Thu, Dec 16, 2021|Whitney Tilson

The omicron variant is going to be THE story that dominates headlines; Summary of my current thinking; South Africa and U.K. data; Anecdotes

1) I think the spread of the omicron variant is going to be THE story that dominates headlines – and perhaps affects markets – for the next couple of months.

For example, these were stories on the front pages of today's Wall Street Journal, New York Times, and Bloomberg:

As always, I'm going to be closely following the situation and providing more frequent and in-depth updates to my readers as this plays out. If you want to dive into the weeds with me, sign up for my coronavirus e-mail list by sending a blank e-mail to: cv-subscribe@mailer.kasecapital.com... otherwise, keep an eye out for occasional updates here.

Here's a summary of my current thinking:

It's likely that, right now, the omicron variant is in the first week of spreading like wildfire in the U.S., which will soon become apparent in the daily case data. That line will soon go vertical, as it did in South Africa and is doing in the U.K. (see below).
The exponential spread will continue until we start bumping up against herd immunity. It's unclear what that point is, but South Africa may already be there...
The million-dollar question is omicron's severity. If the virus has morphed into something akin to the seasonal flu, a theory for which there is increasing evidence, as I discussed in Tuesday's e-mail, then the growth in hospitalizations and deaths may be minimal (fingers crossed!).
The effect on the economy and markets depends on this million-dollar question. There will undoubtedly be a short-term economic impact as travel and events are canceled (see headlines above), offices remain closed, millions of people quarantine after catching COVID, etc. So the short-term news flow is likely to be negative, which could trigger a sell-off in the markets.
However, investors are usually forward-looking. If they see low severity and therefore the transition from the pandemic phase to the endemic phase, then there could be a huge relief rally.
So, for now, I'm not making any big market predictions. In my personal account, I'm sitting tight with 18% cash, hoping to have the opportunity to put some of that dry powder to work.

2) Here is a brief e-mail I sent to my coronavirus e-mail list yesterday:

I think Dr. John Campbell is right that the U.K. is foreshadowing what will happen in the U.S. roughly six weeks from now.

Here's a link to his latest video (17 minutes; I watched at 2x speed).

Highlights:

Omicron is EIGHT TIMES more transmissible than delta.

There will therefore be a HUGE surge in cases here.

It appears that the severity is much less than delta, but it's not yet clear how much less.

Therefore I want to tweak what I wrote in my last e-mail: hospitalizations and deaths may initially be flat or even decline (as is happening in the U.K. right now) as omicron displaces delta, but will then likely rise, even if omicron proves much less severe, due to the sheer number of people who get COVID as omicron quickly infects nearly all unvaxxed folks (plus even a fair number of vaxxed ones; for example, a friend who's triple Moderna (MRNA) vaxxed just got COVID, but – no doubt due to the vaccinations – had negligible symptoms).

Therefore, it makes sense in the short term to take/maintain strong precautionary measures – both personally and at the national level – until the omicron wave passes.

Most importantly, given we don't know the severity of omicron nor whether it will trigger the same Long COVID issues as prior variants , you still DO NOT WANT TO GET COVID. Therefore, with this massive storm certain to hit us within a matter of weeks: a) if you're not vaxxed, get vaxxed; and b) if you're not boosted, get boosted!

3) To see how quickly the omicron variant is likely to spread in the U.S., look at what's happening in South Africa and the U.K., both of which just hit all-time high daily cases (source):

South Africa

U.K.

For the latest news, I suggest the following:

David Leonhardt's update in the New York Times this morning: Expecting a Surge
Dr. John Campbell on South Africa Omicron
This Twitter thread on the virology of omicron

4) While keeping in mind that the plural of anecdote is not data, I want to share what I've been hearing this week from my friends and readers...

As a background, nearly everyone I know was fully vaccinated months ago so I only rarely heard of anyone in my network getting COVID... but boy did that change this week!

One friend wrote:

Don't take this as statistically significant, but I was in an offsite strategy session in Florida on Monday and Tuesday with 15 people, all vaxxed. I am three-shot Pfizer and a colleague is three-shot Moderna plus believes he had COVID. He and I tested positive Tuesday morning. Being in Florida, we both got a monoclonal antibody treatment same day (four shots). Mild symptoms (like a mild cold, still have sense of smell, no fever). That means we both came to Florida with it and possibly passed it on to at least 13 others in direct contact and countless others at the hotel and en route. Very few people at the hotel aside from the staff were masked. Even at the treatment center in Florida the staff were barely masked!

PS—My son goes to Cornell, where they have 1,200 active cases for a student body around 25,000, so that's 5%. In a week they went from about 5 to 60 to 200-300 cases a day. Syracuse is worse. Apparently Harvard and the Boston colleges are fine so far. I suspect it just takes one big super spreader event to light the fire...

Another friend who had three Moderna jabs (though the last one only a week prior) wrote:

I tested positive yesterday (omicron), zero symptoms, no idea how I got it, did nothing outside normal routine.

Another friend, who is unvaccinated but thinks he had COVID in the early days of the pandemic, reported:

I just got COVID, likely at a party on the Lower East Side. It was just a headache and sore muscles for a few days, and feeling more susceptible to the cold.

Lastly and most alarmingly, a friend sent me this e-mail from his friend who is a senior person at a large private equity firm in Manhattan:

FWIW – totally anecdotal – but COVID is present in New York in a way I've never seen, dating back to the earliest days. All my friends / clients / coworkers are vaccinated, and nearly all have the booster. Despite this, COVID is spreading like WILDFIRE. Dozens and dozens have been infected in a matter of a few weeks. I think it's going to get much worse before it gets better. It must be omicron – delta and the other strains never spread like this. It's literally everywhere. Everyone is backing out of dinners and holiday parties this week were canceled. I was supposed to see a client and canceled – the first time I've voluntarily canceled a client trip since April 2020.

I checked the daily case data for New York City (source) and, sure enough, it's spiking:

My family and I are flying to Kenya tomorrow to spend the holidays with my parents, sister, and nephew. In light of what's happening here, I actually think we will be safer there, on safari in the Masai Mara and then on the beach in Lamu, mostly away from cities and crowds...

Best regards,

Whitney

P.S. I welcome your feedback at WTDfeedback@empirefinancialresearch.com.