Lockdown
Well what a
difference a couple of weeks make. In January 2020 investors were scrambling to
buy more stocks especially in the US tech sector. In March 2020, when it became
clear the Corona virus had spread to the developed world, investors could not
dump their stocks fast enough. Stop losses, margin calls, redemption's and all
out panic led stock markets to some of the biggest down days since the crash in
1987.
I hope you and your friends and family are healthy and safe throughout this strange period.
Western governments have for the most part been caught out by the fast spread of this deadly virus among their populations. The popular response at the end of the day for most governments was to place their societies under lockdown.
When businesses are no longer allowed to serve their customers, governments cut the “invisible hand of Adam Smith” off their bodies. We are back at centrally planned economies now where governments insist they know what is best for their populations. Essentially economically that means we are trying out Soviet communist style economics again. Economically those communist policies have never worked and never will work. If people cannot work, they will not make any money. No money or income for people at the end of the line means food shortages and hunger. Obviously the Corona virus kills people, but the longer the lockdowns go on for and the smaller the safety net of governments the more people lockdowns will kill as well. We are witnessing the biggest economic experiment since WW2 in western societies.
I hope you and your friends and family are healthy and safe throughout this strange period.
Western governments have for the most part been caught out by the fast spread of this deadly virus among their populations. The popular response at the end of the day for most governments was to place their societies under lockdown.
When businesses are no longer allowed to serve their customers, governments cut the “invisible hand of Adam Smith” off their bodies. We are back at centrally planned economies now where governments insist they know what is best for their populations. Essentially economically that means we are trying out Soviet communist style economics again. Economically those communist policies have never worked and never will work. If people cannot work, they will not make any money. No money or income for people at the end of the line means food shortages and hunger. Obviously the Corona virus kills people, but the longer the lockdowns go on for and the smaller the safety net of governments the more people lockdowns will kill as well. We are witnessing the biggest economic experiment since WW2 in western societies.
This blog’s purpose
is to dive deeper into the necessity of the lockdown, because the lockdown
sucks the oxygen out of the economy and the lockdown has the most severe
consequences for the stock markets around the world.
The data we are being shown in the media is of appalling quality. Every country measures infection rates and death rates caused by the Corona virus in a different way. So it is very hard to compare countries with each other that way since what data gets included varies.
The data we are being shown in the media is of appalling quality. Every country measures infection rates and death rates caused by the Corona virus in a different way. So it is very hard to compare countries with each other that way since what data gets included varies.
Sweden got crucified
in the media for refusing to lockdown their society. The Corona virus
death rate in Sweden, looks higher than in neighbouring countries like Finland,
Norway and Denmark. As previously stated we cannot that easily compare Corona virus
deaths between countries since measurements vary wildly.
Should the UK be pounding itself on the chest, that at least the Corona virus response hasn’t been as bad as in Sweden? Let’s have a look.
Should the UK be pounding itself on the chest, that at least the Corona virus response hasn’t been as bad as in Sweden? Let’s have a look.
Holland Park Capital London looked at the 2019
total death rate in Sweden, the Netherlands and the UK. For the UK only the England and Wales data from the ons.gov.uk website was easily found. The England and Wales data was therefore used as a proxy for the whole of the UK. In the
Netherlands the data can be found on the cbs.nl website and the Swedish data
can be found on the scb.se website.
For all three countries the weekly death rate compared to the average normal for this time of the year weekly death rate only really starts jumping up, because of the Corona virus, in week 13, week 14 and week 15. Week 13 should include the 27th of March 2020. Week 14 should include the 3rd of April 2020 and week 15 should include the 10th of April 2020. Clearly only three weeks is still a limited data set. That is one of the biggest problems that we know so little about this Corona virus and the data we have is of such bad quality. Governments hide behind scientific advice, but it is hard for scientist to model the unknown. How deathly is the Corona virus? How contagious is the Corona virus? How do temperature and humidity in a country affect the Corona virus? Can an infected person without any symptoms still spread the Corona virus? Can an infected child of 5 years old spread the Corona virus?
For all three countries the weekly death rate compared to the average normal for this time of the year weekly death rate only really starts jumping up, because of the Corona virus, in week 13, week 14 and week 15. Week 13 should include the 27th of March 2020. Week 14 should include the 3rd of April 2020 and week 15 should include the 10th of April 2020. Clearly only three weeks is still a limited data set. That is one of the biggest problems that we know so little about this Corona virus and the data we have is of such bad quality. Governments hide behind scientific advice, but it is hard for scientist to model the unknown. How deathly is the Corona virus? How contagious is the Corona virus? How do temperature and humidity in a country affect the Corona virus? Can an infected person without any symptoms still spread the Corona virus? Can an infected child of 5 years old spread the Corona virus?
If only we knew...
Anyway in those three
weeks in Sweden sadly 6614 passed away. On average in 2019 in Sweden 1712
people passed away per week. That average times three makes 5135 people. The difference
was 1479 more people that passed away in Sweden in the mentioned 3 weeks
compared to the 2019 average. That difference is not all due to the Corona
virus as it is normal that more people pass away in winter than summer.
Here is
a table to compare the numbers for the three countries;
England and Wales
|
Netherlands
|
Sweden
|
|
Deaths in the 3 weeks in 2020
|
46044
|
14505
|
6614
|
Average deaths in 3 weeks in
2019
|
30417
|
8757
|
5135
|
Difference
|
15627
|
5748
|
1479
|
% difference
|
51%
|
66%
|
29%
|
So there is no
evidence in the above table that a lockdown works. Sweden so far despite having no lockdown is doing much better than England and Wales and the Netherlands on above metric. Social distancing and doing a
lot of virus tests seem to work, but the above lockdown data suggest so far a lockdown does not make a
difference for the Corona virus.
It is still early days of course. Every week that goes by we will get more and better data as people are focusing on the Corona virus so much now. Sweden, the UK and the Netherlands have different climates and the people have a different culture. There is also some evidence that the Corona virus first started to spread in the Netherlands, then in the UK and only now in Sweden. The first wave of the Corona virus in the Netherlands may have “peaked”, the virus in the UK may be “peaking” now and the virus may only "peak" end of May in Sweden. That would change the % difference numbers in the weeks to come if true in favour of the lockdown argument.
It is still early days of course. Every week that goes by we will get more and better data as people are focusing on the Corona virus so much now. Sweden, the UK and the Netherlands have different climates and the people have a different culture. There is also some evidence that the Corona virus first started to spread in the Netherlands, then in the UK and only now in Sweden. The first wave of the Corona virus in the Netherlands may have “peaked”, the virus in the UK may be “peaking” now and the virus may only "peak" end of May in Sweden. That would change the % difference numbers in the weeks to come if true in favour of the lockdown argument.
So far though; the conclusion
for the stock market is that the lockdowns may not have been necessary. If true
that would be great news for the stock markets. Time will tell. Stay classy and
safe out there. Good luck!
