LOCK DOWN!

3rd Apr '20 by Terry Dickens

358 comments 8275 reads

While I like Paul Scott's contributions 99% of the time. I think his view on the Government LockDown is a tad too harsh.

This virus (or the government's response to it, depending on your point of view) has completely shut down huge parts of the economy. It's an unthinkable scenario.

Below is an excerpt from an article in this week's Trendwatch, editor Rob Cullum.

According to Imperial College London, which has been influential
in shaping the government’s response, had the government not imposed a lockdown, there would have been at least 100,000 deaths in
this country, possibly up to 250,000. With the lockdown in place, the
latest scientific prediction is that the virus will have peaked in this
country within 3 weeks. Cases and deaths should then start declining. In 12 weeks' time, the epidemic should be over in this country.
The number of deaths may finish up at less than 20,000. Incidentally, it’s reckoned that up to two-thirds of the death toll is accounted
for by victims who are nearing the end of their lives and would have
died anyway within 12 months.
Of course, while the epidemic may be over in 12 months, the recovery of the economy from the hit, estimated to be between 15% and
25% of GDP, will take a lot longer.

and

The good news is that, even though we haven’t got a vaccine yet,
we still have a defense: the lock-down. By reducing contact between
people so that all infected people pass the disease on to less than one
other person on average, simple arithmetic dictates that the epidemic
will die out. It will also “flatten the curve” – the peak will be lower,
ensuring that hospitals are not overwhelmed.
It seems to have worked in China, which is reporting no new COVID
-19 cases of domestic origin… if you believe in their statistics. Restrictions on movement there are slowly and cautiously being lifted.
Of course, lock-downs do cause enormous economic damage,
which will certainly drive the world into recession. But it’s quite possible that, once the outbreak is under control – probably in the summer – the economy may rebound quite quickly.

Good luck with your investing and keep safe

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William K

23rd Sep '20

Dr Mike Yeadon suggests that 90% of Pillar 2 tests are false positives, meaning that the official incidence on new cases is ten times higher than it actually is. The ONS has a lower but unspecified number of new cases. The issue here is the PCR test that cannot distinguish between people with active infections and people with infections acquired months earlier. If the official data doesn't actually record 'new' cases, the Government is, as Dr Yeadon suggests, supplying us with misleading data about a non-existent 'second wave' and acting on it in a way that may cause irreparable harm.

Gromley

As I understand it Dr Yeadon is suggesting that the false positive rate for tests in Pillar 2 is at least 0.8% . So therefore if you test 1,000 people you will get 8 false positives.

And if the true underlying prevalance of current infection is around for eg. 1 in 2000 you are massively overstating the number of infections.

That's okay so far, although I am not sure why he seems to infer that the ONS population survey is more accurate?

However, when he goes on to suggest that this overstatement drives an uneccessarily agrresive policy response by overstating the rise in cases, I lose his thread.

The 0.8% (if that is what it is) is a constant, so if recorded cases are rising it must be because of a rising number of actual cases and in fact the rate of increase is implicitly being understated.

The 0.8% looks dubious in any case as throughout July and August the test positivity rate was consistently below 0.8%, with a low of 0.5% on a 7 day rolling average basis.

So surely that must be around the maximum value of the false positivity rate? (But likely much lower still, unless there were genuinely no cases at that time).

Based on the 7day RA to 15-sep (there seems to be a bit of a lag in updating some of the data at coronavirus.data.gov.uk ) test positivity was 1.5%

So if for example we assume the false positive rate to be say 0.3%, true positives have gone up from 0.2% in July to 1.2%, much more extreme than an increase from 0.5% to 1.7%!

Also,the other flaw seems to be that if he is correct and the number of cases are being vastly overstated, then doesn't it follow that the case fatality rate must be vastly understated?

Gromley:

Re: Also,the other flaw seems to be that if he is correct and the number of cases are being vastly overstated, then doesn't it follow that the case fatality rate must be vastly understated?

Our problem here is that we don't have a mortality percentage for the new cases (or if we do I haven't seen it yet).

There are at least three possible explanations why the increase in cases might not be accompanied by the expected increase in mortality:

1. The virus is becoming less virulent (as happened with scarlet fever).

2. The treatment is more effective (dexamethasone, anti-virals, interferon beta etc.)

3. The extra cases only involve non-vulnerable people who are much less likely to die than the vulnerable.

Indeed wilkonz and as cases have only recently started rising more sharply and as there is a lag between cases and hospitalisations and deaths we don't really know if the fatality rate has come down or not.

If it has though, I would add to your possible reasons :

4. Lower initial viral load with less virus circulating than earlier in the year (but that might not last) .

5. (As I think dmjram suggested elsewhere) it has already wiped out a large proportion of its favoured targets.

DWit199

24th Sep '20

The ONS has a lower but unspecified number of new cases.

159 of the 208,730 total samples tested positive. The ONS samples are processed in the same labs as Pillar 2. Dr.Yeadon can only be correct if the ONS and Pillar 2 tests have different criteria for a positive report or there is some other systematic failing in the way Pillar 2 swabs are collected and handled. It's not possible to tell from the published information.

dmjram

Further evidence of the collateral cost of the covid response:
"A total of 30,260 excess deaths have occurred in private homes since the first coronavirus deaths were recorded in the UK in early March. The total number of deaths occurring in people’s homes across the UK since the first death in early March is now 43% higher than in previous years. However, less than one-in-10 of the excess home deaths are due to Covid (9%).

The latest available figures show that A&E attendances in NHS hospitals in England are below levels a year ago: there were 3.8m attendances at A&Es between June and August, down from 5m in a normal year or 29%."

“In the most recent weeks we can exclude the fact that much of the excess mortality is due to Covid because infection is much lower,” said David Leon, professor of epidemiology at the London School of Hygiene & Tropical Medicine. “So what we see is probably more to do with decisions that are being taken by families, by individuals, their GPs and also hospitals’ willingness to admit.”

Blissgull

There was an interesting article in the news recently suggesting that the measures people are taking now, especially the widespread use of facemasks has the effect of reducing the initial viral load, thus making the disease less dangerous.

Wilbraham

Recent article from a Stockholm emergency physician on the Swedish experience

https://sebastianrushworth.com...

Sweden in contrast shows more of a linear relationship, reflecting its lack of lockdown and constant application of the same measures to slow the spread of the disease - there is no lockdown flatlining/post release surge seen.

An interesting narrative but I don't think it is true. The graph below shows Google workplace mobility data since 10 March. The y axis is the percentage reduction in "mobility" within workplaces as defined by Google compared to the pre lockdown activity. I have removed weekends and holidays to give a clearer picture of the underlying data.

The UK curve shows a strict lockdown followed by a phased release. The Swedish data shows a less severe initial lockdown followed by a second slower onset lockdown which was released quite quickly. It certainly doesn't show constant application of the same measures.

See the total cases chart from the link you provided.

The best fit is a linear relationship with a change in slope from July onwards.

Workplace mobility data is a small subset of all the factors contributing to case growth. The total case number reflects this and the impact of all other variables/related behaviours.

Below is a chart from Covid in Sweden showing number of new cases per day against deaths per day. The scale is logarithmic. At the peak in April, there were 500 new cases a day and 100 deaths per day. In September we see about 300 new cases a day and 2 deaths per day. Whilst there are different ways of interpreting the data, such as that the old and vulnerable are now either dead or better protected, it is consistent with herd immunity and/or a decline in the virulence of the virus.

Terry Dickens

2nd Nov '20

Any thought on the latest lockdown sweeping over UK and the world right now

The Phoenix

You called near the bottom last time Terry so maybe we should be asking you, think near term it doesn't matter who wins US election but result needs to be decisive if its close that won't be so good. Once the result is sorted the US QE trillions should be released which should bull markets up if March is repeated when the trillions were unleashed to shore up the drop.

To answer your question, my thoughts on the latest Lockdown are negative. I am a Lockdown sceptic and believe it will do more harm that good. The arguments against Lockdown have already been aired in depth on this thread so I won't repeat them here. My main question at this moment is:

Why are schools and universities not subject to the Lockdown? This would only make sense if school children and young adults have been proven to be non-spreaders and there is no evidence to support that they are non-spreaders. We all understand that education is important for young people, but other things also are important. And if the Lockdown isn't actually going to prevent the spread of Covid-19 with the maximum efficiency, there seems little point in having a Lockdown.

There is also the matter of the economy (see the chart below from the Office of National Statistics). Sooner or later everyone is going to have to pay for the Lockdown, a subject on which there seems to be very little public information or debate.

Hi Wilconz the amount of debt used to terrify me but it really is seeming these days it doesn't matter so much is now held by central banks think about a third of the total in UK, USA, Japan and Europe with interest rates negative yielding on a lot of the bonds.

The bank of England recently just cancelled off a 150 bil of debt due for repayment to it from the UK Goverment if we were Argentina or such like currency would have lost 15-20% overnight but it seems that because we are top of the food chain we can get away with it.

I'm convinced at some point all central bank held debt in the UK, US and Eurozone will be cancelled off over the coming years as it comes due it's one thing to stiff a genuine creditor like China, but given central banks are owned by Goverment's the vanishing tricks seem to work.

Madness but given the current state of the world other than creating trillions/billions at a keystroke which the central banks then buy what's the alternative unemployment up to 20% overnight.

Regards Andy

Increasing debt is a second order effect due to economic activity contracting and tax receipts falling.
Central banks can indeed wipe out accrued debt created in the current environment.

The damage and destruction in the real economy remains however - contracting GDP, falling incomes, rising unemployment etc etc. That is the real economic damage of the lockdown which no central bank book keeping can help with. If bond buying/money printing could deliver rising GDP, incomes and productivity the dismal science would have been renamed decades ago.

Instead this loss will be become more and more permanent as the measures drag on. That ultimately means the UK can produce less and provide lower incomes for its population. That is where the real pressure on taxes will come from - a shrunken pie means less for all and higher taxes for many going forward to fund what people have become accustomed to.

I do hope you’re right Andy. It could let the unfortunate taxpayer off the hook.

I agree with wilkonz, little put revisiting our views on the "rights" and "wrongs" of this - I don't see much many people have changed their views much.

At least here we have been able to understand and respectfully disagree with the opposite point of view. As opposed to the way the "debate" has unfolded in other places.

The one thing I will say of the latest England lockdown is that it had become inevitable.

It became clear to me over the last month or so that the key metric that is driving the government is not Covid deaths vs lockdown. I am pretty clear that they would be prepared to accept a higher (covid) death toll in order to protect the economy - for some of the reasons we have discussed before I am not entirely unsympathetic to this argument.

However the key metric (and Boris confirmed this over the last couple of days) is NHS capacity. Certainly breaching NHS capacity costs lives (covid & non-covid) but that is not the most relevant policy concern imho. Breaching NHS capacity would be a clear failure of the government and would I think trigger social unrest and a much more chaotic lockdown than we are seeing.

The question imho is (and was) not; to lockdown or not to lockdown, but rather; to lockdown early, effectively and in a structured fashion or only when forced at a point which is potentially too late and becomes implemented in a chaotic fashion. We have once again imho opted for a sub-optimal position in between.

My personal view is that there was no option in the Spring that would not have led to lock down at some point and similarly there was no such option now in the Autumn.

I do understand the counter to this - "But Sweden". There does not seem to be any easy and convincing way to demonstrate the demographic differences, but I just do not see the validity of direct comparison. If Denmark represents what we did, then it would not have been good to have gone from Denmark to Sweden.

Apologies for getting close to reopening the "rights" and "wrongs" discussion, but that it not what I am getting at - the point is that this is the social and political context in which Government decisions are being made.

All imho obvs.

Phuntt

I’m still trying to work through all the possible economic consequences of the debt mountain and effects it will have (and I plan to write a piece here once I have at least my own thoughts in order). However, I’ll make a couple of points to think about:

1) it’s not that we are getting away with it because we are a rich first world country, it’s that the effects of the actions taken will take years to filter into the system. Whatever way you calculate it, the UK increased the money supply by £150bn at a time when economic output is diminished. More money for less output means prices will rise - this is the definition of inflation and it cannot be avoided. However, what’s not clear is where that inflation will be felt - will it remain in assets like it did after 2008 or will it filter into the economy at consumer price level?

2) the UK is facing a macro shock that other first world countries are not - Brexit. Even if all major world economies are able to get away with it, it is not certain yet that the UK can.

3) If inflation does kick in at a consumer level, I’m uncertain as to the consequences when a large proportion of the population finds themselves without a job or the chance at a job, prices rising and benefits unable to keep pace. The last parallel was called the 1970s and it was a grim time in the UK.
4) although the UK is buying and cancelling its own debt, at some point it will have to return to the markets for cash. What it does now will determine the risk premium those investors will look for before they hand over their cash.
5) people refer to the exponential growth rate of COVID all the time. We still don’t know how big this debt mountain is going to grow but it is already over 103.5% of national GDP, they aren’t near to the middle of the spending, GDP is decreasing rapidly and the tax base is declining while the long term benefit role is growing rapidly. Whatever else happens, taxes must increase hugely in the UK which will depress economic growth and make the problem worse.

I’m depressing myself here so going to stop typing before I lose the will to carry on. That’s why I keep putting off going any deeper into this - it causes serious sleepless nights. On the positive side, nearly all of above actually makes this a good time to hold stocks so keep buying.

3rd Nov '20

Hi clarea

I tend to agree with you, regarding the US elections, if there is a reasonable margin, then I also think we may have seen the other bottom of the FTSE at around 5490.

My first bottom call in March was completely against the consensus of opinion, ie most people shouting sell SELL. But I got lucky.

Let's hope for a good end to a most unusual year.

Keep safe and may all your Longs go up, and all your Shorts go down.

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Terry Dickens

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