A recent STATNews First Opinion piece suggested that we’re seeing the abandonment of telemedicine by physicians after a strong start in 2020. Data from Phreesia shows early adoption in March 2020 with a fall off in May – This pattern reflects the earliest phases of the telemedicine hype cycle.
Distracted and disillusioned maybe. Abandoned, no.
So what happened? Telemedicine is having its moment on the Gartner Hype Cycle. The hype-cycle provides a conceptual model of the maturity of emerging technologies through 5 phases. We see a new technology. Then we jump on board, feed the hype, fantasize a little bit and inflate expectations about what the new technology can do. After a flurry of hype we realize it wasn’t all that it seemed and we crash. But ultimately we come to our senses and realize that there’s probably some value to the new tool and we find where it fits.
Telemedicine saw nearly overnight adoption with the explosion of COVID19. As the pandemic unfolded in New York we saw peak technoutopia unfold on social spaces like Twitter. The future had finally arrived, we were told, and telemedicine would change the world. For those who had built their world around telemedicine, this was their moment. Telehealth stocks spiked.
Enter the trough of disillusionment
But something happened on the way to paradise. Our optimism gave way to reality.
Loss of revenue. We learned quickly that revenue from teleconnection is not what it is for IRL care. For hospital systems the loss of facility fees created a gravitational pull back to in-person visits. For an industry working on slim margins our archaic system of reimbursement prevented telemedicine from evolving as a sustainable, new way of caring or doing business.
The reality of caring for humans. The craziest angle of the telemedicine spike was the way the medical community almost universally abandoned the physical exam. For a brief moment in time physicians elected to deliver care without any physical data from the patients. But despite the honeymoon of believing that everything in medicine could be conducted virtually, we learned that teleconnection was good for a lot of things but not everything. It was the Bonobos Effect: some things have to be done in person.
Teleconnection can be hard. And then there were the challenges that came with video. There were the technical elements of working with patients who couldn’t figure it out. There was the adjustment to hours of human video connection – doctors reported a level of exhaustion disproportionate to the number of patient encounters. More on my ideas around telemedicine fatigue here.
So as America and its clinics began to open up after the first COVID wave we regressed to our 20th century comfort spots.
So what about the idea that the future had finally arrived? It did arrive but it just wasn’t evenly embraced.
And this was because the early adoption of telemedicine occurred out of necessity rather than value. Because at a time of strict social isolation, teleconnection was all we had to both to deliver care and maintain a stream of revenue. Wide, temporary adoption was not surprising. It was necessity. With that necessary move we overplayed telemedicine’s disruption of the traditional care model.
But telemedicine does bring value
But maybe we got ahead of ourselves. Telehealth brings real value. It’s a matter of identifying teleconnection as one very powerful tool in the evolving care space. Not the only tool. In our large hospital-based practice caring for a large population of medically complex children from the far reaches of Louisiana, Oklahoma and west Texas, telemedicine plays a vital new role. Simple check-ups for medically complex children far removed from our traditional ‘point of care’ brings tremendous value to families. It allows tighter contact and follow-up when high-touch care isn’t necessary. How remote care fits precisely in to our model is under careful evaluation.
The past few weeks have been interesting and offer one example of how technology disrupts (albeit transiently) an industry. More interesting than this early peak of inflated expectations is the longer plateau of productivity that we will realize with the telemedicine hype cycle.
Stay tuned for more on telemedicine’s plateau of productivity. To stay informed be sure to subscribe to the 33 charts newsletter.
The post Telemedicine Hype Cycle and the Future of Remote Care appeared first on 33 Charts.
Will Powell Pivot? Don’t Count On It
Stocks are rallying on hopes that Jerome Powell and the Fed will stop increasing interest rates this fall, pivot, and start reducing them next year. For…
Stocks are rallying on hopes that Jerome Powell and the Fed will stop increasing interest rates this fall, pivot, and start reducing them next year. For fear of missing out on the next great bull run, many investors are blindly buying into this new Powell pivot narrative.
What these investors fail to realize is the Fed has a problem. Inflation is raging, the likes of which the Fed hasn’t dealt with since Jerome Powell earned his law degree from Georgetown University in 1979.
Despite inflation, markets seem to assume that today’s Fed has the same mindset as the 1990-2021 Fed. The old Fed would have stopped raising rates when stocks fell 20% and certainly on the second consecutive negative GDP print. The current Fed seems to want to keep raising rates and reducing its balance sheet (QT).
The market-friendly Fed we grew accustomed to over the last few decades may not be driving the ship anymore. Yesterday’s investment strategies may prove flawed if a new inflation-minded Fed is at the wheel.
Of course, you can ignore the realities of today’s high inflation and take Jim Cramer’s ever-bullish advice.
When the Fed gets out of the way, you have a real window and you’ve got to jump through it. … When a recession comes, the Fed has the good sense to stop raising rates,” the “Mad Money” host said. “And that pause means you’ve got to buy stocks.
Shifting Market Expectations
On June 10, 2022, the Fed Funds Futures markets implied the Fed would raise the Fed Funds rate to 3.20% in January 2023 and to 3.65% by July 2023. Such suggests the Fed would raise rates by almost 50bps between January and July.
Now the market implies Fed Funds will be 3.59% in January, up .40% in the last two months. However, the market implies July Fed Funds will be 3.52%, or .13% less than its January expectations. The market is pricing in a rate reduction between January and July.
The graph below highlights the recent shift in market expectations over the last two months.
The graph below from the Daily Shot shows compares the market’s implied expectations for Fed Funds (black) versus the Fed’s expectations. Each blue dot represents where each Fed member thinks Fed Funds will be at each year-end. The market underestimates the Fed’s resolve to increase interest rates by about 1%.
Short Term Inflation Projections
The biggest flaw with pricing in predicting a stall and Powell pivot in the near term is the possible trajectory of inflation. The graph below shows annual CPI rates based on three conservative monthly inflation data assumptions.
If monthly inflation is zero for the remainder of 2022, which is highly unlikely, CPI will only fall to 5.43%. Yes, that is much better than today’s 9.1%, but it is still well above the Fed’s 2.0% target. The other more likely scenarios are too high to allow the Fed to halt its fight against inflation.
Inflation on its own, even in a rosy scenario, is not likely to get Powell to pivot. However, economic weakness, deteriorating labor markets, or financial instability could change his mind.
Recession, Labor, and Financial Instability
GDP just printed two negative quarters in a row. Some economists call that a recession. The NBER, the official determiner of recessions, also considers the health of the labor markets in their recession decision-making.
The graph below shows the unemployment rate (blue), recessions (gray), and the number of months the unemployment rate troughed (red) before each recession. Since 1950 there have been eleven recessions. On average, the unemployment rate bottoms 2.5 months before an official recession declaration by the NBER. In seven of the eleven instances, the unemployment rate started rising one or two months before a recession.
The unemployment rate may start ticking up shortly, but consider it is presently at a historically low level. At 3.5%, it is well below the 6.2% average of the last 50 years. Of the 630 monthly jobs reports since 1970, there are only three other instances where the unemployment rate dipped to 3.5%. There are zero instances since 1970 below 3.5%!
Despite some recent signs of weakness, the labor market is historically tight. For example, job openings slipped from 11.85 million in March to 10.70 in June. However, as we show below, it remains well above historical norms.
A tight labor market that can lead to higher inflation via a price-wage spiral is of concern for the Fed. Such fear gives the Fed ample reason to keep tightening rates even if the labor markets weaken. For more on price-wage spirals, please read our article Persistent Inflation Scares the Fed.
Besides economic deterioration or labor market troubles, financial instability might cause Jerome Powell to pivot. While there were some growing signs of financial instability in the spring, those warnings have dissipated.
For example, the Fed pays close attention to the yield spread between corporate bonds and Treasury bonds (OAS) for signs of instability. They pay particular attention to yield spreads of junk-rated corporate debt as they are more volatile than investment-grade paper and often are the first assets to show signs of problems.
The graph below plots the daily intersections of investment grade (BBB) OAS and junk (BB) OAS since 1996. As shown, the OAS on junk-rated debt is almost 3% below what should be expected based on the robust correlation between the two yield spreads. Corporate debt markets are showing no signs of instability!
Stocks, on the other hand, are lower this year. The S&P 500 is down about 15% year to date. However, it is still up about 25% since the pandemic started. More importantly, valuations have fallen but are still well above historical averages. So, while stock prices are down, there are few signs of equity market instability. In fact, the recent rally is starting to elicit FOMO behaviors so often seen in speculative bullish runs.
Declining yields, tightening yield spreads, and rising asset prices are inflationary. If anything, recent market stability gives the Fed a reason to keep raising rates. Ex-New York Fed President Bill Dudley recently commented that market speculation about a Fed pivot is overdone and counterproductive to the Fed’s efforts to bring down inflation.
What Does the Fed Think?
The following quotes and headlines have all come out since the late July 2022 Fed meeting. They all point to a Fed with no intent to stall or pivot despite its effect on jobs and the economy.
- *KASHKARI: 2023 RATE CUTS SEEM LIKE `VERY UNLIKELY SCENARIO’
- Fed’s Kashkari: concerning inflation is spreading; we need to act with urgency
- *BOWMAN: SEES RISK FOMC ACTIONS TO SLOW JOB GAINS, EVEN CUT JOBS
- *DALY: MARKETS ARE AHEAD OF THEMSELVES ON FED CUTTING RATES
- St. Louis Fed President James Bullard says he favors a strategy of “front-loading” big interest-rate hikes, repeating that he wants to end the year at 3.75% to 4% – Bloomberg
- FED’S BULLARD: TO GET INFLATION COMING DOWN IN A CONVINCING WAY, WE’LL HAVE TO BE HIGHER FOR LONGER.
- “If you have to cut off the tail of a dog, don’t do it one inch at a time.”- Fed President Bullard
- “There is a path to getting inflation under control,” Barkin said, “but a recession could happen in the process” – MarketWatch
- The Fed is “nowhere near” being done in its fight against inflation, said Mary Daly, the San Francisco Federal Reserve Bank president, in a CNBC interview Tuesday. –MarketWatch
- “We think it’s necessary to have growth slow down,” Powell said last week. “We actually think we need a period of growth below potential, to create some slack so that the supply side can catch up. We also think that there will be, in all likelihood, some softening in labor market conditions. And those are things that we expect…to get inflation back down on the path to 2 percent.”
We are highly doubtful that Powell will pivot anytime soon. Supporting our view is the recent action of the Bank of England. On August 4th they raised interest rates by 50bps despite forecasting a recession starting this year and lasting through 2023. Central bankers understand this inflation outbreak is unique and are caught off guard by its persistence.
The economy and markets may test their resolve, but the threat of a long-lasting price-wage spiral will keep the Fed and other banks from taking their foot off the brakes too soon.
We close by reminding you that inflation will start falling in the months ahead, but it hasn’t even officially peaked yet.recession unemployment pandemic treasury bonds bonds corporate bonds sp 500 stocks fomc fed federal reserve spread recession gdp interest rates unemployment
Why You Should Not Worry About Disney and Netflix Stock
The two streaming giants have struggled but investors should not be too concerned.
The two streaming giants have struggled but investors should not be too concerned.
During the lockdown/quarantine days of the pandemic, we all apparently rode our Peloton (PTON) - Get Peloton Interactive Inc. Report bikes while binge-watching streaming videos. As soon as we finished that, we headed onto a Zoom Video (ZM) - Get Zoom Video Communications Inc. Report call, presumably before ordering food delivery and later having a Teladoc (TDOC) - Get Teladoc Health Inc. Report appointment
That may not have actually been your direct experience, but it's how the stock market performed. People bought so-called "stay-at-home" stocks because we all were, well, stuck at home. Of course, at some point we weren't stuck at home, and sentiment on those stocks changed.
The challenge for investors is sorting out the real narrative from the false one.
At-home-exercise bikes were never going to replace gyms once people could go out again, and the audience for a premium-priced product was limited when gym memberships can cost as little as $10 a month.
Telemedicine has a bright future, but it has limits and it may prove an area where the brand name does not matter.
Streaming video is different, however, and while Netflix (NFLX) - Get Netflix Inc. Report and Walt Disney (DIS) - Get The Walt Disney Company Report stock are down roughly 40% and 55% respectively over the past 12 months, there are a lot of reasons shareholders need not be concerned.
Netflix Has a Correctible Problem
While Netflix grew steadily for a long time, no product has an endless upward trajectory. The company lost subscribers in its most recent quarter, but that comes after it added more than 36 million customers in 2020 and another 18 million in 2021. Even with its Q2 2022 drop of about a million subscribers, the company still has 220 million paying customers.
That's a huge number and it's not likely to get all that much bigger or all that much smaller over the next few years. The reality is that Netflix has left its growth phase and has moved into its fiscal responsibility phase.
Now, instead of producing $200 million movies and throwing them at the wall, the company has to be smarter about its content investments.
"So our content expense will continue to grow, but it's more moderated as we adjusted for the growth in our revenue," Chief Financial Officer Spence Neumann said during the company's second-quarter-earnings call.
"And we think we've gotten a lot smarter over the last decade or so being in the originals business as to where we can direct our spend for most impact, highest impact, and highest satisfaction for our members."
Nobody at Netflix wants to say "we're going to make fewer shows and focus on having hits," but Netflix has reached the retention stage of its business. It needs to have enough content its customers want to see coming up to keep people from quitting.
That may not be an easy transition, but it's one the company is likely to make, where it can be comfortably profitable around its current customer base.
Disney Has Nothing to Worry About
Disney is obviously much more than a streaming company, but Disney+ has been a massive driver for the company. Its growth was accelerated by the pandemic, but every family and any adults who like Marvel and Star Wars were always going to subscribe.
Fans of the company's huge franchises are simply not going to skip the biggest shows coming out of those universes.
Disney, unlike Netflix, does not have a too-much-content problem. It knows its customer base and understands that while "Falcon and the Winter Soldier" might draw a bigger audience than "Ms. Marvel," both drive audience to the service.
Disney may struggle with what's a theatrical release and what goes to streaming, but it has hit franchises that have stood the test of time. That's not going to change just because lockdowns have ended and we have other entertainment choices.stocks pandemic quarantine lockdown
Bed Bath & Beyond stock should be worth $4 only: Baird
Bed Bath & Beyond Inc (NASDAQ: BBBY) has been on fire over the past couple of weeks, but that “frenzy” is unlikely to last for very long, says…
Bed Bath & Beyond Inc (NASDAQ: BBBY) has been on fire over the past couple of weeks, but that “frenzy” is unlikely to last for very long, says Justin Kleber. He’s a Senior Equity Research Analyst at Baird.
Bed Bath & Beyond stock could tank 55% from here
On Tuesday, he downgraded the Bed Bath & Beyond stock to “underperform” and reiterated his price target of $4.0 a share that represents about a 55% downside from here. In a note to clients, Kleber said:
This frenzied move has been driven by non-fundamentally focused market participants. With market share losses accelerating and BBBY burning cash, fundamental risk/reward looks unattractive.
The meme stock, he added, has to sharply improve its EBITDA to justify its current $2.30 billion enterprise value – but that’s unlikely to happen in this macroeconomic environment.
Versus its year-to-date low, Bed bath & Beyond stock is currently up more than 100%.
Why else does he dislike Bed Bath & Beyond Inc?
In its latest reported quarter, the American chain of domestic merchandise retail stores lost $2.83 a share (adjusted) – more than double the $1.39 that analysts had expected. Kleber is also bearish on the Bed Bath & Beyond stock because:
Supply chain disruptions have exposed BBBY’s antiquated infrastructure and wreaked havoc on the business at the same time the company’s pivot toward owned brands has not resonated with customers.
The retailer will likely remain challenged as demand for home goods continues to normalise following two years of pandemic-driven boost, he concluded.
In June, the Union-headquartered company named Sue Gove its new CEO (interim) tasked with fixing the liquidity concerns. Most recently, Bed Bath & Beyond was reported considering private loans to optimise its balance sheet.
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