Top Three Takeaways – November 16th
- Major assumptions are taking place in just about all aspects of our society right now. I’ll be leery of operating on assumptions until the day I die, in part because of the first time my dad talked to me about them. Around ten at the time, my dad told me there are three types of people. People who are dishonest and can’t be trusted. The majority of people in society who mean well but are often wrong about some of what they proclaim to be true. And a small number of people who are as honest as they are considered. These are the people who when they tell you something, you can take it to the bank. He told me to strive to be one of those people. The key to becoming one of them... Always operating with integrity and never operating on assumptions. He pointed out that’s where most people get it wrong. It’s also when he shared the saying about assuming with me. Why is this a takeaway for me today? On all of the biggest issues of the day, seemingly everything is assumed. It’s been assumed Joe Biden is President-Elect for a week and a half now, though he’s still officially not. That’s the first and the biggest assumption which remains omnipresent as we await recount results, legal challenges to run their course and state certification of votes to occur. Joe Biden becoming the next president is a likely assumption at this point but still it’s an assumption, not a fact – yet.
- Republicans will retain control of the Senate by winning at least one of the two Senate seats in Georgia on January 5th. This is the second big assumption by investors and most pundits. For the sake of our 401k’s and for that matter the integrity of this Republic, that’s one I’d like to indulge but it’s an even less certain assumption than the assumption Joe Biden will be the next president. Incidentally, if by a minor miracle team Trump was able to turn the tables on Biden’s advantage in at least three contested states, Republicans would retain control of the Senate, regardless of the outcome of those two runoff elections in Georgia as they currently hold 50 seats based on settled elections. The stock market, which is close to yet another record high, would be reacting very differently if not for this assumption. Or the third...
- Vaccine efficacy. Yes, Pfizer has a vaccine candidate they say proved 90% effective in their testing. Yes, Moderna said they’re very close to releasing results from their phase 3 candidate. Yes, this is generally good news. But yet again it’s all assumed. Kind of like when it’s assumed by many who usually get flu shots that they’re immunized again the flu. At best, they’re immunized against a specific strain of flu and usually not what’s going around during flu season. Just as the medical establishment never tells you the odds are a flu shot won’t protect you from catching the flu, as the average efficacy of a flu vaccine is 43%, they also don’t tell you the best performing vaccine in recorded history for a virus is 60%. It is possible to have a COVID vaccine that’s 90% effective? Theoretically, yes. Is it likely that a COVID vaccine will be more than twice as effective as the average annual flu vaccine and 30% more effective than any flu vaccination in history? That’s quite the assumption. And it’s this third one that’s the least likely of these three big assumptions which are impacting how all most all news is being presented and long-term investment decisions are being made. Among other considerations. Thinking about the prevalence of these assumptions is what reminded me of what my dad taught me thirty years ago. The odds are at least one of these assumptions will be incorrect. The question then becomes who the biggest ass(ume) will be.
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