At the end of last week and early this week, we had two news developments that had a negative impact on the financial markets.

Omicron

If you are worried about the latest COVID variant, get used to it.  As Johnny Carson playing his Carnac the Magnificent fortune-telling character, who had a knack for stating the obvious, would say, “There will be more variants in your future.”

Dr. Dave Rasnick, PhD spoke at a conference organized by Robert F. Kennedy Jr. in February of this year.  Dr. Rasnick was hired by Abbott Laboratories in 1978 to set up a chemistry group in their diagnostics division.  He has about two decades of experience in clinical diagnostics.  Dr. Rasnick was critical of the computer algorithmic process that Fan Wu and colleagues in China used to define the SARS-CoV-2 from the “millions of RNA fragments from a sample taken from the lungs” of a single pneumonia patient in China.  His conclusion: “Nowadays, it’s all technology and no biology.”

Dr. Rasnick was also critical of the use of the PCR process for diagnostic tests.  In 1997, he met Kary Mullis, who invented the PCR process and received a Nobel prize for it in 1993.  The purpose of the PCR process was to create billions of copies of a single fragment of DNA.  Mullis died in 2019, so he is not available to offer his thoughts about the PCR “test.”  Dr. Rasnick knew Kary Mullis well and had this to say:

It turns out that the most stable sequences of RNA viruses are approximately the same in all members of the viral family, including the family of coronaviruses.  The 1% or less of the viral RNA that is amplified by the PCR test is chosen from these relatively stable samples.  So, at best, the PCR test is targeting a family of RNA viruses and not a specific virus.  Before PCR can be done on the RNA of a coronavirus, a process that is error prone must first convert the RNA into DNA.  By their very nature, the short synthetic sequences of DNA used to initiate each cycle of the PCR test cannot be guaranteed to distinguish between virus and non-virus.  This alone makes PCR test highly suspect.  However, these technical limitations were not the reason Kary opposed the PCR test.  He simply could not accept equating a string of RNA or DNA with actual virus.  Kary was not alone.

As for the number of potential variants, Dr. Rasnick had this to say: “An international database consortium in Munich has already catalogued over 400,000 different sequences of SARS-CoV-2.”  If you wish to watch Dr. Rasnick’s presentation, here is a link to the conference presentations: https://childrenshealthdefense.org/webinar/the-covid-vaccine-on-trial-if-you-only-knew-watch-now/   He starts at 1 hour+20 minutes of the video.  There is also a link to a transcript a few lines below the video frame.

Despite all the COVID variants, you can rest assured because Pfizer CEO Albert Bourla recently said on CNBC, “I’m very confident that this drug (Pfizer’s new COVID treatment pill) works for all known mutations, including omicron.  But we are working on other drugs for the eventual case that maybe a resistance is developed.”

Assuming the virus theory is true and tests are accurate, the omicron variant is reported to be weak in nature.  According to Angelique Coetzee, Chairwoman of the South Africa Medical Association who first raised the alarm of the latest new COVID variant known as Omicron, it causes “unusual but mild symptoms.”  In Botswana, Assistant Minister Sethomo Lelatisitswe reported that they had 19 cases of the omicron variant, including 4 foreign diplomats who left the country.  Of the 15 remaining cases in Botswana, 11 were vaccinated, while 4 who were unvaccinated did not show any symptoms at all.  3 of the patients showed mild symptoms, while the rest had no symptoms.

Despite the mild nature of omicron, it has prompted a variety of new travel restrictions and other actions by governments around the world.  So far, it is government actions rather than the virus itself that has created negative economic implications.

The Fed

President Biden reappointed Jerome Powell as Chairman of the Federal Reserve on November 22.  Perhaps Chairman Powell considered his reappointment as an opportunity to be more hawkish in his public pronouncements.  On Tuesday of this week, at a Senate Banking Committee hearing, Chairman Powell said that “clearly the risk of more persistent inflation has risen” and “it’s probably a good time to retire” the word transitory.

It was already obvious that our current bout of inflation was not transitory, but it was contrary to the favorite meme of the media that inflation was temporary in nature.  It also suggested that the Federal Reserve might take action to reduce the rate of inflation sooner than previously expected.  Economists are no longer asking if the Fed will raise interest rates but are now tasked with predicting how many times the Fed will raise rates and at what pace.

The Bottom Line

When the stock market is at high valuation levels (high price/earnings ratios, low dividend yields) supported by accommodative Federal Reserve policies and excessive margin debt for an extended period, there are likely to be some sharp declines.  These declines can be set off by almost any news developments that are offered to justify the declines.  Conversely, when the stock market is at low valuation levels (low price/earnings ratio, high dividend yields), favorable news can result in sharp increases.

If you have any questions or comments, please contact me.

Sincerely,
Robert G. Kahl
CFA, CPA, MBA