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Investors Are Irrationally Bullish Based On The Outlook For Vaccines

Dec. 08, 2020 4:31 AM ETAstraZeneca PLC (AZN), BNTX, PFE21 Comments
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Bankruptcy, Long/Short Equity, Special Situations

Seeking Alpha Analyst Since 2012

B.A. in Economics; M.S. in Finance. I usually write about distressed companies and companies in Ch.11 bankruptcy. I am semi-retired after spending decades in investments.


  • Pfizer's and Maderna's vaccines protect against getting sick, but may not actually stop the virus from spreading.
  • The markets have over-reacted to the potential positive economic benefits from vaccines.
  • Just because people get vaccines it does not necessarily mean restrictions and lockdowns will be lifted by politicians.
  • Investors might want to consider creating portfolios that would reduce the impact of a continued slow economy even with vaccinations.

While the development of Covid-19 vaccines are positive developments, investors are over-reacting to their potential medical benefits and to their impact on restoring economic activity to normalcy in the near future. The reality is that vaccines do not equal normal economic activity. Because of the many complex issues associated with Covid-19, it may be a long time before we are back to normal. Just as many investor over-reacted negatively in February and March to Covid-19, now investors are over-reacting, in my opinion, to any positive developments.

Covid-19 is a type of influenza that occurs every year. The worst recent influenza occurred in 2017-2018 (H3N2) that killed an estimated 61,000 Americans and there were 45 million illnesses that required 21 million hospital visits according to the CDC. The reported deaths (see further below) for Covid-19 exceed the 2017-18 rate, but the number of those with illnesses and hospital visits is actually much lower. Since we are currently in the "flu season" I would expect the results will get worse until mid-February when the flu numbers historically peak. 


Pfizer and Maderna

Many people think the vaccines currently under review have a very high effective rate against getting Covid-19 or more specifically, protecting them from testing positive for Covid-19 and protecting them from transmitting the virus to anyone else. Many think a 95% effective rate means that the vaccine would stop most transmissions in the future. This may NOT be correct. The announced efficacy results only relate to protecting them from developing symptoms, including death, after being exposed to others with Covid-19. It is unclear at this point that the vaccines actually protect against becoming positive and protect against transmission after taking the two vaccine shots. An excellent video analysis of the vaccines was created by MedCram that explains what efficacy announcements really mean.

It is expected that the FDA will approve the vaccine (BNT162b2) by Pfizer (PFE) and BioNTech (BNTX)  and also Maderna's this month. (Test results announcements for Pfizer are here and Maderna's are here.)

Both Pfizer's and Maderna's vaccines use messenger RNA and are just temporary vaccines. It is unknown how long they will protect people from developing Covid-19 symptoms. Another uncertainty that may have a very strong impact on the general population's decision to get these particular vaccines is if you get this temporary vaccine now will you be able to take another different vaccine in the future that gives permanent/better protection? 


The AstraZeneca (AZN) vaccine faces two large public relations problems. First, their vaccines use chimpanzee's DNA. Some people may feel very uneasy about that. Second, AstraZeneca made a critical mistake in one of their trial groups. They gave a half dosage for the first shot. Many, including myself, were dumbfounded that they could make such a mistake in one of the most important medical studies ever conducted. To make the problem even worse is that efficacy was higher, 90%, in the "mistake" group than the correct dosage group, 62%.


*Are they testing individuals for Covid-19 prior to giving people either of the two shots? If they do test, the reported Covid-19 numbers will most likely soar as more of the population is tested.

*If individuals are not tested for Covid-19 anti-bodies prior to a vaccine shot, will there be any impact on efficacy and potential side affects by getting a vaccine? 

*Will there be mandatory testing and having ID cards proving vaccinations (something like the little yellow folders used to prove smallpox vaccinations decades ago) to board planes, enter subways, eat in-doors at restaurants, and enter stores?

*Will the news media have hysterical reports of certain individuals developing terrible side affects from the vaccines? This could be a PR disaster trying to get widespread vaccinations

*Why are younger people even being vaccinated if the particular vaccine only protects against symptoms and not transmission, because rarely do young people get ill/die?

*Why risk getting side affects from a vaccine and just benefit from herd immunity with everyone else getting a vaccine?

Media Issues and Reporting Data

Many people feel that Covid-19 is just another influenza and that it is just a repeat of the problems we faced in 2017-18, but with a higher death rate. These same people feel the real problem is the Media. They feel the media was obsessed with defeating Trump and used Covid-19 as a tool to achieve that goal. Whatever Trump did or said was "wrong" according to the press. They blamed Trump for everything. In addition, politicians are attempting to do a "reset" on the world order because of Covid-19. World War I gave progressives the opening to change much of Europe's government structure. These politicians today are hoping to do the same now for changing the economic and social structure worldwide. 

Media is obsessed with Covid-19 data. The problem is the data is incorrect. Is it incorrect on purpose?-Not sure. The national Covid-19 death rate is a basket of fruit. There seems to be extremely different standards used by local governments reporting Covid-19 deaths. In Wyoming, for example, only those who died because Covid-19 was the primary or major cause of death are included, which results in a 0.757% death rate (280 deaths and 36,985 cases). New York, however, has a 4.82% death rate (34,637 deaths and 718k cases). According to my New York City contacts, New York City includes all deaths of those testing positive who did not have a recovery notification filed prior to death. It does not seem that New York even considers the actual cause of the death in their Covid-19 reporting number. So in New York, if you test positive and get killed by a cab walking across the street, you might be included in the total, if there was no recovery report filed prior to the accident.

For the sake of discussion, if we use the Wyoming death rate number of 0.757% and apply it to the current U.S. total number Covid-19 positive tests of about 15 million, the totals deaths would be about 113k instead of 285k. A major psychological difference in totals. The 113k is about twice as bad as the 2017-18 influenza number. 

Various tech companies have greatly benefited from Covid-19 with people working from home, shopping on-line, and using social media as way to stay busy during lockdowns. Many of these same tech companies censor any type of discussion or reporting of different medical opinions that do not conform to their Covid-19 agenda. Is this some type of tech conspiracy or just a common sense business model?

Lack Of Data On Mask Usage 

The policy of wearing of masks has changed dramatically since the start of the Covid-19 problem Initially Dr. Fauci did not recommend wearing masks, then it became a suggested way to protect others from getting infected by wearing a mask, and now to the current policy in many parts of the country where masks are mandated in public. An interesting research study published in mid-November in the Annals of Internal Medicine by researchers at Copenhagen University Hospital stated that:

a recommendation to wear a surgical mask when outside the home among others did not reduce, at conventional levels of statistical significance, incident SARS-CoV-2 infection compared with no mask recommendation.

Much of the problems with masks is how they are actually used. People wear them all day and may or may not wash them each night. Chemical residue from the detergent remain on the fiber that could be breathed in, which could be harmful. There are chemical dyes in many masks that are also breathed in with unknown consequences. Many people store their masks in pockets, purses, and in other very unsanitary manner. Too often people sneeze or cough wearing a mask, which still allows for water droplets, which may contain the virus, to pass through the mask and float in the air. Since masks are uncomfortable to wear, people keep touching their faces to adjust their masks. In addition, masks can absorb moisture in the air that might contain the virus.

Last March, the public demanded that elected officials "do something" immediately to protect them. Mandating the wearing of masks and threatening fines for those who did comply, made the politicians feel like they were trying to show leadership. Parts of the public, however, thought the mandates made the politicians look like dictators, especially when certain media outlets broadcast the same politicians not obeying their own rules.

Future Restrictions and Lockdowns

The real problem is that politicians, such as Gov. Cuomo, will not give up their power to control people. Gov. Cuomo, for example, closed down the entire subway system a few years ago because of a forecast of a modest snow storm. The entire system and not just the subway trains that run above ground, which have been closed down in past before snow storms, were closed for almost three days. (He just loves to control.) There was absolutely no logic to the entire closure. 

Covid-19 numbers will continue to rise even with vaccines as more people get tested and people die many months after getting their initial Covid-19 infections. I also expect the news media will be quick to report any severe adverse reactions to the vaccines or people dying even after getting the vaccines. Until the news media becomes a professional source of information, the politicians will continue to react to media numbers and reporting by continuing restrictions. I don't think I even need to mention that these restrictions will continue to have a very negative impact on many sectors of the economy.

Conclusion-Impact On Investors

This articles includes many opinionated editorial statements, but hopefully the issues raised/questions asked will make investors re-evaluate their overly bullish outlook for the economy and markets. 

Investors might want to buy out-of-the-money puts; sell calls against positions; or sell their Covid-19 sensitive stock positions. I feel the market has become too bullish based on vaccine approvals. Last March, the market was too bearish just because there was a more deadly influenza virus spreading. Millions are not going to die in the U.S. The media is leading investors around by their nose rings, which needs to stop.

Please make comments below so these issues can be properly debated in a rational setting.

Analyst's Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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