More on vaccine efficacy

In a Swedish study, the results of which are about to be published in the Lancet, vaccine effectiveness against COVID infection has been found to wane over 6 months. It is not obvious that there is any effect against infection beyond 6 months from date of full vaccination. Meanwhile, effectiveness against severe outcomes was found to wane over 9 months for men, older people and those with co-morbidities. The report is available here.

Inflationary Expectations

It seems that suddenly everybody is talking about inflation. Better late than never, I guess. In Australia, the inflation rate for the full year to 30 September 2021 was 3.1%. The September quarter price index rise was said to surprise economists and the bond market traders. Some Chief Executive Officers of large Australian companies have begone warning their consumers that price rises will be on-going. I know that in some industries, suppliers are giving notice of impending price rises closer to 10%. Producer prices are increasing rapidly and that will eventually feed its way into consumer prices. The Consumer Price Index is the favoured inflation measure of many people, but producer prices give a better lead indication. Continue reading

Cognitive dissonance triggers in the business news

I know that cognitive dissonance can stress some people so apologies in advance if these stories from today’s business news in Australia give you the jitters. But many people, like me, will find them funny and get a good old-fashioned guffaw out of them. Or at least a smirk.

First, to corporate finance. A senior executive from the RBA, Australia’s central bank, gave a speech yesterday. That in itself is enough to prime most people for a laugh, given that many utterings from RBA senior executives are laughable. He said that Australia risked climate conscious global investors divesting from Australian business for greener opportunities. This is being referred to as a potential capital strike. I understand that he made these comments as a warning to Australian business for not being sufficiently green. But on the same page of the newspaper, a different report quoted the CEO of a major coal mining company saying the company is enjoying massive demand for its coal. That high demand, particularly in conjunction with rising prices, is creating booming revenue. Further, he said that with little increase in production of coal (globally) in recent years, this boom could last many years. In a previous post I mentioned that corporate finance options would evolve as traditional sources of finance were becoming, as the RBA man said, “climate conscious”. Sure enough, the coal executive explained how new sources of overseas capital are opening up, with particular emphasis on the likely long term funding from Asian debt capital markets to invest in and expand production capacity. I think the RBA chap should get out and about more.

Secondly, we turn to the current thorny issue of mandatory COVID vaccines for employees. Two of Australia’s four big banks were reported to have disclosed their policies. Westpac has introduced a compulsory jab policy. This was after it had surveyed its staff and found 91% were already fully or on their way to full vaccination status. According to the bank, the survey proved that the staff were supportive of this new policy which would keep everyone safe. Meanwhile, the ANZ bank also reported that it had surveyed its staff and it too found 91% on their way to full vaccination status. According to the bank, this showed a compulsory jab policy was not needed and it had no intentions of introducing one. So there you have it – how to interpret a survey result of 91% in two totally different ways. 

The search for the case for mandatory vaccination

Extraordinary claims require extraordinary evidence. Employment termination for not being vaccinated is surely sufficiently extraordinary to warrant demonstrable justification. If there is a case to justify firing an employee, then the data would support it. Right?

I can’t find any Australian data to support the mandate. Instead, I can see case numbers, deaths and vaccination rates. Take the following graphic from The Australian as typical. The curious reader might want to know if the increase in average daily new cases is different between the vaccinated and the unvaccinated, particularly among the ages of the workforce. I can’t find that breakdown in official data, although of course it will exist.

If the case numbers were much higher among the unvaccinated compared to the vaccinated, that would be helpful data to convince the public of the need for vaccination. If any readers know of the split, I’d appreciate a pointer to the data in the comments. Why the Australian state governments do not publish this is a mystery to me. Unless Occam’s Razor strikes again.

However, the UK health authority does publish its data.


This monthly snapshot shows infection rates split by age band and by vaccination status. Look at the last two columns. This is unlikely to convince the remaining unvaccinated to get vaccinated. Maybe a breakdown of deaths by age band and vaccination status would help? Again, this data will exist in Australia but I can’t find it. Thanks again to UK Health, here it is for the same monthly snapshot:

UK Health, ibid

Is the Australian data similar to this? Someone clearly knows. The UK experience shows a couple of things:

  1. The vaccines do not prevent infection. The case rate among the vaccinated vs unvaccinated was around 50% in the above UK data. Removing the under 18s from the rate sees it change such that the unvaccinated represented 16% of the cases. (The under 18 data is highly skewed to the unvaccinated and is therefore less reliable in this analysis.)
  2. The mortality differences between the vaccinated and unvaccinated are negligible until after the age of 50. The survival rate for unvaccinated people in the 50-59 age band is 99.99%. This reduces to 99.94% for 70-79 year olds. Even above age 80, which includes those who have already lived beyond current life expectancy, the survival rate is 85% for the unvaccinated.
  3. The virus continues to be an old person’s disease. Youth and the workforce are largely unaffected by being infected.

There is no case for mandatory vaccination presented here. Any business that terminates an employee for not being vaccinated risks a serious legal backlash down the road. If that were not the case, then the data to support such actions would be in the public domain.

COVID vaccine efficacy

The public policy response to COVID19 in most countries includes these two axioms – 1) mass vaccination is essential to end the pandemic, and 2) the vaccines do not prevent the transmission of the virus but they do result in a substantially lower seriousness of the illness in those that catch it.

So it is useful to interrogate these axioms by checking the actual data.

Here is how a small sample of countries is doing with vaccinations.

Israel did remarkably well to get above 50% over 6 months ago. Canada lagged but its vaccine roll out was then rapid. The UK and US are broadly similar. From this chart, the narrative would have you believe that the number of new COVID cases this year should have been highest in Canada, lowest in Israel with the UK and US in between. (Ignore Australia – there is insufficient data yet and it being a closed island creates a mismatch in comparisons to other countries; but I’ll leave the data as a sidenote.)

Here is the chart of new cases:

This chart shows the actual result to be opposite to the expected. Israel is suffering the most new cases, Canada the least and the UK, US in between.

What about the reduction in seriousness of the illness? Here is the case fatality rate:

Israel’s case fatality rate (CFR) has been very stable, showing some reduction this month. There is no obvious associated reduction in CFR with rising vaccination penetration.

Canada’s CFR dropped rapidly during the first half of this year while the vaccine penetration was only around 5% of the population. As the vaccine penetration rapidly increased, the CFR remained stable, with some reduction emerging just recently.

The CFR in the US is similar in pattern to Israel. The UK has seen a reduction in CFR in the last three months which roughly coincides with its increase in case numbers. Overall, the proposition that illness severity is reduced is not compelling.

There is enough evidence to conclude that mass vaccination is not going to end the pandemic. What is missing in this analysis is the effect of naturally acquired immunity relative to vaccine induced immunity. Could it be that a rapid vaccine rollout put a ceiling on natural immunity arising from cases of acquired COVID? I think that would be plausible. If so, an explanation for the actual data is that naturally acquired immunity is more effective than vaccine induced immunity.

We’ve been here before, right?

In the 1930s, the authoritarian forces of Nazism, Fascism and Communism were in the ascendency in Europe. A doctrine that became common to all of the architects and proponents of these ideologies was that the state must not be bound by the law. The rule of law neccessarily meant that the state was unfree. Giacomo Perticone put it this way in 1931: “During the whole of the evolution of judicial thought, one was led to the conclusion that a regime of law was one in which the State was a prisoner of the law, and as a consequence incapable of action, of will, of power, a State indecisive, emasculated and all that which follows.” It followed that a State bound by the rule of law was unfree and to be free to act justly it must not be subject to the obligation to follow the law. In other words, the State should be able to treat citizens exactly as it pleased. [Ref FA Hayek, The Constitution of Liberty]

The proponents and leaders of these totalitarian forces thus justified their right to ignore the concept of the rule of law. At a basic level, the rule of law can be considered as a legal system in which everyone is treated equally before the law, whether it be statute or common. The totalitarians devised their own justification for doing exactly the opposite. Orwell’s oft-quoted sentence from Animal Farm reads: “All animals are equal, but some animals are more equal than others.” The sentence captured both the concept of differing treatment and the abuse of language to maintain a power hierarchy and authority to coerce others.

Continue reading

We only have 10 years left to save the planet

Look, I know that we’ve only had 10 years left to avert global catastrophe for at least the last 30 years and so I will understand it if you are becoming jaded by such screaming headlines. But trust me, this is serious.

The scientific research reported by The Washington Post in 1971 (see below) stated that burning fossil fuels would likely cause a disastrous new ice age within 50 or 60 years. We have just passed the 50 years mark. So we only have 10 years left.

The continuing evolution of corporate finance

Australia's major banks have signalled their intention to stop financing businesses that they, the banks, see as problematic for climate change. These are resources businesses in projects related to fossil fuels such as coal, oil and gas. During proceedings in a Parliamentary Committee hearing last week, the committee heard evidence that such businesses were increasingly turning to private equity and foreign sources of finance.

I think this trend will accelerate. Public companies, particularly the big retail banks in Australia, have seen their shareholder registers evolve over recent decades. The number of shareholders has increased, the average age of shareholders has reduced and the average shareownership value has reduced. Further, Australian superannuation funds have vast numbers of members that are willing to look through the investment portfolios of their fund to see where the investments are actually being made. Shareholders have become more diverse and, inevitably, many have organised themselves into shareholder activist groups. They put pressure on boards via various means to abandon fossil fuel investments.

Most of the directors and senior executives of public companies and the superannuation funds appear to be frightened of shareholder activist groups. It is hard think of any other reason for those entities to denounce fossil fuel projects as a class of investment.  Investment decisions ought to be made on a case by case basis. To impose a ban on financing a certain class of investment is not operating case by case. It is operating according to a bias.  I have no sympathies for corporate leaders who are scared of the prospect of a twitter storm or other noisy attention. The need to appear virtuous has superseded all other investment objectives if whole classes of projects are simply put off limits. That is weak, and possibly in breach of their duties. When you see a corporate entity claiming sustainability virtue points by selling off their coal investments, you see duplicity in action: selling a coal investment to another party is simply taking all future profits now in one net present value lump sum. If those companies genuinely believed the coal project in question should not exist, then it should be shut, dismantled and cleaned up. It should not be sold as a going concern.

Meanwhile, private equity executives do not need to even consider the issue of shareholder activists. They don't exist in the business model. They can make financing decisions based on a project's merits. In some respects, that is closer to how publicly listed banks used to finance business before the revolution in the shareholder base. I anticipate the on-going evolution of financing options. To be sure, the objectives of private equity are different from those of the high street banks but the end result will be the same: worthwhile projects will get their finances arranged. The projects will continue. While the public banks will withdraw, other financiers will step in. The activists will eventually realise that the game moved on while they thought they were winning.