Covid-19

[weijian]

I was honestly disappointed that this indicates that there would probably not be any more (entertaining) debates to come.

President Donald Trump tweets he and first lady Melania Trump test positive for Covid-19

(CNN)President Donald Trump and first lady Melania Trump tested positive for coronavirus, the President announced early Friday morning, an extraordinary development coming months into a global pandemic and in the final stretch of his reelection campaign.

https://edition.cnn.com/2020/10/01/polit...index.html

[Wildreamz]

I'm fully expecting the Zoom debate that we deserve.

[Wildreamz]

@Holymage My portfolio is mainly FAANG and SaaS type stock, lol. I also own Tesla. Interesting perspective, because I disagree with much of them.

1. High valuation ("bubble companies") doesn't cause bankruptcy. In fact high valuation reduces the risk of bankruptcy because it's easier for the company to raise cash by selling equity (which Tesla did at $7-800) exactly a month ago. That said, a sharp downturn in the economy, and prolonged forced social distancing policy might bankrupt them, so Tesla is indeed facing some headwinds.

2. I don't see FAANG as very high valuation in general (Google now has trailing PE of 22, growing at high teens), with very strong balance sheet and cash position. Forced social distancing is actually a tailwind as internet traffic exploded the past few weeks around the world (which is cancelled out by a downturn in the economy in general). They are some of the safest bets in the face of this crisis.

Just my 2c 

Wildreamz,

Obviously high valuation doesn't cause bankruptcies. The bubble companies which I meant, are those that have cash flow issues and/or flaw business model, but are artificially propped up by low interest rates and investors euphoria (zombie companies). Another company came to mind, Blue Apron. The window for raising capital has already been closed for weeks, and all assets classes have been selling off for cash, even including traditional safe havens like gold and US Treasuries. Do you seriously think that Tesla is able to raise capital now? You must be kidding me.

US corporations are in record debt, and due to quarantines and a fear of being infected, there is a steep drop to the flow of money. With revenue freezed, expenses to be maintained, do you still think companies have sufficient cash flow to survive, much less heavily indebted companies. There is a reason why the Russell 2000 dropped 40% compared to the 30% drop in S&P. Unemployment claims has already started rising in various states.

Google has a strong balance sheet for sure. No dispute about that. But Google and Facebook are predominantly in the advertisement industry, with majority of market share. Do you think businesses that are suffering amid declining consumer demand, will still advertise? Would you continue to advertise if you own a small business and is bleeding cash? This is different from 2008 when Google has a tiny share of the advertising space. Your thinking is a typical, and simple extrapolation and assuming revenue will keep growing in a linear manner, and there will never be a recession. 
More likely than not, Google's earnings will shrink in the impending recession (if we are not already in one), your "low/moderate" PE of 22 will just grow larger as earnings drop. Maybe the PE will decrease, as the share price falls faster. Same applies for the other FAANG.

Just my 2c.
When the time comes, I will definitely revisit this post again, let's see what comes to reality 

PS: Tesla raising capital, either indicates that Elon Musk is a great capital allocator or Tesla has serious cash flow issues. I am betting on the latter.

Good luck.

Google (bellwether of the advertising industry) just released earnings: +14% Revenue growth year on year. So at the depth of the COVID crisis (last quarter), it saw -1.66% revenue growth.

Tesla just reported fifth consecutive quarters of positive GAAP net income (a record), and reached record revenue (+39% y-o-y) last quarter on the highest EV market share and deliveries. 

Perhaps this is a short-term blip, let's visit this again in 12 months.

[Wildreamz]

https://www.channelnewsasia.com/news/wor...e-13500370

Pfizer says early data signals COVID-19 vaccine is 90% effective

[Raks]

https://www.channelnewsasia.com/news/wor...e-13500370

Pfizer says early data signals COVID-19 vaccine is 90% effective

Usual Pfizer PR tactic. Announce first, data later. 

AZ data should be published next week (together with PR). If it's another good news the market sentiment will be even better. But even good vaccines will take time to have an impact on real earnings in travel companies etc.

Mass vaccination program is challenging, even more so in countries with anti-vaxxers. Another factor is increased distrust towards government agencies. Even non-anti-vaxxers are doubting the "rushed" vaccines. 

https://www.ft.com/content/f1966dd4-1c21...634d8d9f16

[Wildreamz]

..

Even non-anti-vaxxers are doubting the "rushed" vaccines. 

https://www.ft.com/content/f1966dd4-1c21...634d8d9f16

Understandable. It depends on how robust the safety and efficacy data is, and how effective it is communicated.

[weijian]

Not exactly a movie bluff, but rushed vaccine programs do bring me flash backs of a movie called "I am Legend"

I think our world needs more optimism and the stock market works based on sentiment more than anything else, as we know it. There are definitely huge logistics issues as we progress towards the immunization program but I reckon that those most seriously affected by Covid-19, like old people, folks in the service/hospitality industries OR even those whom familial ties are separated by a causeway, requires hope to look forward to, and vaccine news provide that.

[Wildreamz]

By the way, for context, flu vaccine typically has an efficacy of only 40-50%.



source: https://www.cdc.gov/flu/vaccines-work/ef...tudies.htm

This 90% efficacy is unexpected, which is why there is such a huge market reaction (overreaction?).

[gzbkel]

The economist has a good article on the vaccine:
https://www.economist.com/science-and-te...e-pandemic

[Raks]

The economist has a good article on the vaccine:
https://www.economist.com/science-and-te...e-pandemic

Yes, it's the beginning. Very interesting to see such optimism; and the quick dumping of "stay - at - home" shares. 

More results will come in one by one - a few vacs had their 3rd phase in mid/end Sep. If everyone releases good prelim or midway data in Pfizer manner, the market will remain buoyant for the coming months. Prelim data usually look better at effectiveness when it has a small sampling size. 

We are probably quarters away before vaccines cure the pandemic & economy.