From both a markets & epidemiological perspective, I think there is some legit cause for concern here - if just from tail risk perspective. The Delta variant per se is no big deal, but early evidence of rising hospitalizations amongst vaccinated could be.…
A similar trend is being seen in Israel - albeit it is still early days. Some epidemiologists believe lockdowns and vaccines are creating selection pressures on virus that are driving the prevalence of new mutations in the same way antibiotics can promote antibiotic resistance.
They do not create the variants (per se). What they can do is create more space for those variance to increase in prevalence as other variants die off. Lockdowns can select for more infectious variants (Delta), and vaccines can select for vaccine-resistant mutations.
It's not clear if this is what we are actually seeing - no one yet knows the full story - but it is a plausible argument/scenario. The scientific evidence is a moving feast as new evidence is emerging daily and we ought to be constantly recalibrating probabilities & opinions.
The doomsday scenario would be if a vaccine-resistant mutation spreads, particularly because now-ineffective vaccine-induced antibodies could plausibly inhibit the functioning of T-Cell immunity, triggering ADE that leads to a substantial spike in mortality amongst vaccinated.
Obviously, we can only pray that doesn't happen, and that it's a low probability scenario. However, it is a tail risk that seems to be increasing and bears watching. The key metrics to watch will be hospitalizations of the vaccinated & associated mortality rates.
What does seem apparent is that the pandemic could be far from over (the probability has gone up). Many markets/sectors have been priced for a high probability of rapid recovery. A downward repricing to reflect increasing risks to the outlook is appropriate.
PS to put a bit more colour on the selection dynamic, suppose there is a high level of covid in the population, and you decide to do a hard lockdown. Constant mutation means there will be lots of variants in population. The lockdown might kill 99% of the least infectious variants
Subsequently, you reopen, and now the 1% of the variants that are the most infectious survive and spread throughout the population. The variant itself was not caused by the lockdown, but the lockdown promoted its adaptive survival and propagation throughout the population.
Given that globally, we have a large population of people that have had covid, and that we have been continuously in and out of lockdown, it is a very plausible argument that lockdowns have been a key contributor to the emergence and spread of more infectious variants like Delta.
Some basic info on ADE. ADE is a major problem with Dengue Fever, for eg, which has four serotypes. This is why getting Dengue the second time (with a different serotype) is far more dangerous/life threatening than getting it the first time.…

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More from @LT3000Lyall

18 Jul
This is an example of the often breathtaking ignorance of European bureaucrats. I don't think I've ever seen so many mistakes made in a single tweet. One of the reasons improved relations with Russia is so difficult is people like this have no idea what they're talking about.
Facts: Russia's economy is growing not declining. It's leaders *do* want to diversify the economy away from natural resources, and the country *has* in fact already meaningfully diversified its economy away from resources over the past decade or so, albeit share is still high.
The rule of law needs more work but it has been improving in Russia. European gas imports are at record highs and gas prices have surged. Europe faces declining domestic O&G production in coming years & reliance on imports may rise. And Russia has built a gas pipeline to China.
Read 7 tweets
17 Jul
To some ears, this sounds sensible. To others, Orwellian.

It's because there is a commonly held misperception that repressive govt historically emerge due to "bad people doing bad things". In fact, it was driven by ppl that thought they were the good guys doing necessary things.
The issue is bigger than the short term issue at hand. The fundamental problem is the human tendency to hubris & a belief that centralized authority can and should ascertain truth. This leads to a tendency towards authoritarianism, driven by expediency & amplified by emergency.
Emergencies have often been the trigger for the emergence of repressive govt, as was the case in Hitler's Germany for eg. Emergencies lead ppl to accept the suspension of typical constitutional guardrails that prevent the excess accumulation of power, as it's considered necessary
Read 11 tweets
16 Jul
One of the most underappreciated attributes of certain stocks is they are *very unlikely to lose you money*. Investors are often too preoccupied with *looking up*, worrying about catalysts & growth/re-rate potential, & forget to *look down* and ask, how likely am I to lose money?
It is striking the number of times I see people dismiss certain cheap stocks because they are unexciting, lack a catalyst & lack multibag potential, and totally ignore the fact that the likelihood of losing money over a decent holding period in such stocks is essentially zero.
Meanwhile, I routinely see people touting stocks for their growth potential, blue sky upside scenarios, etc, and totally failing to consider *how much could I lose if my bullish assumptions/expectations don't pan out*.
Read 4 tweets
16 Jul
There is a problem in the medical field with people considering randomized controlled trials the *only* source of evidence. It is the *gold standard* of evidence, but that does not mean other inferior sources of evidence have no value. It is an excessively binary way of thinking.
Randomized controlled trials should, as a generalization, trump other inferior forms of evidence (although RCTs are not 100% infallible). But in the absence of RCT data, *the best alternative sources of evidence should be used*, and it should not be assumed to be useless.
An analogy: In a murder trial, the gold standard of evidence might be video footage of the murder occurring. However, we don't say that because we often lack the very best form of evidence, that it is impossible to infer by any other means/evidence what is likely to have happened
Read 9 tweets
16 Jul
Excess mortality in Sweden in 2020 was below long term averages, despite a lack of lockdowns. This is a data point worth chewing on for those that believe authoritarian government control of people's personal choices/behaviour is the only way to get people to behave "sensibly".
Here is the reality: people care a lot about their own health. Given accurate information, they can generally be expected/trusted to make decisions that reflect a fairly rational assessment of the personal risk/benefits associated with their behaviour.
The left wing/authoritarian minded implicitly believe people are stupid; don't know what's best for them; and need to be corralled and treated like children. They need be told what to do; what decisions to make; & what risks they are allowed to take, for their own benefit.
Read 4 tweets
15 Jul
Re US long rates, I think a key thing to watch (beside Fed purchases) will be the cost of USD hedging. A lot of the bid is coming from EU/Jap institos buying em and hedging out currency, generating better yields than available domestically. This will bust if cost of hedging rises
A recent WSJ article pointed out the cost of 12mth USD hedging to Euro/Yen was some 50bp. 1.3% long rates hedge out to 0.8%, better than 0.0% domestically. But what happens when those hedges roll off if the cost of hedging has risen to 200-300bp+?
If inflation continues to print above 5% in the US eventually this is going to have an impact on the USD. If a sense develops the Fed is not serious about tackling inflation, USD depreciation expectations will rise and the cost of hedging will skyrocket.
Read 4 tweets

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