Editor's note: You can find a full transcript of Doc and Matt's briefing with special guest Dave Lashmet, complete with slides, below the video. If you'd like to view a pdf of the slides, click here.
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Doc: Welcome everybody. Welcome to COVID conversation number 19. I'm Dr. David Eifrig with me again is Matt Weinschenk. We are socially distanced. This time though I have escaped from Northern California and the fires in my vineyard, and I'm down in Southern California at my brother's house. We've also brought in a guy from the northwest of the United States who's on an island off the coast of Washington. Dave Lashmet. Dave, welcome. Fun to have you here and before Dave says more, say hello Dave and then I want to add a little more.
Dave: Hello, Dave.
Doc: Haha, this is gonna be a good one. So I have to tell you when I was trying to decide to join Stansberry, Dave was one of the guys that I called up to do my diligence on and I just… to say I fell in love is putting it mildly.
Dave Lashmet is one of my favorite people in all of Stansberry. Sorry, Matt, you're up there too, but I'm not going to say. But here's the thing… Right now, Dave Lashmet has his claim to fame at Stansberry. He has top 10 the best performing pick of all time at Stansberry Research. I also happen to know Dave has the worst performing pick of all time.
Doc: Not yet. No, not what that… what that suggests to you folks is, don't put all your money into any one of his picks. But if you put them into a sprinkling 10, 15 of them, the potential is there. And again, no promises. I'm just these are facts. He's got the high and he's got the low. And the other thing is right now, and we don't do a whole lot of sales stuff, but I just can't speak more highly about Dave's science prowess, and you'll see some of that later today. But, on here, we've got this thing for Stansberry's Venture Technology newsletter which Dave publishes, and it's super expensive. So if you're not interested in spending some big money, don't even bother to look at it, because you're not going to get a pick or anything like that from it, but you should read about it, we have a promo that's going that I think, is worth people's time if they're interested. Alright guys, let's jump in, we're gonna do that actually gonna be a little different this time.
We're going to start a little bit of what's happening in the world of COVID disease. We're going to sort of drive into a little bit of immunology, and then we're going to talk about vaccines. One of the themes for me today is very simple one, which is: Human, the human ability to fight this stuff, to achieve, to create and improve. Last two weeks ago, I sent a book called Factfulness to my whole team, everyone got this book by by Rosling and we're going to open up the talk with a with a quote from him, but first, just want to remind you if you have any questions…
But here's the here's the quote from… quote from Hans Rosling. And let's just get started with… It has to do with fear and facts. Indulge me.
"When we are afraid, we do not see clearly, critical thinking is always difficult. But it's almost impossible when we are scared. There's no room for facts when our minds are occupied by fear." Now people know I've talked about this with the amygdala and the need to be in a group and running and we're seeing a lot of that all over the place.
It's crazy. I just saw a law. I was just on a conference call this morning, guys. And the federal government has mandated you can reuse COVID-19 N95 masks, but you can't reuse an N95 mask after you've been out in the field breathing smoke through it. Who knew? Anyway, let's dive in.
Matt: Okay, so not a lot of news really on the, on the path of the virus. We switched to a global view here; I'll tell you why in a second. But you know cases have continued to decline, deaths are slow in decline, and after that, you know, we said you know, barring surprises, which there could be where it seems to be over the hump. So, we just switched to the global view here just to get a similar look, you know, on the case count. You know, the globe is turning in the same direction because the U.S. has such a large proportion of those and maybe with deaths.
So optimism there and the places that are rising, flat, and declining in the in the U.S. You know, we've had a few slight over to rising but a lot of these are you know, either very small or not rising that quickly. So things you know, across the U.S. look good. Again, surprise in the fall as things open up too quick, who knows? There's a lot still debate over what the causes are. There's natural path that is the disease, there is the measures that are being taken. And really the answers aren't known just yet, but still up to be over the hump for now. No surprises in that in the negative direction.
Doc: Yep. And this spring break, it's a chart looking at folks who were spring break before and after. And what I what I want to highlight about this is the natural and similar shape of these curves. And that suggests two different time periods, two different groups go through kind of the same natural history, natural biology. And that's a… that's a theme for me and for today again, that the end of the world is not coming. The sky is not falling.
Another piece of news came in the New York Times recently that said someone had been reinfected a second time and of course that you saw the writing, "oh my gosh you know, what if this thing can reinfect you and reinfect you and keep killing, killing!" And in fact, it was cleared naturally and normally using the lines of defense that the body uses.
And just to quickly review so people who don't know or don't understand this… and David, feel free to jump in on this if you have thoughts. But there's really thought to be two systems in immunology. One is called innate immunity. And that's where your cells and some simpler systems sort of kill and remove and contain things. And then there's the adaptive where your cells remember this particular intrusion and then are set up to attack it and clear it later. And it's kind of the purpose or what we tried to trigger in vaccines.
And there's two parts to that. I mean, is that is that a fair characterization, Dave? Are you good with that?
Dave: I think it's fine. How we style these to talk about cancer immune therapy was, you have a border patrol versus the regular army. At first, you have to rely on your border patrol. And then, given time, you can raise an army.
Doc: Yeah. And so this next side shows you these B cells and T cells. And the B cells are the ones that create these antibodies. And they float around in the system. And they can make multiple millions and millions of combinations to attach to things within your body that then can trigger attacks. And then there's T cells that have memory as well and they kind of float around. And the problem right now is T cells are much harder to measure, but they still provide immunity. And B cells are much easier to measure. And then but take a little longer to come into place. The next slide shows you this fact.
And this looks at five different groups of people and related to SARS-CoV-2 which is blood donors in 2019, 2020. And then people have been exposed at a mild level and severe level as well. It shows you that we have this increasing level of T cells, and we have an increasing level of antibodies. And again, all natural, all efficient, all effective. And as Dave points out, even relating to killing cancer cells, not just infectious agents like this.
So, one of the things that I find interesting is when we look at people with these COVID memory T cells, you can see even in healthy blood donors, this exists, there's a lot of stuff around so… Any comments and thoughts on that, Dave?
Dave: Yeah, you forgot people who were killed by COVID - zero percent.
Doc: Yes, there we go. So the next thing I want to point out to you is…
Moderna, a vaccine maker. And this is kind of… I don't want to cast too many aspersions on the vaccine industry. Or industry in general. But I do want to point out that the person who is assigned by the President to be head of this group that's pushing hard has some conflicts of interest. And it's, you know, you hope that people are going to be in filled with integrity and honesty. You can go look at Fauci on the next slide, he was involved with GSK.
The same guy who's headed Moderna, or now head of Warp Speed was on the board. Then, when he was brought on… Moncef Slaoui said he was going to divest.
There's no proof yet he has. He still holds stock and GSK which is also in the vaccine hunt. And final slide where I just kind of go…
Just be aware as we talk about vaccines and the effectiveness. Just remember, there's big, big money. This is I've been telling people up in Northern California, this is one of the biggest land-grabs, in my opinion, that I've ever seen. I think it's bigger than the gold rush for the future of mankind and immunity and health and using technology, AI, all these things coming together real nicely. But this guy, the CFO and the CMO at Moderna sold on this pop when Moderna announced Phase One results. Now, David, there was some controversy that they didn't release their data. Do you think that was okay? Do you think there's any under-table, underhandedness on that? Do you think that's not a problem in any way you have any feelings? Thoughts?
Dave: Double nightmare, both medically and investing. So let me touch on both. Medically, their phase one results happened in Seattle where I live. And so some of the people who got the vaccine had severe side effects and we know it because they got interviewed. Which is unusual, right? That we could actually see that happening.
So I am wondering as rushing forward because they can't provide their full data set and lure as many Pied Piper investors as they would want. On the investing side, they seem to want to price a vaccine at around 35 bucks. And that will never add up to their market cap. Given that they're in a competitive environment, given that there's Glaxo and everybody else who also wants a piece.
Dave: Moderna's not going to have pricing control over the entire world.
Dave: And at $30 if it was, you know, everyone in the U.S., they would never ever, ever make their market cap. They've massively outgrown what they could possibly return to investors.
Doc: All right.
Dave: So that's why they sold. That's what the CFO and CMO know that retail investors don't.
Doc: Yeah, exactly. So, alright, next slide.
Matt: Alright, so let… Our main theme, we'll kind of be talking about a vaccine because people want to know if we're going to have one or if we're not. And I think the framework to look at that is when this first started, someone said, we'll have a vaccine in 12 to 18 months. And people sort of put that on their calendar and took it as gospel, which isn't the case. I mean, there's risk here. There's things that we don't know, and hopefully they can find one, maybe they can't. But at the same time, it's not the worst-case scenario, you know, just forget vaccines for a second. You know, experts have been saying there will be a pandemic someday, and now we've got one. And it's bad, but it could have been worse. You know, it could have been a 10% fatality rate. It could have been a lot of things and in the case of a vaccine, it's not going to be as hard as a flu vaccine or people say we don't have a flu, we don't have an HIV vaccine! What makes you think they will have this so quick?
And it's not worst case, right? There's some reasons to think maybe 12 to 18 months, we could get here. So, so the normal process is pretty long you got research, preclinical, then you got all these studies and trials, you've got the FDA review.
And so that's why these things take so long. In the past, vaccines have taken a lot longer, right. Polio from epidemic to vaccine was 60 years. Ebola took 15. The first SARS and MERS we don't have vaccines, but they were 17 and six years now. So 12 to 18 months sounds absurd, right? But you know, over time, the timeframe is getting shorter. Researchers believe they did have a vaccine for the, for SARS, but they just didn't go to trials because the epidemic disappeared. So you know, we are making progress.
And it's possible you know, here – the fastest vaccine ever was five years. And here's the abbreviated plan. It's not just that they're doing the science faster, but they're combining trials. They're combining two and three. And they're starting their production ahead of time, ahead of approval, because it's such a serious scenario. There are people willing to make those investments up front, even if there's a risk that they won't pay off.
So, you know, Dave, especially on the next few slides here, you know, I'd love to hear your approach. So, one of the reasons, just to compare SARS, just to compare COVID and the flu, COVID has this single nucleoprotein RNA. Whereas the flu has these eight different nucleo proteins, right. And I've heard these called like, eight, they're like eight pages, right?
So here, just COVID is a little simpler than all these eight segments of the flu.
But when the flu mutates, it shuffles these different pages, and it looks very different each time it comes around again. But COVID isn't… doesn't mutate as fast and it doesn't mutate in the same way. So, yes, it's going to mutate. Yes, it might not work, if the vaccine might not work for five or 10 years, but it's not the same as the flu where it's going to change, you know, every three or six months.
And really, it all goes to this spike that they're targeting. Dave, this is definitely where I think we'd like to hear from you.
Dave: So, okay. Coronavirus is called the corona virus because on a microscope starting about 70 years ago, it looked like a crown. And what we now call each of the spikes on the crown is a spike. So this is what the outside of the virus looks like. The part that actually attaches to human cells is one of three gems on the top of the spike of the crown. And each gem, only one of the three is going to open, but it basically gets three shots on goal. And one of them's potentially going to open. So that's what the target is for a vaccine. Typically a vaccine, no matter how you make it, and whether you want T cells or B cells that make antibodies, you're going to want them to look for the spike, because that's the beyond the outside of the virus. It's the part that your immune system gets to see.
Matt: Right, and so, mutation so far, you know, that spike isn't really changing. So it seems like a stable target, at least for now is why they're using that approach. Right?
Dave: Yeah, the, if you go back to that slide, just for a second.
We just had an illustration in our issue that came out yesterday. See the big red bit on the right side, it's one of the gems that's open. There's a hinge that opens that, okay. We think that the change that we're seeing is just below your arrow. The one change that is, that is commonly in right about there, that one change that we see is probably affecting how the hinge opens. And that's the only change that's really disseminated globally around the spike to make sure that the gems are exposed more efficiently.
Matt: Alright, so as far as how we're… they're making these viruses so that sort of the story everybody remembers from, from high school sciences is you make a vaccine by taking a virus and killing it or weakening it and having people ingest or inject it in some way. And then their body learns to attack it. And there are people trying to make a vaccine in that way. But there's new methods, you know, Moderna for one is you don't need a whole killed virus. You just need a piece of RNA or in this case, it's RNA, but it could be DNA. And you can use that as a as a simpler way to create antibodies.
You can also take a virus, usually adenovirus, and modify that so it has the target and inject that into people. So these, these are all very different approaches to making a vaccine. Now, the things that's interesting about this is DNA and RNA virus, this approach is new. It hasn't really been as… Are there any actual vaccines in use that are RNA vaccines at this point, or the, Moderna's will be the first one if it works, right?
Dave: I believe so.
Matt: Yeah. So this is new. On the, on the plus side, if it works, it'll be… the process is easier because when you have a virus, you have to kind of grow it biologically. But these can be sort of manufactured. But on the downside, we don't know how well they're going to work or if they work. And there's not a lot of people who can do that manufacturing just yet. So it might be, might be easier to manufacture or it might be harder to manufacture.
So, but the good thing is there's a lot of different ways that people are approaching this. And ideally, one could work.
There's actually two approved vaccines. I'm not going to take either of them. I don't know about you guys, but you know… One's from China, one's from Russia. They're not approved because they went through all the approvals. They're approved because it's an emergency situation.
This CanSinoBio is going to go through a phase three in Saudi Arabia. And this one in Russia, they said it was approved and then they came back and said, well, it's not… it's not really approved. It's approved for testing. So…
Really, we're looking at some of the leaders right now in phase three. Moderna, which we've talked about, again, a completely new approach. They haven't had a drug work yet. But they've got, you know, 2.5 billion from the government to keep going. They've got 30,000 patients in a phase three.
BioNTech is a phase two and three, combined. They're working with Pfizer, which would be good because Pfizer has a lot of manufacturing capability. They've got about $2 billion in pre order from the government. And Pfizer says they can make manufacture 1.3 billion doses, but we'll have to see. Those are both RNA approaches.
AstraZeneca is using the adenovirus approach. And you've got some other ones from China here. And, and one of the… There's two things that are really going to hold things up at this point. And that's one: Phase threes are tough, and you can't rush them. We'll talk about that next. But the other thing is production. You know, sinovac, a pretty large company, they're building a facility for 100 million doses annually, which isn't, you know, that's 10 years just to vaccinate China. So it's a long, long ways away with the manufacturing. Doc?
Doc: David, what's your thought on this? What sort of, when you look at these, what we've put leaders and the shots on goal, what sort of technology or who do you think's in the, you know, close to the hunt? Or do we have to subscribe to your letter to get that? What's your? Do you have a feeling on this?
Dave: I think that –
Doc: And let me let me let before you answer. You know I, I'm old enough now that long time ago I mean RNA was thought to be so unstable that you didn't, you couldn't even do anything with it or work with it. You know that's a whole other story. But is that going to be a problem here with the stability of the RNA when you're working on vaccines that are going after that? And what's your sense of gestalt of that as well?
Dave: So the real issue about RNA is that RNA is also in human cells. It's how we translate our DNA into factory orders for our protein factories. But if it free floats in your blood system, RNA gets cut to bits. So what the RNA companies have to do is not just include RNA, which all the vaccines that you showed, no matter what the approach everyone's going after spike because spikes the outside of the virus.
You don't want to include the rest of SARS too, because it's dangerous. The part you want to include is the spike. So if you have the RNA of spike and you inject it free floating in your blood, nothing's going to read the spike. Instead, they're going to try and cut apart RNA. Because free floating RNA isn't good for you, and your bloodstream knows how to deal with it. So what you have to do is encapsulate RNA in a way that can be protected from enzymes that would try and cut it. And also actually make it into your cell and make it into the protein factories so that it can be a factory order. And one approach is to make it use a lot, a lot, a lot, a lot of it. And the open question is what are the side effects if you do that?
I think you can manufacture it and I think you can manufacture it in quantity. It's still actually a biotech. You're not making it on base pair by base pair, but you're making it an insects. And you're not requiring it to have sugars and you're not requiring it to look as if it's mammalian. So you don't have to use like a giant vat of mammal cells. You can just use insects to mass produce DNA, in this case, half a DNA which is the RNA. So production costs fall by a factor of 10. And production output increases by a factor of 10 per dose.
Doc: And when you think about the, not likelihood, but you think about the timing, do you think that we'll have something that works a year from now? Do you think six months is realistic? Where are you on the timing of things? Like what, and we'll get into this in a little bit, but I just forcing your hand early. What what's your take?
Dave: I think that yeah, so I saw it as a later slide too so I can speak again. But I think that we want to see efficacy and real people, not animals, which is something you and I have spoken about before you don't believe in the animal rule. And I agree with you here. We want to see what happens with people in the real world with advocacy before we choose one over the other. Like by October, we'll probably have pretty good safety data on the earliest vaccines to start trials. But since we don't have efficacy data, there's two problems about guessing. One problem is what do you do with obese patients? How do you possibly figure out what dose to use? The other problem is what do you do with old patients? How do you possibly figure out what dose to use? And without efficacy data, there's no way to figure those out. So if we pick a winner early, or even multiple winners, we don't really know they won. We're just giving them money.
Doc: Yeah, and just so people know this, most of the trials in the early phases, the safety, the dosing, all that is done in you know, college aged, often have been men, volunteers, you know, for extra money on the weekends, and not in morbidly obese people or really old, or even immune compromised people say cancer patients. So that's what Dave is referring to is we just won't we won't know that.
And anyway, all right. So let's dive into the next stuff from. David, sorry to interrupt you if you're good.
Dave: I'm good.
Matt: All right. So on that front, you know, when we're when they're trying to determine efficacy, and this is why it's so hard to rush the speed is because these phase threes. You know, if you have people this is this is a statistical issue, right? Let's say you have people with a disease, and you give them a medicine and you see who gets better and who doesn't matter. That's one thing.
But if you give someone a vaccine, you then can't spray coronavirus in their face and see if they get sick or not. Right? That would be a highly unethical study.
Dave: You can do it, but what you'd have to do is use young people who, who aren't representative of obese people or old people. You can do a challenge trial, like the Chinese may have done such a thing for their military, but it doesn't apply to the U.S. population.
Matt: Right. That's being pursued.
Dave: Yeah. And I mean, the U.S. has done it in the military as well with several vaccines over the last couple decades too. So it's some not so good results.
Matt: Yeah. So just as an example, this is a dengue a vaccine from a few years ago, they had 20,000 people, they gave the vaccine tests 13,000 and withheld it from 7,000, then you have to go put them out there in the population for a year.
1.5% of the vaccinated people got sick and 3.8% and the non-vaccinated people got sick. So then you have to compare those rates to get a statistical, you know, a good enough statistical difference. And that's why these things take so long. That's why it's hard to rush. That's why you know you're concerned with if we're going to know the efficacy and how long it takes.
So we've talked about the super forecasters before this is from up without getting the whole thing. These are a group of people who have been proven to be good forecasters.
From Philip Tetlock, you can search his name and find out more about it. But they've been tracking where their expectations for a successful vaccine are. And you can see they're trending up. This is between October 2020 and March 2021 is the highest group and just the six months after that as the next highest. This is a good barometer of you sort of where progress is going even if they're not correct.
But again, this is just they're predicting when there'll be enough to inoculate 25 million people, so this doesn't really include the production factor. But they've got some optimism there. And we'll see how it goes. So there's a lot of challenges, there is a chance that it's going to work. I still think that 12 to 18 months is probably too fast, especially for large scale. But there's a lot of a lot of money working on this. There's a lot of people, you know, investing in production ahead of time. And there's a lot of different approaches going on. So that's sort of a summary of what we may expect. Dave, what do you think about, and Doc too I mean, when do you think we can go outside because we've got enough people vaccinated or you think it's not even gonna happen?
Dave: Doc, you want to go first?
I got this. So that super forecaster question is a two-part question.
It's when do you have a vaccine? And one of you nearly prepositioned it for distribution and 25 million people? I would say that you're going to get the 25th millionth person in after October 2021. But I think that we're going to be able to get 5 million doses in first responders within a year.
So I guess I'd be more of the C category for 5 million doses, but 25 million doses distributed, then you're in long-term distribution chains and manufacturing issues like you raised.
Doc: And I'm going to say it's going to take longer than that. Both the good news and the bad news is the good news is I think we're going to discover through and probably it'll come out I'm gonna guess November or December, that a lot more people than we knew were using their T cells and their native immunity. And then even the antibody production is going to show up in many, many more people than we realize. And we're already going to have, I'll call it herd immunity or mostly cleared it, and that this will be a government boondoggle. And at best, at best, we'll have efficacy data end of next year. So October or November 21 is when I will put my money down. But I want to be wrong and I'm, I tend to be a little more pessimistic when I've been breathing smoke fumes, and air quality indexes in the 400s for several days. So that's kind of my grumpy stance right now.
Dave: I guess I would tweet that and just say, what we do in infectious disease about your opportunity to be infected is tied to infective dose. And if a person is presented with an average person, and there's no average people. We let's say me, because I'm pretty average.
Doc: No, not true.
Dave: If I saw a small amount of virus in my nose, my immune system would be able to overcome it. If I saw a large amount of virus in my nose, my immune system might not be able to overcome it. So that difference means that I'm going to generate both immediate and some lasting immunity against exposure. But would it necessarily protect me against a massive dose? Yeah, we don't know that.
Doc: Yeah, but you're going to be better protected for a massive dose than you were if you hadn't been exposed. Here's what I'm excited about. Right now, places all over the country kids are going back to school. My brother's kids are in small pods. Some other friends going off to college driving their kids around. And you know, you're gonna see pictures of them all on a porch. There was one yesterday I think was at Ohio State.
And you know, all these kids have signed things saying they won't party and they won't get together with anybody else. They're gonna stay in the room and study the whole time. But they've all gotten together, they're all going to get COVID and then the school is going to boot them out for violating this. Where are they going to send them? They're gonna send them back to their parents around the country. We're going to see the final spike of this thing, if you will, no pun intended on the corona spikes and this thing will have herd immunity like this is.
This is exactly what I wanted to do is get all the young people together in concerts and spray a light dose of corona. So along with what you're saying, David, just give them a little bit in their nose just to get it going. Anyway.
Dave: No, I feel like that's Dr. Venkman says don't cross the beams.
Matt: Well, I don't… All I can predict is that Doc's solution will not be put into practice. I know that much. Spraying corona at a concert.
Okay. Let's just check in on the exam economic things real quick…
Obviously, you know, companies have been shoring up their balance sheets, which means they're borrowing at low rates. You know, generally, if someone's over six times levered, you call that, you know, highly, highly levered… A troubled company. The Federal Reserve would say, like, don't give bank loans at that rate. And just, you know, high yield debt is approaching that level. This is higher than it's been, you know, in 20 years. At the same time, you know, there's –
Doc: Go back to the second.
Doc: Dave, what do you think of this man? I look at this and start to freak out. This is incredible leverage, just like money's that like, oh, sure, like that.
Dave: One of the things I've talked to Mike DiBiase and Bill McGilton about is that there seems to be a… see that investment grade line –
Doc: And just so people know so people know who you're talking about, David, these are the two guys that run our bond analytical stuff. So they analyze debt with a couple of our newsletters. Just so people know who that those guys are.
Dave: Exactly the bond guys, James Bond and James Bond 2. What we saw when looking across how Moody's and Standard and Poor's are turning corporate debt into a grade is that everything gets a really low B. And if the whole spike is in the lower B section, it's not really lower B. It's that they're grading it for money. And it's bad debt. It should be junk, but they're giving it a low, low B score as if it's not junk.
So see, like, as we approach 2017, 2018, 2019, it looks like investment grade debt has gone way up. That's not really investment grade. It's the lowest possible grade of investment grade that's growing. So what's really growing is high yield, and pseudo high or in practice de facto high yield debt. And that makes us much more vulnerable. And we're at the mercy of the bond rating agencies once again.
Doc: Yeah, well, I mean, look at the tip of the of the lower what's called investment grade, right at the far right. And that level is almost exact same level where the high yield was back when high yield was at its lowest leverage back in the early 2000s. You see that? Can you point on that point? Yeah, right there.
Matt: Yeah. So investment grade, high yield has become investment grade, right?
Doc: That's right.
Matt: Yeah, so that's exactly what you're saying. Yeah. So there's a you know, you'd call that a mix shift. It's not just going up, it's because things are changing within that group.
So on the other side of things, you've got high unemployment, you know, people can't make their rent, but actual eviction filings are down over last year and in most in most big cities. And not over last year, but over the last, you know, stretch of years.
So, what this says to me is, you know, we have all these, we have contracts, we have people who owe things, but it's also costly to default on someone's bonds. It's costly to evict someone especially if everybody is out of work, you can't get someone else in there. So there is flex in the economy. There's the ability to be flexible. And since it's such a unique situation, right, since you know, you're not going to default on everyone's mortgage, it's gonna make it worse off on the bank.
There is some ability for the economy to adjust to these things. Now these can only be pushed so far until they break, but there's a little bit of optimism. There's thing you know, there's things along the mortgage lines and things like that similar to these evictions. But you know it's similar with those bonds…. Even if they can't pay there's still deals that can be worked out to keep things moving.
Doc: And I would want to just caution people and hate to be again grumpy, grumpy Dave, but what I'm hearing from folks who have some rental properties – and not big time apartments but smaller stuff – is their tenants have either been furloughed laid off. And there's this hope that right around now and in the fall that things are going to pick back up. And they're not really.
And I've also heard that these folks, there was a miscommunication because no one really wanted to be clear. The landlords were saying, Hey, listen, you know if you can only give me $600s for your rent as opposed to $1,200. You know, great. And you know, the renters hearing, Oh, great. He's changing my rent to $600 when in fact, they're $600 for each of those months, that's not being paid. That's adding up. And I don't think people have had that conversation because I've asked every one of these landlords and there's three or four on the east coast and a couple on the west coast. And that conversation hasn't happened yet where it's like, what do you mean, I owe you $3,000 for the last five months? I thought you told me I could stay here and not you know…
I think that's reflected in these pictures because I haven't booted out yet because I think there's a huge verbal misunderstanding between government saying, you know, we telling people hey, listen, don't kick people out, versus you really owe that money.
Dave: Yeah, that's that seems like very prescient.
Doc: Yeah, yeah. Thank you.
Matt: We've been talking about inflation and there's lots of mixed signals. Some prices have gone up and some are going down. And this was an interesting collection here. So you have steak, pork and chicken are all inflating massively, you know, up 25% over last year. You have shrimp and fish going down, you know 30% deflation. And this is an example of, you know, the two kinds of price changes.
What happens is this is a supply shock. You know, there was COVID outbreaks at these meatpacking facilities and they, they shut down and there wasn't enough steak and pork. So the prices went way up. On this end, it's a demand shock. You know, people don't cook fish and shrimp at home as much as they as they do eat out. So when people weren't going to restaurants and the prices of these things declined. So you know, when you used to bundle things and say, well, let's talk about food prices in normal times, in times of where everything has changed those bundles don't make sense anymore. So now these are things that used to be the same, and now they're quite different.
And this is also why it's the inflation picture is really muddled right now, because you have huge growth in the money supply, but you have a huge drop in aggregate demand with a slowing economy. So you can really puzzle these things out and, you know, find investment opportunities to if you can find the companies who can raise their prices during times like these.
People keep pointing out how the stock market keeps going up, but the economy is not good. And that's a divergence. But really the indices are very top heavy. And most of the stocks in the S&P 500 are down. Some are down as much as 80%
Dave: Mostly the airlines.
Matt: Yeah, those are probably the airlines. This, I think, is Tesla. I didn't look. But these are the large tech companies.
Dave: Tesla's not in there.
Matt: Oh, you're right. Tesla's not in the S&P. I'm not sure which one this is, but I would sure like to find out. [Editors note: It's Abiomed (ABMD).]
Matt: Is Amazon up 100%? Well, anyway… But most stocks aren't up, which may mean you may find some that are a good price. But it also means that small changes in the outlook for those big tech companies can make very big swings in the S&P 500 Index. So the outlook going up has made big swing upward. The outlook going down would make big swings downward.
This is growth versus value. At this point, at the start of 2020, we would have said, "Wow. Growth stocks are valued very highly compared to value stocks." And that was at this point. And now we've seen this right here. There's a point where you have to ride that. And a point where you have to fade it and say, okay, can't keep going.
But man, it's really pushing up to the dotcom level here. And people have been calling for values returning for a long time and it hasn't happened for a good 10 years now. So we'll see when it turns around. Obviously that rubber band is getting stretched pretty far.
Doc: Dave, do you have any thoughts on this? Would you be buying value here?
Dave: I really liked what you guys said about Rainier.
Matt: Oh yeah. Great hard asset.
Doc: Alright, David. Thanks for joining us. You're our first guest ever. You've been spectacular. Do you have any thoughts and comments from your isolated island position on the world and what's happening? Any thoughts? Final ideas?
Dave: I just want to talk about you guys because no one else will. Because I'm your first guest. The reason I wanted to come on here is because you guys have had a great, objective take on what the economic impacts of COVID are and what do they mean in a way that maybe, maybe some private customers from Goldman get. But it's not generally available anywhere in the world. And I think you're doing a great service. And I'm happy to have been invited on.
Doc: Well, thank you. And I'll say that I feel like you actually even made I a step better than what Goldman gets by having you on, man. So how about that.
Doc: Matt, always a pleasure. Thanks for keeping me honest when we were going over a couple of things earlier today. And, what else? For the old guys out there, I couldn't see those small slides either and you can blame Matt on that, for the really tiny, tiny, fine print.
Matt: You can see them below and zoom in. They're right there. And you can also click to learn more about Dave Lashmet and the exciting stock he has coming out soon.
Thanks, guys. Appreciate it. It's been great.