Sunday, August 02, 2020

A Vaccine May Not Be the "Magical Cure" Everyone Anticipates

Few appear willing to follow the probabilities of a future in which a vaccine cannot possibly be the "magic cure" everyone wants.
Let's attempt the impossible and set aside all preconceptions we might have about a vaccine for Covid-19, and think it through somewhat dispassionately. Let's start by stipulating that dispassionate analysis is as rare as anti-matter, as everyone's barely-cloaked self-interest and ideological biases demand an indignant, rabid response to any challenges to the one true faith, i.e. whatever they believe.
Speaking of self-interest, we would blind not to notice the rapacious interest of Big Pharma in reaping billions of dollars in profits from a vaccine or vaccines. What could be better for obscene profits than a vaccine everyone must have to participate in the conventional economy, a vaccine the federal government will let the "owner" price at "market"?
"Owner" is in quotes because the federal government is funding much of the research expenses yet the Big Pharma corporations retain ownership of the results--such a deal for Big Pharma! The gummit puts up the money but Big Pharma gets 100% "ownership" and the right to price their vaccine at "market," which is whatever the government is willing to pay for the vaccine it funded.
We would also be remiss not to notice that Big Pharma's track record of releasing medications with glossed-over side-effects and poor efficacy is not exactly spotless. Horrendously costly meds have been passed out like candy with claims of efficacy that have later been shown to be unsubstantiated and side-effects that have been under-reported or otherwise marginalized.
We've all heard the comedic fast-talking voice talent listing the horrific side-effects in a blur during Big Pharma's ceaseless adverts--adverts that were illegal not that long ago. Side effects include hallucinations, dizziness, heart failure, seizures, warts, temporary blindness, compulsive spending sprees, fear of people in white coats, obsessions with travel to Mars, imaginary super-powers, itchiness in the cranial cavity and shortness of breath when eating ice cream. This parody is not far off the actual listings of side-effects.
Yes, it was illegal for drug companies to advertise directly to the public not so long ago. That impediment to additional billions in profits disappeared when the bribes, oops I mean campaign contributions became large enough for politicos to sell the public interest down the river.
Thus a bit of cautious skepticism about Big Pharma's claims and pricing is in order. The list of people who are now dead after believing Big Pharma's claims that its opioids were "safe" and "non-addictive" is tragically long.
Then there's the pesky issue of reliability: can any corona-virus vaccine achieve 99% effectiveness? And for how long? There is some science-based skepticism that a corona-virus vaccine that works for virtually everyone and is effective for a year or longer is even achievable.
If the reliability/effectiveness is significantly less than 99%, that introduces a Russian-Roulette type risk calculus in those getting the vaccine. What if I'm one of the unlucky folks who get the virus despite getting the vaccine?
If the duration of efficacy is variable--maybe it works for a year for most people but considerably less for a significant percentage of those who get the vaccine--then that also introduces the same risk assessment: how can I know if the vaccine will protect me for a full year?
Since Nature often tracks a Pareto Distribution--the 80/20 rule--let's make some preliminary estimates based on that. Let's say that the vaccine is 80% effective, and 80% of the populace agrees to get the vaccine. (Let's set aside the reasons why 20% of the populace might decide not to get the vaccine regardless of its purported effectiveness or the penalties placed on those who refuse.)
The U.S. population is around 330 million, and let's estimate that institutionalized residents might not be given a choice about getting the vaccine--ot if there are recognized risks, some at-risk institutionalized residents might be refused the vaccine as a matter of caution.
So perhaps 10 million people won't have a choice in the matter. That leaves 320 million with a choice. If 20% refuse for various reasons, that's 64 million who will be unvaccinated and 256 million who choose to get the vaccine.
If the vaccine is effective in 80% of these 256 million people, then 205 million will receive the benefits of the vaccine and 51 million might come down with the virus (perhaps in milder cases, perhaps not--that will have to be determined by large-scale double-blind studies).
Again following the Pareto Distribution, let's estimate that 20% of the 256 million people who get the vaccine will choose to avoid higher-risk settings such as cruises, concerts, etc., even though they've been vaccinated, because the uncertainty increases their caution. This would be entirely understandable and prudent in at-risk populations such as those older than 60, those with pre-existing conditions, etc.
As I explained in Consumer Spending Will Not Rebound--Here's Why (May 18, 2020), this older, at higher-risk cohort happens to collect the lion's share of household income and own the lion's share of household wealth. Their decisions to limit participation in riskier activities have an outsized economic impact because they collect almost half the income and own about 85% of all household wealth.
Following the 80/20 rule, we end up with 64 million unvaccinated and 51 million vaccinated who choose to avoid higher-risk activities. That's 115 million people who will not resume their pre-pandemic lifestyles either because they may be barred from activities because they're not vaccinated or because their at-risk profile and the inherent uncertainties of the vaccine cause them to avoid higher-risk activities.
Those assuming that requiring vaccination to board a airliner will boost vaccination to nearly 100% could be underestimating the strength of the motivations of those who decide not to get the vaccine. It would also be unwarranted to assume that everyone who chooses not to get the vaccine is a rabid anti-vaxxer.
Given the latent uncertainties and the self-interest of those pushing for a rapid approval of a vaccine, it would be entirely prudent to choose to let the first wave of residents get the vaccine and then await the results of large-scale studies of efficacy, duration, etc.
Given the rapacious greed of Big Pharma corporations and their track record of playing fast and loose with claims of safety and efficacy, we can also anticipate multiple vaccines battling for market share, a struggle that will create incentives to inflate claims of efficacy and marginalize side-effects.
As for bans on air travel, concerts, etc. for the unvaccinated, many people will simply drop out of the mainstream economy. The wealthy will book seats on private charter aircraft and hire performers in open-air venues, etc., the unwealthy will seek unconventional options and give up flying, going to sports events, etc.--activities they may no longer be able to afford anyway.
What kind of economy will we have if a third of the populace--100+ million people--are no longer participating at pre-pandemic levels for one reason or another? An accurate description might be The Greater Depression.
Few appear willing to follow the probabilities of a future in which a vaccine cannot possibly be the "magic cure" everyone wants. Some percentage of the populace will not be participating in the economy at pre-pandemic levels for one or more of these reasons:
1. They choose not to be vaccinated.
2. They choose to be vaccinated but remain cautious in their activities and spending.
3. They no longer have the income or wealth to resume their 2019 level of borrowing/spending.
Lastly, imagine the impact if a few people die of the virus after getting the vaccine. Human risk assessment does not necessarily track probabilities like a computer. Assuring everyone that only 1% of the recipients of the vaccine become ill or die within a year will not be as reassuring as proponents hope.
Recent Podcasts:
My COVID-19 Pandemic Posts


My recent books:
Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).


If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.
Thank you, Victoria S. ($50), for your splendidly generous contribution to this site -- I am greatly honored by your longstanding support and readership.
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Friday, July 31, 2020

Memo from Insiders: Dear Bagholders, Thanks for Buying Our Shares at the Top

The self-sustaining recovery is a fantasy that's evaporated.


What looks like a powerful, can't-lose rally to newbies is recognized as distribution by old hands. In low-volume markets (as in the past few months), insiders holding large positions can't dump all their shares at once or the price of the stock would plummet due to the thinness of the bid.


The only way to get top-dollar for one's overvalued shares is to play distribution games: sell a little each day on the upticks, and buy back shares when they threaten to drop below the key support levels followed by trading algos.


When insiders have finished distributing their shares to naive and trusting bagholders at the top, then the price can flush lower with a velocity that shocks the complacent bagholders who saw only the inevitability of an endless rally rather than the inevitability of a collapse of bubble valuations.


Stocks are priced for a V-shaped recovery and/or $1 trillion in federal giveaways per month. Neither is possible. The V-shaped recovery hopes were based on $6 trillion in federal/Federal Reserve stimulus washing over the nation, boosting household incomes and opening spigots of cash for enterprises and local governments.


The basic idea was to give the economy a needed shot of adrenaline to get to to the point where a recovery would be self-sustaining: companies would hire back laid-off workers, people would start borrowing and over-consuming again, sales and income tax revenues would return to pre-pandemic levels, etc.


The self-sustaining recovery is a fantasy that's evaporated. The spike in activity was all the giveaways being spent. Now that most of the free-money programs are expiring, there's no more stimulus to spend.


As for budgeting another trillion or two for future infrastructure projects: what few proponents of infrastructure spending realize is the number of companies and skilled workers capable of getting this work done is limited. You can create the cash out of thin air but you can't conjure up experienced welders, crane operators, etc. to get the work done or the complex operational skills required to manage these large, complicated projects.


Also overlooked is the fact that most of these companies and workers are already busy, and it takes years to train new workers with the requisite skills.


So what's left to support the can't-lose rally? The promise of trillions of dollars more given directly to households and enterprises and local governments, at a run-rate of a trillion a month. Anything less won't be enough.


And then there's the line of dominoes that are toppling:

Distribution isn't a rally.


Recent Podcasts:

AxisOfEasy Salon #14: Jobageddon and the Coming Education Revolts

Charles Hugh Smith on the disconnect between the Markets and the Economy (51 min)

My COVID-19 Pandemic Posts


My recent books:

Audiobook edition now available:
Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World ($13)
(Kindle $6.95, print $11.95) Read the first section for free (PDF).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($6.95 (Kindle), $12 (print), $13.08 ( audiobook): Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 (Kindle), $8.95 (print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).


If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.


NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Kevin S. ($50), for your outrageously generous contribution to this site -- I am greatly honored by your support and readership.

 

Thank you, Michael R. ($5), for your most generous contribution to this site -- I am greatly honored by your support and readership.

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Thursday, July 30, 2020

The Next Leg Down: The Top 10% Are About to Take a Hit

No federal bailout or stimulus can reverse these three dynamics, and no amount of legerdemain can replace the spending of the top 10%.


Few of those anxiously seeking a rebound in consumer spending take into account the top 10% of households account for almost 50% of consumption, and that top 10% skews heavily to the older, wealthier top tier whose free-spending ways have been built on the enormous wealth effect as their stocks, bonds and real estate assets have soared in value over the past 12 years.


The top 10% has largely escaped the significant financial hits cutting a swath through the bottom 90%, but that's about to change. Few of the top 10% have seen their pensions cut, their portfolios of stocks and bonds shredded, their home value in free-fall or their managerial / technocrat position eliminated. Most are watching the financial devastation from the security of owning 85% of the nation's assets, and from positions in the protected-class with access to federal money, either directly or indirectly.


Three factors could materially suppress the future consumption of those responsible for 50% of all consumer spending.


1. Age-related caution about exposure to the virus. Not only are many of the top 10% older, many of these households are caring for parents in their 70s, 80s or 90s. Given the heightened risks for these demographics, is it really worth it to go into crowds for entertainment? The short answer is no. Furthermore, these older, wealthier households have been there and done that-- foregoing cruises, air travel, fine dining, live music, etc. is not that much of a sacrifice, as they've enjoyed all these niceties for decades.


2. As corporate revenues and profits continue sliding, the managerial / tech class will start getting culled. All sorts of positions that looked "essential" before the pandemic are suddenly on the chopping block.


3. The wealth effect is about to reverse as the Everything Bubble finally pops. With the Nasdaq at record highs, bonds rising in value as yields plummet and the real estate market bubbling along on 3% mortgage rates, such a reversal is widely viewed as "impossible." Of course it is--until it isn't. All bubbles pop.


All the bright spots of consumption fueled by top 10% spending--rising sales of second homes, RVs, home remodeling, etc.--are based on the incomes and wealth of the top 10% never materially declining. But how realistic is it to reckon a rotten-to-the-core economy dominated by greedy monopolies and cartels and looted by financier skims that is finally in an inevitable free-fall would magically leave the top 10% untouched?


How realistic is it to reckon that the Everything Bubble would magically continue inflating forever when history is conclusive that all bubbles pop?


No federal bailout or stimulus can reverse these three dynamics, and no amount of legerdemain can replace the spending of the top 10%.

Recent Podcasts:

AxisOfEasy Salon #14: Jobageddon and the Coming Education Revolts

Charles Hugh Smith on the disconnect between the Markets and the Economy (51 min)

My COVID-19 Pandemic Posts


My recent books:

Audiobook edition now available:
Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World ($13)
(Kindle $6.95, print $11.95) Read the first section for free (PDF).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($6.95 (Kindle), $12 (print), $13.08 ( audiobook): Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 (Kindle), $8.95 (print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).


If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.


NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Egon V.G. ($10/month), for your outrageously generous pledge to this site -- I am greatly honored by your support and readership.

 

Thank you, Shawn K. ($10), for your most generous contribution to this site -- I am greatly honored by your support and readership.

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Wednesday, July 29, 2020

Our Slide into Social Psychosis and Breakdown

Not only is our lifestyle on back-order, so is our sanity.
Yesterday I mentioned our collective inability to make sense of the contradictory messages of the status quo and our own experience. This inability to reconcile completely contradictory messages generates psychosis, an internal breakdown that manifests as a disconnect from reality.
To take one example: we're constantly bombarded with the message that a four-year college diploma is the essential key to a secure middle-class lifestyle, yet our experience is that millions of college grads are living precariously, burdened by extremes of student loan debt.
Here's another I discussed yesterday: the status quo hypes the stock market's near-record highs as "proof" all is well and everything's getting back to "normal" but our experience is the real economy is in a stumbling free-fall.
And what is that "old normal" everyone is so anxious to return to anyway? How about too busy to be healthy, too addicted to social media to have agency? Or as the writer of Small Family Farms Aren't the Answer wrote: "In short, we've done the most modern-American thing possible: bartered away our quality of life for the freedom to be miserable."
As for the "new normal," it's Extremes of Neofeudalism, Incompetence and Authoritarianism (June 30, 2020).
In other words, to keep us in thrall to an unsustainable status quo, what's been normalized and institutionalized is social psychosis, breakdown and burnout.
Our experience is shaped by what psychiatrist R.D. Laing identified as the Politics of Experience. While Laing's initial focus was on family dynamics (Sanity, Madness and the Family: Families of Schizophrenics) and how conflicting demands (contradictory political "necessities") within a family can trigger a breakdown in children, his insights also apply to society at large.
Laing explores the way our internalized interpretation of experience can be shaped to create uniform beliefs about our society and economy that then lead to norms of behavior that support the political/economic status quo.
Here's how Laing described the social ramifications in Chapter Four Politics of Experience:
"All those people who seek to control the behavior of large numbers of other people work on the experiences of those other people. Once people can be induced to experience a situation in a similar way, they can be expected to behave in similar ways. Induce people all to want the same thing, hate the same things, feel the same threat, then their behavior is already captive - you have acquired your consumers or your cannon-fodder."
For Laing, the politics of experience is not just about influencing social behavior; it has an individual, inner consequence as well:
"Our behavior is a function of our experience. We act according to the way we see things. If our experience is destroyed, our behavior will be destructive. If our experience is destroyed, we have lost our own selves."
One manifestation of this destruction is the shunting of systemic failure onto the individual. The system itself cannot be seen as a failure, so all failure must be pinned on the individual.
Those of you who have read Survival+ will gain a new perspective on opting outprotected fiefdomswhen belief in the system fades, profound political disunityplantation-like structuresderealizationradical self-relianceasymmetric stakes in the gameinduced amnesia and other ideas I have presented on the politics of experience over the years.
Contradictory political "necessities" are destroying our internal coherence, our social order and our economy. Not only is our lifestyle on back-order, so is our sanity.
Recent Podcasts:
Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).


If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.
Thank you, Lisa P. ($100), for your outrageously generous contribution to this site -- I am greatly honored by your steadfast support and readership.
 
Thank you, Dave M. ($5/month), for your marvelously generous pledge to this site -- I am greatly honored by your support and readership.

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