Pfizer/BioNTech & Moderna: The Next Enrons?

In December 2021, the Indianapolis-based insurance company OneAmerica disclosed “the highest death rates we have seen in the history of this business, and not just at OneAmerica.”

Chief Executive Officer Scott Davidson reported a 40 percent spike over 2019 pre-pandemic levels.

Interestingly enough, he did not attribute most of the deaths to Covid.

In this now-famous viral video of his press conference, Davidson continued:

The data is consistent across every player in this business. . .Just to give you an idea of how bad that is, a three-sigma or a one-in-200-year catastrophe would be a 10 percent increase over pre-pandemic. So 40 percent is just unheard of.

Now, with several other insurance firms besides OneAmerica having reported similar results, the trend has drawn attention from senior Wall Street analysts. A leader within this camp is Edward Dowd, a former senior managing director at BlackRock who invested two months working with a team of experts studying the excess mortality data. Dowd argues that eventually Pfizer’s stock price will bottom out below $10 per share and Moderna’s stock will end up—like Enron’s—worthless.

Prospective and current MBA students considering lucrative careers in the hedge fund industry and related sectors will find this story especially interesting. (To learn more about hedge funds, review this BSchools report.)

Meet Edward Dowd

After graduating from college at the University of Notre Dame, Dowd started his career selling fixed-income products for HSBC in Chicago. He spent five years with the firm, then earned his MBA from one of the top programs we cover at BSchools: the Kelley School of Business at Indiana University.

Recruiting him out of Kelley, the Wall Street investment bank Donaldson, Lufkin & Jenrette hired him as an electric utility research analyst. That experience helped him land a portfolio analyst and management role at Independence Investments in Boston, where he focused primarily on the software and telecommunications equipment industries.

Back on Wall Street, Dowd then spent more than a decade in charge of super large-cap, multi-billion-dollar growth funds as a managing director for BlackRock, growing one of the firm’s funds from $2 billion to $14 billion.

Dowd’s career chronology means he was working in the capital markets during a series of fraud-driven scandals between 1998 and 2008. Besides the Enron Scandal, they included the Dot-Com Collapse and the Great Recession. That vantage point gave Dowd unique insider perspectives on how such episodes unfold.

Dowd’s Recession Warning

To appreciate the significance of the all-cause mortality reports we examine below, it helps to first understand the recent macroeconomic context in which these reports surfaced.

After the 2008 Great Recession, the way policymakers alleviated the pressure from subprime mortgage loan defaults on banks was not to force those lenders to declare bankruptcy, but for the federal government and the Federal Reserve System to buy up their bad debts. As a result, during the decade between 2010 and 2020 the federal government’s debt increased by almost 65 percent relative to the nation’s gross domestic product, and net interest charges on that debt grew by roughly 25 percent relative to GDP.

Shifting all that financial responsibility onto the government accompanied substantial boosts in the U.S. money supply by the Fed. This graph from the Federal Reserve Bank of St. Louis shows that the adjusted M2 money supply (M2SL) soared from roughly $7.5 trillion in early 2008 to about $22 trillion in February 2022, a 193 percent increase.

Recently, since February 2020 the Fed drove up the money supply by an astonishing 40○percent, about four times the amount of new money created from 2018 to 2020. That effort resulted in a number of undesirable consequences that we’ve covered extensively here at BSchools. Nevertheless, the Fed ostensibly took those unprecedented steps when Covid hit to prevent a stock market crash, ease credit, and provide more liquidity to help the government fund the CARES Act emergency relief programs.

Starting in 2008, the Federal Reserve boosted the money supply for 13 years without significant inflation, but those days appear to be ending. In January 2022, inflation in the United States unexpectedly jumped to levels not seen in some sectors since the early Reagan Administration. And like many in the investment community, Dowd is concerned that a substantial spike in U.S. inflation could destabilize financial markets at home and abroad.

He warns that if sudden inflationary pressures result in a foreign government’s inability to pay higher interest charges on their borrowed funds, the results could challenge policymakers across borders. A nation’s default could snowball into a multinational macroeconomic incident beyond the rapid-response capabilities of individual governments and central banks.

Such a cascade could provoke another global contraction, although such an event probably wouldn’t approach the scale of the Great Recession. Nevertheless, Dowd argues that control systems ostensibly set up by global governments under the guise of “vaccine passports” are instead aimed to achieve a very different objective. He insists they are actually intended to help prevent disturbances that could erupt if fiscal and monetary policymakers’ best efforts to relieve rapidly deteriorating economic conditions fail.

Third Quarter 2021: The First All-Cause Mortality Increases

OneAmerica was not the first insurance company to announce a disturbing upswing in all-cause mortality during the third quarter of 2021. Actually, the surges started to appear in financial performance reports released by life insurance companies two months earlier, in November.

Before we look at those announcements, bear in mind two typical characteristics of this industry’s earnings reports: accuracy and stability. Because astute, highly-skilled actuaries supervise the preparation of these “big data” reports, their analyses contain some of the most accurate statistics released by any industry in the private sector.

Moreover, compared with earnings reports in other industries, insurance firm earnings reports rarely fluctuate. Why? Except during the Vietnam War in the United States, after World War II the number of people who’ve died has remained remarkably constant from one year to another.


The first company to announce results was MetLife. On November 4, the firm disclosed a 27 percent higher mortality ratio for group life policies than the firm’s optimal target of 85 percent. The firm attributed 18 percent of those claims to Covid, which sunk its earnings by $290 million.

But what surprised analysts more was Chief Financial Officer John McCallion’s unexpected remarks about a sudden and drastic increase in younger deaths:

Approximately 40 percent of U.S. Covid deaths in the quarter were under age 65, about double the rate of the first quarter of this year and the highest percentage in any quarter since the pandemic began, and therefore having a greater proportional impact on the working-age population.

Munich Re

Next to report on November 9 was the German reinsurance group Munich Re. This firm disclosed a 32 percent increase compared with a year earlier from losses within its life and health reinsurance division. This alarming report from the Bavaria-based company is also significant because it raises two important questions: What is reinsurance, and why are this sector’s results significant?

Reinsurance is insurance purchased by insurance companies. Also known as “stop-loss coverage,” it’s the practice by which insurance companies insure each other by transferring portions of their risk portfolios to other firms.

By offloading some of their risk, the purpose is to reduce the probability that they’ll need to cover large claim obligations. So when losses start to appear in results released by the reinsurance sector, that’s evidence of trends impacting underwriters throughout the entire insurance industry.

Transamerica and Aegon

Then, in the most disturbing upswing in mortality to date, on November 11 the Dutch underwriter Aegon—which through its subsidiary Transamerica does 66 percent of its business in the United States—announced surprising results.

Aegon told Reuters that “unfavorable mortality claims” in the Americas during the third quarter shot up by $111 million over the previous year, from $31 million in 2020. That’s a 268 percent surge.

Fourth Quarter 2021: All-Cause Mortality Explodes

Starting about 30 days after OneAmerica’s press conference, one major life insurance underwriter after another began to announce steep rises in all-cause death claims for the fourth quarter of 2021.

Damaging the financial performance of some of the world’s biggest brands, the bloodbath focused scrutiny on a potentially historic developing trend without precedent in this typically stable industry. And at two of the largest firms, Prudential and Lincoln Financial, the percentage increases even exceeded those at OneAmerica.

Based on statistics compiled by Dowd and his team of experts, the following table presents a summary of all this fourth-quarter red ink. The change in death claims in the right column represents the percentage increase over pre-pandemic levels from 2019.

Underwriter Increase in Death Claims (percent)
Lincoln Financial Group $LNC 57
Prudential Financial $PRU 41
Principal Financial Group $PFG 37
Danke Unum Group $UNM 36
The Hartford Insurance $HIG 32
MetLife $MET 24
Reinsurance Group of America $RGA 21

Economic and Market Considerations

In view of the established increase in all-cause mortality, here are some of the considerations relevant for analysts and investors to keep in mind while they evaluate potential strategies.

Stock Performance: Underlying Context

To fully appreciate our stock performance analysis in the remainder of this report, it’s useful to first briefly review a few more contextual aspects.

1. As the Enron case demonstrates, Dowd correctly points out that nothing attracts America’s attention across the nation like plunging stock prices. However, mainstream media is consistently and chronically late at covering such episodes. Typically, by the time the Wall Street Journal and the New York Times devote any significant coverage to a protracted stock price slide, the value of those shares is often next to nothing.

For example, and as we’ll see in more depth in the next section, insiders like hedge fund executive Jim Chanos had suspected since September 2000 that Enron was in trouble. That was 15 months before the firm’s late November 2001 collapse.

However, Fortune Magazine didn’t even run its first story about Enron’s problems until March 5, 2001, only eight months before the bankruptcy filing. In fact, it took a 31 percent nosedive in Enron’s share price in July 2001 before the firm even started to appear in national headlines. But by the end of November 2001—barely eighteen weeks later—Enron’s stock worth $90 a share in August 2000 was worth only 26 cents.

2. Coverage isn’t much more timely within the specialized business press. So far, only a few specialized insurance and financial industry publications have even started to cover the rising all-cause mortality trend, such as in this article.

3. A skill that the best portfolio managers develop requires drawing actionable conclusions without waiting for complete information—including comprehensive press coverage. Good management consultants and investment bankers also rely on this skill, and that’s why MBA programs teach it. All these professionals rely on this capability because waiting for “perfect” information can hinder a crucial first-mover competitive advantage in a wide variety of decision situations. For example, Dowd prides himself on his ability to pick growth stocks and make other good decisions with only 30 percent or less of all the information that would guarantee a correct result.

4. An old adage on Wall Street is that “nothing ever falls in a straight line.” As stock prices drop, counter-trend rallies are always common. Portfolio managers call these rallies retracements. These retracements can temporarily bid up share values somewhat, even though the price continues marching along its long-term downward trend.

5. Unlike Enron twenty years ago—and both Pfizer’s Frankfurt-based principal mRNA subcontractor BioNTech along with Moderna today—Pfizer earns income from many products, and each of those products delivers its own cash flow stream. In our BSchools report “What Will I Learn in Business School?” we explain how discounting the aggregate future earnings from all products back to the present time helps the equities market value the stock price for a diversified conglomerate like Pfizer. Other things equal—that is, when facing a downward trend that would affect all competitors in a market sector equally—one would expect Pfizer’s stock price to sink more slowly and bottom-out higher than the stock of smaller companies with fewer products. Such stocks would include those of BioNTech and a single-product company like Moderna.

6. Many Wall Street insiders suspect that the President’s Working Group on Financial Markets (the Plunge Protection Team or PPT) started manipulating the markets through the Treasury Department’s Exchange Stabilization Fund as early as February 1. At that time it became clear to the markets from the deployments of Russian forces that a strike on Ukraine was imminent.

Curiously, despite a huge 20 percent spike in the yields on 10-year U.S. Treasury notes, no slide in the Standard & Poor’s or any other stock market indices occurred, and it’s likely that the share prices of the Pfizer, Moderna and BioNTech stocks may have been propped up in part by the PPT’s efforts.

With those contextual aspects in mind, now let’s consider a few actionable insights.*

Dowd’s Stock Price Forecasts

On January 26, 2022, Dowd first went on the record during the Thomas Paine Podcast, a program popular within the finance industry because journalist Mike Moore previously worked on Wall Street at Citigroup. During that interview, Dowd indeed predicted that Moderna’s stock would lose all its value and Pfizer’s stock would end up around ten dollars:

My thesis is, when this all gets outed—and it’ll take time—Pfizer will play what we call the “front nine,” and it will go below ten. It will be a sub-ten dollar stock. Five is realistic, and zero is not a zero probability. I believe it should go to zero.

But you know how these things work: it will go to five, then they’ll settle the case, and then it will go to ten. Wall Street loves to anticipate a settlement and will buy the stock ahead of that. But there will be a settlement. And it’ll be the biggest fine ever.

Now, will the CEO go to jail? Who knows? But I’m just trying to prevent death and destruction. And one of the ways to do that is to pummel the stock into submission so the financial press has to talk about this.

Actuarial Data Drives Short Selling

Short selling by hedge funds was instrumental in driving Enron’s share price down to zero. Similarly, Dowd talks at length about how all the new actuarial data is driving enthusiasm among hedge funds for short selling the shares of Pfizer, BioNTech, and Moderna:

If the hedge funds turn on this—and the hedge fund community smells blood—this unwinds faster. And I would say that because I’ve been outspoken on Twitter and GETTR, a lot of my old hedge fund colleagues are reaching out.

So I smell a sentiment shift. You can see the stock prices of Moderna and Pfizer starting to unravel, and this actuarial data only accelerated the hedge funds’ willingness to smell blood.

I think it’s in motion. It’s already begun. And the faster these stocks start to implode, the quicker we save peoples’ lives actually because this will become a story that can’t be contained in the mainstream media.

You remember Enron, right? Enron’s stock peaked out, and then it started bleeding pretty profusely, because the way that Wall Street works is that Chanos started calling old buddies, presenting his “short thesis” to everyone. That’s what’s going on now. The hedge funds have their positions on—at least the early ones do—and they’re going to start picking up the phone, and they’re going to start making their case to other friends, while other data points come out. . .and there will be a day when Pfizer goes down 12 percent, and then [CNBC’s Jim] Cramer’s talking about it. There will be one of those days.

The Enron story took about a year to unfold, and hopefully we accelerate this process; it should become apparent pretty quickly that something majorly wrong occurred in all our institutions that are supposed to protect us—like the FDA, the CDC, and the NIH.

The Big Short: Chanos Attacks Enron

What Dowd talks about in the above excerpt is how legendary investor Jim Chanos recognized an ingenious opportunity to short sell Enron’s high-flying stock more than a year before the firm’s bankruptcy filing.

In September 2000, Chanos read a Wall Street Journal report about how Enron had won Securities and Exchange Commission (SEC) approval to use mark-to-market accounting practices. Chanos’ hedge fund Kynikos (later rebranded as Chanos & Company) then tried to figure out why Enron’s Form 10-K showed its broadband subsidiary’s revenues far outpaced the fledgling industry, even though its parent was spending much of its capital.

As soon as the Kynikos team realized that Enron was using that accounting method to inflate income while camouflaging losses from discounted sales, Chanos pounced. In November 2000 he decided to short the $90 stock, then called Fortune Magazine writer Bethany McLean to suggest that she review the 10-K for herself. The following March—five months later—the magazine finally published McLean’s article which asked how Enron’s stock could possibly trade at a whopping 55 times earnings even though the firm was piling up debt.

By July, the stock price had fallen by 31 percent. By August, CEO Jeff Skilling had resigned, and the firm was under fire for forcing rolling blackouts across California. By November Enron ran out of cash, which finally triggered “the most stunning company collapse and financial fraud case Wall Street has seen.” Meanwhile, it only took thirteen months for the hedge fund Chanos had launched with only $16○million to reap windfall profits from all his big Enron short sales and pocket half a billion dollars.

Current Analysis: Pfizer, BioNTech, and Moderna Stocks

So given what Dowd had predicted in terms of stock prices and hedge fund activity, how well are the Pfizer, BioNTech and Moderna stocks performing as we go to press in May 2022?

After OneAmerica announced its 40 percent death claims spike, Pfizer’s stock lost 8 percent of its value within the following week. By March 1, the stock was off 25 percent from its high of $61 in December 2021. At press time Pfizer’s stock had rallied somewhat but was still down significantly—more than 15 percent from its high.

Meanwhile, Pfizer appears to have adopted a defensive posture against potentially unfavorable forthcoming news. Apparently drafted by securities lawyers, a series of new business risk disclosures appears in Pfizer’s earnings report for 2021’s fourth quarter. These updates focus on possible adverse safety data. The carefully-selected language warns investors of “unfavorable new preclinical, clinical or safety data and further analyses of existing preclinical, clinical or safety data or further information regarding the quality of preclinical, clinical or safety data, including by audit or inspection” (emphasis ours).

Things seemed even more concerning for the stock price of Pfizer’s mRNA subcontractor BioNTech. On March 9, BioNTech’s stock closed down 72 percent from its high in August 2021, and during that slide lost nearly half its value within only a single month. After a slight recovery, it still closed down 63 percent 16 days later, on March 25.

But the stock displaying the greatest decline was Moderna’s. From a high of $484 on August 9, 2021, the stock’s value had sunk to only $126 per share the following March 7, a 74 percent plunge in only 30 weeks. What’s more, only about two weeks after Dowd’s first media appearance, the stock crashed—and crashed hard.

The stock plunged 13 percent in a single day on February 14—as much as the prescient Dowd had predicted for the size of single-day loss likely to attract national media coverage. Forbes reported that the Valentine’s Day massacre wiped out more than $140 billion of Moderna’s market capitalization, leaving it below $57 billion. Furthermore, an SEC filing the preceding Friday night disclosed that four Moderna executives including CEO Stéphane Bancel dumped 23,281 shares in the company worth about $3.6 million during that week alone. The $660 million Bancel lost during the crash cut his personal fortune to $4.6 billion.

Conclusion: One Fact Stands Out

So what can one conclude about all the data we just presented? One fact stands out: the stock prices of Moderna and Pfizer’s main subcontractor BioNTech both plummeted by an average of 73 percent during a roughly 30-week period.

These share prices sank like rocks. So far, they’ve never rebounded. And furthermore, those plunges began roughly five months before the life insurance mortality data attracted any significant attention from hedge funds or pretty much anybody else.

Keep in mind also that by contrast, Enron’s stock only fell by less than half that during the initial nine-month period while the utility’s stock was quietly but aggressively targeted by Chanos and his friends at other hedge funds with big short positions.

So will Pfizer, BioNTech, and Moderna turn into the next Enrons? That outcome will probably depend upon what the collective wisdom of the hedge fund community eventually decides.

*Disclaimer: BSchools does not intend this article as a basis for our audience’s decisions about any potential or current investments, nor a recommendation to buy or sell any investments, including securities and crypto-assets. In no event can BSchools be held responsible for the investment-related actions of our readers. As all MBA students and graduates should know, securities transactions involve substantial risk and can swiftly result in the unexpected loss of invested capital. Ensure that you thoroughly understand the full extent of all risks involved and consider your level of trading experience before executing any transactions. Even prospective and current MBA students with trading work experience before business school find that advice from objective investment professionals with more skill provides valuable learning experiences. We encourage you to consult with such advisors routinely before executing any significant investment transactions.

Douglas Mark
Douglas Mark

While a partner in a San Francisco marketing and design firm, for over 20 years Douglas Mark wrote online and print content for the world’s biggest brands, including United Airlines, Union Bank, Ziff Davis, Sebastiani, and AT&T. Since his first magazine article appeared in MacUser in 1995, he’s also written on finance and graduate business education in addition to mobile online devices, apps, and technology. Doug graduated in the top 1 percent of his class with a business administration degree from the University of Illinois and studied computer science at Stanford University.