Covid-19 Winter - The 4th Wave

Winter is coming... again. A 4th wave of Covid-19 is hitting Europe and is likely to impact the United States in the coming weeks.

As we can see below, countries in Europe are now setting daily case count records since the pandemic began. This comes even as vaccination rates have climbed to around 70% on the continent according to the European CDC (Link).

What can we take away from this recent uplift?

• Reinforces the idea that there will be a "flu-like" surge of Covid-19 each winter moving forward.
• ~70% vaccination rates in the population do not prevent large scale outbreaks of Covid-19.
• There is no singular solution to combatting this virus and ending the pandemic. We need to continue the fight using multiple tools, including:
• Vaccines
• Anti-Viral drugs (Pfizer's new covid-19 pill is great news on this front: Link)
• Social Distancing
• Increased hygiene across the population

Covid-19: The Coming Employment Crisis

The impact of the pandemic hitting the global economy is unprecedented. Let's look at one data point in particular, employment. One facet of the post 2008 financial crisis expansion has been a slow but steady increase in employment. Covid-19 brings an abrupt end to that.

As you can see below, estimates are that within two weeks, the US will have around ~2.25M initial jobless claims. For comparison, the prior all-time peak topped out at ~695,000 Americans two years into a recession in 1982. The speed of this crisis is breathtaking.

Policymakers are now faced with an enormous crisis; keep people healthy while also keeping people employed. Sending out an immediate $2,000 to each person is a good start.

McDonald's Acquisition of Dynamic Yield - Software Continues to Eat the World

Last month, McDonald's made headlines by announcing it's largest acquisition in over 20 years, dishing out $300M for seven year old Dynamic Yield. A noteworthy move by the fast food giant that requires a second look:

Below listen to CEO Steve Easterbrook speak about the acquisition:

Items that stand out:
1. Mass personalization as opposed to mass generalization is the future of the service industry. No two menus will be the same, each customer will see entirely different ordering options much the same way two users see different Google search results now. This applies to all customer facing applications... on mobile, at a self order kiosk in a physical store, or on the drive thru.  

2. Software continues to eat the world. Algorithms replace repetitive human labor. What was once run entirely by labor intensive humans will not be digitized. The future looks something more like: Driver A's autonomous vehicle moves into McDonald’s drive through lane, a video monitor recognizes the car license plate or face of the driver. Software then quickly determines the personal preferences favor healthy options and there is only one occupant in the car. As the vehicle approaches the ordering screen, the menu will display salad options more prominently. 

3. Buzzword BINGO will never die. Listen to the video above to hit your letters... 'intelligent menu boards' / 'data mining' / 'digital platform' / 'personalized experience' /... even Amazon got a name check! 

Below is the original article written by Marc Andreessen in 2011:                                                       "Why Software is Eating the World"

Update: Federal Reserve Balance Sheet

During Fed Chair Jay Powell's testimony this week, it was made clear that the Fed Chair is looking to walk back comments made in December 2018 that the balance sheet reduction was on 'autopilot'. This comes just months after Powell first made the ‘autopilot’ statement and equities responded with a torrid sell off, falling close to 20% before ultimately bottoming on Christmas Eve. 

This turn around can lead investors to a couple of conclusions. First, the FED clearly takes into consideration ‘financial conditions’ or more likely, equity valuation / stability. The FED put, initially thought lost during chair Powell’s first few months, is alive and well. Second, the financial sector and the economy as a whole are less able to absorb a tightening of monetary policy than previously thought. 

Throughout 2018, there was substantial discussion that the FED balance sheet runoff was going smoothly, that the economy was humming along, with some commenting that the global economy was expierencing ‘synchronized global growth’. The below chart shows how far the FED has moved, after growing the balance sheet by over $3 Trillion, just ~$400B has rolled off. Relative to the increases, this was nothing and yet markets roiled up, volatility spiked, credit spreads were widening, and liquidity all of a sudden was being talked about as a risk. Economic growth may have even slowed as result, as businesses and consumers, concerned at the equity volatility, delayed spending / business investment in Q4. Now, the FED appears to have backed themselves into a corner on the balance sheet. The party’s back on, so let’s get up and keep dancing.

Photo Post #9: Roosevelt Island, New York NY

Panoramic View of Manhattan from Roosevelt Island, January 2018. © Chris Besserer

© Chris Besserer

The view of Manhattan from Roosevelt Island. Temperature, 5 degrees Fahrenheit.
© Chris Besserer

© Chris Besserer