Author: Dorian Holden

Thanks to the coronavirus, many are questioning the future of working in offices.

Warren Buffett for example just said, “The supply and demand for office space may change significantly,” Mr. Buffett said. “A lot of people have learned that they can work at home, or that there’s other methods of conducting their business than they might have thought from what they were doing a couple of years ago. When change happens in the world, you adjust to it,” as quoted by The Wall Street Journal.

Better, working at home has been found to have a positive effect on productivity.  

In fact, according to a YouGov survey, some of the reasons included “time saved from commuting (71%), fewer distractions from coworkers (61%) and fewer meetings (39%),” as highlighted by USA Today.

“As folks do start to go back to work offices and resume their commutes, I think individuals are going to be thinking through what parts of this COVID phase of life are they going to want to keep,” said Maria Flynn, CEO of Jobs for the Future. “Is it going to make folks reconsider how much time they want to spend commuting or having more flexibility to work from home?  It’s going to be changing the mindset for the works as well as the employers.”

In short, the pandemic may have just changed the workplace as we know it.

If that’s the case, some of the top “work at home” stocks to consider include:

·      Zoom Video Communications (ZM)

·      Slack Technologies (WORK)

·      RingCentral Inc. (RNG)

·      LogMeIn Inc. (LOGM)

The economic numbers are bleak.

Just yesterday, we learned U.S. GDP contracted at an annualized rate of 4.8%.  Economists were only expecting a decline of 3.9%. Going forward, it could contract by as much as 25%, with some forecasts calling for a 40% fall. 

According to the U.S. Bureau of Economic Analysis (BEA), “The decline in first quarter GDP was, in part, due to the response to the spread of COVID-19, as governments issued ‘stay-at-home’ orders in March. This led to rapid changes in demand, as businesses and schools switched to remote work or canceled operations, and consumers canceled, restricted, or redirected their spending.”

Unfortunately, second quarter numbers could be far more depressing.  White House economic adviser Kevin Hassett said we could see a 20% to 30% decline, as highlighted by Daily Mail.  

“They’re going to be the worst in our lifetime,” added Dan North, chief economist for the credit insurance company Euler Hermes North America, said as quoted by MSN. “They’re going to be the worst in the post-World War II era.”

This morning, we learned that U.S. weekly jobless claims hit 3.84 million, which pushes us above 30 million over the last six weeks.  Economists were only looking for a loss of 3.5 million.  

“Federal Reserve Chairman Jerome Powell added the unemployment rate is likely to rise above 10% from the March level of 4.4% which counted a period before the intense social distancing policies went into effect,” says CNBC.

Should we see further fallout in the markets, one of the best ways to prepare is by hedging for volatility.  Three ways to do that include:

ProShares Ultra VIX Short-Term Futures ETF (UVXY)

As volatility ticks higher with the trade war, ETFs such as the UVXY could run even higher from a current low of $30 a share.  . The ETF was designed to match two times (2x) the daily performance of the S&P 500 VIX Short-Term Futures Index. 

VelocityShares Daily 2x VIX Short-Term ETN (TVIX)

The TVIX is another great way to trade elevated volatility.  This ETF  tracks an index of futures contracts on the S&P 500 VIX Short-Term Futures Index.

iPath S&P 500 VIX Short-Term Futures (VXX)

As volatility returns to the markets, one of the best ways to profit from volatility is with the VXX ETN, which provides exposure to the S&P 500 VIX Short-Term Futures Index Total Return.

GDP hasn’t fallen this much in 12 years.

Thanks to the coronavirus, GDP contracted at an annualized rate of 4.8%.  Economists were only expecting a decline of 3.9%. Going forward, it could contract by as much as 25%, with some forecasts calling for a 40% fall. 

According to the U.S. Bureau of Economic Analysis (BEA), “The decline in first quarter GDP was, in part, due to the response to the spread of COVID-19, as governments issued ‘stay-at-home’ orders in March. This led to rapid changes in demand, as businesses and schools switched to remote work or canceled operations, and consumers canceled, restricted, or redirected their spending. The full economic effects of the COVID-19 pandemic cannot be quantified in the GDP estimate for the first quarter of 2020 because the impacts are generally embedded in source data and cannot be separately identified.”

BEA also noted:

• Current-dollar personal income increased $95.2 billion in the first quarter, compared with an increase of $144.1 billion in the fourth quarter. The deceleration was more than accounted for by a deceleration in compensation that was partly offset by an acceleration in personal current transfer receipts.

• Disposable personal income increased $76.7 billion, or 1.9 percent, in the first quarter, compared with an increase of $123.7 billion, or 3.0 percent, in the fourth quarter. Real disposable personal income increased 0.5 percent, compared with an increase of 1.6 percent.

• Personal outlays decreased $253.5 billion, after increasing $118.8 billion. The decrease was mainly accounted for by a decrease in PCE.

• Personal saving was $1.60 trillion in the first quarter, compared with $1.27 trillion in the fourth quarter. The personal saving rate—personal saving as a percentage of disposable personal income—was 9.6 percent in the first quarter, compared with 7.6 percent in the fourth quarter.

The biggest reason for the fall were consumers.

Many cut back on spending on cars, clothes, travel, eating out, and as millions of Americans lost their jobs to the crisis.  Health care spending also fell 2.3% as hospitals canceled or delayed many procedures outside of coronavirus cases.  

“The upshot is this was already an economic catastrophe within two weeks of the lockdowns going into effect,” said Paul Ashworth, chief U.S. economist at Capital Economics, as also quoted by CNBC. “The second quarter will be far worse.”

Days ago, Gilead’s COVID-19 vaccine appeared to be a flop.

In fact, STAT News said Gilead (GILD) experimental drug remdesivir saw “rapid recoveries in fever and respiratory symptoms with nearly all patients discharged in less than a week.”

Of course, GILD soared on the news.

However, according to Financial Times, the drug may have flopped in its first clinical trial.  

“A potential antiviral drug for the coronavirus has flopped in its first randomised clinical trial, disappointing scientists and investors who had high hopes for remdesivir, according to draft documents published accidentally by the World Health Organization and seen by the Financial Times,” as reported.

In fact, it was reported that a trial did not improve patient conditions or reduce pathogens in the bloodstream. The drug also showed “significant” side effects in some.  

However, there is some good news.

The company just said preliminary results of a COVID-19 vaccine trial “showed at least 50% of patients treated with a 5-day dosage of antiviral drug remdesivir improved and more than half were discharged from the hospital within two weeks,” as noted by CNBC.  “The company also said another trial by the National Institute of Allergy and Infectious Diseases met its main goal.”

“These data are encouraging as they indicate that patients who received a shorter, 5-day course of remdesivir experienced similar clinical improvement as patients who received a 10-day treatment course,” said Aruna Subramanian, a lead investigator of the study.

Here we go again.

Oil prices are slipping on storage concerns.  

Last checked, oil was down 26% to $12.49, and could easily slip back below zero — again.  All as global storage capacity plummets, and as COVID-19 keeps demand at extreme lows.  

“The market knows that the storage problem remains and we are on a calculated path to reach tank tops in weeks,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy, as quoted by CNBC. “Actions are needed now as the problem stopped being theoretical and far away. The storage clock is ticking for producers and we are approaching the final countdown if no further action is taken.”

Worse, oil prices could drop to -$100 a barrel, says Mizuho analyst Paul Sankey.

“Will we hit -$100/bbl next month? Quite possibly,” Sankey says, as quoted by Markets Insider. “We have clearly gone to full scale day-to-day market management crisis, and as we said when we first called for negative prices, the physical reality of oil is that it is difficult to handle, volatile, potentially polluting, and actually useless without a refinery.”

However, this should come as no surprise.

For one, Goldman Sachs has noted oil prices would continue to fall in the coming weeks, reasoning that a “historic yet insufficient” deal by major oil producers to cut output is unlikely to offset a coronavirus-led demand rout, as noted by Reuters.

And two, with the coronavirus keeping most of us indoors, there’s no demand for oil.  As a result, we’re seeing a monster buildup of supply with no place to store all of it.  Worse, “Traders are storing an estimated record 160 million barrels of oil on ships – double the level from two weeks ago as they seek to tackle a glut of stocks created by a slide in global demand from the coronavirus,” as noted by Reuters.

Unfortunately, we’re nowhere near a bottom in oil prices.

Until we see a substantial draw of supply, and we see a return of demand, oil could easily fall even deeper into negative territory.  There are no solid arguments for oil right now. 

April has been a rough money for dividends.

With the U.S. economy crumbling under the weight of the virus and decimated oil prices, companies are moving to preserve cash by cutting dividends.  “Dividend pain has just begun,” analyst Charles Toole of Adviser Investments said, as quoted by CNBC.

General Motors (GM) for example just cut its quarterly cash dividend and its share buyback program.  All as the virus does severe damage to global auto sales.  “We continue to enhance our liquidity to help navigate the uncertainties in the global market created by this pandemic,” said GM Chief Financial Officer Dhivya Suryadevara, as quoted by Reuters.

There are rumblings that Exxon Mobil (XOM) may be forced to cuts its dividend, too.  

Ford Motor (F) cut its dividend, which could save the company about $2.4 billion annually, notes The Wall Street Journal.  Carnival (CCL) cut its dividend and cut capital expenditures and operating expenses, as noted by Barron’s.  

Estee Lauder (EL) cut executive salaries, suspended dividends, issued notes and borrowedd the full amount under its $1.5 billion revolving credit facility, as the cosmetics giant reacts to the coronavirus pandemic, says The Street.

Hilton Worldwide (HLT) suspended its dividends and buybacks, too.  Hilton explained that “[w]ith travel at a virtual standstill, operations have been suspended across many managed and franchised hotels, and those hotels that remain open have reduced services for guests because of decreased occupancy levels.”

Unfortunately, this may only be the start of a long list of recent cuts.

Arch Coal just cut its 50-cent dividend.  Expedia halted its 34-cent dividend.  Quest Diagnostics just suspended its buyback program.  Las Vegas Sands cut its dividend of 79 cents.  ConocoPhillips suspended its buyback program.  Columbia Sportswear cut its 10-cent dividend.

Those are only a few. We could even see Exxon Mobil cut its dividends, too.  

This isn’t news we were hoping for.

Just days ago, STAT News said Gilead (GILD) experimental drug remdesivir saw “rapid recoveries in fever and respiratory symptoms with nearly all patients discharged in less than a week.”

Of course, GILD soared on the news.

However, according to Financial Times, the drug may have flopped in its first clinical trial.  

“A potential antiviral drug for the coronavirus has flopped in its first randomised clinical trial, disappointing scientists and investors who had high hopes for remdesivir, according to draft documents published accidentally by the World Health Organization and seen by the Financial Times,” as reported.

In fact, it’s being reported that a trial did not improve patient conditions or reduce pathogens in the bloodstream. The drug also showed “significant” side effects in some.  

At the same time, the World Health Organization said the document releasing such information was published early in error.  Gilead also said the post included “inappropriate characterisations of the study” and that, “Importantly, because this study was terminated early due to low enrolment, it was underpowered to enable statistically meaningful conclusions.”

However, despite this news, Gilead has said the drug may still benefit patients.

Gilead added, “The study results are inconclusive, though trends in the data suggest a potential benefit for remdesivir, particularly among patients treated early in disease.”

The story is just now developing.  We’ll keep you up to date on any changes.

For the first time in history, oil prices went negative.

All thanks to a severe lack of demand, and far too much supply.  Not even OPEC’s production cut of 10 million barrels a day could stop the decline.

However, we are seeing a slight recovery in oil.  We just have to question how long it can last.  After all, until the coronavirus threat is over, we still won’t see much demand.  On top of that, there’s still far too much supply with no room to store it.

At the same time, OPEC may be hinting at further cuts.

“Majid bin Abdullah Al-Qasabi pointed out that the Cabinet discussed the Kingdom’s keenness to achieve stability in the oil market, its affirmation with the Russian Federation of a firm commitment to implement agreed targeted cuts over the next two years, their continuing monitoring of oil market situations closely, and being prepared to take further measures jointly with OPEC+ and other producers,” as highlighted by Oil Price.

Unfortunately, as we’ve seen with OPEC in recent weeks, action is too little, too late.

Threats to Iran Driving Oil Higher

At the same time, oil is running higher on Iranian threats from President Trump. 

“I have instructed the United States Navy to shoot down and destroy any and all Iranian gunboats if they harass our ships at sea,” he tweeted.  

This threat comes just days after Iranian vessels were operating very close to U.S. ships in the Persian Gulf.  Iran fired back, with The Hill noting, “Iran’s Islamic Revolutionary Guards Corps (IRGC) acknowledged the encounter on Sunday but claimed without evidence that American forces triggered the incident, accusing the U.S. of ‘unprofessional and provocative actions.’”

While it’s a wait and see at this point, it won’t be enough to keep oil prices higher.

Unfortunately, transportation of all forms is set to plunge, says Forbes, as millions of Americans work from home, and are unlikely to take vacations until the virus threat is gone.  On top of that, oil travel demand has dropped considerably.  “According to the U.S. Transportation Security Administration, passenger screenings at airports have dropped by roughly 95% in the month of April, compared to early March,” they note.

In short, while oil may be rising today on OPEC hopes, and threats to Iran, oil could fall more.

Oil prices dropped to less than $12 a barrel.

Unfortunately, it comes as no real surprise.  In fact, at $20 a barrel on April 15, we said there was a strong possibility of $10 a barrel. We could even sub-$10 at this point.  All because there is no demand with an unbelievable amount of supply.

For one, OPEC is of no help at all.

Granted, OPEC will cut by 10 million barrels beginning May 1, 2020 and will extend until the end of June 2020.  Cuts will then taper off to 7.7 million a day from July 2020 through the end of the year. Then, it will taper off again to 5.8 million from January 2021 through April 2020.  

But that’s nowhere near enough.

At the time of the cut, even Goldman Sachs said oil prices would continue to fall in the coming weeks, reasoning that a “historic yet insufficient” deal by major oil producers to cut output is unlikely to offset a coronavirus-led demand rout, as noted by Reuters.

“It hasn’t taken long for the market to recognize that the OPEC deal will not, in its present form, be enough to balance oil markets,” wrote Stephen Innes, chief global markets strategist at AxiCorp said, as quoted by CNBC.

Two, there is no demand for oil.

With the coronavirus keeping most of us indoors, there’s no demand for oil.  As a result, we’re seeing a monster buildup of supply with no place to store all of it.  Worse, “Traders are storing an estimated record 160 million barrels of oil on ships – double the level from two weeks ago as they seek to tackle a glut of stocks created by a slide in global demand from the coronavirus,” as noted by Reuters.

“Right now we don’t see any near-term relief for this oil market … we remain really concerned for the outlook on oil near-term,” says Helima Croft, global head of commodities strategy at RBC Capital.  ““There is still a lot of crude on the water right now that is going to refineries that do not need it.”

At this rate, oil could easily plunge to less than $10 a barrel.  

Until the coronavirus story disappears, and we begin to see price demand recovery, oil will not even see $20 a barrel again any time soon.

The coronavirus is still rampaging throughout the world.

Businesses and schools are closed.  Stay at home orders have spread across the U.S.  Unemployment has skyrocketed, as the economy grinds to a halt.  What’s worse is – at the moment – there’s no solution. There are no vaccines.

However, we may be getting closer.  

On April 17, 2020, we brought a few of the top vaccine stories to your attention, with many of them picking up a good deal of momentum.

Gilead Sciences Inc. (GILD)

Gilead (GILD) for example is still running on news its vaccine produced “rapid” recovery in patients. In fact, a University of Chicago Phase 3 drug trial found that most of its patients had “rapid recoveries in fever and respiratory symptoms” and were then discharged from the hospital in less than a week, as reported by CNBC.

Moderna Inc. (MRNA)

Moderna Inc. (MRNA) is up another $4.68 on the day after winning an $843 million U.S. award to develop a vaccine.  Moderna hopes to have safety data from Phase 1 trials shortly, which could allow it to advance to the next phase in the second quarter. At the moment, the company is working with the National Institutes of Health on a healthy-volunteer study. Its product is a synthetic strand of messenger RNA (ribonucleic acid), or mRNA (or messenger RNA), designed to convince bodily cells to produce antibodies against the virus.

Inovio Pharmaceuticals (INO)

Inovio Pharmaceuticals (INO) is up 80 cents after starting human trials of its COVID-19 vaccine.

After getting the approval of the U.S. FDA in early April 2020, Inovio vaccine trials began on 40 adult volunteers in Philadelphia and Kansas City. 

Takeda Pharmaceuticals (TAK)

Takeda Pharmaceuticals (TAK) is up slightly as it looks into “whether blood plasma from recovered Covid-19 patients, which can contain infection-fighting antibodies, can be used against the illness. Similar treatments have shown promise in treating other serious infections,” says Bloomberg.

BioNTech (BNTX)

BioNTech (BNTX) is up nearly $4 after receiving  a $185 million upfront payment from Pfizer for a COVID-19 vaccine development collaboration, says MarketWatch.  BNTX could also receive milestone payments of up to $563 million from this, as well.