An innovative new technology called far-UVC is being developed by a company called Healthe.

Essentially, it uses a specific wavelength of ultraviolet light to kill microorganisms without hurting humans.

Dr. David Brenner, an Oxford-educated physicist at Columbia who applies quantum mechanics to radiation therapy, had a friend die from a superbug caught in the hospital. He became obsessed (my word) with preventing future superbugs from killing people. (The link to his name will bring you to an impressive list of his publications, lectures, and information.)

We have long known ultraviolet light kills viruses and bacteria. The subway trains in Manhattan are exposed to UVC light every night. Many hospital surgical rooms are also exposed to UVC light, of course while humans are not in them, making them very clean rooms for surgery.

In a 2017 TED talk, Brenner explained why a particular wavelength in the ultraviolet light spectrum would not harm humans but still kill superbugs. In 2016, 700,000 people died from exposure to bacteriological superbugs. At the current path we are on, by 2050, the death toll will be 10 million.

In this talk, he shows why “far-UVC,” ultraviolet light in the spectrum of 222 nanometers (I am told that it is technically 205-222 nanometers) won’t penetrate human skin or eyes but can still kill bacteria and viruses—both on surfaces and in the air.

As it turns out, the sun also produces these particular wavelengths, but our atmosphere’s ozone layer stops them. But that doesn’t mean we can’t produce them here.

Columbia University officials didn’t want to fund his research as they did not see much practicality or viability.

UGH!!

So what does a man in a modern world do to fund his obsession? He starts crowdfunding. Seriously. But as it turns out, you can’t patent a wavelength of light, so now other companies are beginning to pick up on his research. COVID-19 made the need for new approaches readily apparent.

Healthe Lighting is already manufacturing devices that look like airport metal detectors. They kill any virus or bacteria on your body as you walk through. One of the main investors is Stephen Ross, a venture capital and private equity investor, who also has an ownership in the Miami Dolphins. They have installed a form of the technology that filters the air in their indoor training facilities.

Here is an ABC News video of an installation at the iconic Magnolia Bakery in Manhattan (I highly recommend their cupcakes). The Air Force is beginning to test and install far-UVC equipment. Seattle’s Space Needle is using it to market their reopening plan. The company already has over $100 million in backlog orders.

Within a few months, the company says it will be able to produce simple LEDs that emit the proper wavelength. They will likely be expensive at first, but like anything involving technology and chips, costs will fall quickly, enabling wider use.

COVID-19 is devastating restaurants and bars because people are in such close proximity. But these LEDs will be easy to put on the walls and ceiling, or even in regular light-emitting lamps on each table. When somebody coughs or shouts and unknowingly spreads a virus, the far-UVC light will kill it. Will it be perfect? No, if you are kissing someone with COVID-19 or another virus, you may still catch the bug. The light doesn’t go past your skin or eyes.

Can you attach a small strip on every seat in a stadium? Of course. Plus lighting in airports, trains, planes, hotels, in fact, just about everywhere people congregate.

Yes, if you gather at a big outdoor event with no far-UVC lighting, there would be no protection. But (and this is a big but) infection potential should be lower after enough of the virus has been killed.

And we are not talking just about COVID-19. We are talking about all viruses, including new ones. David Brenner’s vision of killing superbugs in hospitals (which caused 49,000 people to die last year last year in just the US) is in reach.

This is simply amazing. It will usher in a new area of health, saving lives, and significantly improving economic productivity.

Here are some links to additional far-UVC research.

 

The US Economy

 

  • The housing market remains a key source of strength in the US recovery. Sales of new homes hit the highest level in years, rising more than 40% from last year.
  • Inventories of newly built houses are tightening.
  • Active listings of homes tracked by Realtor.com have collapsed this year. The lack of homes for sale will accelerate price increases.
  • Freddie and Fannie have increasingly been waiving housing appraisals in mortgage originations.
  • Both the Richmond and Philly Fed reports on business activity are relatively strong.
  • The sharp drop in US unemployment insurance benefits (loss of the extra $600) is showing up in debit card payments (unemployment payouts are often deposited into dedicated debit card accounts).
  • But even the extra $300 payments (as opposed to $600 paid earlier) will fully replace many Americans’ lost incomes.
  • Job postings on Indeed remain far below last year’s levels.
  • There are still over 30 million Americans receiving unemployment benefits.
  • The Conference Board’s index of consumer confidence tumbled to the lowest level since 2014. The cut in government benefits is the key reason for the weakness.
  • Loss of confidence among younger Americans has been particularly severe.
  • Durable goods orders continued to recover last month.
  • The rebound in capital goods orders suggests that CapEx is improving.
  • Mortgage applications remain elevated.
  • According to JP Morgan, credit/debit card spending hasn’t been significantly impacted by the loss of unemployment benefits.
  • Spending at restaurants and bars remains well below pre-crisis levels.
  • Small business employment remains soft.
  • Hardship rates among younger Americans have declined over the past year, suggesting that many have moved back in with their parents.
  • Americans continue to avoid public transportation.
  • The yield curve has steepened this year, which points to a rebound in the GDP in 2021.
  • Stock prices are telling us that the US is out of recession, according to JP Morgan. Other markets are less upbeat.
  • The Kansas City Fed manufacturing index rocketed higher in August.
  • Pending home sales are up over 15% from a year ago.
  • Home price appreciation has accelerated, according to AEI Housing Center.
  • Lower-tier homes continue to outperform.
  • The share of renters with missed payments is expected to climb, according to Oxford Economics.
  • Retail and housing have led the recovery in economic activity.
  • More than a million Americans a week still file for unemployment.
  • Small businesses are shedding jobs.

 

The US Stock Market

 

It’s a tale of two bull markets. One part of the market is trading as you would expect with near depressionary economic numbers. The only description for the other part is “insane.”

The distinction is essential.

  • ‘Corrections’ generally occur over short time frames, do not break the prevailing trend in prices, and are quickly resolved by markets reversing to new highs.
  • ‘Bear Markets’ tend to be long-term affairs where prices grind sideways or lower over several months as valuations are reverted.

Using monthly closing data, the “correction” in March was unusually swift but did not break the long-term bullish trend. This suggests the bull market that began in 2009 is still intact as long as the monthly trend line holds.

 

 

In the charts below here are the critical items to note:

  1. The current level of RSI is above 70
  2. Index is ABOVE 2-standard deviations (pushing into the “red zone.”)
  3. The distance from the 26-week moving average (6-months) is above 12%
  4. The MACD histogram is above 20

These are all levels that have typically represented extremes and have preceded short-term correction.

It is quite remarkable that given the economic devastation, the S&P 500 is trading at not only at record highs, but at near-record deviations of the 4-year moving average and MACD readings. Historically, such deviations have either been resolved by a correction back to the 4-year moving average or a full-fledged bear market.

 

 

The technology-heavy Nasdaq is hitting massive extremes with the one-year RSI above 70, and trading at 4-standard deviations above the 4-year moving average. (Note: the 4-standard deviations gap suggests the Nasdaq has accounted for roughly 99.99% of all potential price gains.) With the deviation from the 6-month moving average and the MACD extension at record levels, there is an increased risk of a significant correction.

 

 

Staples, Healthcare, Communications, Technology, and Discretionary have been the drivers of the “raging” bull market. Energy, Real Estate, Utilities, and Finance are in a much different position than the rest of the market.

 

The US Bond Market

 

Observations from Bond Guru Mark Grant

Key Points:

  • US corporate bankruptcy filings are running at a record pace and lawyers says the reorganizations have only just begun.
  • The travel industry, restaurants, commercial office space and associated REITs are particularly vulnerable.
  • Meanwhile the total funding gap for the 143 largest US public pension plans rose to $.62 trillion, well above the 2009 crisis level.
  • Despite rising stock prices, plans averaged -0.4% returns for the 12 months ended June 2020.
  • It now being almost impossible to raise local taxes, pensions and municipal bondholders are increasingly vulnerable.
  • Yet thanks to Fed-engineered low interest rates, stocks keep rising in what Grant calls “a fairy tale environment.”

 

Stock Market Valuation

 

Forward P/E ratio:

 

 

Growth vs. value price-to-book ratios:

 

 

No matter how many valuation measures you use, the message remains the same. From current valuation levels, the expected rate of return for investors over the next decade will be low.

 

The Fed

 

Thursday, from beautiful Jackson Hole, Wyoming, Federal Reserve Board Chairman Jerome Powell delivered what was dubbed a “profoundly consequential” speech, marking a change in the way the Fed views inflation.

For the first time in years, the Fed announced a new approach to inflation targeting. The central bank will now focus on price levels rather than the rate of change. Moreover, the Fed will put a higher emphasis on the health of the labor market.  Interpretation?

Zero-bound interest rates, lower for longer—much longer.

 

 

The flood of liquidity, and accommodative actions, from global Central Banks, has lulled investors into a state of complacency rarely seen historically. However, while market analysts continue to come up with a variety of rationalizations to justify high valuations, none of them hold up under real scrutiny. The problem is the Central Bank interventions boost asset prices in the short-term; in the long-term, there is an inherently negative impact on economic growth. As such, it leads to the repetitive cycle of monetary policy.

  1. Using monetary policy to drag forward future consumption leaves a larger void in the future that must be continuously refilled.
  2. Monetary policy does not create self-sustaining economic growth and therefore requires ever-larger amounts of monetary policy to maintain the same level of activity.
  3. The filling of the “gap” between fundamentals and reality leads to consumer contraction and, ultimately, a recession as economic activity recedes.
  4. Job losses rise, wealth effect diminishes, and real wealth is destroyed.
  5. The middle class shrinks further.
  6. Central banks act to provide more liquidity to offset recessionary drag and restart economic growth by dragging forward future consumption.
  7. Wash, Rinse, Repeat.

If you don’t believe me, here is the evidence.

The stock market has returned more than 130% since 2007 peak, which is more than 12x the growth in corporate sales and 3.6x more than GDP.

This is PURELY a Fed fueled stock market. Period.

 

 

The markets are betting that the Fed will shift to a more accommodative approach to dealing with inflation.

Zero-bound rates. Negative in much of the world. I’m mad, you’re mad, we’re all mad. But it is what it is.

It looks like this:

 

 

Powell isn’t alone.

Other Central Banks around the world are following the same plan. In the end, there will be inflation. When it comes, people will be upset.

When confidence is lost, the Fed put will fail. Markets are far bigger than the Fed.

U.S. corporate bankruptcy filings are now running at a record pace and are set to surpass levels reached during the financial crisis known as “The Great Recession.” This compares with 38 bankruptcies for the same period during the financial crisis of 2008/2009 and is more than double last year’s figure of 18 over the same time period.

For companies with liabilities over $50 million, 157 have filed for bankruptcy already this year and I predict more will follow, perhaps significantly more. Reorganizations are just getting under way. Many corporations are hanging on for dear life and that the surge in reorganizations has only just begun. Just take a look at retail, the travel industry, hotels, restaurants, commercial office space and the REITs connected to them.

In the retail sector, companies with assets of over $50 million, 24 have filed for bankruptcy which is triple the amount of last year. Also check out the energy space where 33 filings have taken place as compared to 14 filing last year. Look all around you and then note the equity markets as well as the bond markets and the real estate markets and, given all of this bad data, it is really quite surprising that the markets are behaving as well as they are, in this environment.

Thank you Jerome Powell.

 

Market Data