Musings From a Coffee Shop

Published on April 6, 2021

Derrick Rossi was born in 1966 in Toronto. He is the youngest child of Maltese immigrants who did not have a college education but worked hard to raise their five children. Rossi’s father worked in an auto body shop for fifty years and his mother was part owner in a Maltese bakery. Their son went on to develop an interest in molecular biology and made early discoveries in the field of messenger RNA. He founded ModeRNA Therapeutics in 2010 to commercialize his research.

Rossi never envisioned that his work would lead to vaccine development and he is no longer involved in the company. However, there’s no doubt that his early discoveries played a key role in making Moderna’s COVID-19 vaccine possible. Clinical trials indicate that the Moderna vaccine is 94.1% effective at preventing COVID-19 illness in people who received two doses and had no evidence of being previously infected. The FDA issued an emergency use authorization for the Moderna vaccine on December 18, 2020. The Pfizer-BioNTech vaccine, also utilizing mRNA technology, received an emergency use authorization on December 11, 2020.

Vaccine development was always a process measured in years, not months or weeks, and the most optimistic estimates early in the pandemic was that a vaccine may require a year to eighteen months to develop. But in a matter of weeks, Moderna had developed a vaccine and it rapidly entered clinical trials. The timeline is simply remarkable.

The federal government anticipates that all adults in the United States will be able to make appointments for vaccination by April 19, 2021, just two weeks from now. Both the Moderna and Pfizer vaccines require two doses and not everyone will be able to get immediate appointments. However, it is likely that everyone who wants a vaccine should have an opportunity to be fully vaccinated by the end of June.

One week after receiving the second Moderna vaccine shot, I am able to sit inside a coffee shop and write this article. That might not seem like a big deal, but it has been over a year since I last did something this mundane. And the mundane now seems like a milestone.

Slowly, but surely, the economy is reawakening from a long slumber. Over the weekend, outdoor dining was packed and more restaurants are opening up inside seating as well. Bolstered by stimulus payments, pent-up demand, and beautiful spring weather, people want to get back to their lives, and that’s a great thing to see.

Exactly a year ago, I observed that the world has no pause button, and it’s a useful personal exercise to reflect on how I thought the pandemic would evolve compared to what actually happened:

The speed and shape of the recovery is on everyone’s minds at this point, and much will depend on Keynes’s animal spirits. Will the boarded up businesses scattered through countless American cities open up again when governments give the all-clear to do so? Will the customers of these businesses be willing to again go out and spend money in person after weeks or months of self-isolation?

Much will depend on whether the coronavirus pandemic is viewed as a one-time event or as a potentially recurring feature of our lives going forward. If the pandemic is viewed as a horrible, but temporary, interlude in an era of prosperity, then the government’s efforts to induce a “medical coma” of the hardest hit sectors of the economy could well succeed. Sound businesses will emerge with muscle atrophy. Those that were weak even before the crisis may never reopen at all. But the overall system will rebound and regroup.

In early April 2020, few people believed that the lockdowns and related restrictions would last a year rather than weeks or months. I recall watching small businesses close, following the talk on Facebook and elsewhere, and the sentiment seemed to be that things would be back to normal by the summer, at the latest. The first stimulus bill had passed and the hope was that this temporary palliative would be able to staunch the bleeding for the time required to “stop the spread”. But the situation did not abate and the country endured month after month of constrained economic activity. The federal government responded with two additional stimulus bills funded by issuing trillions of dollars of new debt.

At the start of the pandemic, financial markets clearly did not anticipate that the federal government would step in as vigorously. Yet here we are in early April 2021 with stock markets at record highs. Who would have believed that in March 2020 when I was writing about how to cope with the massive market meltdown that was underway?

I was wrong about many aspects of the pandemic, but I was correct to not panic when stocks crashed. I don’t know how other investors handled that crash mentally, but I anchored on the actual businesses that are represented by the ticker symbols I own. For example, I took the time to examine Berkshire Hathaway as a business and tried to understand how the shutdowns would affect the company’s subsidiaries. I did the same for other companies that I own.

Make no mistake about it, I understood that, with few exceptions, all owners of American businesses were poorer due to the pandemic. It would be delusional to think that my portfolio had not declined in intrinsic value terms. The question was whether the market was appraising the situation accurately or acting with emotion. As usual, stock market participants reacted more emotionally than an owner of a privately held business that has no market quote. In panics, quotes are an emotional burden for those who do not understand the intrinsic value of what they own.

Conviction has to be built up during ordinary times if you want to fortify yourself mentally for the tough times. A market crash is not the time to begin to study the intrinsic value of your holdings. I made one major portfolio change during the pandemic, not because the price of the stock in question had declined but because my conviction in the business declined. Of course, I had studied the company in depth prior to owning it. But in retrospect, I did not have enough conviction to own that business at all. This lack of conviction did not manifest until tested by a crisis.

So where do we go from here? If we assume that all adults in the United States who want a vaccine can be fully vaccinated by the summer, will things go back to normal at that time?

I suspect that we will have several more months of restrictions before we are truly back to normal, but the reality is that no one can really predict the trajectory of the rest of the year. I’m not going to post any polls on vaccine acceptance because they seem to be changing all the time, but it is quite clear that a significant percentage of Americans view the vaccines with suspicion and may not be willing to get the shots. In May 2020, I wrote about the politicization of masks and the discourse regarding vaccines seems to be developing in the same way. Talk of “vaccine passports” and coercive measures to obtain compliance are likely to backfire.

Society has an interest in maximizing the percentage of the population accepting the vaccines because we want to reach “herd immunity” — the point at which the COVID virus will not find enough susceptible people to remain a threat to the population at large. Convincing as many people as possible to accept vaccinations will reduce the time required to reach herd immunity. However, in a free society, government should not compel people to accept vaccination through coercive methods.

A key question remains whether unvaccinated people represent a direct threat to vaccinated people. The CDC’s latest recommendations indicate that vaccinated people should continue taking precautions but can gather in small groups with other vaccinated people as well as with unvaccinated people who are not at risk of severe illness from COVID:

You can gather indoors with fully vaccinated people without wearing a mask or staying 6 feet apart. You can gather indoors with unvaccinated people of any age from one other household (for example, visiting with relatives who all live together) without masks or staying 6 feet apart, unless any of those people or anyone they live with has an increased risk for severe illness from COVID-19.

When you’ve been fully vaccinated – retrieved on April 6, 2021

Will unvaccinated people pose any risk to vaccinated people? If not, should vaccine passports be required? Should masks be required after everyone who wants to be vaccinated has been able to get the vaccine?

These are the key questions that should guide policy in the months ahead. If the vaccine is available to everyone who wants it, we should be in a position to return to normal. It is reasonable for people to expect society to take precautions to protect them if there is no vaccine available, but not reasonable to expect continued restrictions if a vaccine is an option.

As I look back over the past year, I am amazed by the advances in science that led to vaccine development in record time. But I am dismayed by the politicization of the pandemic and the great divide between Americans. When political party affiliation is so tightly correlated with issues such as masks and vaccines, something has gone terribly wrong in our national discourse.

Politicians need to focus on getting society back to normal as soon as possible and resist the temptation to not let a crisis “go to waste”. The pandemic has cast a spotlight on many longstanding problems in America, but longstanding problems deserve reasoned debate and deliberation outside the context of an emergency.

It’s hard to be optimistic about politics, but right now it is hard to be a total pessimist on a nice spring day as I sit inside a coffee shop for the first time in thirteen months.

Musings From a Coffee Shop
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