The principle that the end justifies the means is in individualist ethics regarded as the denial of all morals. In collectivist ethics it becomes necessarily the supreme rule—Friedrich August von Hayek, The Road to Serfdom
In this issue
The August 2021 ECQ in Name Only? Covid Cases Surging Among the Vaccinated Population Here and Abroad! PSEi 30 Plunges Below the March 2020 Trendline!
I. ECQ In Name Only? ECQ as a Popular Band-Aid Fix to the Pandemic
II. ECQ in the Name Only: Stringency Index Less Restrictive in Last Two ECQs
III. ECQ in Name Only: Improved Traffic on ECQs of August 2020 and March-April 2021
IV. Doing The Same Thing Over and Over Again Expecting Different Results, Lockdown as an Election Tool for the 2020 Elections
V. ECQ in Name Only: Economic Losses Are More than Statistical Estimates
VI. The Vaccine’s Herd Immunity? With COVID-19 Cases Surging Among the Vaccinated, the Popular Narrative is Shifting; India’ Emerging Natural Immunity
VII. PSEi 30 Plunges Below March 2020 Trendline! July’s Loss Second Biggest Since 2009! China’s Shanghai Index Also Broke Critical Support!
The August 2021 ECQ in Name Only? Covid Cases Surging Among the Vaccinated Population Here and Abroad! PSEi 30 Plunges Below the March 2020 Trendline!
I. ECQ In Name Only? ECQ as a Popular Band-Aid Fix to the Pandemic
From the Manila Times (July 30): The National Capital Region (NCR) will return to an enhanced community quarantine (ECQ) from August 6 to 20 to thwart a looming surge in coronavirus disease 2019 (Covid-19) cases triggered by the highly contagious Delta variant. The new lockdown was announced by Palace spokesman Harry Roque Jr. on Friday
Pressured by certain quarters, the national leadership relented to the reinstatement of the socialist lockdown model to help curb rising cases of COVID as well as “give time for authorities to prepare to deal with a possible surge” (Inquirer August 1).
So authorities would impose the Enhanced Community Quarantine (ECQ) on several areas, including the National Capital Region, for the next two weeks beginning August 6th.
Oddly, the DOH denies that the current surge is about the Delta variant, which they claim that there is no community transmission yet. Said differently, the present swelling of cases is about the former strains of COVID.
However, to flatten the curve and ease the risks of the outbreak of the Delta variant on the medical community requires another episode of home incarceration.
The general idea is that a preemptive policy, which would serve as a 'circuit breaker', should break the chain of transmission or thwart the emergence of a third wave.
II. ECQ in the Name Only: Stringency Index Less Restrictive in Last Two ECQs
Figure 1
But the ECQ has undergone different changes.
Or, ever since mid-March to May 15, 2020, or the original version, the recent imposition of ECQs and MECQs has not been the same.
Based on the Stringency Index from Our World in Data, the latest versions of August 2020 and March to April 2021 have been significantly looser than their predecessor. (Figure 1 upmost pane)
The Stringency Index consists of 9 metrics of mobility, in particular: school closures; workplace closures; cancellation of public events; restrictions on public gatherings; closures of public transport; stay-at-home requirements; public information campaigns; restrictions on internal movements; and international travel controls.
Using the ECQ of March to May 2020 as the base or representing the strictest policy response, the Stringency index has eased by some 30-40% since. The ECQs of August 2020 and March to April 2021 registered 25% to 30% off the base, which meant that policy conditions have not been as rigorous as the original.
Though designed to restrict mobility, the guiding rules and implementation of the latest ECQs have eased significantly.
By its original standard, ECQ is in the name only.
Will the August 2021 ECQ change this symbolic political approach to overcome the pandemic?
III. ECQ in Name Only: Improved Traffic on ECQs of August 2020 and March-April 2021
Figure 2
Mobility data of several providers corroborate the substantial easing or less draconian policy and social response to health protocols.
Based on Google’s Mobility Data, neither of the latest two ECQs have diminished traffic to the March to May 2020 levels.
In fact, despite the ECQs, movements have improved though still distant from the pre-pandemic period.
Traffic at the Grocery and Pharmacy stores exceeded the pre-pandemic period in the ECQ/MECQ of mid-April/May 2021!
Comparing the ECQ of August 2020 and the Mar to April 2021, Apple’s mobility index likewise shows higher lows or an uptrend. Although traffic by Apple's standard remains substantially depressed relative to Google.
On the other hand, Waze's mobility index depicts slightly reduced traffic in the early 2021 lockdown relative to the August 2020 counterpart.
Overall, none of the three mobility data have reverted to the original standards.
The Stringency Index and Mobility Indicators have chimed. By original standards, ECQ is in the name only.
From June 2020 (GCQ) to the present, the Stringency Index has fluctuated in a narrow range.
IV. Doing The Same Thing Over and Over Again Expecting Different Results, Lockdown as an Election Tool for the 2020 Elections
Why a two-week lockdown?
That's because such policies are patterned after COVID-19's pre-symptomatic transmission phase, which is on average 5-6 days but can be up to 14 days (WHO).
The imposition of the latest two ECQs came when COVID cases were at their peaks. Thus, the decline from which makes the lockdown policy appear to have worked.
But has it?
To be sure, despite the two waves, cases have been on an uptrend since March 2020 and accelerating upwards even before the anticipated menace from the Delta variant. (Figure 1, lower pane)
So ECQs tend to lay back COVID cases, which eventually find a staging point for a run!
We also had a circuit breaker before.
At the onset of the 2020 outbreak, the ECQ's archetype was to mimic the China model to prevent their spread. Yet after the initial health gulag, cases soared!
Yet, after two more ECQs, where are we today? The case chart in Figure 1 shows that despite the ECQs, since March 2020, COVID cases have been in a bull market in the Philippines!
As demonstrated, the promotion or alleviation of immediate effects at the expense of the longer-term consequences represent the context of most political solutions.
The lockdown provides incentives for the personal interest of politicians. As Professor Antony Mueller rightly describes
The political time horizon is the next election. In the endeavor that the benefits of political action come quickly to their specific clienteles, the politician will favor short-term projects over the long-term even if the former bring only temporary benefits and cost more in the long run than an alternative project where the costs come earlier and the benefits later. Because the provision of public goods by the state severs the link between the bearer of the cost and the immediate beneficiary, the time preference for the demand for the goods that come apparently free of charge by the state is necessarily higher than in the market system.
Antony P. Mueller, Ten Reasons Why Governments Fail November 22, 2018 Mises.org
With elections on the horizon, wouldn't it be beneficial to the incumbent (national and local) leaders to keep a stranglehold on the populace?
For instance, according to the Inquirer (July 28): “A commissioned survey showed that 46 percent of Filipinos will not go out to vote in the 2022 elections if there is a high number of COVID-19 cases in their area”.
Will the pandemic be used to postpone or suspend the 2022 national elections?
And under such an environment dominated by fear, won't the national and local incumbents be on the advantage, given the machinery and bureaucracy they command during the Election Day?
That said, the act of "doing something", as well as doling out of ‘public goods’ sells to voters (e.g. ayuda, free vaccines, and more)
Sure, for headline effects, authorities will likely impose longer curfews, liquor bans, limit border flows and declare suspensions/restrictions on operations of several economic segments.
But the question is whether authorities will implement such a regimen rigorously and if people will comply. Or, will they remain lax as the previous?
Will the August 2021 ECQ be another paper tiger?
V. ECQ in Name Only: Economic Losses Are More than Statistical Estimates
After all, the National Government previously admitted that a lockdown would neither be good for the economy nor that the economy can afford it.
The NEDA also claims that the economy “stands to bleed ₱105 billion, with almost half a million Filipinos losing their jobs for each week” (CNN July 30).
But the sustained discoordination of resource allocation, the disruption of supply networks, the labor displacements and malinvestments from public spending should lead to the reduced real demand and the erosion of savings and capital formation.
Or, economic and financial losses should be much more than estimates made by statisticians who deal only with visible aggregates. Yet opportunity costs also matter. Then there are risks to the banking system tied to the economy even before the pandemic. (discussed last June)
There are social costs too. For instance, because of the deterioration of the standards of living, which should continue to worsen, one can expect that the health vulnerabilities of a substantial segment of the population to mount, leading to increased risks of a health crisis and lowered life spans over time. An environment of fear, which limits services, only exacerbates a decaying health climate.
Intertemporal political consequences will be a factor too.
Alas, people never seem to learn. The allure of centralized governance remains firmly rooted in the population.
VI. The Vaccine’s Herd Immunity? With COVID-19 Cases Surging Among the Vaccinated, the Popular Narrative is Shifting; India’ Emerging Natural Immunity
Figure 3
Last June I wrote, (bold original)
Are the Seychelles and Mongolian cases an anomaly? Or as in the case of the UK, are these trends about to emerge globally?
Coronaviruses naturally mutate. If so, how effective are vaccines against the original and mutant strains? And how lasting are its antibodies? More importantly, do coronaviruses build resistance against vaccines? Or do vaccines also cause or spur mutations in coronaviruses? What are the intertemporal side effects (adverse events) of these vaccines?
In any case, COVID-19 and vaccines are like a cat-and-mouse dynamic. It would seem like the current crop of vaccines chase the old strains while new strains emerge, rendering previous vaccines less potent and permeable to new infections or reinfections. A vicious cycle emerge.
Let me add to the June comments by citing recent data or several news feeds.
As of July 29th, the full vaccination share of the Philippine population reached 7.2%, while one-dose vaccination hit 10.5%, according to Our World in Data.
Meanwhile, the City of Mandaluyong has wonderfully revised its tabulation of COVID-19 cases from July 29 to date. It included a breakdown of new COVID cases in the dimension of vaccinations. (Figure 3, upmost table)
From July 29 to August 1, 124 new COVID cases were added, comprising 71 unvaccinated, 37 FULLY vaccinated and 16 ONE-Dose vaccination. By percentage share, the unvaccinated comprised 57.3%, fully vaccinated 29.84% and 12.9% for one dose. Or, based on this divide, the unvaccinated had 57.26% share and the vaccinated 42.74%. Shocking!
Although one week isn’t a trend and the City of Mandaluyong ain’t the Philippines, it is interesting to note that while the vaccinated (full and one-dose) accounts for a small segment of the overall population, ironically, the vaccinated have taken a big slice in the increases of COVID cases in our area!
If this trend continues, the City’s officials could bring back the old tabulation format.
Let us move to the global scene.
From a major media proponent of vaccines, the New York Times (July 30): The Delta variant is much more contagious, more likely to break through protections afforded by the vaccines and may cause more severe disease than all other known versions of the virus, according to an internal presentation circulated within the Centers for Disease Control and Prevention… Dr. Rochelle P. Walensky, the director of the agency, acknowledged on Tuesday that vaccinated people with so-called breakthrough infections of the Delta variant carry just as much virus in the nose and throat as unvaccinated people, and may spread it just as readily, if less often. But the internal document lays out a broader and even grimmer view of the variant. The Delta variant is more transmissible than the viruses that cause MERS, SARS, Ebola, the common cold, the seasonal flu and smallpox, and it is as contagious as chickenpox, according to the document, a copy of which was obtained by The New York Times.
From Businessinsider (July 28) “CDC: The coronavirus could be 'just a few mutations' away from evading vaccines”: The coronavirus could be just a few mutations away from evading existing COVID-19 vaccines, according to the head of the Centers for Disease Control and Prevention…The CDC announced Tuesday that people infected with Delta — vaccinated or unvaccinated — have higher viral loads (meaning they carry greater amounts of virus) compared to other versions of coronavirus. That means even vaccinated people could pass the virus along to others similarly to how unvaccinated people do.
From another key media proponent of vaccinations, the CNN (July 30): Vaccination alone won't stop the rise of new variants and in fact could push the evolution of strains that evade their protection, researchers warned Friday. They said people need to wear masks and take other steps to prevent spread until almost everyone in a population has been vaccinated. Their findings, published in Nature Scientific Reports, support an unpopular decision by the US Centers for Disease Control and Prevention to advise even fully vaccinated people to start wearing masks again in areas of sustained or high transmission. "We found that a fast rate of vaccination decreases the probability of emergence of a resistant strain," the team wrote.
From the Times of Israel (July 11) “Israeli data seems to show COVID vaccine protection starts fading after 6 months”: There is a growing correlation between vaccinated Israelis who have been infected with the Delta variant of the coronavirus and those who were among the first to get the vaccine, possibly indicating that the vaccine’s protection fades over time, a report said Sunday. …On Thursday, Pfizer said it will seek US authorization for a third dose of its COVID-19 vaccine, saying that another shot within 12 months could dramatically boost immunity and maybe help ward off the latest worrisome coronavirus strain. The company’s head of medical research and development, Mikael Dolsten, said in the statement that data from Israel about infections among people vaccinated in January and February indicated that “after six months, there may be risk of infection with the expected decline of antibodies.”
The Government of Israel announced a third jab, the world’s first, for its citizens over 60 (The Haaretz July 29).
From Reuters UPDATE 2-Antibodies from Sinovac's COVID-19 shot fade after about 6 months, booster helps – study (July 27): Antibodies triggered by Sinovac Biotech’s COVID-19 vaccine declined below a key threshold from around six months after a second dose for most recipients, but a third shot had a strong booster effect, a lab study showed.
A critical shift in the popular narrative that vaccines are the elixir to the pandemic is taking place. It should percolate to the local media environment soon.
As an aside, for those proposing vaccine passports, guess what happens next should the current dynamic persist?
Yet, what is happening to the much-touted role of vaccines in attaining herd immunity???
Aside from the vicious cycle from the cat-mouse dynamic, a relatively fast diminishing marginal return has also afflicted the protection period offered by the current crop of experimental vaccines. The implication is that declining antibodies need to be replaced by third, fourth, fifth…to the nth jabs!
Nope, these jabs ain’t boosters, but replacements.
Just Awesome!
And this outlook excludes the side-effects of vaccines.
Yet a more interesting development in India…
From the BBC (July 21): The Indian Council of Medical Research (ICMR) surveyed 36,227 people across 21 states in June and July - and found that two out of three has antibodies. As this still left 400 million people vulnerable to the infection, officials warned against lax Covid protocols.
The middle chart in Figure 3 from the Statista.
As of July 30th, the fully vaccinated accounted for about 7.4% share of the Indian population, while single-dose vaccinations reached 26.4% share, according to the Our World in Data.
Hence, natural immunity likely accounted for most of the reported two-thirds of the population with antibodies.
If true, then India will likely be among the first to attain herd immunity!
VII. PSEi 30 Plunges Below March 2020 Trendline! July’s Loss Second Biggest Since 2009! China’s Shanghai Index Also Broke Critical Support!
Figure 4
The re-imposition of the ECQ triggered Friday's stunning 3.48% dive that comprised about 90% of the week’s 3.84% deficit endured by the domestic equity benchmark. A massive pre-closing dump contributed to nearly half or 47% of Friday’s losses!
But unknown to most, the four successive weeks of decline pulled the PSEi 30 down by a staggering 9.15% in July!
The prior selloffs have portended the inherent fragility of the stock market even before last week’s events.
As it stands, the whopping loss last July signified the largest for the year and accounted for the second-biggest since 2009, next only to the 21.61% plunge in March 2020!
The takeaway is that the uptrend from the BSP-sponsored rescue of the stock market from the nadir of the March 2020 crash was broken or violated, catalyzed by the steep drops before last week, and exacerbated by the response to Friday’s ECQ announcement. (Figure 4, upmost window)
Diminishing trading volume or market liquidity exposed the fragility of the domestic stock market to selling pressures.
Current developments have barely been a surprise since the sharp plunge in the growth of money supply has signified the erosion of financial liquidity conditions that have prompted the BSP to declare an extension of its direct loans to the National Government in July.
The liquidity bounce last June exhibits the BSP’s operations even before the announcement. (Figure 4, middle pane)
Again, stumbling financial liquidity conditions have resonated with the declining volume of trades at the PSE with which the benchmark resonated.
While the last-minute dump on Friday would likely spur a sharp bounce on Monday, it is doubtful if the coming oversold rebound would generate enough traction to recover the previous trendline as volume withers.
The peso also rallied .74% on the memory of the lockdown’s weak economy equals a strong peso. In reality, the peso recoiled from oversold conditions.
Of course, another potential influence on the domestic financial markets may be from China.
The tightening grip/crackdown of the ruling Communist Party on the education and tech industry has crashed China’s stock markets.
Despite the rescue attempts by the National Team, the Shanghai Composite likewise broke its March 2020 uptrend.
Be it known that markets and socialism are opposing/incompatible forces.
Yours in liberty,
The Prudent Investor Newsletters
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Notice: This newsletter is intended to apprise readers of the market conditions based on the information available at the time of the items’ writing, whose accuracy and timeliness of the issues concerned are subject to change without prior notice. The contents of the newsletter are not expressed solicitation to trade and that the positioning on particular issues discussed merely reflect the opinions of the writer.
