‘Wrong!’ Trump and Fauci clash over the resurgence of COVID-19 cases, shutdown of U.S. economy — and hydroxychloroquine


Anthony Fauci and President Trump are still at odds.

Fauci, director of the National Institute of Allergy and Infectious Diseases for three decade who has worked on the front lines of the AIDS pandemic in the 1980s and 1990s, the Ebola outbreak of 2014 to 2016 and the anthrax attacks two decades ago, testified before Congress last week that the U.S. should have taken speedier and more comprehensive action to close businesses when coronavirus first appeared in the U.S. earlier this year.

Fauci said the U.S. effectively only shut down half the economy. “If you look at what happened in Europe when they shut down, or locked down, or went to shelter-in-place, however you want to describe it, they really did it to the tune of about 95% plus,” he told the hearing. “When you actually look at what we did, even though we shut down, even though it created a great deal of difficulty, we really functionally shut down only about 50% in the sense of the totality of the country.”

President Trump hit back at Fauci on Twitter
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on Saturday evening, replying to a post by CBS News
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of Fauci’s testimony. “Wrong! We have more cases because we have tested far more than any other country, 60,000,000. If we tested less, there would be less cases. How did Italy, France & Spain do? Now Europe sadly has flare ups. Most of our governors worked hard & smart. We will come back STRONG!”

Nearly 53 million people have been tested for coronavirus in the U.S. to date, according to the Centers for Disease Control and Prevention, with more than 5 million or 10% of those testing positive for the virus. Wait times of more than 10 days have become the norm for many Americans. There are, however, stories of people who have had to wait 26 days to get their results. Waiting 10 days for a test defeats the purpose of getting tested, some health professionals say.

Approximately half of the tests being performed daily are conducted by commercial labs such as Quest Diagnostics
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and LabCorp. “Only one state has an average turnaround time of greater than five days,” said Admiral Brett Giroir, a member of the White House coronavirus task force.” Five states are between four and five days. 26 states are still three days or less, and the rest are between three and four days.” Turnaround times of 10 to 12 days represent outliers, he added.

The Trump administration, meanwhile, is trying to block $25 billion for states to conduct testing and contact tracing in the next coronavirus relief bill, people involved in the talks told the Washington Post this month. Democratic lawmakers, in negotiations over a new stimulus bill, have demanded $25 billion for the testing and contact-tracing, over three times what the GOP have suggested. Contact tracing identifies people who someone with COVID-19 has come into contact with.

At the U.S. House Select Subcommittee on the Coronavirus Crisis, Fauci reiterated that there was no scientific evidence to show that hydroxychloroquine was helpful for coronavirus patients. “You look at the scientific data and the evidence, and the scientific data, on trials that are valid that were randomized and controlled in the proper way; all of those trials show consistently that hydroxychloroquine is not effective in the treatment of coronavirus disease or COVID-19.”

When asked by Republican Rep. Blaine Leutkemeyer from Missouri about a “peer-reviewed” study suggesting otherwise, Fauci said, “The Henry Ford Hospital study that was published was a non-controlled retrospective cohort study that was confounded by a number of issues, including the fact that many people who were receiving hydroxychloroquine were also using corticosteroids, which we know from another study gives a clear benefit in reducing deaths with advanced disease.”

”So that study is a flawed study, and I think anyone who examines it carefully [would see] that it is not a randomized placebo-controlled trial. You can peer review something that’s a bad study,” Fauci said, adding, “I would be the first one to admit it and to promote it, but I have not seen yet a randomized placebo controlled trial that’s done that. I don’t have any horse in the game one way or the other. I just look at the data.”

Social-media sites attempted to quash a video pushing misleading information about hydroxychloroquine as a COVID-19 treatment — which led to Twitter partially suspending Donald Trump Jr.’s account. The video featured doctors calling hydroxychloroquine — a drug used to treat malaria, lupus and rheumatoid arthritis for decades — “a cure for COVID”, despite a growing body of scientific evidence that has not shown this to be true.

As of Sunday, COVID-19, the disease caused by the virus SARS-CoV-2, had infected at least 17.8 million people globally and 4.6 million in the U.S. It had killed over 685,179 people worldwide and at least 154,449 in the U.S., according to Johns Hopkins University. Cases in California surpassed 500,000 as the state reported 7,118 new cases Saturday, with 134 new deaths, bringing the death toll in that state to 9,365. New York has the most fatalities (32,694) followed by New Jersey (32,694).

The Dow Jones Industrial Index
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closed higher Friday, as investors tracked round two of the potential fiscal stimulus. The S&P 500
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and Nasdaq Composite
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also ended the week after some of the industry’s largest and most powerful players — Apple
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Facebook
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,
Amazon.
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and Google parent Alphabet Inc.
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-3.27%

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— reported their results.

How COVID-19 is transmitted



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Value stocks really may have lost their mojo this time — and growth stocks are gaining from it



Something fundamental about value investing may have changed.

Are value stocks reasserting their historical dominance over growth stocks, once and for all? Many value-oriented investment advisers are eager to declare this is so.

Indeed, iShares S&P 500 Value ETF
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since July 9 has beaten its iShares S&P 500 Growth ETF
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rival by 5.6 percentage points. That’s an impressive reversal of their relative returns from the beginning of 2020 until July 9, during which S&P 500 Growth beat S&P 500 value by 28.8 percentage points.

Forgive me for being skeptical. I’ve lost track of how many times in recent years that value advisers have claimed that value is, finally, living up to its long-term pattern of beating growth. At least over the past 13 years, myriad claims of renewed value dominance have proven to be nothing more than a triumph of hope over experience — as you can see from the chart below.

Even so, one should not be too quick to give up on value stocks. These stocks (defined as those trading for low ratios of price to book value, earnings, and so forth) have a long and illustrious history of beating growth stocks (those trading for higher such ratios). According to data from Dartmouth College finance professor Ken French, the 20% of stocks closest to the value end of the spectrum have beaten the most extreme growth quintile by 3.5 annualized percentage points since 1927.

Because of this long history, I have many times argued that value stocks should be given the benefit of the doubt. Nevertheless, as more and more years have passed in which the value premium has been negative, I have had to concede that something fundamental about value investing may have changed.

A new study points to one such factor. Entitled “The Real Effects of Modern Information Technologies,” it recently was circulated by the National Bureau of Economic Research. The study was conducted by Itay Goldstein, a finance professor at the University of Pennsylvania, Shijie Yang, a finance professor at The Chinese University of Hong Kong, and Luo Zuo, an accounting professor at Cornell University.

The study addresses the information asymmetry that, at least in prior decades, existed between growth and value stocks. During those earlier years, it was far harder to obtain relevant financial data for companies in the value camp than companies in the growth camp. Value stocks’ superior long-term return therefore represented, in part, compensation for the greater uncertainty that existed for such stocks and the greater effort required to dig up the relevant data.

In recent years, company data has become more easily and cheaply available, thereby largely eliminating this asymmetry. To analyze the consequences of this, the professors focused on how the U.S. Securities and Exchange Commission implemented its Electronic Data Gathering, Analysis, and Retrieval system (known as EDGAR) in the mid 1990s. Companies were segregated into 10 groups and each group joined the EDGAR system at a different date over a three-year period. This staggered implementation enabled the professors to compare the price behavior of companies that had become part of EDGAR with those that had not yet joined.

It’s worth remembering that, before the EDGAR system was implemented, companies submitted their required filings as hard copies that were made available in the SEC’s public reference rooms in Washington, D.C., Chicago and New York City. As you can imagine, accessing those documents was far more difficult than it is in today’s internet era. The professors quote a New York Times article that described one of the SEC’s public reference rooms as a “zoo” in which “files are often misplaced or even stolen.”

Information gathering in that pre-EDGAR era favored growth companies because they disproportionately were the ones for which Wall Street analysts and the financial news media were willing to dig through these SEC filings. That’s because growth companies are the most popular among investors, since they are the ones for which the most attractive growth stories can be told.

Value companies, in contrast, are those that are most out of favor among investors. This is especially the case for the smallest companies, where — not coincidentally — the value premium is strongest.

The professors report that “on average, the EDGAR implementation leads to an increase in firm profitability and sales growth in value firms but hurts performance in high-growth firms.” This reduces the spread between growth and value stocks—reduces the value premium, in other words. And this is precisely what one would expect, Goldstein told me in an email: “As more information becomes available, research costs are going down, which should lead to a decrease in the value premium.”

Note that the professors didn’t focus on EDGAR because it’s the only way in which the internet era has made the dissemination of company-relevant information easier, cheaper and quicker. For example, in 2013 the SEC allowed companies to start using social media to release key information. But since there were lots of other things going on in 2013 besides this change, and because the change equally affected both growth and value stocks simultaneously, it’s impossible to measure the impact of just that change.

What was unique about the EDGAR implementation was that it was done in stages, thereby allowing the professors to isolate the unique effects of that implementation while holding all other factors constant.

To be sure, Zuo added in an email, more research is needed to confirm the extent to which the information asymmetry between growth and value stocks is the source of the value premium. But, in the meantime, this new study provides a compelling narrative for why value stocks may continue to struggle.

Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at mark@hulbertratings.com

More:The ‘cobra effect’ will have a ‘disastrous and unimaginable’ impact on the market, Wall Street vet warns

Plus: Vanguard comes to defense of the 60/40 portfolio as it forecasts stock market returns for the next decade



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Republicans want to replace extra $600 unemployment with 70% replacement wages — but that could take months


What’s next for Americans who may have received their last unemployment-insurance checks that included the extra $600 a week from the CARES Act?

Well, that depends on how well-equipped their states’ employment offices are.

On Monday, Senate Republicans unveiled a new stimulus package, dubbed the Health, Economic Assistance, Liability Protection and Schools Act, or HEALS Act, that calls for implementing supplemental weekly unemployment benefits equal to 70% of a workers’ prior wages with a $500 cap.

But implementing that would take a minimum of eight to 20 weeks for state labor departments, according to a memo to members of Congress written by the National Association of State Workforce Agencies, a nonprofit and nonpartisan trade group.


The Republicans’ HEALS Act would allocate some $2 billion for state workforce agencies to upgrade their computer processing systems.

Until states can implement that, the Republican plan calls for two months where unemployment beneficiaries would receive a flat $200 a week on top of what they would otherwise receive at the state level.

Labor Secretary Eugene Scalia said, “the great majority [of states] indicated they can get this done within eight weeks.” States can apply for a waiver from the Department of Labor “if they’re not able to achieve it” within eight weeks, he said in a CNBC interview on Tuesday.

Opinion: Killing the $600 unemployment benefit is a boneheaded move

The HEALS Act would allocate some $2 billion for state workforce agencies to upgrade their computer processing systems.

Scalia said that one proposal put forth by Senate Minority Leader Chuck Schumer and Senator Ron Wyden, a Democrat from Oregon, which ties unemployment benefits to state unemployment rates, would have “required more changes by states.”

The time lag to switch over to the 70% wage-replacement payout formula is related to the fact that so many people receiving unemployment benefits are self-employed or are gig workers, said Wayne Vroman, an economist at the Urban Institute, a left-leaning policy think tank.

Under the $2 trillion stimulus package, known as the CARES Act, these types of workers became eligible for unemployment benefits. Without the CARES Act, they would have been ineligible.

Unlike traditional salaried workers, self-employed and gig workers often have volatile incomes that are not automatically reported to state workforce agencies.Therefore, state workforce agencies “would have to request that information from an applicant from their 1099 tax form,” Vroman said.

(A 1099 tax form is often used in place of a W2 form to report earnings to the government for a person who is not an employee, according to the Internal Revenue Service.)

“Those forms would serve as a source of income but they are much more difficult to get a hold of,” he said, and would likely require state workforce personnel to speak individually with unemployment beneficiaries.


‘The Republican proposal on unemployment benefits, simply put, is unworkable. It will delay benefits for weeks if not months as we slide into a greater degree of recession.’


— Senate Minority Leader Chuck Schumer

If unemployment benefits are distributed based on claimants’ prior wages, “new capacity would need to be created to receive and analyze earnings data for self-employed workers,” the National Association of State Workforce Agencies said.

But many states like Florida are already struggling with processing jobless claims in a timely manner. As a result, more than 55,000 Floridians who were eligible missed out on the $600 a week boost in unemployment benefits, CNBC reported.

The Department of Economic Opportunity, which administers unemployment benefits in Florida, recently cut nearly 1,000 contracted call center workers.

The agency told MarketWatch it is “actively monitoring the discussions being made by Congress to possibly extend Federal unemployment benefits and will work diligently with the U.S. Department of Labor to serve Floridians.”

Vromen suspects that states which supplement their workforce agencies with more funding on the state level as opposed to relying on federal funds would adjust more easily to the 70% wage replacement formula if the Republican proposal is signed into law.

Also see: Republicans and Democrats both want another round of stimulus checks — but here’s where they disagree

House and Senate Democrats hold that the Republican proposal for unemployment benefits unfairly penalizes Americans who are unemployed due to the pandemic. “If you’ve lost your job through no fault of your own Republicans want you to take a 30% pay cut,” Chuck Schumer, a New York Democrat, said Monday.

“The Republican proposal on unemployment benefits, simply put, is unworkable. It will delay benefits for weeks if not months as we slide into a greater degree of recession,” he said on the Senate floor.

Schumer and House Speaker Nancy Pelosi, as well as many other Democratic lawmakers, have been urging Republicans to consider the HEROES Act, a $3 trillion stimulus package House Democrats passed in May.

That proposal, among other things, would extend the extra $600 federal unemployment benefit to January 2021.

The Congressional Budget Office found that if these benefits were extended through January 2021, an estimated five of every six recipients would receive more in benefits than they would from working those six months.

Republicans say that would act as a disincentive for beneficiaries to return to work. Democrats however hold that there aren’t enough jobs out there for unemployed people to fill.



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This sector could have a half million job openings and opportunities for older workers


Although the coronavirus continues to rattle global markets and industries, some analysts expect to see greater demand for advanced manufacturing talent in the U.S. as the pandemic diminishes. That could create opportunities for older men and women, including white-collar professionals struggling to find jobs.

Before COVID-19, there were 500,000 manufacturing jobs open in the U.S., according to the National Association of Manufacturers (NAM). “We’re going to have a need very quickly to ramp up on hiring in those facilities that may have been shut down during the crisis or that need to expand operations,” said NAM president and CEO Jay Timmons in a recent press conference.


“The fact that one can get a certificate in about nine months and totally re-career into a nearly guaranteed job is an incredible opportunity for an older worker.”


— Nora Duncan, Connecticut state director of AARP

As manufacturers frantically try to keep up again with demand for essentials and lifesaving PPE (Personal Protective Equipment) for health care workers as cases rise across the country, their innovation and high-tech problem-solving could help dispel misconceptions that all manufacturing jobs are dirty and physically demanding, said Sara Tracey, project manager of workforce services for the Ohio Manufacturers’ Association in Akron, Ohio.

Manufacturing jobs and what they pay

Entry-level manufacturing jobs in industries such as aerospace, technology and defense include CNC operators, set-up technicians and programmers, as well as inspectors, higher-end assembly technicians and quality assurance.

The pay typically ranges between $35,000 and $65,000, including overtime and benefits, said Richard DuPont, director of community and campus relations for the Advanced Manufacturing Technology Center at Housatonic Community College in Bridgeport, Conn. More experienced professionals can earn upward of $95,000.

80% of older Americans can’t afford to retire – COVID-19 isn’t helping

In Ohio, manufacturers have been training and moving some workers into higher positions so the companies can hire and train new candidates for vacated ones, Tracey noted. Resources such as the Making Ohio website let people explore careers in manufacturing, including robotics, automation and 3-D printing.

Industrial maintenance is an important career pathway these days, as well, Tracey said. This sector is expecting more retirements in the near future, which will create jobs from “traditional machine mechanics to troubleshooting state-of-the-art electronic or robotic processes,” Tracey noted.

Also see: Cannabis, whiskey, and mobile bike repair: These entrepreneurs are thriving in the pandemic

Connecticut, among other states, now offers training programs with community colleges, state manufacturers and other organizations.

From banking to precision tools

This kind of training helped Allison Clemens-Roberts, who is over 50, find work after losing her clerical job in the pensions department of a Connecticut bank in 2017. A severance package gave her time to look for work, but she couldn’t find even temporary employment. She blames age discrimination by white-collar employers.

“There’s no way to hide how old you are. They can ask when you graduated from school,” Clemens-Roberts said.

But while she was out of work, Clemens-Roberts received a postcard from AARP offering a 25% tuition scholarship on advanced manufacturing programs at Goodwin University, a career-focused school in East Hartford, Conn.

She wasn’t interested until her husband Frank saw a TV commercial touting the benefits of Goodwin’s manufacturing and other programs.

“He said, ‘Why don’t you think about changing careers?’” Clemens-Roberts recalled.

So, with several months left on her severance, she enrolled in a full-time, six-month CNC (Computer Numerical Control) Machining, Metrology and Manufacturing Technology certification program. It would prepare her for a job working with automated machine tools which requires mathematical skills, attention to detail and critical thinking.

SectorWatch: 80% of older Americans can’t afford to retire – COVID-19 isn’t helping

Scholarships cut Clemens-Roberts’ tuition bill from $7,000 to $3,200. After a two-month paid internship at TOMZ, a manufacturer of precision components for major medical devices in Berlin, Conn., she was hired in April 2019. Six months later, TOMZ reimbursed Clemens-Roberts $1,500 for her education tab.

Clemens-Roberts said her family is now in a better financial position than when she was working in a bank, living paycheck-to-paycheck. Considered an essential worker, she has kept her full-time job through the pandemic, except for three days in March.

“I never thought I would go to college and participate in a graduation — in cap and gown,” Clemens-Roberts said. “That was a big surprise. And [actor] Danny Glover was the speaker. A bucket-list experience.”

There’s “obviously age discrimination, among other things, at play” for job seekers over 50, said Nora Duncan, Connecticut state director of AARP. “The fact that one can get a certificate in about nine months and totally re-career into a nearly guaranteed job is an incredible opportunity for an older worker.”

While AARP helped Clemens-Roberts pay for the tuition initially, the internship helped her get hired as a machine operator.

Older and younger manufacturing workers helping each other

The search for skilled manufacturing labor across the country is creating opportunities for workers of all ages, said DuPont. And older and younger generations working together are assisting each other.

The older students help younger classmates with life skills, while younger students can help with technology,” said DuPont. “Together, they make excellent teams.”

Don’t miss: How will the robots see you through the pandemic?

Just ask Fernando Vega, 62, who is now a quality inspector at Forrest Machine, in Berlin, Conn. It makes precision-machined parts and other components for the aerospace and commercial industries. In the 1990s, he was a quality inspector before recessions and outsourcing forced him to consider other careers.

He tried working for a nonprofit and though Vega found the work rewarding, it wasn’t financially sustainable.

So, Vega went back to school in spring 2018 to study advanced manufacturing at Goodwin.

“I was in a class of 18, and at first everyone kept to themselves. But when it came time to read blueprints, there was some panic and I said, ‘Don’t panic, I’ll show you.’ The [younger] students helped me with trigonometry, and then we started to work together.”

Vega has worked at his manufacturing job throughout the pandemic. At one point, he was putting in 50 hours a week, but that was reduced to 40 hours plus overtime.

Vega recalled promising his mother that he would go to college. “But that was a long time ago,” he said. His mother never got to see him graduate but Vega feels he’s fulfilled his promise — not only to her, but also to himself. “I love my job,” he said.



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Job trouble? Wave of rehiring after economy reopened to fade in July after viral spiral


The engine of the U.S. economy may have gotten clogged again — no thanks to the recent acceleration in coronavirus cases. That’s bad news for Americans hoping to return to their old jobs.

Just how much damage has been done will become more evident this week, especially from the U.S. employment report for July due next Friday. The number of jobs regained last month is unlikely to match the huge increases in May and June that totaled a combined 7.5 million.

Wall Street
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economists predict the U.S. added about 1.5 million jobs in July.

Even that estimate may be inflated though by seasonal changes in educational employment at the state and local level, Morgan Stanley contends. Private-sector jobs could increase by less than one million, the investment bank calculated.

See: MarketWatch Economic Calendar

Whatever the case, a much smaller increase in hiring or rehiring in July would bode ill for the U.S. recovery from the coronavirus pandemic. The government last week reported that gross domestic product sank a whopping 32.9% in the second quarter on an annualized basis, the biggest decline since World War Two.

Read: Economy suffers titanic 32.9% plunge in 2nd quarter, points to drawn-out recovery

Also:‘A massive welfare economy’ – federal aid prevents even steeper GDP collapse

“The big question hovering over next week’s employment report is whether the two-month surge in job gains stopped in July,” says David Donabedian, chief investment officer of CIBC Private Wealth Management. He thinks that’s exactly what happened.

It will be hard for the economy to make up a lot of lost ground in the third quarter unless hiring snaps back even faster.

See:MarketWatch Coronavirus Recovery Tracker

The U.S. lost a record 22 million jobs in March and April, according to Labor Department data. So far the economy has recovered less than one-third of those jobs.

The weekly tally of jobless claims, meanwhile, showed an even higher 30 million unemployed people were collecting benefits as of mid-July, representing about one in five Americans who said they were working before the pandemic, according to a Labor Department survey of households.

Robert Frick, corporate economist at Navy Federal Credit Union, said many people who expect to return to work are going to find they have no jobs or businesses to which they can return, a “grim reminder” of how much long-term damage the pandemic has caused.

“In the long run we are going to see a sobering slowdown in job growth,” he said.

The still-high level of unemployment, the viral spiral, and the uncertainty over whether Washington will provide more financial aid has understandably made Americans feel less confidence. On Friday Congressional lawmakers were still at odds on the next relief package with many benefits set to expire at the end of July.

A variety of measures that monitor consumer attitudes show a clear deterioration in July that’s likely to bleed over into August. That will make a recovery even harder.

Read:Consumer confidence wanes in July and points to rockier economic recovery

And:Consumer sentiment falls as coronavirus cases rise and federal aid set to expire

The news might not all be negative next week, however.

Manufacturers — auto makers in particular — have shown more resilience than the service side of the economy. The closely followed ISM manufacturing survey could show improvement for the third straight month.

The housing industry has also snapped back faster than expected amid a surge in home sales. Prospective buyers with secure jobs are taking advantage of record-low interest rates to buy new homes, a trend that may have been fueled by people fleeing the closed spaces of cities with a high number of coronavirus cases.

Even that potential bit of good news, however, has been overshadowed by the broader damage to the economy from the latest spike in coronavirus cases in many American states.

A full recovery can’t take root and blossom, economists say, until the disease is brought under control.

See: Pandemic will continue for some time, experts tell Congress as U.S. case tally nears 4.5 million



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