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A Risky Rise Continues
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A Risky Rise Continues

Afternoon Audit
May 11, 2020
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The Afternoon Audit
Monday | 5.11.2020

Big Tech Leads Stocks to Rise

Catch Up Quick

  • An Iranian warship accidentally struck another with a missile during an exercise, killing 19 sailors and wounding 15 others in the Strait of Hormuz

  • White House Senior Economic Advisor predicts unemployment rates “north of 20%”

  • According to Governor Cuomo, New York coronavirus hospitalizations fall to March levels

  • Amazon reportedly is considering a takeover of AMC Theaters

My Monday Opinions

  • Universities have an insurmountable challenge ahead— they must convince students for the next year that online classes are worth the the same as in-person ones; however, once the pandemic subsides, they will have to re-convince students that in-person classes are the best option to retain tuition revenue

  • Biometric ID company CLEAR (you've likely encountered at airport checkpoints around the country) is introducing a product that will link personal health data to verified IDs to help businesses screen employees for coronavirus infections— if effective, this will play a huge role in the successful revamping economic activity prior to a vaccine

  • There is a strong chance Tesla CEO Elon Musk moves his HQ out of California, as he could save billions in taxes over time if he moves his company and his home to Nevada or Texas

The Risks of Reopening

States Ease Restrictions

  • New York will begin a gradual reopening this week, allowing "low risk" industries such as landscaping and drive-in movies to resume operations

  • Governor Newsom on California said "70% of the economy in the states...can open with modifications into the next phase"

  • Other states across the nation are easing restrictions as well— this is no new news

Around the Global

  • New coronavirus infections accelerated in Germany days after it loosened social restrictions

  • South Korea again closed down bars and clubs after seeing its largest one-day increase of new COVID-19 infections in a month

  • In Wuhan, Chinese authorities also reported five new cases on Sunday, the city’s highest number of new infections since 11 March

Tying it Together

  • Countries that began the reopening process before the U.S. are simultaneously experiencing an increase in cases

  • It seems inevitable that the U.S. will follow in the footsteps of these countries, especially with people more eager than ever to get out of the house and interact with family and friends

The Bottom Line

  • I think it is dangerous for U.S. equities to price in a successful reopening, especially because the current budget deficit leaves very little room for further fiscal support

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