their own benefit.

Coronavirus: Paraguay getting pressured by China?

I recently looked at the surge of COVID-19 in Brazil. My speculation was that Paraguay could become a hot spot due to their obvious proximity to Brazil. Also, Our World In Data has them lagging when it comes to vaccinations. Worldometer definitely shows an uptick in cases. It appears to have started in mid-February. Compared to some other South American countries such as Brazil and Chile they did a decent job early on at fighting the spread of the virus. Yet, that early success could actually be a detriment now as they could experience a serious spike in cases. 

 

A way to avoid such a spike is to improve their performance when it comes to their vaccination program. Leave it to the Chinese to attempt to use this to their advantage. The Diplomat (Mar 27) has this to say:

Paraguay’s foreign ministry said this week it had been approached by brokers claiming to offer batches of Chinese-made COVID-19 vaccine in exchange for the country cutting its diplomatic ties with Taiwan.

The ministry said in a statement the “intermediaries and other private figures” who offered the deal “had no official status, and their legitimacy or links with the government of the People’s Republic of China has not been proved.”