Posting has been light this week due to travelling back to Europe and subsequent jet lag. A few observations however. No sooner had we posted on the template that Hong Kong provided for the west, both good and bad, than Hong Kong itself doubled down on the bad side, closing schools, gyms and all evening restaurant dining on a modest spike up in cases and an increase in deaths to …8. That is quite literally one in a million. At the same time the hapless UK government declared that as of next week wearing of face masks in shops would be come mandatory and enforced with a GBP100 fine – albeit admitting that neither the shops nor the police would actually enforce this latest infringement on civil liberties. Had they instead merely encouraged people to return to work – including mandating their own 500,000 employees to do so, then doubtless many would have adopted the Hong Kong voluntary ‘signalling’ approach of wearing masks outside and taking them off inside. Worryingly, the latest scare report about a second wave of deaths used to justify the UK face mask actions came from the very same Neil Ferguson and his Imperial College Models that caused the lockdown in the first place.

Currently, travel within Hong Kong on the cheap and excellent public transport system is back to normal – everyone is wearing masks but it is not compulsory. Travel to and from Hong Kong remains surreal however. The airport express train is almost completely empty, as are the airline lounges and of course the planes themselves. Onboard, there are no new movies to watch and the pre-packed, economy style catering even in premier cabins just heightens the feeling that all the airlines are in deep, deep trouble.

As numbers of ‘with Covid’ deaths in the west continue to shrink to levels barely registering on the graphs, (and ‘from Covid deaths even more so) politics continues to damage the underlying economies using Covid as a vector. Remember this is a virus that we now know does not affect 99% of the population and from which 99.85% recover. In fact it appears to be about as deadly as the Salisbury Novichok.

As we have noted before, there is remarkably little said about the numbers and the actual recovery rates, nor is there ever much context given. In the UK for example, this means that by properly anchoring against an average daily ‘all deaths’ of around 1500, (as opposed to zero) we see that so-called ‘with covid’ deaths to the under 60s without any co-morbidities now total a cumulative 302. A fifth of a single ‘normal day’s’ worth in six months. Against this ‘risk’ we have furloughed pretty much the entire working age population. For the under 40s the cumulative total is only 37, which again for context means that in the last 6 months, there has been the equivalent of an extra 35 minutes of normal deaths.

Short Term Uncertainty

The political response to increases in infections (but not ICU hospitalisations or deaths) seems almost designed to maintain a climate of fear and seems almost co-ordinated. Certainly the narrative is only ever pushing the fear and perpetual danger side of the story. It seems like Trump wants to blame China and everyone else wants to blame Trump – suggesting this will run until November at the earliest. This is imposing increasing uncertainty on the ability of all countries outside of China seemingly to plan how to exit the crisis. More measurement is leading to more ‘cases, but not (so far) more deaths, but by constantly shutting down (or trying to) in response to what objectively is now a minor health issue, and certainly one that could never have previously justified such a response -the level of economic uncertainty is rising.

Medium Term Risks

This is now re-emerging for us as a medium term risk. Certainly in the US, the Democrats will continue to aim for maximum fear and disruption in order to undermine President Trump and hopefully get their man Biden in without him having to say anything. Meanwhile in western Europe, a combination of blame shifting and a competition to be toughest on the virus is producing uncosted (and therefore largely uncontested) damage to the private sector, while the Magic Money Tree is allowing politicians of a socialist persuasion to pursue their wildest fantasies and the crony capitalists to further their own (largely globalist) agenda.

This is thus adding to the other medium term risk from policy and politicians which is the increasingly bellicose stance from the US on all aspects of China. While much of Mike Pompeo’s uttering on Hong Kong or the South China Sea actually reveal how impotent US threats have become with regard to China itself, they are really targeted at ‘allies’ and other Asian countries; do as we say or else. The UK and Australia have already been forced into line over Huawei and it is clear that the South China Sea rhetoric is aimed at Malaysia, Singapore, Indonesia, Vietnam and obviously Taiwan – although for the last that is hardly needed. It’s the ‘either you’re with us (US) or against us routine’. Just in case Europe is feeling left out, the US continues to try and thwart the Nordstream 2 pipeline designed to sell Russian gas to Europe, particularly Germany.

All this disruption to trade and cheaper energy as well as slowing adoption of high speed internet and 5g infrastructure may suit US politics, but it absolutely does not suit other western and EM economies. Meanwhile the stop start nature of the response to the virus is not helping.

Long Term Themes

Trying to end on a positive note, while the Huawei saga remains an essentially political one, we should not dismiss 5G as simply the ability of your fridge to order your groceries. As with all technology, it is not the invention, it is the innovation that matters. Once the infrastructure is in place, it is the private sector that builds off the back of it. When thinking about longer terms themes such as automation and robotics or the digital economy generally, it is worth remembering that the bottom up drivers of change are being worked on in labs and by engineers all over the world. One interesting one we read about the other day was remote mining. With greater connectivity, there is no reason why a robot excavator in the Australian outback could not be ‘piloted’ by an operator from an office block in Darwin, who goes home to his family every night. Just like the drone pilots operating in Afghanistan but living in Nevada. But less deadly. The mines already have largely autonomous giant trucks to move the ore, so this would further reduce the need for large and expensive labour camps.

We also know of the benefits of robotic surgery and have already seen a glimpse of the benefits that technology and connectivity can bring to even (particularly) the most basic healthcare – particularly when aligned with AI and big data analytics. With an increased focus on healthcare systems arising from this crisis, a technology solution is vital. We will aim to look at some more of the positive themes next week.

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