What if we have a vaccine. One that works. One that stops Covid-19, that pulverizes it, clobbers it and teaches it the lesson of its life. Don't shed on me!
Yep, that's what today's rally was about, a virtual dry run for the potential success of the vaccine that Moderna (MRNA) might be able to produce en masse by the end of the year. Who can blame unbridled enthusiastic buyers. Moderna, the revolutionary new drug company that uses artificial intelligence and Amazon (AMZN) Web Services to speed up a vaccine for what otherwise might take years to develop, is going into phase two trials for its vaccine. More important, it's already shooting for late stage trials in early summer. That is truly warp speed fast and you can believe if it works and we don't see any serious side effects in the first three or four months of the phase three, we'll be lining up for the anti-Covid-19 force field.
Today's rally is what it will look like. It's a dry run for the big win and it's powerful, all encompassing and a testimony to the notion that you had to buy, not sell in the heart of the pandemic. That you have to ignore tomorrow's hideous Labor Department's non-farm payroll number, because it is rear-view mirror, because the bottom in the U.S. economy's been put in and good news is around the bend.
Now that you've heard the Pangloss vision behind the endless rally that we've had, the one that has brought the Nasdaq all the way back to even, let me give you a more plausible explanation for the action.
First, it is possible, given that we are reopening the economy, that April marked the bottom in lots of different industries, from toys, to waste pick-up, to even aerospace. That's something the very hard-headed CEO of Raytheon Technologies (RTX) told us this very morning on Squawk on the Street. Admittedly, it's based on the notion that it couldn't be any worse than April, given that barely anyone bothered to fly at all, something that's not all that positive for the huge portion of passenger planes that Raytheon makes, including, most the engines.
Second, we are getting some normalcy. As constrained as it is, there are restaurants that are open, admittedly with a low fewer tables, maybe too few to survive, but who knows the government is giving you eight weeks of payroll money and expenses if your small restaurant stays in business. Don't you have to try?
We know that Wynn (WYNN) , the gigantic casino operator, has a very thoughtful plan for opening its casinos, aided by experts from Georgetown and Johns Hopkins. They aren't fooling around. Count me as a believer.
Thursday morning I got an email entitled "That's right-Sports are back." There's a big UFC 249 bout May 9 between two no doubt fantastic contestants and it's on display this Saturday in front of a fanless audience. Looks like at least some pro-sports impresarios have figured out how to do sports. Can basketball, baseball or football be far behind? Maybe someone's figured out how to do professional sports for real. Is that why Disney's (DIS) stock is going up, not down after that suboptimal quarter?
Third, we know that the reopening of America is fraught with the possibility of a new eruption in Covid-19 deaths, but perhaps, just perhaps, the flare doesn't happen. The president, hate him or like him, has said it is worth the risk to open, rather than have a Great Depression. That could very well mean the bottom has been put in. This time around we at least know the drill.
Fourth, oil, which had collapsed to minus $37 a barrel, has climbed steadily to the mid-twenties. I know that's nowhere near the thirties that would take the myriad bankruptcies we've been expecting off the table.
Remember, for many hedge funds, oil is the barometer of activity, and it really is a sign of the success of the reopening. That's huge, given how the decline seemed calamitous.
Fifth, we don't have the vaccine as of yet, but we have the prospects of a shorter stay in a deadly hospital, because of the early success of Gilead's (GILD) remdesivir. Earlier this week Regeneron (REGN) announced that it is tantalizingly close to a monoclonal antibody creation that can help combat the disease once you catch it. Maybe their drug can work side by side with remdesivir to create a potent cocktail like the potion that turned AIDS from a death sentence to a manageable disease.
Sixth, we have companies that are thriving in the new words, companies like ServiceNow (NOW) and Salesforce.com (CRM) , which have figured out how to reopen in a thoughtful and productive way. That's why their stocks have been on fire of late and can't seem to be able to be stopped even on the worst of days. The moves are downright incredible including today's run in cloud messenger Twilio (TWLO) .
Finally, there's some economic activity out there for certain. We are seeing the stock of Home Depot (HD) rally for days and days. Shares of Stanley Black and Decker (SWK) are flying. Perhaps there may even be a gardening season, often thought of the Christmastime for the chain? The homebuilders seem to have hit some sort of bottom. That's a big slug of the economy right there.
I don't know if this is all just a bunch of malarkey. It's entirely possible that Moderna's vaccine doesn't work. It's a too novel way to fight a novel coronavirus. Maybe it's not effective after a few weeks. Maybe it makes some people sick. There's a reason why it can take years to develop vaccines. So much more can go wrong than right when you inject a healthy person with a form of poison.
The opening of the country may be premature. The successful openings of other economies have more testing and more contact tracing. You know who has it, which helps you not get it. The masks, which seem so repulsive to many in this country, including the president, are standard issue. Some states are still on the incline when it comes to infections, hospitalizations and deaths. It seems ill-advised, while the pandemic is raging, to throw more people into a statewide inferno.
And the market's rejoicing could be more of a function of a lack of investing alternatives, or the desire of money managers to keep up with the averages or a flood of money that has gone to growth managers who triumphed during the April romp, the best in decades.
Me? I want to stick by the mantra of owning the stocks that thrive in a recession, but also can do well if, indeed, we claw out of the abyss. I don't want the stocks of the airlines, although it would be a marvel if the oracle of Omaha would market the bottom with sale of 10% of the big four airlines. I don't want to mess with companies that have challenged balance sheets where the dividend is in jeopardy, the lone instance being the Walt Disney company, because of its iconic brand. You still can't get me to recommend hotel stocks or the banks.
But I get the rally. It's based on hope and this time the hope isn't hanging on a breaking branch. It's hanging on a bough that might hold, and even if it isn't, it's no longer a death sentence for so many who fall to the earth.