“The UN World Food Programme has warned that 270,000,000 people face starvation as a result of the global impact of lockdowns and restrictions. This alone makes the response to Covid the single most lethal policy that Governments have ever adopted, potentially killing many times more than Mao, Stalin and Hitler combined.” - From the website Lockdown Sceptics, 13th January 2021.
We can perhaps agree that the Anglosphere has not had a great war, courtesy of more or less a year of universal involuntary house arrest and levels of economic destruction not seen since the 1930s – all thanks to explicit government action, not from what equates, for some, to a particularly bad flu. But not all modern economies have suffered equally. Japan, for example – a longstanding investment favourite of ours – has had a fabulous war by comparison. From The Japan Times:
On Jan. 1, the world total of coronavirus cases was 83,748,593 and deaths 1,824,140. Japan’s corresponding figures were 230,304 and 3,414. Unusually, in Japan the disease killed more people in autumn-winter than spring. Still, for balance and perspective it’s worth noting that more Japanese died from 25 other causes in 2020. COVID-19 accounted for only 0.3% of all deaths. There were seven times as many suicides and 40 times as many flu and pneumonia deaths. Japan was also one of the few countries without excess mortality caused by COVID-19.
Japan attracted world notice for neither imposing a lockdown nor obsessively testing asymptomatic people. As Tomoya Saito put it in these pages, “Encouraging people with mild or no symptoms to take PCR tests would have revealed nothing but resulted in isolating false-positive cases.” The Stringency Index has been developed by Oxford University’s Blavatnik School in collaboration with Our World in Data to gauge the strictness of nine lockdown measures including school and workplace closures and travel bans, with 100 being the most strict. Japan’s index stayed below 50 until Dec. 8, whereas all its G7 partners have mostly stayed above 50..
Japanese shouldn’t take Western criticism too seriously. The mainstream media has been on a mission to cheerlead the lockdown narrative. Countries like Sweden and Japan that diverge from the approved narrative are the object of their special ire for irresponsibility bordering on criminal dereliction of duty. Examples of better outcomes without the extensive range of health, mental health, livelihoods, economic and civil liberties costs of harsh lockdowns should be welcome. Instead, many commentators seem to be willing the lockdown-light countries to fail so they can feel vindicated.
Unfortunately for them, there is little empirical data to support the abstract mathematical models on which governments relied to clamp lockdowns. The virus is not unprecedented, but the draconian societal shutdowns are. Who would have expected Western democracies to mimic authoritarian China?
Never before in human history have entire healthy populations been put under effective house arrest and told when they can go out; where to; for how long; who and how many people they can meet; which businesses can stay open to sell designated goods and provide listed services. Yet after a year of this extreme experiment, data from around the world show that the spread of the pandemic correlates more with geography, demography and seasonality than lockdown stringency and sequencing.
Europe accounts for three times as many COVID-19 deaths as its share of world population, North America six times and South America 2.4 times. By contrast Oceania has only one-tenth, Africa one-fifth and Asia (including Central and West Asia) one-third their respective shares of world population. East Asia is the star performer. The average mortality for China, Hong Kong, Mongolia, South Korea and Taiwan is 5.5 deaths per million people (DPM). Within East Asia, Japan has the highest mortality with 27 DPM. To put that into global context, however, the world average is 234 DPM and the worst performing countries in Europe (in ascending order, U.K., Spain, Italy, Belgium: all hard lockdown countries) have between 1,080-1,674 DPM. Among Japan’s fellow G7 countries, the average for the other six countries, all of which had stringent lockdowns, is 949 DPM.
What might explain the variation by continents? For one thing, in Africa and most of Asia minus East Asia, average life expectancy is much lower and COVID-19 is highly age-segregated, attacking those over 75 with particular ferocity. For another, part of the reason for life being nasty, brutish and short in these countries is that proportionately far more people with serious ailments succumb earlier owing to health care shortcomings than in the industrialized high income countries. And we know that coronavirus is far deadlier for people with comorbidities.
Moreover, in countries like India, universal BCG and polio vaccination is mandatory, while immune systems of people have a lifelong exposure to curative and preventive drugs for malaria. Research by Indian scientists suggests that exposure since childhood to an extensive range of pathogens has given Indians sturdier immunity to COVID-19. A similar conclusion holds for sub-Saharan Africa.
Another team looked at human genomic datasets for possible explanations for the strikingly lower rates of COVID-19 mortality in East Asia that has been the geographic origin of several modern coronavirus epidemics. Their results suggest that ancient coronavirus-like epidemics drove adaptations in East Asians between 25,000-5,000 years ago. As they colourfully put it: “An arms race with an ancient corona-like virus may have taken place in ancestral East Asian populations.” The winter surge shows that even in Japan, face masks did not prevent infection and transmission. This too strongly suggests that an exceptionally low death rate despite a high proportion of elderly must be due to genetic factors, health factors (e.g. little obesity) or pre-existing immunity.
On April 27, Australia’s ABC broadcaster ran a story on “How Shinzo Abe has fumbled Japan’s coronavirus response.” Countries in Europe and the Americas must wish they could fumble so spectacularly !
Big Media, by contrast, in terms of its credibility has had a positively disastrous war. Those entities already struggling for revenue (no names, Guardian) seem to have preferred to editorialise rather than report troublesome facts. Some technology firms have, strangely, followed Big Media’s unprofitable shift into editorialising, which, along with a heavier looming regulatory burden, is likely to have profound implications for their own business models. Events are moving so fast it’s becoming even more challenging to forecast what the media (both traditional and social) landscape will look like in the fullness of time. Thankfully, we don’t need to invest based on our forecasts of such events. Suffice to say, we are content to face the future owning a mixture of defensive value stocks – not least in Japan – together with systematic trend-following funds, and real assets, notably the monetary metals, not least gold and silver. Because we don’t know what the future holds, we diversify, hopefully sensibly. But we definitely fear a particularly disorderly year for currencies, and for related prospects for inflation and / or stagflation. What we don’t currently own, and may never own, is bitcoin. From the 25th December 2020 edition of Grant’s Interest Rate Observer:
Many years ago, Lloyd Blankfein was asked about the rising price of gold. “What do I know?” the witty CEO of Goldman Sachs replied. “I was bearish at $35 an ounce.”
And so it is with the Tesla of crypto-currencies. Bemusement, wonder, disbelief and good old-fashioned envy are the prevailing sentiments toward bitcoin in the Grant’s offices. To our brothers and sisters, the bitcoin bulls (brothers and sisters in opposition to 21st-century central-banking doctrine), we pose a question. You believe you know what you are long. Have you given enough thought to what you are short ?
You are long, of course, as you see the situation, the blockchain and the currency of the future. You are long deliverance for the hundreds of millions of people who are trapped in countries with crumbling currencies and shaky banks. You are long Friedrich Hayek’s ideal of a private currency. You are long transparency (through the blockchain) and freedom from the inflationary oppression of the central banks. You are long volatility, edginess and the quality of cool. You are long scarcity—a price-insensitive supply curve. You are long excitement—a price-insensitive demand curve.
You are long the prospective curve of bitcoin adoption—the Salvation Army is accepting BTC, and ether, too, as donations this Christmas, came news the other day. You are long money.
Pleasantly, you are short the scorn of the bubble-baiters and goldbugs, who, whatever the merits of our arguments, wish we had made them a little less vehemently when bitcoin wore a three-figure price tag. And, of course, in company with the goldbugs, you are short the risk of an outbreak of monetary reform or the return of real interest rates (not that that would necessarily deter the holders of an asset with four or five times the volatility of gold).
However, in a sense, you are also short the very thing you thought you were long. You are short technology itself—for instance, the risk of a better bitcoin coming down the pike. And you are under rising threat from the skill and malice of the world brotherhood of hackers. The plucking last month of more than $1 billion’s worth of bitcoins and other cryptos by the digital sleuths of the U.S. Department of Justice was no ordinary seizure of stolen property. It was a successful hack on the digital hiding place of a fellow professional hacker. We’d fear for the safety of our digital stash, if we had one. No doubt, quantum computing, if and when it arrives, will introduce interesting new security complications.
You are short, to continue, the very idea of valuation, although bitcoin (no more than gold, or, for that matter, trillion of dollars’ worth of today’s bonds) throws off an income stream. You can never be sure it’s a bubble, quoth Alan Greenspan, but the recent premium of as much as 650% of the price of the Bitwise 10 Crypto Index Fund to the value of the underlying portfolio assets is far from the canon of Graham and Dodd.
You are short the environmental movement, bitcoin “mining” being the only kind that makes analogue digging look green. In general, you are short the Man—it’s the heart of the crypto ethos—but the Man runs the IRS (are you current on your bitcoin capital-gains-tax liabilities?) and the Treasury and the Fed (which does not like competition) and the national regulatory apparatus.
Bitcoin trading would be well nigh impossible without the sketchy regulatory workaround called tether (Grant’s, Oct. 2). Defiantly, crypto lives outside the banking system. To convert those invisible tokens into kosher cash is the problem that tether exists to solve. Suffice it to say that the so-called stablecoin may or may not hold up under the combined investigatory scrutiny of the New York State and federal governments. Or, for that matter, under the legislative initiatives of Congress. “A new U.S. congressional bill would require stablecoin issuers to secure bank charters and secure regulatory approval prior to circulating any stablecoins,” news site CoinDesk reported the other day.
Gold is a store of value, credit a store of confidence, bitcoin a store of hope. Fingers crossed, bitcoin bulls.
Tim Price is co-manager of the VT Price Value Portfolio and author of ‘Investing through the Looking Glass: a rational guide to irrational financial markets’. Email us: firstname.lastname@example.org.
Price Value Partners manage investment portfolios for private clients. We also manage the VT Price Value Portfolio, an unconstrained global fund investing in Benjamin Graham-style value stocks and specialist managed funds.
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