Don’t Know How Much Stimulus Is Needed? Put it on Autopilot, Some Say

One of the trickiest questions facing Congress when it takes up the debate on new stimulus later this month is just how much help the economy needs to recover from the Covid-19 pandemic.

If it is already recovering rapidly, the government may spend and borrow more than needed, pushing the national debt higher. If the recession drags on, multiple rounds of economic relief may be necessary, a process fraught with political hurdles.

Some economists and lawmakers say they have the solution: put stimulus on autopilot, so that aid to households automatically becomes more or less generous as economic triggers are hit. They say enhanced unemployment benefits could be authorized to continue until the unemployment rate falls below a preset threshold, avoiding the political fights that can slow stimulus efforts.

“There were 13 votes in the wake of the [2007-09] recession to extend unemployment benefits,” said Rep. Don Beyer (D., Va.), the vice chairman of Congress’ Joint Economic Committee. “That’s a lot of political back and forth. Any time you have to go through a tough negotiation, there are political costs to both sides, so why not take it away from that?”

A few features of current law already act as automatic stabilizers: When the economy weakens, more people qualify for food stamps and unemployment insurance, and the Treasury collects less tax revenue. When the economy strengthens, that goes into reverse, thus automatically “stabilizing” the business cycle.

The U.S.’ automatic stabilizers are weaker than in some other advanced countries. Tying these programs to economic conditions would be one way to make them more powerful, at a time when the Federal Reserve has less room to cushion the economy since interest rates are already close to zero.

At the end of March, Congress expanded those programs by adding $600 a week to regular unemployment benefits, which ranged from 31% to 54% of weekly pay in 2019, widening eligibility to contract workers, such as delivery drivers or freelance writers and extending the duration of benefits.

Senate Minority Leader Chuck Schumer (D, N.Y.) and Sen. Ron Wyden (D., Ore.) introduced a measure on July 1 that would extend the extra $600 until a state’s average unemployment rate over three months is below 11%, then gradually shrink the bonus as the rate drops further. It would also extend the duration of regular benefits from 39 to up to 78 weeks, as long as a state’s unemployment is above 5.5%.

House Speaker Nancy Pelosi (D., Calif.) has endorsed the idea of using triggers for enhanced aid, though she didn’t include them in the latest coronavirus relief package the House approved in May. That bill would extend enhanced benefits through the end of 2021 at a cost of $432 billion, pushing the cost of the overall bill to $3.4 trillion, according to the Congressional Budget Office.

The unemployment rate, which stood at 11.1% in June, is expected to fall to 10.5% by year-end and to 7.6% by the end of 2021, still well above the 3.5% recorded in February before the virus spread throughout the U.S., according to the CBO.

Tying benefits to economic triggers would cost even more depending on how the proposal is structured, said Claudia Sahm, macroeconomic policy director at the Washington Center for Equitable Growth, a left-leaning think tank, who advised House leaders on the measure. But if the economy recovers rapidly, automating the enhanced benefits means they would quickly phase out, leaving minimal impact on the debt.

Triggers could be especially useful during this recovery, whose pace depends on the virus. Strong economic data in May prompted calls from Republicans that another big aid package might not be necessary. Just weeks later, a resurgence of cases appears to have slowed growth.

While the current proposal for triggers revolves around unemployment insurance, in theory tax cuts, higher benefits for food stamps and stimulus checks could be similarly linked to the state of the economy.

The proposal is unlikely to make headway so long as Republicans control the Senate. Critics say enhanced benefits discourage workers from returning to the labor force. There is some evidence that extended benefits have that effect: A 2015 study by economists Marcus Hagedorn, Iourii Manovskii and Kurt Mitman found an abrupt stop in extended benefits in the U.S. at the end of 2013 led to higher employment the following year.

“There is a vicious cycle here that the unemployment rate won’t fall if the government keeps the benefit so high,” said Chris Edwards, an economist at the libertarian Cato Institute, who also warned such fiscal policy rules could add trillions to federal debt.

“I don’t see what the advantage is in trying to make decisions for the future now,” he said.

Mr. Beyer, who introduced a House bill similar to Messrs. Schumer and Wyden’s plan, said the triggers proposal might not make it into the next fiscal package Congress expects to pass by the end of the month, but he is optimistic. After the House passed its bill, Mr. Beyer said Mrs. Pelosi told a group of lawmakers from relevant committees to continue to explore the idea.

And if Democrats win control of the White House and Senate in November, “It wouldn’t surprise me if we do it in January,” he said.

https://www.marketscreener.com/news/Don-t-Know-How-Much-Stimulus-Is-Needed-Put-it-on-Autopilot-Some-Say–30879639/

With No Summer Concerts, It’s Garth Brooks at the Drive-In

Concert promoters — and fans — haven’t given up on live music, even with most summer shows wiped out by the coronavirus pandemic.

The stadium shows and festivals that had been expected to make this year the biggest ever for live music have given way to virtual tours and drive-in shows. The performances don’t come close to making up for scores of canceled or postponed events, but they are finding eager audiences so far and providing a financial lifeline for some artists and bands while tours are on indefinite hiatus.

More than 350,000 fans rolled into over 300 drive-in theaters across North America on June 27 to watch a Garth Brooks performance taped without an audience at a Nashville soundstage weeks before the viewing. Cars were parked in every one-and-a-half or two spots to allow space for concertgoers to maintain their distance from one another, even while tailgating. Promoters are tracking the results of the show — which priced admission at $100 per car — as a potential test case for future events.

Walter Kinzie, chief executive of the company that produced the Garth Brooks concert, Encore Live LLC, declined to say how much the show made, but called the event “overwhelmingly successful on all accounts.” Since then, he said, artists and their representatives have been calling nonstop. “The amount of interest from major headliners has been unbelievable,” he said.

He also said most of the drive-ins that screened the Garth Brooks show are now signed up to distribute prerecorded or live-streamed shows exclusively from Encore. The company hasn’t announced specific plans for future shows.

Caryn Gullifor packed her Toyota Highlander SUV with her mother, aunt, best friend and 10-year-old son — plus a tent, chairs, table, coolers and bug spray — for the show at the McHenry Outdoor Theater in northern Illinois. The 33-year-old sales manager, who had seen Mr. Brooks in concert once before, said the ticket price was worth it, and she will go again if another artist she likes does something similar. Without the artist there onstage, and with sound coming through the car radio rather than a massive speaker bank, it wasn’t a true substitute for a normal live show, Ms. Gullifor said.

“Seeing Garth at the drive-in still had some of those things from a concert I love, though,” she said. “The audience singing and dancing together, and spending quality time with friends and family.”

Before the onset of the coronavirus, the global live-music business had been expected to generate $28.8 billion in ticket sales and sponsorship revenue this year, according to PricewaterhouseCoopers LLP, a 3% increase over 2019. Now, the live business is forecast to fall 75% to about $7 billion this year, according to media and tech analysis firm Midia Research.

Across North America, shows in the six-month period ended May 20 grossed $1.61 billion, 55% less than they did in the year-ago period, according to trade magazine Pollstar.

Alternative singer-songwriter Andrew McMahon is performing live for three sold-out nights later this month in the parking lot of a concert venue in Anaheim, Calif. Most tickets were priced at $200 a car, with front rows going for $350. At 236 cars per show, the event will gross over $50,000 in ticket sales each night, according to the organizers.

Cars will be parked first-come-first-served in a staggered pattern, with at least 10 feet between them to allow tailgating. Fans can bring their own food and drink, but concessions and merchandise will be available for order through a mobile app and delivered directly to attendees’ cars; restrooms will be managed via virtual queue.

Last week, promoter Nederlander Concerts began selling tickets to watch a live stream of the July 11 show for $20, or more with merchandise.

The limited capacity and enhanced health precautions mean drive-in concerts don’t represent a sustainable business model for the long term, said Jordan Harding, general manager of the venue, City National Grove, adding that the three-night duration should help offset some fixed costs, such as installing staging, sound and lighting equipment — all appropriately distant from the audience.

“We’re looking forward to reopening the main venue,” he said. “But this is a nice way to bridge the gap.”

Electronic musician Marc Rebillet’s 13 drive-in shows in nine markets last month grossed $523,000 with 12,132 fans in attendance altogether — and double the number of fans per show he was seeing prepandemic. Mr. Rebillet’s merchandise sales quadrupled to about $13,000 a night, according to the shows’ promoter, Matt Feldberg.

“There’s definitely a huge ‘I was there’ zeitgeist element,” said Mr. Feldberg.

Virtual tours, with fans watching online from home, are proving financially viable to some degree.

Ben Baruch started promoting his clients’ paid streamed performances in March. The Denver-based artist manager decided early on that free online shows, viewed by some in the industry as a good way to reach new fans and maintain contact with older ones, wouldn’t help pay the bills.

“Exposure is great,” he said, but “we wanted to make sure our artists and crew members were able to live.”

Now, he is sending some of the bands he manages on “tour” — in one case to empty venues — with tickets, and premium-priced options such as VIP merchandise packages and Zoom meet-and-greets. One of Mr. Baruch’s clients, Connecticut jam band Goose, ran a five-night “Bingo Tour” with fans purchasing boards to play bingo with the set list to earn prizes.

Without the expenses of tour buses, fuel, lighting and production rentals that would be involved in traditional touring, the net income from one of these virtual events is consistent with what a band might expect from a night on the road, Mr. Baruch said. Between tickets, VIP and merchandise, the acts are netting $10,000 to $20,000 a night.

“Unfortunately, we can’t do this for 20 to 30 nights like we might on a traditional tour because the demand just isn’t there,” said Mr. Baruch, adding that as long as coronavirus-related restrictions continue, any touring act is going to register a drop in revenue over the course of the year.

Nevertheless, he said digital events will cover overhead such as band and crew pay.

Some fans were disappointed to discover that the Garth Brooks performance they paid to watch at drive-ins had been prerecorded, so it could be shown at a convenient hour in multiple time zones, rather than simulcast live.

“I could have had the same experience at home on YouTube,” said Garrett Allen Sr., 34 years old, who watched from the back of an SUV with his wife and three children at the Starlite Drive-In in Wichita, Kan. “And wouldn’t even have to wear pants.”

https://www.marketscreener.com/news/With-No-Summer-Concerts-It-s-Garth-Brooks-at-the-Drive-In–30879536/

Coronavirus Is No Cure for Health-Care Stocks

Investors are struggling to predict where the stock market is headed next. Even so, many are already betting that health-care shares won’t lead the way.

The sector offered shelter for investors — followed by an outsize rebound — during the market turbulence earlier this year. With several companies scrambling to create the first effective coronavirus vaccine or treatment, health-care stocks suddenly appeared to offer big opportunities for gains.

Lately, however, much of that allure has worn off. Fund managers have reduced their allocation to health-care stocks, and investors recently pulled more money from global health-focused equity funds than they have in nearly two decades.

The S&P 500’s health-care sector finished June as the second-worst performer of the index’s 11 groups, falling 2.5% compared with the benchmark’s 1.8% gain. Companies from pharmaceutical giant Pfizer Inc. to biotech firm Biogen Inc. to health insurer Anthem Inc. dragged the sector down, all tumbling at least 10% during the month to rank among the biggest losers in the S&P 500.

Investors say the sector’s recent losses reflect a growing list of concerns. Rising coronavirus infections have already halted elective surgeries in some parts of the country, eating into revenue as hospitals preserve capacity. Meanwhile, companies working on virus remedies are facing pressure to keep drug costs low. Investors are also beginning to fear a Democratic sweep in November’s election that could lead to industry changes — especially if a more progressive candidate is chosen to run as vice president.

“Contrary to what many would believe, Covid-19 is not a net positive for the sector,” said David Kastner, senior investment strategist at Charles Schwab Investment Advisory. “It is simply less negative than it is for many sectors.”

Even with the recent losses, the sector remains down just 0.3% in 2020, compared with the broad index’s 3.1% decline.

This week, investors will look to earnings from the pharmacy chain Walgreens Boots Alliance Inc. to better understand the virus’s effect on health-care companies. Traders will also be watching economic indicators such as the Institute for Supply Management’s U.S. nonmanufacturing index for its assessment of the services industry.

Despite rising rapidly earlier this year, many biotech and pharmaceutical companies are now trading well below their 2020 highs. Investors initially flocked to companies working on virus vaccines and treatments, but trial results reveal the long road ahead. Investors are beginning to realize that many companies will struggle to find an effective remedy. And those that do will likely be pressured to keep their medicine affordable, limiting big opportunities for profit.

As a result, shares of Moderna Inc. and Inovio Pharmaceuticals Inc. — both of which are working on a vaccine — have fallen at least 26% from their highs this year. Gilead Sciences Inc., the drugmaker behind Covid-19 treatment remdesivir, is down 9.1% from its late-April high.

Meanwhile, investors are also trying to assess what a recent uptick in cases will bring. During the first spike of coronavirus infections this year, elective surgeries were dropped, doctors visits were canceled and clinics closed. That weighed on shares of hospitals operators such as Tenet Healthcare Corp. and HCA Healthcare Inc., which have badly trailed the broader market this year, off 52% and 34%, respectively.

The recent underperformance of the sector marks a contrast from earlier this year. During the selloff that began in mid-February, the S&P 500’s health-care sector fell 28%, compared with the benchmark index’s 34% decline. And then, after markets bottomed in late March, the group rallied 32% over the next month, outpacing the broader market. The stocks have, historically, been more resilient in recessions.

Evidence that traders were beginning to rotate out of the shares began emerging during the second quarter, when investors, including stuck-at-home day traders, began piling into cyclical stocks that careened in the early stages of the pandemic.

By mid-June, the exodus became more clear: Funds that focus on the health-care and biotechnology sector saw their 10-week inflow streak come to an end in the week ended June 10, according to EPFR Global data.

And by the following week, the situation had grown worse: The funds saw a record $2.6 billion of outflows — an all-time high since EPFR began tracking the data in the first quarter of 2002.

Cameron Brandt, director of research at EPFR, said the exodus from health care is indicative of some profit-taking after a strong rally, and noted that inflows to the sector have since returned, though at much smaller levels than this spring. However, he added, the recent changes have coincided with a political shift, too: As money began flowing out of health- and biotechnology-focused funds, more national polls began showing that presumptive Democratic nominee Joe Biden was overtaking President Trump by a wider margin.

“Of the sector fund groups that tend to move in response to political shifts in the U.S., health care and financials tend to be the most sensitive,” Mr. Brandt said.

“Two weeks ago was when the narrative of ‘It’s still possible that Trump will get re-elected’ [shifted] to ‘Trump will not and may take the Republican Senate down with him,'” he added. “And Democratic control is not viewed as a positive for the health-care sector.”

Health-care stocks initially rallied in March at the prospect of Mr. Biden as the Democratic nominee because a massive overhaul of the health-care system would be less likely under his presidency. Even so, investors tend to view any kind of Democratic leadership as less favorable for business.

A June survey from Bank of America of roughly 200 fund managers showed that they view a Democratic 2020 sweep of the presidency and Congress as the third-biggest risk that markets are facing, following a second wave of coronavirus and permanently high employment.

The survey also revealed that fund managers’ net allocation to the global health-care sector plummeted in June. The bank said a net 30% of respondents were overweight — meaning they owned a larger position than the benchmark they track — down from 48% in May.

In the coming weeks, traders say they will be watching to see whether rising coronavirus infections dent demand for health-care services and whether employment in the sector will continue to improve.

The June jobs report revealed that health-care employment increased by 358,000, led by gains in offices of dentists and physicians. However, job losses continued in nursing-care facilities, and employment in the sector remains far below February’s levels.

Many investors and analysts said they aren’t worried about any significant long-term dent in demand. Despite restrictions on elective surgeries in some states, other facilities have begun scheduling visits and procedures again. And unlike some sectors that may suffer from permanent changes in consumer behavior, demand for health care will persist, analysts and investors predict.

“A lot of the reduced revenue is artificial — it’s just the local governments that are stopping [health-care providers] from continuing their services,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance. “We believe as those restrictions are lifted, you’ll see a lot of people come back…Health care will continue to be a good sector to invest in.”

https://www.marketscreener.com/BIOGEN-INC-4853/news/Coronavirus-Is-No-Cure-for-Health-Care-Stocks-30879576/

Glaxo, Sanofi near £500M COVID-19 vaccine deal with the U.K.

Sanofi (NASDAQ:SNY) and GlaxoSmithKline (NYSE:GSK) are close to a £500M deal to supply the British government with 60M doses of their coronavirus vaccine, according to the Sunday Times.

The business department is understood to be taking an option to buy the vaccine from the pharma giants should it work in human trials, which are due to begin in September.

https://seekingalpha.com/news/3588561-glaxo-sanofi-near-500m-covidminus-19-vaccine-deal-u-k

UK PM’s fiancée urges more shops to ban coconut products from monkey labor

UK Prime Minister Boris Johnson’s fiancée Carrie Symonds on Friday welcomed pledges by four British retailers to stop selling coconut products that use monkey labour in their production, and urged others to do the same.

Symonds, a conservationist, was responding to a report in the Telegraph newspaper that highlighted the use of pigtailed macaques taken from the wild in Thailand and used on farms to scurry up trees and harvest coconuts.

The report cited an investigation by the animal rights organisation PETA Asia.

“Glad Waitrose [JLPLC.UL], Co-op, Boots & Ocado have vowed not to sell products that use monkey labour, while Morrisons has already removed these from its stores,” Symonds tweeted.

She called on all other supermarkets to stop selling the products, which include certain brands of coconut water and coconut milk, and named three major chains.

Walmart-owned Asda said it was removing Aroy-D and Chaokoh branded products from sale while it investigated the report with its suppliers.

“We expect our suppliers to uphold the highest production standards at all times and we will not tolerate any forms of animal abuse in our supply chain,” it said in a statement.

A spokeswoman for Sainsbury’s said it was actively reviewing its ranges and investigating the issue. “We are also in contact with PETA UK to support our investigations,” she said.

Tesco, Britain’s biggest retailer, said its own-brand coconut milk and coconut water did not use monkey labour in its production and it did not sell any of the branded products identified by PETA.

“We don’t tolerate these practices and would remove any product from sale that is known to have used monkey labour during its production,” a spokesman said.

https://www.marketscreener.com/WALGREENS-BOOTS-ALLIANCE-19356230/news/PM-s-fiancee-urges-more-shops-to-ban-coconut-products-from-monkey-labour-30865786/