Covid Omicron: The bears have Thanksgiving

— Will the Bulls have Christmas?

— “There are known knowns. These are things we know that we know. There are known unknowns … ” — An apt description of the new world of Covid Omicron.

— Worst case scenarios

— Too Much Information — the number of mutations on the spiked protein 

— Take a deep breath. Settle yourself and recap some recent Covid/market history. Santa may be delayed, but still on his way.

Will the bulls have Christmas?

There is an old adage in the commodities markets that goes something like this: ‘If the bears have turkey for Thanksgiving, the bulls will have it for Christmas’. There is no question that the bears feasted heartily the day after Thanksgiving as Covid Omicron-style burst onto the scene. It has provided us with a new load of “known unknowns.” As we all know the market loves uncertainty (not). Combine that uncertainty with the holiday-abbreviated Friday trading session and a market that is pretty skittish anyway (the UST 10-year fell 16 basis points to close at 1.483%) and you had the ingredients for a better than 2% decline in all the major indexes. The ‘sell first, ask questions later’ rule was in effect.

What is the worst case?

I believe that the worst case in the case of covid Omicron is that we’re all dead — in which case who cares about the market?

A more likely worst case is that Omicron is more contagious that Delta. It overpowers current vaccines with many more breakthrough cases (albeit those breakthroughs would be less severe). We go back to mandatory masking, social-distancing but no lockdowns (I think we’ve learned our lesson). The economy slows causing inflation fires to be muted. Then we would have to wait three or four months for the next breakthrough RNA derived vaccines from Bio-N-Tech/ Pfizer and Moderna. Meanwhile we go through our daily lives with inconvenience but, again, no lockdowns.  Even if the Omicron variant is more lethal or contagious (at this time we have no evidence of either) masking and distancing should still be a gold standard providing good protection. THIS IS NOT OUR FIRST RODEO nor will it be our last. Seems like Covid has become endemic … just like common influenza. We need to get used to it.

None of the media coverage focuses on the positives: how quickly this new version was detected or the preventive measures (including improved contact tracing) and travel bans that have already been put in place to deal with the problem. The news may also encourage those who have not been vaccinated to take the precaution.

Too Much Information … The Number of Mutations on The Spiked Protein

The media has given special attention to the number of mutations on the spiked protein of the Omicron variant as a big red flag. This concern is because the receptor on the spike protein is where antibodies would attach to kill the virus. Interestingly, according to Dr. Peter Hotez, Professor of Pediatrics and Molecular Virology and Microbiology at Baylor College of Medicine, both the Lambda and Beta variants had a disconcerting number of mutations on the protein and basically amounted to nothing. He thinks the Delta variant should be our major concern as it is still raging in certain parts of the country, something the market did not seem too concerned with prior to Omicron). Hotez also suggested the we should have clarity on the infectious nature and disease severity of the Omicron variety in the coming week.

The above account and attached video clip gives valuable perspective, missing in most media accounts of the last few days. It is a prime example of how fear sells and perspective takes a back seat in the reporting of stories. As I’ve said before, the media is not your friend in the investment decision process.

Time to Chill

It’s time to sit back, relax and give thanks for all our blessings. Knee-jerk reactions to news items such as that we saw last Friday are seldom wise but do create opportunities. In my mind the severity of Friday’s decline signifies a level of fear not present at the usual bull market top. The secular bull market continues. Santa may be delayed but he is on his way. The bulls will have Christmas!

What’s your take?

P.S. “The companies (Pfizer and Moderna) said they can adapt their mRNA vaccine within six weeks and start shipping batches within 100 days if an escape variant is identified.”