WHO Do You Trust?

Monday, 22 June 2020
Melbourne, Australia
By Greg Canavan

Are we going back into another lockdown?

Can the global economy afford to do it?

Would citizens put up with it?

These are all questions we’re about to find the answers to.

At a global level, this stupid virus is as potent as ever. As The New York Times reports:

The World Health Organization issued a dire warning on Friday that the coronavirus pandemic is accelerating, and noted that Thursday was a record day for new cases — more than 150,000 globally. “The world is in a new and dangerous phase,” said Dr. Tedros Adhanom Ghebreyesus, the director general of the W.H.O.’

Can you trust the WHO though? More on that in a moment…

Here in Australia, the Victorian Government is winding back reopening measures as the state sees a spike in new rates of infection. Given Victoria had the most stringent measures in place to ‘stop the spread’, you have to wonder about the government’s strategy.

Certainly, community and small business resentment is going to grow. Thousands of small businesses who planned on opening today will now have to delay…or go under.

The fact that Vic Police will stringently monitor adherence to the new rules, while allowing mass protests just a few weeks ago, will only add to grievances.

It’s alright for the government. The news will take the spotlight away from last week’s revelations of branch-stacking and the dirty world of Labor politics.

Convenient, huh?

Is it morally right though to continue to deny people their livelihoods? How long will Victorians obediently follow the rules?

And are we getting the correct information? Are we getting the correct treatment?

This brings me back to the WHO.

Should we trust this organisation?

After all, there are claims they covered for China when the outbreak initially hit. Trump wants to pull their funding. There are also claims they are aligned with big pharma.

The Spectator’s Rebecca Weisser recently wrote about a trial in the use of Hydroxychloroquine (HCQ) by Oxford University, run by doctors Peter Horby and Martin Landray.

Known as the Recovery Trial, Weisser writes that it:

‘…has steadfastly ignored Professor Didier Raoult and a string of countries that have implemented his protocol, early use of HCQ with Azythromycin in safe doses, despite the fact that, after treating 3,737 patients — the single largest study in the world —Raoult has lost only 0.6 per cent, while Horby and Landray are presiding over carnage —a fatality rate of 25 per cent.

It takes serious effort to achieve such spectacularly bad results. How did Horby and Landray do it? They still haven’t published detailed results but seemingly by giving patients doses double the highest rate ever prescribed. Landray admitted to an investigative journalist at FranceSoir ‘these are quite high doses to… have a chance of killing the virus.’ Or killing the patient.

Weisser points out that the WHO was also running an international Solidarity trial using similarly high and toxic doses of HCQ.

Why? Because the WHO has been working for years with Gilead Sciences trying to get the pharmaceutical company’s lacklustre drug Remdesivir to show efficacy at curing first Ebola, with poor results, and now Covid-19 where it has been unable to demonstrate that the drug reduces mortality in any statistically significant way.

Unsurprisingly, toxic drug doses and muddled medications haven’t deterred the US Food and Drug Administration from announcing this week that it is removing the emergency use authorisation for HCQ because of the results of the Recovery trial.

HCQ, used correctly, is a massive threat to big pharma and big money.

Which is why it is demonised.

That is why you should take any virus-related announcements from the WHO with a grain of salt.

I’m not saying the virus isn’t serious. But there is evidence to suggest that the health authorities are more interested in turning a buck from it than safeguarding society. As Weisser concludes her story:

In Britain, where almost 42,000 people have died of Covid, the only thing randomised, controlled trials have achieved, is to blind people to the evidence that 40,000 of those deaths could have been avoided. It’s no joke; except for those laughing all the way to the bank.

It’s fair to say that only you, me, and a handful of others see the world through this lens. The vast majority of people think the WHO works for us, not big pharma.

If we are on the cusp of a second wave, renewed lockdowns could only be weeks away. I struggle to see how we go back to the dark days of April. But we could be in for a prolonged period of the economy operating on life support, or until big pharma comes up with a vaccine for us all to diligently take.

How long will the market hold up in such a scenario?

As you know, this is a topic Murray Dawes and I have discussed consistently over the past month. You can catch up on Murray’s latest analysis below.

For me, there is one sector I’m watching closely right now: consumer discretionary stocks.

Consumer discretionary stocks have outperformed in this rebound for two reasons. Firstly, the harsh lockdown wasn’t as long as initially feared. Secondly, government income support measures have actually boosted incomes in many areas. In addition, the ability to defer mortgages for six months has freed up lots of cash for discretionary spending.

That’s why the sector has had such a strong rebound, as you can see in the chart below…

The Insider

Source: Optuma

But if we’re still battling this virus, and government support measures are set to ease in three months, then consumer stocks should start to feel the pinch.

Note how the index bounced off the 100-day moving average (red line) in the chart above? That’s an important low to keep an eye on. If the index closes below that level in the days or weeks ahead, it will represent a ‘lower low’ on the charts. That will suggest a correction is underway.

That doesn’t mean the market is about to collapse. Many stocks are reasonable valued here, especially considering bonds are so expensive.

But it would suggest a change in sentiment is occurring.

In my view, long-term investors should welcome such a change. A decent sell-off from here would provide some great opportunities.


S&P 500, Nickel, Rare Earths and Gold
By Murray Dawes


[Click on the picture above for Murray’s real-time analysis of key markets around the world.]

I continue to think that the risk is to the downside for equities in the short term. Friday’s weak trading has confirmed a second daily sell pivot which is what I needed to see to increase my conviction levels.

The price of the E-mini S&P 500 as I write this is 3,080. I’d expect to see some resistance around 3,100–3,140 in the E-mini S&P 500 futures. The 200-day moving average is at 3,016 and there is a risk that strong selling pressure could return below there.

I’m happy to back off from a short-term bearish view if we see a daily buy pivot confirmed over the next few days.

I thought it may be useful for you if I have a look at some different markets. In today’s update I analyse the High Yield Corporate Bond ETF [NYSE:HYG], nickel, rare earths and gold.

Nickel and rare earths in particular are both looking quite bullish if they can finally confirm a monthly buy pivot. It hasn’t happened yet so there is more time to wait. But their long-term charts are both in important zones where I expect strong support to eventually emerge.

My desire is to use these weekly updates as a window into my trading methodology. I’d like them to be as relevant as possible for you, so if you have any suggestions or markets that you’d like me to cover, I’m all ears.

You can write to letters@portphillipinsider.com.au, with a subject title of ‘Week Ahead Feedback’ and I’ll follow up on the suggestions in future updates.


Murray Dawes,
Editor, Pivot Trader