10/5/21: COVID19: Nordics v Sweden

Updating data on comparatives between Sweden (the 'natural experiment' for 'Covid19 is just a flu' crowd, albeit the pandemic was not treated as such in the country itself) and the Nordics.

Note: I define three groups of 'Nordics' by composition.

First, for completeness: case counts:

The above is self-explanatory, but open to arguments concerning diagnostics and tests accuracy. Hence, let's take a look at deaths counts, which are much harder to 'fudge' for the 'Covid19 is a flu' crowd:

In simple terms, Sweden's policy approach to the pandemic, as contrasted by other Nordics, has resulted in 

• 6,137 deaths in excess of Nordics 3 group (Finland, Norway, Estonia, Iceland, the Netherlands and Denmark)
• 11,219 more deaths than (population-comparable) Nordics 2 group (Finland, Norway, Estonia, Iceland), and
• 12,512 deaths in excess of Nordics 1 group (Finland and Norway).

Here are country-by-country comparatives: 

9/5/21: COVID19: U.S. vs EU27 comparatives

 

Updating data for the U.S. - EU27 comparatives for the pandemic through this week (week 17):

Table above reflects several major features of the recent data evolution for the Covid19 pandemic in the U.S. and the EU27, also highlighted in the charts below:

• Firstly, total number of new cases has diverged in recent weeks. Starting with week 7 of 2021, the U.S. cases continued to fall, while the EU27 cases entered a new upward trend. The new wave - Wave 3 - formed in Europe, whilst the U.S. managed to escape development of Wave 4.
• For eleven of the last consecutive weeks, the EU27 cases significantly exceeded those in the U.S.
• As of Week 12, 2021: EU27's Wave 3 has peaked and we have now witnessed five continuous weeks of declines from the peak, although the EU27 case numbers still substantially exceed those in the U.S.
• There is only one attributable difference between the two countries that can explain this divergence: vaccinations rates. In fact, whilst the U.S. response to the pandemic in its first 10 months has been an unmitigated disaster, the EU27's unroll of the vaccines has been a Trumpesque-level failure of its own. 

As the result of the above factors, EU27 trends in deaths numbers are equally concerning:

• The EU27 started 2021 with a significantly lower per-capita death rate than the U.S. 
• At the start of January, as reported on this blog, adjusting for age differences and population size differences, the U.S. pandemic was associated with 139,188 excess deaths compared to the EU27.
• At the end of this week, this gap was down to 87,598.
• Put differently, President Trump's policies were responsible for excess deaths amounting to roughly 1/3 of the total deaths sustained in the U.S. over the period of 2020. Since the start of 2021, EU27 policies on vaccinations are responsible for closing this gap by almost 40 percent.
• The above comparatives for vaccination roll out failure effects are conservative. The EU27 has suffered Wave 3 of the pandemic amidst strict and wide-ranging lockdowns, not comparable to the U.S. measures deployed over the same period of time. 
• In fact, Week 17/2021 U.S. deaths counts are now lowest for any week since week 27/2020. In contrast, the Eu27 deaths are currently the lowest since week 45/2020.

Tragically, for the EU27, European rates of mortality from the virus have been running above those in the U.S. every week since Week 43/2020, as shown in the chart below:

In fact, as the chart above illustrates, EU27 is yet to see the return to its lowest recorded mortality rate of 0.014 set in Week 37/2020, while the U.S. has been running below that rate on-trend over the last five weeks.

Chart next show the dramatic difference in mortality per case in the U.S. and the EU27 (vertical axis) against the world-wide mortality (horizontal axis), without adjusting for age and population size differences (a note of caution: regression lines are only indicative, at best):

In summary, therefore, the EU27 is paying a high price for its utter failure to unroll vaccinations at scale. The U.S. performance, starting with February-March, has been exemplary compared to the European policy approach, although a lot of the gains made so far are:

1. Subject to forward uncertainty (U.S. weekly statistics have been exceptionally volatile and hard to interpret); and
2. As of yet, not enough to erase the scars left by the Trump Administration's mismanagement of the early stages of the pandemic.

9/5/21: COVID19: BRIICS

 Updating data for BRIICS for Covid19 pandemic through Week 17 of 2021 (current week):

Almost half of all cumulated cases within the BRIICS (Brazil, Russia, India, Indonesia, China and South Africa) group are now in India (above) and almost half of all deaths are in Brazil (below).

The pandemic dynamics have turned decisively in recent weeks: in terms of new cases, India dominates the trend up, with all other BRIICS showing amelioration in the pandemic:

Similarly, for we weekly death counts:

China data remains utterly unbelievable and hard to trust.

Summary table of recent developments:

India's pandemic dynamics are shocking, horrific and show no signs of abating. This is a humanitarian disaster that requires help from the rest of the world - help that has been coming in too-little and too-late.

9/5/21: COVID19: Europe and EU27

 

Updating graphs for Europe and EU27 pandemic data through week 17 of 2021:

Some good news with a shade of a reality check:

• New cases are off their Wave 3 highs, solidly so
• Current case counts are still above Wave 2 trough and well ahead of where they were at the end of Summer 2020.

Similar, but a bit more benign trend in weekly death counts:

Good news 'part 3': mortality rates are declining, again:

While the progress on vaccinations across Europe has been less impressive than desired, it now appears that two factors are driving the end of the Wave 3 of this pandemic:

1. Vaccinations roll-outs, and
2. Cumulated effects of recent (and in some countries still ongoing) restrictions.

Let's hope these trends remain persistent in weeks ahead and the new variants do not show up with resistance to vaccinations. 

8/5/21: COVID19: Most impacted countries

 Covering data through this week (week 17) of 2021 for world's most impacted countries.

First: most impacted countries by the rate of infections and by mortality:

There is only one large country (population > 100 million) that is listed in both tables: the U.S. 

Now, a table of countries with more than 1 million cases:

The U.S. ranks 8th worst performer in the group of 28 countries with more than 1 million cases, when measured across all three metrics: infections per 1 million of population, deaths per 1 million of population and deaths per 1,000 of diagnosed cases. 

Looking at major countries groups in the context of the above table:

Finally, looking at the most impacted countries from the point of their relative contributions to global totals for cases and deaths:

8/5/21: COVID19: Worldwide Data

 Updating worldwide data for the Covid19 pandemic through week 17 of 2021 (current week):

We exited Wave 3 that started Week 34, 2020, peaked in Week 1, 2021, and bottomed out in Week 7 of 2021.

Since Week 8 of 2021, we are seeing growth of a new wave, Wave 4

The latest levels of new infections are now the highest in the history of the pandemic and in the last two weeks of the data, world case counts are in excess of the Wave 3 peak levels.

Starting with Week 8 of 2021 we are witnessing a new, Wave 4, of the pandemic emerging. The latest weekly death counts as of Weeks 14, 16 and 17, 2021, rank as 7th, 6th and 5th highest in the history of the pandemic.

Good news: Recent decreases in mortality rate are most likely attributable to three key drivers: (1) earlier detection of cases due to improved testing; (2) younger demographics of those with confirmed infections; and (3) improved treatments in the earlier stages of the disease.

The slight increase in mortality through week 12 of 2021 appears to have stabilized and reversed in the most recent 5 weeks.

Summary table above shows significant improvement in the pandemic dynamics in the U.S. and more modest, but still sizable improvements in the EU27. BRIICS and Asia are showing worsening pandemic dynamics, and worldwide data broadly reflects this development.

While U.S. and EU27 numbers are encouraging, overall picture of the pandemic remains extremely worrying: worldwide, contagion is still raging unabated and those countries showing strong improvements in vaccinations and reducing contagion spread remain vulnerable to spillovers of new variants and new infections from the rest of the world. 

7/5/21: Record Wealth in the Post-Covid World... for the select few

 Demolishing American middle class... one year at a time

6/5/21: 75 Top Economics Influencers to Follow 2020-2021

 

With some delay of a few months (tells you the range of my attention span, right?) - delighted to spot this list of 75 Top Economics Influencers to Follow via Focus Economics: https://www.focus-economics.com/blog/top-economics-influencers-to-follow for 2020-2021. 

Thanks, Focus Economics team! 

3/5/21: Margin Debt: Things are FOMOing up...

 Debt, debt and more FOMO...

Source: topdowncharts.com and my annotations

Ratio of leveraged longs to shorts is at around 3.5, which is 2014-2019 average of around 2.2. Bad news (common signal of upcoming correction or sell-off). Basically, we are witnessing a FOMO-fueled chase of every-rising hype and risk appetite. Meanwhile, margin debt is up 70% y/y in March 2021, although from low base back in March 2020, now back to levels of growth comparable only to pre-dot.com crash in 1999-2000. Adjusting for market cap - some say this is advisable, though I can't see why moderating one boom-craze indicator with another boom-craze indicator is any better - things are more moderate. 

My read-out: we are seeing margin debt acceleration that is now outpacing the S&P500 acceleration, even with all the rosy earnings projections being factored in. This isn't 'fundamentals'. It is behavioral. And as such, it is a dry powder keg sitting right next to a campfire. 

26/4/21: What Low Corporate Insolvencies Figures Aren't Telling Us

 

One of the key features of the Covid19 pandemic to-date has been a relatively low level of corporate insolvencies. In fact, if anything, we are witnessing virtually dissipation of the insolvencies proceedings in the advanced economies, and a simultaneous investment boom in the IPOs markets. 

The problem, of course, is that official statistics - in this case - lie. And they lie to the tune of at least 50 percent. Consider two charts:

And

The chart from the IMF is pretty scary. 18 percent of companies are expected to experience liquidity-related financial distress and 16 percent are expected to experience insolvency risk. The data covers Europe and Asia-Pacific. Which omits a wide range of economies, including those with more heavily leveraged corporate sectors, and cheaper insolvency procedures e.g. the U.S. The estimates also assume that companies that run into financial distress in 2020 will exit the markets in 2020-2021. In other words, the 16 percentage insolvency risk estimate is not covering firms that run into liquidity problems in 2021. Presumably, they will go to the wall in 2022. 

The second chart puts into perspective the IPO investment boom. Vast majority of IPOs in 2020-2021 have been SPACs (aka, vehicles for swapping ownership of prior investments, as opposed to generating new investments). The remainder of IPOs include DPOs (Direct Public Offerings, e.g. Coinbase) which (1) do not raise any new investment capital and (2) swap founders and insiders equity out and retail investors' equity in. 

The data above isn't giving me a lot of hope, to be honest of a genuine investment boom. 

We are living through the period of fully financialized economy: the U.S. government monetary and fiscal injections in 2020 totaled some $12.3 trillion. That is more than 1/2 of the entire annual GDP. Since then, we've added another $2.2 trillion. Much of these money went either directly (monetary policy) or indirectly (Robinhooders' effect) into the Wall Street and the Crypto Alley. In other words, little of it went to sustain real investment in productive capital. Fewer dollars went to sustain skills upgrading or new development. Less still went to support basic or fundamental research. 

In this environment, it is hard to see how global recovery can support higher productivity growth to bring us back to pre-pandemic growth path. What the recovery will support is and accelerated transfer of wealth:

• From lower income households that saved - so far  - their stimulus cash, and are now eager to throw it at pandemic-deferred consumption; 
• To Wall Street (via corporate earnings and inflation) and the State (via inflation-linked taxes).

In the short run, there will be headlines screaming 'recovery boom'. In the long run, there will be more structural unemployment, less jobs creation and greater financial polarization in the society. Low - to-date - corporate insolvencies figures and booming financial markets are masking all of this in the fog of the pandemic-induced confusion. 

25/4/21: Impact of foreign shareholders on the performance of the Chinese banks

 A new paper (pre-print version): Gurdgiev, Constantin, and Jiagi, Li, The Journey of a thousand miles: a decade of impact of foreign shareholders on the performance of the Chinese commercial banks (April 25, 2021). Handbook of Banking and Finance in Emerging Markets, eds. D. K. Nguyen, Edward Elgar Publishing, August 2021, forthcoming., Available at SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3834020. 

Abstract: 

We analyze the impact of foreign shareholdings on the performance of 28 Chinese commercial banks over a period of 2010-2019, capturing the period prior to and following the reforms of 2014. Using panel data GMM with instrumental variables, we consider bank performance from three perspectives: profitability, quality of assets and liquidity. The individual performance indicators are return on equity (ROE), non-performing loan (NPL) ratio, loan-to-deposit ratio, and loan loss coverage ratio. We find that foreign shareholdings have a significant negative impact on ROE. Increase in foreign investment is coincident with growth in the size of Chinese commercial banks in terms of assets that is faster than the increases in the banks’ return on capital. These findings are intuitively justified: if foreign investors increase banks’ appetite for growth, growth in assets under management will tend to outpace growth in returns on assets in the earlier stages of new investments. From the quality perspective, we show that banks’ NPL ratio is negatively correlated with foreign shareholdings and the correlation is significant both statistically and empirically. NPL ratios fall in the banks with more foreign participation. This result stands contrasted by the fact that some foreign investors (activist and hedge funds), seek to invest in Chinese listed banks with higher NPLs. In terms of liquidity performance, foreign share ownership has a significant negative influence on banks’ loan-to-deposit ratio. Loan loss coverage ratio significantly increases, along with the increasing foreign participation in Chinese commercial banks shareholdings. Combined, these effects suggest significant positive twin effect of foreign shareholdings on Chinese commercial banks risk profiles. As the result, Chinese banks with higher foreign shareholdings are better prepared to sustain losses from bad loans and state risks and have lower risk exposures to bad loans. The combined effects of our findings strongly suggest that Chinese banks’ ROE can be expected to pick up in the near future with further financial opening in the sector and the greater involvement of foreign investors that comes along with it.

25/4/21: Impact Finance perspective of the systemic threats to blockchain applications

 

New paper (pre-print version): 

Gurdgiev, Constantin and Fleming, Adam, Informational efficiency and cybersecurity threats: A Social Impact Finance perspective of the systemic threats to blockchain applications (April 25, 2021). Forthcoming, Chapter 12 in Innovations in Social Finance: Transitioning Beyond Economic Value, eds. Thomas Walker, Jane McGaughey, Sherif Goubran, and Nadra Wagdy, Palgrave Macmillan, 2021, Available at SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3834032. 

Abstract: 

Crypto-assets and blockchain technologies hold the promise of providing more secure systems for managing public and private data, enhancing public trust in data collection, and increasing the efficiency of social impact finance transactions. However, to-date, blockchain technologies have struggled to deliver on these promises. Specifically, cybersecurity threats to blockchain technologies are accelerating and becoming more impactful over time, generating growing risk to the use of the blockchain technologies in social impact finance services provision. Our analysis data on cybersecurity breaches involving cryptocurrencies trading platforms from 2014 through 2019 shows that cryptocurrencies markets have, to-date, failed to develop informational efficiencies necessary to sustain these technologies’ deployment in impact finance. Faced with increasing cybersecurity threats permissionless blockchain systems appear to be more vulnerable to shocks, than they were in the past. Cyber breaches in the cryptocurrency markets create major risk contagion pathways, which are dramatically increasing volatility of both directly attacked currencies and other major cryptocurrencies; as well as present an increased risk of system-wide attacks that threaten not only the accounting and transactional accuracy and efficiency of the crypto-based fintech solutions, but also the data stored using public blockchain protocols. These findings lead us to conclude that, absent dramatic improvements in the regulation of cryptocurrencies and exchanges, public blockchains based on traded crypto-assets are not suitable for large scale deployment in social impact finance applications.