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Fallback Thursday – Stocks Continue to Slide

148,538 new cases yesterday.

1,537 deaths from Covid in Wednesday as we prepare to mark the 20th anniversary of 9/11, when 2,996 people died in a terrorist attack and the whole country mobilized and did whatever it took to prevent another one including, for some reason, going to war against Iraq and Afghanistan.  We haven't gone to war against Covid – at best, we've sort of tried to avoid it.  At one time, it was possible to eradicate the virus but that window has closed and now the World Health Organization says we're just going to have to get used to Covid being one of the leading causes of death.  

If the world had taken early steps to stop the spread of the virus, the situation today could have been very different, WHO officials said.

“We had a chance in the beginning of this pandemic,” Maria Van Kerkhove, the WHO’s technical lead on Covid-19, said Tuesday. “This pandemic did not need to be this bad.

Cold and Flu Season is Coming!!Well, that's water under the bridge now.  Only that water will be getting us wet for the rest of our now-shortened lives and we're about to run headlong into regular flu season, where every time you cough or sneeze you now end up thinking "Is this IT?"  That can be kind of stressful, don't you think?  

652,699 people have died of Covid in the US so that's 1 in 500 and we'll have to "learn to live with it," apparently.  Going back to school has, in the first month, led to 30,000 children being hospitalized with Covid in August and the North hasn't even opened yet.  

Pediatric hospitalizations, driven by a record rise in Covid-19 infections among children, have swelled across the country, overwhelming children’s hospitals and intensive care units in states like Louisiana and Texas.  “It should concern us all that hospitalizations — indicators of severe illness — are rising in the pediatric population, when there are a lot of steps we could take to prevent many of these hospitalizations,” said Jason L. Salemi, an epidemiologist at the University of South Florida, 

Public health officials and experts also caution that even small increases in the number of pediatric Covid-19 patients can put a major strain on pediatric hospitals and I.C.U.s, many of which are already overstretched with nursing shortages and an unusual summer surge of respiratory syncytial virus or R.S.V.  “The average pediatric I.C.U. in the U.S. has 12 beds,” said Dr. Christopher Carroll, a pediatric intensivist at Connecticut Children’s Medical Center. “In a system that small, even a few patients can quickly overrun the capacity. And there are fewer specialty trained pediatric clinicians to pick up the slack.”

More child Covid-19 cases — greater than 250,000 — were recorded in the past week than at any previous point in the pandemic, according to the most recent American Academy of Pediatrics survey of state data. More than five million children have tested positive for Covid-19 since the pandemic’s start.

Public health experts caution that the magnitude of childhood infections matters even if most cases are mild, because scientists are still working to understand the long-term impacts of the disease, including “long Covid,” the presence of lingering neurological, physical or psychiatric symptoms after Covid infection.  “These are children whose development and futures may be compromised,” said Dr. James Versalovic, the interim pediatrician in chief at Texas Children’s Hospital. “The collective impact when we look ahead is significant.”

And that's why Covid is economically important to pay attention to.  At the moment, stimulus money is papering over our problems but that can't go on forever and that means, at some point the loss of life and the loss of productivity is going to matter and it will have a sharply negative impact on the economy – because so far it's having none in this artificial environment.

Speaking of stimulus, we're only running a $3.2Tn deficit this year so why not pass another $4.5Tn in stimulus?  To be fair, $3.5Tn of it is over 10 years and is only a drop in the bucket for what we need to address our crumbling infrastructure, modernizing the power grid and combating global warming – more like $20Tn on the low end.  You can see how hard it has been to get just the $3.5Tn passed so we're probably doomed – it's just a question of how soon, I suppose…

I know I come down on both sides of the debt issue – we do NEED to spend money on Infrastructure and Climate Change – it HAS to be done, but those are investments in our future.  Rather than giving tax breaks to rich people and corporations to incentify better behavior (as if that works), why doesn't the Government just build the stuff and make the money back charging for the services in the future – like tolls on the highways and the Tenessee Valley Authority, which was created by Congress in 1933, and is a self-sustaining entity to this day.

Let the people invest in these infrastructure projects through bonds that can pay double the interest we get in the banks and, if we still feel the need to give rich people more money – make them tax-free bonds so we can all invest in a better future.  Now that's good SOCIALISM!  

 


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  1. good morning, hoping to get a booster today…. question? I've heard its actually better to get the third from the opposite of previous manufacturer. Its supposed to give you a broader spectrum of protection.


  2. stockbern ive had both phizer shots im hoping to get moderna as booster it sounds to be strongest protection.


  3. Socialist – I like to call myself a 'Progressive' – sounds better and it's difficult to taint….


  4. Good Morning!


  5. Comment content omitted because it is too long.


  6. Boosters/all  – the booster talk started because of the rise in breakthrough cases. We thought the breakthroughs were caused by 1. delta variant being 3 time more contagious than the previous (alpha) variant. 2. delta having immunity evasion skills. 3. the vaccine-induced immunity fading within months.

    Turns out we can explain the breakthrough cases entirely with point 1. Further, point 3, upon examination, is patently false, it's looking like vaccine immunity will last at least a year and possibly longer, and point 2 is questionable as immunity evasion compromises infectivity.


  7. Ilene- Thanks for the links to the articles. Possibly you have a more generous view of our government and corporations than me, but the original testing was done on mice in early 2000. Another article in the same Smithsonian magazine IS A VACCINE FOR ALL SEASONS research done by Sonya Maynard and Mathew Twombly. It actually shows the steps needed for the universal vaccine. Also Dr. Fauci is quoted about the ineffectiveness of the "regular flu" vaccines. The meeting he was at was titled,"Pathway to a Universal Flu Vaccine."Remember this is 2017 right at the doorstep of where we are now. "In the flu season that ended in the Spring of 2017, the vaccine had prevented illness in just 42% of the people who took it." quote from Dr. Fauci. There are also numbers from  the CDC and he does mention that those who cannot take it because of allergies to one of it components, which you never hear anything about now. Anyways, everyone has to do what they are comfortable with, but as the old saying goes, " The horses are already let loose from that burning barn." Too little and much too late is my thought.


  8. Snow- Perhaps you can answer this question. When they do a covid test do they check for the Delta variant as well as the Alpha? 


  9. Stock, fine to get the same booster. There are some reports of benefit be crossing to another manufacturer but largely the codon overlap of the vaccines is significant. Meaning they are very similar in structure. So not likely a real difference. 
     

    I got Pfizer, plan to get Pfizer booster. Delta seems to require higher antibody titers to be protected thus the perceived added benefit of the booster. 
     


  10. Pirate, no, the test returns a positive or negative result at the point of care. The sample can be sent for sequencing to identify the strain. 


  11. Pirate/test – generally not – the covid test might be either the speedy test or the more expensive PCR test (which most places are doing with a mouth swab nowadays). Anyway, in a certain proportion of those, the variant is tested, mostly for public health surveillance purposes. Doesn't mean much for clinical purposes; treatment is still the same mostly.


  12. Jeffdoc-Thanks for that info. Sent to State Health Depts I presume, not CDC.


  13. Snow- Speedy test is the sputum and PCR is the swab. Good to know.


  14. Pirate – the CDC generally does not collect data directly. It starts with the local health departments (which are often non-functional (https://www.npr.org/sections/health-shots/2021/08/06/1024933341/detroit-public-health-privatize-covid-bankruptcy)), is sent up to the state health department (again, often not very functional – budget cuts, etc) then is sent to the CDC who collates it. The poor function of this system is a major reason for the US struggle with this – and any – epidemic.


  15.  They delayed release of oil report until 11am. 


  16. Phil your response didn't get through. "Said too long."


  17. snow- from personal experience with the State of Wisconsin Health Dept I certainly agree with your assessment. Just makes it all the harder to control this blasted virus.


  18. PrivateInvestor:

    Although I may have a more positive view of pharm companies (I'll leave gov out because that depends), the main reason I disagree with you is that there is no concerted effort or conspiracy to suppress advancements in vaccines or cures for diseases — and I think you are saying there is. I spent years working in a medical research lab. Things take time, from conception and theory, to tests in animals, to trials in humans to eventual, possible success. (I found the article you're referring to!) Mice and humans are very different. Many things that may work in mice, or theoretically, don't work in humans. Articles I found doing a quick google search show that developing a universal vaccine for the flu has met with serious obstacles and is still being pursued. 


  19. Oh no, I didn't realize my comment was lost.  Gone now…

    Delay/Tommy – Normal on holiday weeks.

    Nice net holiday drawdown overall (ignore the headline).

    • Energy Information Administration Petroleum Inventories: Crude -1.5M barrels vs. -4.6M consensus, -7.2M last week.
    • Gasoline -7.2M vs. -3.4M consensus, +1.3M last week.
    • Distillates -3.1M vs. -2.6M consensus, -1.7M last week.
    • Futures (CL1:COM +0.6%)
    • ETFs: USOUCOSCOBNODBOUSL.
    • The American Petroleum Institute reported late Wednesday that U.S. crude supplies fell by 2.9 million barrels for the week ended Sept. 3.

    Earlier I was talking about the way we were bouncing back but that faded again.

       

    Also out of oil short at $68

        


    • Microsoft (NASDAQ:MSFT) CEO Satya Nadella said Thursday that innovation in digital technology will help alleviate some of the inflationary pressures that have hit the economy by making work more productive.
    • In an interview with CNBC, Nadella also argued that a hybrid workplace leads to a "paradox" where people want flexibility at the same time they want to preserve human contact.
    • The Microsoft CEO contended that digital technology can solve both problems at once, keeping work productive in a hybrid situation and ultimately driving down inflationary pressures.
    • "The thing that is most needed going forward in order to deal with all of the constraints in the real economy is the malleability of some of the digital technology," he said.
    • Commenting on Microsoft's place in driving this innovation, Nadella pointed to the company's integrated software as its main competitive advantage.
    • He said that by offering software in multiple categories that can also interact with each other through the cloud, the company provides a unique option for customers.
    • "We want to compete in each category on its own, but if somebody asks me 'what's the differentiation of Microsoft?,' it's about the Microsoft cloud," he asserted.
    • For more on MSFT's investment prospects in the current market, check out a report from SA contributor Envision Research, which calls the stock "a perpetual compounder at an overvalued price."

    • In preparation of peak holiday season, UPS (UPS -1.1%) expects to hire more than 100,000 essential seasonal employees to support the anticipated annual increase in package volume that will begin in October 2021 and continue through January 2022.
    • Over the last three years, about one-third of people hired for seasonal package handler jobs were later appointed in a permanent position.
    • The company encourages all candidates to receive a COVID-19 vaccine.
    • Last week, Walmart (NYSE:WMT) announced to hire 20K supply chain associates.
    • Last month, The Michaels Companies (NASDAQ:MIK) announced to hire 20K seasonal employees.
    • Citi fires off downgrades on paint companies PPG (PPG +2.1%), Axalta Coating (AXTA +1.6%), and Sherwin-Williams (SHW +0.0%) after both PPG and Sherwin-Williams lowered Q3 guidance.
    • "Shortages, pricing headwinds, and the effect of the semi shortage on Auto OEM builds" have led to the lower outlook writes analyst P.J. Juvekar.
    • Prices for paint ingredient Propylene have risen ~80% YTD, while hurricane Ida took down ~55% and ~30% of production capacity for the chemicals MDI and chlor-alkali, respectively.
    • It's certain that coating companies will increase their prices, says Citi, but it may take the typical 3-6 month lag period before the offset is realized.
    • Wall Street analysts were previously bullish on the paint stocks while Seeking Alpha's quant rating placed neutral or bullish grades on them.
    • Gun stocks are seeing slight gains this morning following news that President Biden plans to withdraw his nomination of David Chipman to head the Bureau of Alcohol, Tobacco, Firearms and Explosives.
    • Chipman, a former ATF agent and gun control advocate who has been criticized by gun rights groups and Republican senators, needed every Democratic and independent senator's support in a divided Senate, which didn't happen.
    • The result hurts Joe Biden's plan to end what his administration calls the "gun violence epidemic" in America as Chipman agrees with Biden's stance on banning assault weapons and limiting high-capacity magazines.
    • Interestingly, gun sales generally rise when politicians call for greater restrictions, as buyers stock up on gun purchases before the regulations go into place.
    • Interested tickers include AMMO (POWW), Smith & Wesson (SWBI +0.9%), Sturm Ruger (RGR +1.5%), Big 5 Sporting Goods (BGFV +3.7%), Vista Outdoor (VSTO +1.5%), Olin Corporation (OLN +1.0%), American Outdoor Brands (AOUT +1.9%), National Presto (NPK +1.5%), Axon Enterprise (AXON +2.2%), and Sportsman's Warehouse Holdings (SPWH -0.4%).
    • The vaping industry is also under watch as the FDA is deciding if e-cigarette companies will be allowed to continue selling their products in the U.S.
    • The Food & Drug Administration is expected to ask for additional time to decide if Juul Labs Inc. (JUUL) can still be sold in the U.S., the WSJ said, citing people familiar.
    • The FDA has set a deadline of today to decide on which e-cigarette makers can still be sold in the U.S.
    • FDA officials have previously said they won't be able to make decisions by today on every product submitted for review, though they said they would fast-track those with the biggest market share, according to the DJ report. The biggest e-cigarette maker in the U.S. is Juul, in which Altria (NYSE:MO) has a 35% stake.
    • Also see, Vaping industry on edge as FDA decides fate of e-cigarettes.
    • Alibaba Group (NYSE:BABA) is known for its position as a giant in China's e-commerce market. And on Thursday, the company said it would do something to help smaller businesses in the United States improve the online operations.
    • The company said its Alibaba.com division is launching a series of new tools, and a grants program, to provide support for current small- and mid-sized e-commerce businesses. Or, what Alibaba (BABA) calls "New Digital Entrepreneurs".
    • Among the new tools are what the company calls its Dropshipping Solutions, which gives businesses the ability to better reduce inventory and bring new products to the marketplace. The company also said its Alibaba.com app would be available on the Shopify (NYSE:SHOP) app store and make it easier for adding new products to their retail stores.
    • Other new services include a virtual reality showroom on Alibaba.com, and live video chats and on-demand videos that let businesses communicate directly with suppliers about their products.
    • Alibaba (BABA) also launching a $500,000 program in which entrepreneurs can apply for grants of up to $10,000 to fund their e-commerce business efforts.
    • Last week, Alibaba said it would invest the equivalent of $15.5 billion over the next five years in China's national "common prosperity" drive.

    • Lululemon Athletica (NASDAQ:LULU) CEO Calvin McDonald said Thursday that the company's recent Street-beating earnings report shows that "all cylinders are firing" at the athletic clothing maker.
    • Still, McDonald told CNBC that the brand remains in "the early innings" as it looks to expand in a post-COVID economy.
    • Lululemon (LULU) reported a quarterly profit that beat expectations by nearly 39%. Meanwhile, revenue jumped almost 61% from last year to reach $1.45B.
    • The Lululemon CEO acknowledged that the company received a boost during the pandemic as people turned to more comfortable clothes during lockdowns.
    • However, he noted that the firm is well-positioned for the post-COVID world as well, as consumers remain interested in fitness and functional apparel.
    • Looking ahead, McDonald said the company faced higher costs from freight expenses, supply disruptions and increased wages.
    • But he believes the firm can overcome the higher costs because LULU doesn't rely on discounts to drive sales, helping it avoid margin compression.
    • Fueled by the earnings report, LULU jumped nearly 12% in Thursday's intraday action, trading at $427 shortly after 10 AM ET. Shares also set a new 52-week intraday high of $434.22 early in the session.
    • LULU rose steadily starting in mid-May before settling into a range for the next few weeks. But the stock had trailed off a bit heading into the earnings report, with Wednesday's close just prior to the release of quarterly results marking LULU's lowest finish since July:

    • Still, LULU has significantly outperformed the broader market since the stock started gaining ground in mid-May. It's returned 21% over that period vs. just 9% for the S&P 500:

    • McDonald's (MCD +0.2%) will launch the McPlant, a meat-free sandwich made in partnership with Beyond Meat (BYND +1.0%), in the U.K. and Ireland beginning at ten locations in Coventry on September 29 and rolling out nationwide during 2022.
    • The company did not release a timetable for release in the United States.
    • The McPlant will be cooked away from meat products and is fully credited as vegan by the Vegetarian Society. It will cost the same as a Big Mac at £3.49.
    • Plant-based fast food could be a growing market. According to a study by The Vegan Society, 54% of Brits bought meat alternatives for the first time during lockdown and 78% of those said they would continue to do so.
    • Consumers and investors have been waiting for the McPlant burger for three years as McDonald's began testing of plant-based menu items in various countries. Competitor Burger King (QSR -0.1%) began selling its Impossible Whopper at all U.S. locations in 2019.
    • The stock market and the bond market are looking for catalysts as investors ingest the latest rate decision from the ECB and the Fed's Beige Book out yesterday.
    • The S&P 500 (SP500) +0.1%, the Dow (DJI) +0.1% and the Nasdaq (COMP.IND) +0.2% are up slightly..
    • The 10-year Treasury yield is flat at 1.34%.
    • The ECB kept rates unchanged but said easy conditions "can be maintained with a moderately lower pace of net asset purchases under the pandemic emergency purchase programme (PEPP) than in the previous two quarters."
    • ECB President Christine Lagarde refused to call it tapering in the press conference, but said the central bank will be "recalibrating" stimulus over the next three months.
    • The target of 2% long-term inflation still looks a ways away, with the underlying inflation target for 2023 at 1.5%.
    • Tapering is also still top of mind in the U.S.
    • "The economic problems described in the Beige Book, especially supply disruptions and labor shortages, cannot be fixed with easy monetary policy," UBS Senior Economist Brian Rose writes. "Meanwhile, it is becoming clearer that inflation is likely to remain far above the Fed's target for some time, fueled in part by businesses passing along the cost of rising wages to their customers."
    • "In our view, this is likely to encourage the FOMC to take further steps toward tapering at their meeting on 22 September."
    • China gaming stocks took a hit on a report that regulators will halt approval for online games.
    • GameStop is down sharply after disappointment in its earnings call.
    • See the other individual issues making the biggest moves this morning.
    • Rick Rieder, chief investment officer of global fixed income at BlackRock, said Thursday that "time has come" for the Federal Reserve to back off from its emergency-stimulus programs by beginning to taper its asset-purchase program.
    • However, even though he sees tapering in the near future, Rieder told CNBC that interest rates would likely remain low "for a long time," as the central bank will delink decisions related to asset purchases from its rate-hike decisions.
    • The BlackRock executive argued that the Fed should cut back its stimulus because central-bank policy acts largely on demand, while the issues facing the current economy focus more on supply.
    • Rieder contended that the main economic challenges currently come from lingering COVID risks and from supply shortages.
    • "[Monetary policy] modulates demand. None of those factors are affected by monetary policy," he said.
    • Rather, Rieder contended that "there's an input problem in the system" that needs to work itself out over time.
    • Commenting on the current bond market, Rieder said that "the real rate is just priced wrong" given the current economy, because of the Fed's continued intervention.
    • Turning to the cryptocurrency market, Rieder said he held a small amount of Bitcoin (BTC-USD) because he sees more people moving into the market over time. However, he did not view it as a core asset like stocks or bonds, citing the volatility of the crypto space.
    • As for monetary policy, the Fed isn't the only central bank trying to figure out how to ease its emergency-stimulus programs. Early Thursday, the European Central Bank announced that it would be reducing its own asset-purchasing program.


    • About a third of U.S. consumers using "Buy Now, Pay Later" ("BNPL") services have fallen behind on one or more payments, Reuters reports, citing a study published by personal finance company Credit Karma. That proportion of late payments, though, improved from the end of 2020.
    • In addition, 72% of those who have fallen behind have seen their credit score drop. BNPL services allow consumers to pay for purchases in installments. The most common plans split up the purchase price into three or four installments.
    • The study, conducted by software firm Qualtrics, found that 44% of the 1,044 adult consumers surveyed had used BNPL services, up slightly from a previous survey conducted in December, Reuters said. The number who had missed payments at that time was 38%.
    • Younger consumers were more likely to miss payments, the survey found, with more than half of Gen Z or Millennial respondents (born between the early 1980s to mid-late 1990s) missing at least one payment. By comparison, only 22% Gen Xers (born in early 1960s to early 1980s) and 10% of Baby Boomers missed at least one payment.
    • The trends in BNPL payments will affect such companies as PayPal (PYPL +1.0%), Affirm Holdings (AFRM +2.8%), and Afterpay (OTCPK:AFTPF +1.4%). Closely held Klarna (KLAR) is another major player in the space.
    • Competition in the BNPL space has heated up as consumers increase their usage of installment plans. On Tuesday, PayPal agreed to buy Japan's Paidy for $2.7B to bolster its BNPL presence in Asia. And last month, Square (NYSE:SQ) agreed to pay $29B in stock for Australia's Afterpay, giving it a BNPL business.

  20. AMGN breaking down today


  21. Covid, debt ceiling, supply chain issues, inflation, FED tapering, China regulatory changes 

    nothing to worry about 


  22. SAM   look at Boston Beer Co    I was $1340 in April , now $530.  They are literally throwing away beer , well actually hard seltzer. 

    you can sell the Dec22 $400 puts, the lowest available,  for $49 .  Phil is that a reasonable entry? 


  23. Phil – any thoughts on LyondellBasell (LYB)? 4.9% yield; I think they should make 5B+ this year, and have a 31-32B market cap. Polyethylene prices are skyrocketing, and they are among the largest manufacturers. 


  24. SAM/Stock – $1,340 was an $18Bn valuation for a BEER company making $300M at most.  60x earnings is ridiculous and valuations do matter – eventually.   Now they are  back to $7Bn and a not so terrible 23x but I think their pop in sales on the seltzer fad may not last – so not for me.  

    LYB/RN – Funny how many of these very profitable Chemical Companies there are.  Good for $5Bn a year and you can buy the whole company for $31Bn at $92 and, my favorite kind of company – they even made $1.4Bn last year.  The dividend is $4.52 and the options are nice so, in the Dividend Portfolio, let's:

    • Buy 500 LYB at $92 ($46,000)
    • Sell 5 LYB 2023 $90 calls for $13 ($6,500) 
    • Sell 5 LYB 2023 $90 puts for $15 ($7,500) 

    Selling $14,000 worth of puts and calls drops the net to $32,000 ($64/share) and our worst case is we buy 500 more at $90 ($45,000) to average $77 but then we'd sell more puts and calls to drop our net to $60 so no fear on this one and we'll collect $3,390 in dividends while we wait to see if we get our full $13,000 profit if called away at $90.  That's $16,390 (51%) anticipated profits over 16 months – not bad for a "boring" dividend play,



  25. Weak finish but Russell is green for the Day. 

    Oil back at $68.