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2021: Back to Normal?

Like everyone else, I am weary of this pandemic mess. I want to travel freely, enjoy dinner with friends, see a movie, and give a hug or shake hands.  And, of course, I want everyone who lost jobs and businesses to get them back.


Alas, that’s not going to happen. At least not quite yet.  The recovery in front of us will be slower than we’d like.


The history of our world shows continual improvement over time. Extreme poverty keeps dropping significantly every decade, although this year was a major setback. But that trend will eventually return. We will get through this. Yet the world on the other side will be different. In some ways, it will be better, primarily because of technology-driven innovation, but don’t expect the old world of 2019 to return. It’s gone.


Having a general idea of where we are going is great, but how we get there is important, too. Today I want to offer some informed speculation about how the next year will unfold. We’re going to reach some key decision points in the coming months and you’ll make better decisions if you think about them before we get there.


In a way, this is like getting the full schedule when planning a child’s school year.  When you know when their vacations are, when grades come out, when games are played, it’s easier to do planning. Sometimes those dates are inconvenient, but it’s better to know the schedule.


Landmarks Ahead


I’ll start with some info from an excellent article from STAT, the healthcare news service founded by hedge fund titan John Henry. I find its pandemic coverage far more enlightening than the mainstream media.


On September 22, STAT ran a long article titled “The Road Ahead.” It lists more than a dozen key moments that could either change the pandemic’s direction in the US, or at least give us important information. At this point no one knows what any of them will bring, but they are worth considering. I’ll share just a few.


January 2021: One year after cases exploded in China


A year after the coronavirus came to our attention, we’ll likely still have basic questions about it, including how long immunity lasts. There’s not an exact answer. Some people, depending on how sick they get or something intrinsic to themselves, will be protected from reinfection longer than others. But when the bulk of people who recover from a first infection become susceptible again, it can change the dynamics of outbreaks.


Protection from the coronaviruses that cause colds is thought to generally last about a year.  Beginning this month, a wave of the pandemic’s earliest patients might see their immunity start to wane.  It’s hypothesized, though, that people who get a second case will typically have milder illnesses and maybe won’t be as infectious.


February 2021: Vaccine Distribution Accelerates


The companies and government are already working on plans to distribute the vaccine quickly. In December the US vaccinated 2 million people, well behind the goal of 20 million established in Operation Warp Speed.  Experts like to say, “Vaccines don’t stop disease, vaccinations do.” We should get to where we need to before summer.  I’m optimistic but this is not guaranteed. And if we don’t have a nation-wide vaccination campaign on the launchpad early this year, the rosiest 2021 economic recovery forecasts may need a review.


March 2021: One Year Since US Outbreak


March will mark a year since the initial European and US outbreaks. This will be a sad milepost, particularly for those who lost loved ones, but also an important data point for the survivors.


First, we will want to see how many of the early patients remain immune. There have been scattered reports of reinfection in those who recovered. Researchers expect they will retain some immunity but it may recede with time. The answer has important implications for vaccine development and herd immunity calculations.


Second, we know many COVID-19 survivors continue to have ongoing health problems. How long do those last? Are they permanent? This matters a great deal, too, and by mid-2021 we should have a better grasp on it.


April 2021: Vaccines Round 2


Right now, our attention is on the promising vaccines that are being fast-tracked through the clinical trials and approval process. Many others are also in the pipeline, and by next spring we should start seeing results. Many of this “second generation” are truly novel approaches in vaccine science. I know it’s the optimist in me, but I will not be surprised if we find a new vaccine technology that is easier to deliver and that is clearly superior.


Some current technologies require the vaccine to be stored at super-cold temperatures. Newer candidates can be refrigerated normally or even kept at room temperature. That would vastly reduce the logistical challenges.


Meanwhile, by April, the first-gen vaccines should be widely available. The question will then become whether people will want them. Vaccines development, delivery and acceptance will be a big economic story this year.


By the way, the fact that a vaccine may not be 100% effective is not a reason to not take it. While it may not keep you from getting COVID-19, it could significantly reduce the symptoms if you are infected. Along with better therapies, your chances of a mild case and a quick recovery should be better.


Bluntly, I intend to get a vaccine. The question will be which one? I am simply going to get my doctor to tell me what he is taking. And of course, there is also the issue of availability.


May 2021: Spring Winds Down and Summer Begins


Canceled. Postponed. Virtual. That was what happened in 2020 to traditional rites of spring, like proms, graduations, and the beginning of wedding season.  This is a festive season that also includes Mother’s Day, Memorial Day and the summer break. May 2020 wasn’t particularly festive. What about May 2021?


At this point, we just don’t know. For it to be anything like normal, we will have to have spent winter and spring distributing a very effective vaccine to most of the population. That, combined with better treatments, might bring people back into circulation. It would mean everything went perfectly for months on end. Possible? Yes. Likely? Ask me next May. But if I were running a business that needs more foot traffic, etc., I would start preparing now for a better summer next year.


June 2021:  We need Americans ‘lining up to get the vaccine’


Finally, vaccines are widely available. Will Americans roll up their sleeves? The way out of the pandemic is to achieve herd immunity through vaccination, a point that will be reached when 70% or more of the population is protected.


Polls, however, indicate widespread, and growing, skepticism about how quickly a safe and effective vaccine can be made available. People of color, who have long histories of mistreatment by the medical field, are even more leery.


“The most effective vaccine in the world is useless if no one will accept it,” said Kawsar Talaat, a vaccine researcher at Johns Hopkins. “You can’t talk your way into trust,” Talaat said. “You need to demonstrate that you’re trustworthy, and that the process is trustworthy.”


July 2021: Olympic Dreams?


The summer Olympics, originally set for July 2020 in Tokyo, have been pushed back a year. Japan has been relatively unscarred by the virus, but bringing so many people from so many places together during a pandemic is risky. And there is also the question of what happens before the games. Will athletes around the world have had safe opportunities to train?


I think the best case is the Olympics will be a skeletal event, with small crowds and all athletes vaccinated and quarantined prior to competing.

By August 2021, we should have some level of clarity. Mass vaccinations will either be happening, or not. If the former, then we should be returning slowly to normal. Maybe by 2022 we’ll be shaking hands and hugging again. But what will be left, economically?

Disruptive Caution


The sequence outlined above may sound bleak. Obviously, we all wish it could end sooner. Possibly it will. A lucky break here or there could change everything for the better. But realistically, I think we should prepare for the disruption to continue well into 2021. And possibly beyond, if vaccine development and deployment (or therapeutics) take longer than expected.


The nature and degree of disruption is a matter of choice. I don’t expect to see more lockdowns like last spring – unless there are more virulent mutations. We’ve learned a lot since then. Masks, distancing, and staying outdoors effectively reduces the spread to manageable levels. But these measures don’t stop the spread, so many will remain cautious.


This caution is what disrupts the economy. It’s perfectly rational, too. If you have the option of working from home, you would probably rather do that than enter a building loaded with possible COVID-19 carriers. But it’s a problem for the restaurants, convenience stores, and other businesses you might have visited near your workplace. Multiply by a few million and here we are.


I can only think of two things that would change these decisions. If we have effective COVID-19 treatments, people will raise their risk tolerance. If you get infected, your doctor just prescribes some pills and you stay home a couple of weeks. Not great, but most people would take the chance. The other is a widely accepted, effective vaccine. You can act more or less normally if you know most of the people you encounter aren’t a threat to your health.


Nevertheless, the behavioral changes that sparked this recession will last a few more months, at least. Some may become permanent. How many people, prevented from going to their gym, have now adopted home workout regimens that are just as effective? Not to mention more convenient and less expensive? They may never go back to their gyms.


Ditto for personal care. Many people who once visited expensive salons to cover their gray roots have learned how to do it themselves. Ditto for manicures, skin care, etc. Bad news for salons and spas.


And conventions? Conferences? I suspect that it will be a while before they’re back.  My favorite strategic investment conference was originally schedule for Phoenix, but instead it became a virtual online event last year.  It wasn’t so bad and was actually better in some ways. I suspect many large events will never return to their previous size. That will be costly for airlines, hotels, restaurants, taxis, and more. Concerts? Bars? Again, they’ll reopen but probably with fewer customers. Which means these segments will shrink. Others will grow to take their place. That’s what entrepreneurs do.


I know it sounds cold-blooded, but nearly every airline other than Southwest has been in and out of bankruptcy. I fully expect air travel will be higher by the middle of this decade than in 2019, though the flight path there might be a little bumpy.  But that’s the long run. We have a big problem right now.


1930s Ahead


More than two months after the enhanced unemployment benefits ended, close to 25 million American workers are still on the rolls. This is a little bit off the high, but not much. Their initially generous benefits are much smaller now.


Meanwhile, the small businesses that received forgivable PPP loans in April/May/June have all ended their 24-week spending period and a new PPP program will soon begin. Whatever isn’t forgiven will convert into regular loans. In trying to help these businesses, the government will have saddled some with even more debt.


Further up the food chain, the airline payroll support program just expired. The large carriers are laying off thousands of workers. Retailers continue to close stores and reduce headcount in locations that lack customers.


Hauntingly, we are starting to see layoffs outside the retail and service sector, at companies like Allstate and Raytheon that weren’t directly affected by the pandemic. They are shedding jobs anyway. This suggests the recession is spreading into parts of the economy it hadn’t previously touched.


All this is going to continue as long as COVID-19 remains enough of a threat to create the behavioral changes described above. We are at least another six months (and that’s a best case) from a vaccine being widely distributed enough to help. Thousands of businesses and millions of workers don’t have the means to wait. They just don’t. They spent their cash and are running out of choices.


As you know, I am as worried about the massive government debt as anyone. But if we don’t spend what it takes to support the economy until a vaccine is ready, the next few years could rival the 1930s. I don’t say that lightly. I see a wonderful long-term future but a giant canyon is opening between then and now.


Historically the general wisdom was that Washington gridlock was a good thing for the economy.  The general wisdom is now shifting as government inaction has become the bigger threat. 


Obviously the two parties see things differently. That’s not new. Until recently, they found ways to compromise. They need to do it again, or we will all pay a heavy price.


And that price will be borne by those least able to afford it. This chart from the Washington Post speaks volumes.  Which recession doesn’t look like the others?




A more modest second stimulus package has now been signed into law.  The new PPP “second draw” loans focus on those that were hardest hit.  Applicants must demonstrate a 25% or greater drop in gross revenues to qualify.  Restaurants get special treatment, allowing them to receive loans of 3.5 times their average monthly payroll cost.  Other businesses are limited to 2.5 times.  The first PPP program worked well despite a number of flaws.  It kept businesses from closing their doors.  I expect that the new round will have similar effects. 


What happens beyond the March, 2021 expiration of the 2nd PPP and federal unemployment benefits is anyone’s guess. It will depend a lot on the success of vaccine distribution and reduced spread of the virus and new mutations.  Further government action may be absolutely necessary.  Both sides will have to compromise or we could be looking at a straight up depression and a return to the March/April 2020 economic crisis. Here’s hoping they can figure it out. My base case is that they will.


I am a believer in human innovation and ingenuity. I think we will figure this out. I think the path of technology and innovation, especially in the biotechnology sector, is such that none of us in 2030 or 2035 will want to go back to the good old days of 2019. The medicine and healthcare of 2019 is going to look like the Stone Age in the 2030s. So will much of our current technology.


We’re going to have to rationalize the debt sometime before 2030. I believe that life-extending technology and perhaps even the Holy Grail of age reversal technology will be available within the next decade or so.  People will need to stay productive for longer to make that work.


As I performed research for this blog, I saw that MIT researchers are working on a “universal” flu vaccine. It targets a protein that rarely mutates, and might lead to a longer-lasting and more effective flu vaccine. Such research is happening everywhere. Some of it will bear fruit and make all our lives better.


But in the meantime, we have to get through 2021. In a few weeks, Georgians will go to the polls and decide on which party controls the agenda in the Senate. The problems will be the same whoever wins. The pace of recovery might be different. But entrepreneurs and businesses will figure it out. Innovation will grow. There will be more opportunities to put money to work in new technologies in this next decade than in the last 50 years combined. That’s one of the reasons I added a new category called “Innovation” to your asset allocation.  It’s already been the top performing category over the past two years. I think that outperformance will continue.


So even as we deal with the problems in front of us, let’s not take our eyes off the prize of innovation in the future. Over the coming months, I will be spending more time talking about the potential of the future (often happening right in front of us) and less about the problems of the present. Join me.


Personal Changes and Proof of My Optimism


I mentioned that I miss traveling and socializing with people. The return to normal has been frustrating and taking longer than I would like, partly because we’re more or less confined to our own ZIP Code. I suspect that there will be an explosion of pent-up demand when the virus is contained or effective therapeutic treatments are available.


That confidence is manifested in our decision to purchase a second home & office in New York City.  We’re looking forward to spending more time with our family, friends and clients who live in the city.  Of course, my clients who live in Florida and elsewhere are welcome to visit us when traveling to NYC too.


Best wishes for a happy, healthy and prosperous new year in 2021!





Acknowledgement:  Special thanks to Andrew Joseph, writer for the STAT healthcare news service and to John Mauldin, president of Millennium Wave Investments for their expertise and insights from which I borrowed heavily in the development of this month’s blog.   

It’s a Whole New World


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