The New Orleans Saints announced that its Hall of Famer Thomas J. Dempsey died on Saturday at age 73 from complications of COVID-19 just ten days after being diagnosed. Dempsey was a placekicker who signed with the club in 1969 as an undrafted free agent out of Palomar College. During his rookie season the following year at Tulane Stadium in a game against the Detroit Lions when his team was behind 17-16 with only second left he took a snap from Jackie Burkett and kicked a jaw-dropping 63-yard field goal that stood as an NFL record for 43 years.
Over his career with the Saints, the Eagles, Rams, Oilers and Bills, the Milwaukee native aced 61.6% of his field goals and 89.4% of his extra point attempts using an old-school kicking style that differed from most others in the NFL. Instead of a soccer style boot from the laces, he preferred the straight toe approach. But, since he was born without toes on his right foot, he wore a flat-front shoe custom designed to accommodate his disability. Some thought that gave him an unfair advantage. Others shook their heads in marvel.
After 11 seasons in the NFL, the good-humored man nicknamed “Stumpy” by his teammates retired in 1979 and went on to work as an oil field salesman and run a car dealership. He was diagnosed with dementia in 2012 and came to reside at the Lambeth House assisted living center in New Orleans where he was one of 50 to be stricken with coronavirus, one of 15 who has died there in quarantine, apart from his wife, sister, three children and three grandchildren except in video chats.
The sad human toll of the pandemic exceeds 1.4 million cases worldwide, 400,000 in the U.S. at this writing, with more than 82,000 deaths including nearly 13,000 Americans. The economic toll mounts as well. Our nation’s spectacular 10-year expansion came to an abrupt halt in March as every aspect of society has been disrupted in the effort to contain the spread of the virus. Apart from the incalculable loss of human life, the worldwide cost may exceed $4 trillion and 4.8% of combined gross domestic product. Talk often kicks up a notch from recession to depression, but all estimates still hinge on a range of unknowns. In the meantime, most manufacturing, employment, education, and services are at a virtual standstill. Oil price wars compound the troubles.
In times of uncertainty, investors turn to the safest havens but leap into risk on hopeful news: progress with a vaccine, interim measures that appear to save lives, down-ticks in case counts, timetables for the loosening of restrictions that will allow us to kick-start our lives again, the next massive government stimulus rescue package and trillion-dollar central bank intervention. Since the start of the month, stock indices have risen by as much as 3.4% on optimism for the turnaround and a return to old routines. The Dow is up 736 points, the Nasdaq up 187 points, the S&P 500 up 75. Oil prices have increased more than 17% to $23.63 a barrel. Gold prices have gained $54 an ounce.
Volatility remains elevated, a function of medical, economic and fiscal pronouncements. Relative value is constantly shifting and often irrelevant in period of illiquidity caused by large institutions placing massive sell orders into markets unable or unwilling to absorb the supply and, at moments, shocked by the strategies being revealed and unwound, deleveraging and re-leveraging. Whether measured in the thousands or trillions, investment accounts are being kickboxed from week to week. There are opportunities and risks galore. The world’s safe haven, U.S. Treasuries, have lost some ground so far this month. The 2-and 10-year yields have inched up a few basis points to 0.26% and 0.71%, respectively. However, the 30-year has strengthened with yields dropping by 5 basis points to 1.29%. The corporate bond market is extremely active; firms are tapping lines of credit and issuing investment grade bonds at a breakneck pace. In spite of all the predictions for a dramatic increase in the number of “fallen angels,” or bonds dropping from BBB ratings to below investment grade as a result of pandemic-induced losses, and “sinking demons,” or bonds and leveraged loans falling from B ratings to CCC levels, the BBB-rated corporate bonds are flat on the month with 10-year yields at 4.61%.
Municipal bonds are operating in almost a parallel universe from governments and corporates where there is explosive new issuance. The primary tax-exempt calendar has been quiet for weeks. Several top rated issuers are able to access the markets in negotiated and competitive sales while lower- and non-rated issuers are on hold or seeking to privately place their debt. All the action is in the secondary market where bid-wanted lists are large and trading is active. The market is sometimes schizophrenic, moving unpredictably from oversold to overpriced, with so many technical factors at play, not the least of which is speculation over the future credit quality of state and local issues in the era of COVID-19. Mutual funds have experienced $13.8 billion of outflows in the past two weeks; municipal ETFs have suffered net withdrawals for the past five. So far this month, the AAA general obligation tax-exempt muni yield has dropped by 2 basis points to 1.04%, the 10-year is up 5 basis points to 1.38% and the 30-year yield has increased by 20 basis points to 2.19%. Nontraditional buyers, called crossovers, such as insurance companies find newfound appeal in munis given the outsized ratio to Treasury yields. At this writing, the 1-year ratio is 507%, the 10-year ratio is 189%, and the 30-year ratio — with the Treasury at 1.29% and the comparable tax-exempt muni at 2.19% — is 170%.
These are indeed extraordinary times. At HJ Sims, our team stands alongside you, your families, your businesses and employees. We are not on the sidelines but fully engaged in the financial markets. Our traders find pockets of opportunity in every session and our advisors have use of stress testing tools to help our clients analyze portfolios and diversify as needed. We encourage you to enhance your dialogue with your HJ Sims representative and take comfort in the strategies that we develop together. But for now we pause during this holy season of Easter and Passover to wish you safe and happy celebrations, be they at home or on line, together with those most dear.
