As reminders…

Alpha–Variant first identified in the UK

Beta–Variant first identified in South Africa

Gamma–Variant first identified in Brazil

Delta–Variant first identified in India

Also as a reminder:

–First time in a while this is just a pure coronavirus update!

–To start off, cases continue to fall. Yes, I have seen the headlines about various states. From one “team’s” media, Alaska has made headlines as an example of a state with relative underperformance on vaccines is still near the crest of the delta wave. From the other “team”, we have high case numbers on a population weighted basis in Maine and Vermont especially–which are high vaccination states. My suspicion in both cases is, like much of the delta wave, a combination of mild/moderate breakthrough cases in both natural and vaccine immunity coupled with infection of those who have not been immunized either naturally or by vaccine. There are reports of hospitalizations and deaths among those with two vaccine doses–these are rare, but they do happen, and are simply a function of the numbers. Same for hospitalization rates in Alaska, Maine and Vermont. Sheer force of numbers from a highly infectious delta variant spreading around.

Key thing to remember is that COVID still grabs eyeballs, and both sides are playing a narrative game, cherry picking states that fit their preferred narrative. This “gotcha'” game is pointless.

Alaska is likely at or near its delta peak. Vermont and Maine are level to declining like pretty much the entire rest of the contiguous 48 states.

The only cause for some concern is these are all relatively cold weather states, and Vermont and Maine do indeed have high vaccine penetration. Hopefully the CDC is already up there getting more granular data. Those are relatively sparsely populated, and my best guess is that delta is simply hoovering up the last unvaccinated in those states (along with some breakthrough cases) as the most infectious variant finds the last vaccine hold outs. The alternative is that while the vaccine (and natural immunity) cut the risk of hospitalization by 90%, a sufficiently infectious variant (delta or better) could cause enough havoc by sheer force of numbers to break through enough to be a nuisance. In this alternative scenario, we need 90%+ resistance to SARS-CoV-2 between vaccines and prior exposure for meaningful herd immunity (where COVID can spread, but the hospital system barely registers a blip). When you hear that 90% estimate on the news, I think this The Darkest Timeline argument they are making. I think that also reflects current staffing and burnout challenges in the hospitals (more on that in a bit).

That said, I don’t think the alternative scenario is the base case, but I recognize I have been plagued by optimism bias for much of the pandemic.

Yes, the guy who did the whole write up on the “choose your own Black Death adventure” has been optimistically biased… What can I say? I’m all unicorns, rainbows and sunshine when it comes to global contagions capable of collapsing health care systems and the entire existing social order.

My suspicion is given the fairly rural and relatively unhit nature of Maine, Vermont etc., the blip is more a function of a breakthrough and mop up of the last pockets of unvaccinated.

But we’ll know for sure approximately 2 months from now. COVID has been oddly clockwork on the 2 month schedule, and by early to mid-December, if cases are going up at last winter or the delta wave rate, we live in The Darkest Timeline. If it looks more like the alpha wave or less…

So hopefully we live in the epidemiology timeline of frosted poptart cats propelled by magic rainbows through space.

–Internationally, you are seeing FAR more headlines about a variety of energy squeezes. We’ll cover this a bit more in the “socioeconomic” section, but only a bit, because I am NOT an expert on global energy trading.

The key thing for “around the horn” is that NO ONE is talking about new COVID outbreaks in these places! Energy problems, while their own separate issue, are at least not new COVID outbreaks.

–New Zealand is finally conceding biological reality, and ending “Zero COVID” policies that have been -quite- restrictive and ultimately futile at keeping delta off New Zealand shores. Despite New Zealand being a small island, where border control and case tracking is easier. As an example of just how restrictive some of this was, one need only look at Poor Damn Dan Hooker, a highly ranked UFC lightweight. Every time Dan has fought in the past year, it has taken him 6 weeks minimum to clear all the necessary testing and quarantines to see his family again in New Zealand. Every time. And he just barely got into the US a few weeks ago in time to win his fight, and then, since it would take 6-8 weeks to get back to his family in New Zealand again, just decided to stick around stateside and take a short notice fight with a guy whose scheduled opponent could not go. Other UFC fighters, seeing Dan’s experience, have been announcing they are leaving New Zealand–including a UFC champion who lives and trains there.

As we said before, the Black Death got to England, despite years of warning that it was coming. The Black Death will always get to England. Someone infected, but does not know it, will always slip through, as family/friends/economy (legit or black market) will always make the risk of crossing the quarantine worth it, or deliberately/accidentally breaking those quarantine rules eventually inevitable. Time probability will eventually come for your “border closing” procedures too.

–The big news after we went to press last week was Merck announcing a successful efficacy study of molnupiravir, and will be seeking emergency use authorization. Molnupiravir was originally designed to fight influenza, and the way it fights the flu is the same as the way it fights SARS-CoV-2.

As we remember, SARS-CoV-2 uses RNA instead of DNA for its genetic material. This means that in order to make a new copy of itself in your cells, it needs to first convince your ribosomes to make its proteins. As you recall, ribosomes do this by “reading” an RNA message and translating the code in the RNA into proteins. As you also recall, it is really easy for a virus to convince your ribosomes to make the virus’ proteins from the virus’ RNA because ribosomes are dumb.

However, to be a new, infectious virus particle, the virus will need to stuff a new copy of its RNA genome (the message that will build its proteins in a new infected cell) into the capsule made by all those proteins.

“How does it get new copies of its RNA to do that?“, I hear you ask Conveniently Rhetorical Hypothetical Reader.

“After all, ribosomes turn RNA to protein, not new RNA. And human cells turn DNA into DNA to replicate their genes–human cells don’t have anything that will make RNA from RNA! How does an RNA virus turn RNA into more RNA in an infected human cell?!?!?!”

Great questions all, but that’s enough for now, Conveniently Rhetorical Hypothetical Reader.

The answer is one of the proteins your ribosomes will be tricked into making by SARS-CoV-2 is the viral RNA dependent RNA polymerase. Which is a fancy science of way saying “it makes its own RNA copying machine, to make copies of its RNA from its RNA.”

Molnupiravir works by looking a lot like a building block of new RNA. But, clever humans we are, it is NOT a useful building block because it “flips” back and forth to look like two totally different “letters” in the RNA code. So now when the virus goes to make new RNA with its fancy RNA-to-RNA copying machine, it will occasionally grab molnupiravir by accident, thinking it’s a building block to use in the growing, new RNA molecule. But it’s not.

Since it can’t really tell what letter molnupiravir is supposed to be, and molnupiravir is “flipping” back and forth, the virus’ copying machine starts making a lot of errors in the RNA code itself. This means as SARS-CoV-2 is cranking along in your cells, thinking it’s a genius, convincing your poor hijacked cell to make more and more and more SARS-CoV-2, it’s secretly creating a bunch of RNA copies of itself that have enormous numbers of mistakes when molnupiravir is on board. The RNA with mistakes now gets packed into new viruses, which release from the cell, and infect more cells. Except now, when they go to hijack your ribosomes, your ribosomes dutifully crank out new proteins according to the instructions on the RNA–which molnupiravir has completely jacked up. Gibberish instructions on the RNA become proteins that don’t work at all for the virus. Without proteins that work, the virus is doomed.

Dooooooooooooomed!

The catastrophic mutation of its RNA by molnupiravir is too complete, and since it cannot make functioning virus anymore, the infection dies out quickly.

So unsurprisingly, based on the way it works, molnupiravir was reported to cut hospitalization in half in its efficacy study when given in the first 5 days or so of symptoms, and taken for about 5 days. It’s an oral pill, unlike the antibody drugs already available for SARS-CoV-2, which require an IV injection.

This New York Times article may contain some additional information about molnupiravir and how it compares to other drugs currently on the market for COVID (since this current study has not been published yet). My employer makes some of those antibody drugs, so that is all I will say–except to also point out that none of the drugs labeled for COVID (molnupiravir or the others already with an EUA) have been compared head to head in the same patient population and viral strain waves. Without that head to head comparison in the same trial, it can be tough to tell if one works “better” than another, necessarily.

Nor have they been tested in combination either.

All drugs may have side effects. Discuss those side effects with your healthcare provider prior to beginning any therapy, and, as always, use medications for their labeled, intended purpose and according to that label, and under the direction of a licensed healthcare professional.

Thank you for your understanding on the limitations of my commentary here.

But that’s what is going on with molnupiravir. It’s another tool in the tool kit for acute COVID, that may also help keep the hospitalization rate down.

Which, yet again, is the main pandemic threat of the virus.

–In other news of existing options for SARS-CoV-2, at this point, most of the Scandinavian nations have announced that they will be halting distribution of the Moderna vaccine to those under 30, out of concern for myocarditis. This appears to be a risk/benefit calculation, as COVID is not especially threatening to those under 30 without co-morbidities, and young males are at higher risk of myocarditis from the vaccine, especially on the second dose. So basically, at least these countries appear to believe that the risk of myocarditis from the vaccine, while still rare, is not worth the expected benefit–at least not while other vaccine options are out there. Because, it should be noted, this is just for the Moderna vaccine, not for all COVID vaccines.

–This prompted an excellent question from one of our physician readers this week about the dog that hasn’t barked… Pfizer has turned in data for pediatric dosing of its vaccine, and Pfizer has received for full approval of its vaccine with the FDA, and Pfizer’s vaccine is authorized for teenagers.

Moderna has not, even though Moderna got emergency use authorization first.

The question is why hasn’t Moderna had these same kind of announcements, especially with headlines and early data suggesting its vaccine may be a little more effective?

I’m not sure. I do know Moderna applied for full FDA approval, and is submitting data for that approval on a rolling basis. And I agree it’s odd, especially if you assume the trends are the truth and Moderna is a few percentage points better in efficacy, that it has not hit the threshold for FDA approval that Pfizer already did. That might just be bureaucratic–Moderna is a smaller, younger company and not as experienced in the regulatory interaction for a full drug approval. That can definitely slow things down. They may be having difficulty getting patients to enroll on the official studies, given Pfizer’s head start on the approvals, multiple vaccines available, and the fact that you can get the Moderna vaccine already under the EUA, also for free. Or some of the rare side effects like myocarditis may be leading the FDA to ask for more cases to get a better handle on its true incidence (remember that Moderna’s trend towards more durable vaccination response may be due to the fact it has a slightly higher “dose” of the mRNA making the spike protein and presumably more spike protein production as a result).

I want to be clear that is totally my speculation about some scenarios that, in my experience, might explain this regulatory difference between Moderna and Pfizer. It should be viewed as speculation, with no basis or knowledge beyond what is available in the lay press, and are my own statements, which have not been reviewed by my employer. Thank you for your understanding.

–Reports this week as well that China was apparently ordering a LOT of PCR primers and probes for a SARS-CoV-2 diagnostic assay, about a month before the pandemic is acknowledged to have started in China. This is consistent with spread in China BEFORE the “official” start date, and molecular data showing the same. But, if true, this is evidence that China knew about the spread of the virus before they officially acknowledged it. I would still take all of this with a grain of salt due to the propaganda potential of the new Cold War.

–The socioeconomic portion, as we mentioned above, is really becoming the more pressing issue, especially as cases are largely dwindling across much of the world. You have no doubt seen these headlines, so I will not belabor them too much. But there is a growing energy crisis that is going global. China is not the only one scrambling for natural gas and coal to keep the lights on “by any means necessary.” Europe is having major issues as well. This is already affecting other industries in Europe, with reports of Dutch greenhouses having to reduce capacity and Germany’s largest ammonia producer announcing a 20% reduction in ammonia. That will have a similar eventual downstream effect, as ammonia is necessary for fertilizer, and the modern world (and modern farming) requires an extensive amount of fertilizer to work. By itself, that is not enough to move the needle on ammonia prices (which would have knock on effects to food price and availability)–Germany isn’t a top 10 producer of ammonia, and the top 5 individually produce multiples of Germany’s annual production. But it’s not ideal.

Brazil is also facing some challenges. Relatively dry and hot weather has left water levels low for hydroelectric plants in Brazil, which may force them to seek the same energy markets that the EU and China are now bidding into. Drought has also reduced crop yields in Brazil. Brazil is a major agricultural exporter, particularly for things like soybeans, corn and coffee. That will not be great for food inflation, to say the least.

There is plenty of internet ink being spilled on causes of this sudden global energy issue–I don’t know enough to know which explanations might be more true, and my guess is that there are several good reasons this sudden supply/demand mismatch with exploding prices is occurring.

And I do mean “exploding” as in “the full Buzz Lightyear ‘Infinity and Beyond'”, if we are being true to the chart…

That is some parabolic action, my friends, and for just how sudden, and sharp that parabola is, the x-axis of both of those graphs is in years.

However, there is good news today, as this morning, prices in Europe leveled off and slightly declined to still ridiculously high on a historical basis as Russia said it might be able to find some additional nat gas to supply to Europe.

<waves world’s smallest flag>

Hopefully, that trend continues, and is not in anyway a temporary reprieve in an otherwise sustained price increase.

Let’s indulge my pessimism bias for just a moment, in case that decrease does not return to historical norms over the next several months.

If they don’t, the current trend is that entire countries are suddenly scrambling to get enough energy to keep the lights of their industries and homes on. Renewables and nuclear are insufficient to plug the gap right now, and the lag time to bring more of those online is too long. You are left with natural gas, coal, etc. as the marginal source of energy–there is clearly not enough of that to go around either. While you can increase production of nat gas, for example, to some extent–maybe the same for coal–there will still be a lead time to get those carbons moving. Given the size and desperation of the demand, based on the price spike, there is a non-zero chance of elevated prices for at least a little while. Is this ESG and government pushes to move to renewables at the cost of making carbon based, fossil fuel sources of energy more expensive and thus attracting less development capital over the last X years now meeting the wild fluctuations of pandemic response?

I don’t know and I don’t particularly care. The answer to that question will not get enough energy to the large, industrial regions in the world where it needs to be.

The only fact that matters is there is enough of a supply/demand mismatch at present, in very large, industrially necessary and critical links in the global supply chains, that governments are reacting and reacting HARD to it.

This problem, and this specific reaction to the problem, IS THE SOCIOECONOMIC PROBLEM.

Why is that?

Well, the “everyone for themselves” approach typified by China’s “any means necessary” order to secure supplies to keep the lights literally on and the announcement this week that the White House is considering release from the US strategic petroleum reserve AND banning exports of oil is predictable. That’s tribalism in action, and the knee jerk reaction in times of stress.

And clearly, governments looking at this are stressed.

But, this is also a BIG problem. The reason is that energy is the single most necessary resource in modern economies. It takes energy to make the necessities of our modern life, and since that production is globalized, the raw, intermediate and finished products are often schlepping all over the world before getting to the people actually using them. All of that schlepping and manufacturing takes energy. The system is not only based on energy, but equally importantly, on abundant energy, essentially on demand, and at a very predictable, stable cost.

That last part is breaking down.

So as governments make the predictable “hoarding” reaction, you set off a zero sum game where there will be winners and losers. Some countries will produce and hold on to enough energy to keep their specialized parts of the global economy going. Others will not be so lucky.

But the “winners” of this scramble will win far less than they think.

Remember the very first socioeconomic section in the coronavirus updates, when China was locking down and we said that one of the major initial challenges was that the outbreak was happening in China, a critical link in the global production chain of a lot of things necessary for our modern world?

Same problem now–just less predictable outcomes. So, for example, only three countries make computer chips of a certain complexity and at scale. Pandemic related disruptions in their production have rippled through the economy and are most clearly seen at car lots around you, where car dealers have -record- low levels of new inventory, new cars are more expensive than ever (because there are fewer new cars), and your used car is currently with a -shocking- amount of money. As each player in the global zero sum scramble for energy going on gets its, in the Darkest Timeline, worst case scenario of the energy Hunger Games now getting played, there will inevitably be a factory making some essential widget, somewhere, who turns out to have chosen its host country poorly. Their host country loses the scramble for energy, either availability at all or at a minimum at a cost that lets them sustain essential widget manufacturing. Now the world is surprised to learn that whatever that widget is, there is whole lot less of it available suddenly.

Similar to chip shortages showing up as no new cars to sell and redonk prices for used cars, the sudden shortage of the essential widget in turn cascades out in more and more parts of the global economy. Turns out the widget is necessary for a whatzit, and the whatzit in turn is mission critical for a thingamabob.

Here’s the other fun part–the daisy chain might not even hit the thingamabobs for months, when they suddenly disappear off shelves or spike in price crazily, like lumber earlier this year.

The cascading disruptions in supply and demand for widgets, whatzits, and thingamabobs make business planning and resource allocation challenging for the producers and consumers of all of these, to say the least.

While globalized production provides a lot of goods at most efficient costs, that cost efficient is utterly dependent on predictable energy supply and cost. The system goes very fragile if that is disrupted, and oddly cascading disruptions across the links in production chains of various goods increase, noticeably, the chance that something breaks, and cascading disruption becomes cascading failure. Again, in the Darkest Timeline, indulging the pessimism bias.

So read again what we said a few months ago when contemplating the “sky is falling” narratives starting to circulate as the world was recovering from the big winter COVID peak about what collapse looks–because energy is the critical resource for the modern global economy and way of life. Or you can check out these two short animated videos covering the Bronze Age collapse, which is the part of history that rhymes best with the worst case risks here:

https://m.youtube.com/watch?v=QMBM1qazAXE
https://m.youtube.com/watch?v=3HaqpSPVhW8&pp=QAFIAQ%3D%3D

Now, the good news is that supply/demand issues will resolve themselves, and we have the global networks and knowledge to do that. Globalized production also does provide some resilience, if other locations can come up on production of the suddenly missing widget quickly enough. You have the globalized knowledge and capital to do that.

So we may NOT be in the Darkest Timeline just yet…

The bad news is that things like moving production to where the energy “winners” are will take time. Making more computer chips, for example, at scale to match one of the current big 3 will take years to build the factories and get the right expertise and experience there. Even if you move it to where the energy winds up locating itself. Same for just “make more energy!” Reopening or developing new nat gas wells and coal seams, putting up more renewable energy sources, bringing online more nuclear energy will take many months to years to nearly a decade (for a big, modern nuclear plant), even digging for more oil will all take time. As an example, here is oil rig counts versus oil price courtesy of Deutsche Bank:

Note first that despite the rise in Brent crude oil price, rig counts are just now shaking off COVID to get back to the ~decade lows of 2016. While you are looking at 2016 there, notice that is another inflection point where Brent oil price shot up, and the rig count shot up as higher price (demand) was chased by higher supply (rig count). That took about a year to match the rig count to Brent crude supply and stabilize the oil price.

So you will eventually match energy supply with demand through price. Key word being “eventually“–and you will have to buy and staff all those new rigs or other forms of energy supply in the meantime.

Everything now depends on how deep the mismatch between supply and demand really is, and how long it takes to get enough supply online to at least stabilize the price.

If there is a Bronze Age-style systems collapse in our near future (the Darkest Timeline), it will come down to the ability to resolve the current supply/demand mismatch in energy at a new total energy equilibrium that works for the current global system BEFORE energy cost volatility/unavailability disrupts OTHER essential industries enough to turn “inconvenient disruption” into “cascading failure.”

This will be complex systems collapse, a network issue, and I am not expert enough at those VERY complicated topics, let alone at this scale, to know the likelihood that one might occur here. I do know the chance of it is higher than it was before the pandemic, and grows the longer energy volatility remains. I also strongly suspect no one is smart enough to know all the moving pieces, all the connections between the various nodes, in the interconnected modern global world.

I know what it will look like if the seams do start to come apart though. The mysterious “supply chain” issues, like the lumber price squeeze earlier this year, and odd absences on the shelves, will become more common. Eventually, tipping points for recession and even outright depressions are reached. More and more often, countries will push the “kill switch” on their internet access–you’ll start to see social media for entire regions and countries go out. That’s the sign of revolutions and war in response to the unpredictable and threatened standard of living. You will know we live in the Darkest Timeline then.

In a perfect world, instead of a zero sum approach to the current supply/demand shock, nations play a more co-operative game to keep essential industries functional while energy finds its new equilibrium. Maybe Russia’s announcement today is the start of that.

However, I look at the Bonfire of Institutional Credibilities globally from the pandemic, and who our current leaders are around the globe. I look at their wisdom, co-operation, humility to see beyond their own incentives, and at their competence to handle this kind of wicked network problem. I look at world so enamored of hyper-expertise that you have super specialists in their own node with relatively dim awareness of how changes in their node affects other nodes–as evidenced by how well socioeconomic issues of pandemic response were anticipated and mitigated. I look at the ability of global social and news media to even articulate the potential risks and challenges with a wicked problem like this is in a way that does not appeal to and magnify tribal responses, and thus help turn zero sum temptation into a more co-operative game.

And at the end of that, I find myself concluding I live in an imperfect world.

If the energy issue we are seeing now is more prolonged than the lumber fluctuations earlier this year, if the zero sum hoarding reactions persist and worsen the problem, if disruptions start to become severe and failures start to happen…

…the cavalry ain’t coming, guys.

I want to stress I don’t know how probable these worst case scenarios are. Only that they are -possible-.

My guess is this is still a classic Black Swan–cascading failure like we have highlighted above is highly improbable, but will be highly significant -if- it occurs.

There are also not real great ways to play defensively against these risks. I don’t know if running out for a generator is all that helpful, for example, if the propane to feed it is getting rationed at some point in the future. And like mentioned before, I think if the Darkest Timeline happens, it will take a few years to shake out, and look less like Mad Max and more like a reduced, but stable, standard of living. With variation on what “reduced but stable” looks like around the world.

The only mitigation strategy will be the usual. Do unto others as you would have them do unto you. Be the salt. Hopefully, this is a short-lived aberration. If it is not, the only way out is through, and through together. Miraculous timed was this little nugget from Jamie Wheal (simplified in the context of employee retention and handling the current high levels of burnout):

“The Australian software giant Atlassian just did a massive study of over 5000 knowledge workers and found Nine Currencies that are essential for engagement and retention:

1. Shared Values
2. Trust
3. Affection
4. Appreciation
5. Voice
6. Achievement
7. Growth
8. Inspiration
9. Love“

But that is how you generally hold a group together, and keep it together, when the seas get rough.

Hopefully, our little band of readers here has been managing at least some of that through these updates…

–Two other good think pieces this week. The first is yet another voice telling you that the modern news and social media is not worth your time, and does not make you better informed.

The second is an actually informative, long form report on the issues is shipping right now. Which is a close second to energy in terms of “critical components in the global chain” experiencing disruption. If disruption turns to failure here too… especially right now…

–Again, probably not, but watch energy and shipping closely…

–Your chances of catching coronavirus most places in the world are equivalent to this being too true:

<Paladin>