April 16th, 2020 is a big day for our country. There is now a plan to begin reopening the country. The decision will ultimately fall to the Governors of the states. The pace of reopening will be determined by the situation impacting each state, as opposed to one process for the whole country. Reopening in an intelligent manner is badly needed, as the unemployment rate is now approaching 20%! In 4 weeks this has occurred. The health crisis is showing that the curve is flattening. Far too many deaths have transpired, and this is a global tragedy of epic proportions on many fronts, but it is getting better and we will beat this.
Another positive development occurred after hours in that the biotech company Gilead, announced very positive results with their drug Remdesivir in the treatment of Covid-19 on seriously ill patients. Here is a quick link to the study: Gilead Study
If you can treat the illness, the situation becomes much more manageable. There are a number of other promising treatments including the HCQ, Zinc and Z-pack combo, antibody therapy, etc.
As far as the markets go, they are still panicked to a large extent. Barry Diller is one of the best executives in America and has run a variety of huge businesses. He is currently chairman of the online travel booking service Expedia. Today on CNBC he said, “we spend $5 billion a year on advertising (at Expedia). We won’t spend $1 billion on advertising probably this year.”
Nothing like this has ever happened to our economy. A statement like this impacts some of our country’s biggest tech names such as Facebook and Google over the short-term. The top 5 stocks in the S&P 500 currently account for a larger percentage of the index than at the dot com peak, and the most since the 1970s. Stocks like Amazon seem invulnerable, but both the previous examples of when this occurred turned out very badly for the most popular stocks. In contrast, the bank index now trades at an even lower valuation relative to the S&P 500 than it did during the Global Financial Crisis. This makes absolutely no sense. I’m going to list my last 3 research reports completed this week on J.P. Morgan, Citigroup and Bank of America and you can judge for yourself. Read them over if you are worried about our financial system. This is one of the greatest buying opportunities we will have in our lifetimes. Don’t get me wrong, it has been a miserable year on many fronts, but at some point the fundamentals will matter, most likely when the panic subsides.
Germany is opening up and even Italy and Spain are starting the process. All the best minds are working to fight this virus. While the situation is dark now, think of what things will be like one year from now. Everyone I talk to seems to have a new appreciation for the things we took for granted. There will be changes that last and there will be things that go back to the way they were. After the Spanish Influenza, Baseball became our national pastime for heaven’s sake. As businesses restart, jobs will come back. Damage is done to our economy, but we will be in a heck of a lot better spot than we are in right now! Here are the articles, which I hope that you will enjoy.