23/6/21: Covid19 Deaths and Income Inequality

 

An interesting, although intuitively straight forward note on the determinants of Covid19 deaths: https://twitter.com/youyanggu/status/1407418434955005955. 

As Youyang Gu @youyanggu states, "I believe income inequality is the single best predictor of total Covid deaths in the US. Not income, but income *inequality*. The R^2 is surprisingly high: 0.35."

There are some potentially important issues with this analysis (some are explored here: https://github.com/jsill/usstatecovidanalysis/blob/main/usStateCovidAnalysis.pdf), but the conclusion seems to be qualitatively robust. 

20/6/21: COVID19: Europe and EU27

 

Updating pandemic numbers for the past week for EU27 and Europe:

As the charts clearly show, 

• Europe experienced significant declines in new cases and deaths in recent weeks, in part due to improved rates of vaccinations.
• The third wave is now clearly behind us in both the EU27 and Europe, although European cases are remaining at much higher levels than those in the EU27. A similar pattern is evident in deaths.
• In terms of Covid19 mortality (deaths per 1,000 cases) the rate of mortality has been effectively flat since week 45 of 2020 and is currently running at around 22 deaths per 1,000 cases in the EU27 and Europe.

While these figures show the effectiveness of vaccinations and past lockdown measures, they also present evidence for the need of more robust international efforts in sharing vaccines with countries with lower incomes. Until similar declines are evidenced globally, it is hard to make an argument that any specific region (be it Europe or North America) can be immune from the risks of the pandemic contagion from other countries. More on this risk here: https://trueeconomics.blogspot.com/2021/06/19621-covid19-worldwide-data.html. 

19/6/21: COVID19: Worldwide Data

 

With some time passing since my last update, and the rates of vaccinations ramping up globally, it is easy to forget the simple, but devastating fact: we are still in a global pandemic. Here are the latest weekly totals for new cases and new deaths, worldwide:

Just as the charts show,

• New cases have fallen significantly from the pandemic peak (Wave 4), but remain above the prior trough between Waves 3 and 4. 
• New deaths recorded are still at extremely high levels, and showing an uptick week-on-week in the latest data.

Meanwhile, mortality of new Covid19 cases is stubbornly at the levels observed over the last two waves of the pandemic:

Put differently, the 'rich' world is getting vaccinated (albeit with some variation in the rates), while the emerging markets and middle-income economies remain well behind on vaccinations curve. Which means there is continued threat of a global pandemic re-igniting and the looming uncertainty over the new variants emerging.

So much for the 'reopening' future...

8/6/21: U.S. Investor Confidence under Biden

 My recent comment on the Biden Administration early successes for the Euromoney: https://www.euromoneycountryrisk.com/article/b1rqlvl15wr2mw/special-country-risk-survey-us-investor-confidence-is-returning-under-biden?LS=Adestra2055255%E2%80%A6 

8/6/21: World is more VUCA. Less Risk.

 For those who have been my students in recent years none of this will come as a surprise: the world around us is becoming less 'risk-driven' and more 'VUCA-prone'. By VUCA, of course, we mean volatile, uncertain, complex and ambiguous. 

Here is a neat summary via McKinsey:

None of the above data sets are 'risk' in any structured or definitional sense of that terms. None carry known, easy-to-define probability distributions, none have strictly identifiable impact distributions and none adhere to the normal laws of large numbers. These are uncertain events that are also inter-related through complex contagion pathways. 

Good luck fitting actuarial tables to them... 

8/6/21: This Recession Is Different: Corporate Profits Boom

 

Corporate profits guidance is booming. Which, one might think, is a good signal of recovery. But the recession that passed (or still passing, officially) has been abnormal by historical standards, shifting expectations for the recovery to a different level of 'bizarre'.

Consider non-financial corporate profits through prior cycles: 

Chart 1 above shows non-financial corporate profits per 1 USD of official gross value added in the economy. In all past recessions, save for three, going into recession, corporate profit margins fell below pre-recession average. Three exceptions to the rule are: 1949 recession, 1981 recession and, you guessed it, the Covid19 recession. In other words, all three abnormal recessions were associated with significant rises in market power of producers over consumers. And prior abnormal recessions led to subsequent need for monetary tightening to stem inflationary pressures. Not yet the case in the most recent one.

The second chart plots increases in corporate profit margins in the recoveries relative to prior recessions. Data is through 1Q 2021, so we do not yet have an official 'recovery' quarter to plot. If we are to treat 1Q 2021 as 'recovery' first quarter, profits in this recovery are below pre-recovery recession period average by 2 percentage points. Again, the case of two other recessions compares: the post-1949 recession recovery and post-1980s recovery are both associated with negative reaction of profits to economic cycle shift from recession to recovery.

Which means two things:

1. Market power of producers is rising from the end of 2019 through today, if we assume that 1Q 2021 was not, yet, a recovery quarter (officially, this is the case, as NBER still times 1Q 2021 as part of the recession); and
2. Non-financial corporate profits boom we are seeing reported to-date for 2Q 2021 is a sign not of a healthier economy, but of the first point made above.

In effect, some evidence that Covid19 pandemic was a transfer of wealth from people to companies that managed to trade through the crisis.