Fortunately, the vaccines seem to be doing their job and preventing against large amounts of hospitalizations but people all over the World are catching Covid again and South America has yet another variant of the virus, which now has 8 times the death rate of the rest of the World. South America has 5% of the World's population but now accounts for 25% of the World's daily Covid deaths – kind of like America was last summer.
Almost a million people have died across 12 countries in the region. Amid another devastating surge, Brazil surpassed 500,000 this past weekend, with the virus killing seven times as many people per capita each day than in hard-hit India. Colombia and Argentina, which together have 95 million people, are tallying three times as many deaths each day as all of Africa. Of the 10 countries around the world with the highest daily death rates per capita, seven are now in South America.
I know we don't want to start July off worrying about Covid when we should be going out and having fun but we need to remember not everyone is having such a good time and that kind of makes me wonder how all these projection of S&P 500 earnings, which rely 50% on the Global Economy, are going to be hitting their marks when the rest of the World is still facing serious issues?
As anger builds over governments’ handling of the crisis, signs of political upheaval are multiplying. Violent protests have already rocked Colombia. Brazil’s president, Jair Bolsonaro, is facing a congressional inquiry over his handling of the pandemic, with antigovernment street demonstrations gaining momentum over the weekend. In Peru, voters elected the head of a Marxist party as president, and leftist groups are drafting Chile’s new constitution.
Confronted during the past year with the near-impossible task of keeping people at home in countries where half of workers toil in the informal economy, often living hand to mouth, some officials bet on herd immunity, either openly or behind closed doors. The result was deadly. In Brazil, as infections surged in the Amazonian city of Manaus last year, President Bolsonaro also encouraged local officials to test out herd immunity, speaking out against lockdowns and face masks, and playing down the dangers of the virus, according to statements given during the congressional inquiry.
The result, public-health experts said, was the collapse of the health system and the emergence in Manaus of the aggressive Gamma variant, previously called P.1, that is now wreaking havoc across Latin America. The Gamma strain, responsible for most new infections in Brazil, was shown to be up to 2.2 times more contagious than previous versions of the virus. The country is logging about 2,000 deaths a day, reaching a total of 501,825 on Sunday.
In parts of Asia, Australia and Europe, governments are reintroducing travel restrictions and delaying the lifting of lockdowns as health authorities find that restrictive measures that kept earlier lineages of the virus in check aren’t curbing Delta, which is twice as contagious as the original Covid strain. And don't forget Japan is going forward with the Olympics in 3 weeks – that should be interesting!
In Europe, German authorities are trying to slow the spread of the virus by limiting travel. Passengers arriving from so-called “variant territories”—including the U.K., Portugal, Russia and India among others—must quarantine for 14 days, whether or not they are vaccinated or have tested negative for an infection. So much for those summer travel plans.
Some 60% of that loss will be felt in developing economies, reflecting slower progress of vaccinations. The U.N. said it expects any recovery in tourism to be led by rich countries with higher vaccination rates, including France, Germany, Switzerland, the U.K. and the U.S.
So get out there and travel this weekend as it's up to US to save the Global Economy – also it may be our last chance if all this travel blows up in our face and puts us back on lockdown too.
Expedia (EXPE) is still losing money in 2021 after losing $2.6Bn last year yet, at $163, the stock is 20% higher than they were in 2019 – a year where they made $565M. $163/share is $24Bn in market cap, so a bit steep, which means EXPE may be an interesting short assuming these trends we're seeing have an impact on enthusiastic summer travel projections.
We can play them short in our Short-Term Portfolio as follows:
- Buy 10 EXPE Jan $180 puts at $28.50 ($28,500)
- Sell 10 EXPE Jan $155 puts at $14 ($14,000)
- Sell 5 Jan $160 calls for $22 ($11,000)
That's net $3,500 on the $25,000 spread that's $17,000 in the money to start. It's an aggressive short, since the $160 calls are currently in the money but that's because I read the above articles, did the math and I don't see why people would pay 100x current earnings when the virus will not likely be "under control" into the end of the year and estimates are likely to be taken down.
