@Chagsy I agree. You only have to look at the daily covid numbers give an indication of PCD testing. In NSW alone:

• 4033 PCR tests today
• 4043 PCR tests yesterday
• 5547 PCR tests on Saturday

What these numbers do not tell us is the breakdown of testing laboratories. However I have seen many NSW Health COVID-19 testing clinics wind down, and it seems that the majority of those that remain are private labs.

I can't speak for other states as I have no clue about the situation there.

Hi Chagsy,

A few comments and a question (for background I am an ED doctor who has been paying attention to the recent Covid changes and am confident discussing the medical side but not the economic side):

·      Testing is not that important if you have a medical background yes. However now that we have removed mask and vaccine mandates the onus is on the individual to be their own test and trace facility and isolation initiator. Behaviourally it is essential, because people who test positive for Covid are 1000x more likely to isolate and also to notify friends and family they may be close contacts. I know this because almost every person I see who has tested negative on a RAT in the initial stages of illness (which is common) has been out living their best life until they test positive.

·      Testing is also important because if we were to treat every flu-like illness with the isolation time that is required for Covid, with the current rates of community transmission we would end up in pseudo-lockdown and it would be even more devastating for the economy. Influenza has also been a killer this year as well as all the usual childcare viruses that people had forgotten about, and the important thing is that in the early stages (and sometimes in the late stages) you cannot tell the difference between any of them.

·      I don’t think testing is about determining treatment, it is about public health principles. I still think the simple plan that was created in the beginning is how we will get out of this, along with vaccination: social distancing, mass testing, mask wearing in enclosed or indoor spaces and good hand hygiene - all of it as a package. You are right that the majority of people do not need antivirals, but to my mind this is irrelevant to whether they should be tested.

·      It also matters to the individual as many companies have Covid specific leave which you obviously need a positive result for. This is another incentive to appropriately isolate, which I think is necessary as in the current climate with a tight jobs market and ongoing sickness affecting staffing some people are either feeling pressured to or being pressured to return to work even if they have flu-like symptoms. Again, given we do not have a gold standard test to distinguish causes of viral illnesses rapidly we need to keep testing to stratify who we send home from work and who comes in.

·      You might argue why bother testing if people are infectious before they have symptoms and when RATs are so inaccurate, they’re going to transmit to other people anyway? Well it matters because you disrupt the chain after they test positive so instead of infecting 100 other people they only infect 50, and overall this does have an effect in reducing transmission. It is not the only step required, but it is an important part.

·      I disagree that only PCR testing companies will benefit. As RAT tests are more accessible and more speedy than PCRs, I think they will remain the test of choice in the community (despite their relatively crap accuracy). Rollbacks of government PCR tests have made it more difficult to access PCRs so most people I see are relying on RATs to make a diagnosis in the community. The only place where regular PCRs are occurring are in hospitals – every patient who comes in currently with flu-like symptoms gets a rapid combination Covid/Flu PCR which helps to stratify what level of isolation they require. This will be even more necessary as it looks like the most recent variants are measles-level infectious which for those of you who are non-medical is bloody infectious. However the PCR test is in short supply – so we (in Melbourne anyway) are also using RATs in hospital for other purposes and in some cases accepting them as equivalent to PCRs because we have no other options. Point-of-care rapid testing will be around for a while.

·      Prevention is definitely better than cure. The popular narrative of ‘living with Covid’ or ‘business as usual’ is crap. We are still in the middle of the pandemic and our hospitals are operating under disaster mode with an increasingly burnt out workforce (don’t get me started). But EVERYONE should be wearing a mask indoors or in public places and social distancing when outside as much as possible. If I could bring back one thing from the last 2 years it would be mask mandates. Everyone should be encouraged to test with symptoms and to consider what large gathering events they are willing to attend (I like the idea of a risk budget!) This is actually what living with Covid without government mandates means – you decide what level of preventative measures you’re willing to live with and if enough people do it right then rates stabilise (but probably never go away)

Sorry for the thesis length answer :D

Now a question if anyone has gotten this far – what would be the economic effects if 2022 is status quo for the next 3-5 years, and would it change your investing strategy?

I hear lots of people saying the pandemic is over and we need to move on, and from what I have time to read and listen to the business community is still debating temporary vs long term inflation, hard v soft landings and looking at businesses as if 2022 is back to ‘normal’. However what no one (as far as I can tell) is talking about is what happens to economies/inflation/earnings if there is no rapid recovery or zombie variant, but more of what we have now? Fresh covid waves every 6 months with milder but overall more deadly variants due to sheer numbers, ongoing sickness and disability affecting return to work and staffing levels, and persistent supply chain issues?

For example China has just come out of their shutdowns and are persisting in their Covid zero policies. To me unless they shut down international travel and invent a better local vaccine this is madness. In 6 months they will guaranteed have another Covid wave (actually every country in the world will see Covid waves in winter). So they are going to shut down again in the future placing further pressure on supply chains. What does the investing landscape look like if this is the case? Do we have to position for extremely long return ie 10 years plus? Does anyone even have an answer for this?

I was actually going to ask @Strawman on one of his podcast appearances but maybe he'll answer here! Would love to hear from people with a business/economic background as I wouldn't have a clue where to start. Thanks everyone!

Great post @Varmallama and happy to share some thoughts.

I'm actually out in Western NSW this week, and have patchy in internet, so will get back properly next week.

Thanks for you detailed reply @Varmallama

On reflection, some of what you say is likely correct. It's highly tempting to go into a detailed discussion of many of the points you raised, but it probably isn't relevant to have an extensive conversation about the finer medical points, as I'm pretty sure they don't have any direct relevance to strawman subscribers and I am wary of us having a back and forward that is not constructive to the broader strawman community.

Like yourself I am a FACEM, but work in Brisbane where we have not seen any of the restrictions on PCR testing that are afflicting you in Melbourne, and that I was completely unaware of! I am also, in all probability, longer in the tooth, and perhaps a bit more cynical of human nature and health systems. But perhaps not.

I don't believe people who test positive for Covid are 1000x more likely to isolate. This is hyperbole, used to further your position. I am quite sure that a significant proportion of the population behave in a way that suits them, and consequently the public health aspect of a confirmed diagnosis, that probably did exist a year or two ago, is now muted, but not negligible.

given we do not have a gold standard test to distinguish causes of viral illnesses rapidly we need to keep testing to stratify who we send home from work and who comes in. We do have a gold standard test: PCR. That is why I believed it is likely to be resilient, and hence those companies that sell PCRs will stand to benefit. PCRs for most resp viruses are available. The rapid 4plex can identify those that have influenza, COVID or RSV. The more detailed resp virus panel can identify many of the others. Those that "come in" are the ones that need to "come in" regardless of the cause. As I previously said, in this low volume population, knowing the causative agent will help management, but hey are a distinct minority.

The only place where regular PCRs are occurring are in hospitals. Certainly not in QLD, I cannot comment on other states. Anyone can rock up to a path lab and get a PCR.

 I disagree that only PCR testing companies will benefit - a convincing argument. I would add that I am not in total agreement that the community will continue to use them, but if PCRs are not widely available, and hospital use is increasing rather than decreasing (at least outside of QLD) then you are absolutely correct.

And having just written all that I realise I have just replicated Marc Antony's speech: "I have come here to bury Caesar not to praise him..." and gone and done exactly what I said I wouldn't do in my opening paragraph. I apologise, but having spent all that time writing it I am selfishly going to post it anyway and ask for forgiveness!

My shot at redemption comes in the form of some sort, of hopefully useful, reply to your excellent points in the last paragraph:

as a subscriber and an avid reader of the Economist, and occasional reader of the FT, many of your questions about the impact of COVID on the future of the world economy, are often discussed in articles and podcasts. As you note, perhaps the biggest impact of COVID will be in the ongoing "dynamic zero COVID policy" that Xi Jinping has staked the future of the legitimacy of the communist party on. There are, in the last few days, further cases of COVID including the BA.4 and BA.5 in Beijing, Western China and Shanghai.

Harsh lockdowns are inevitable. There is a little hope that despite having finally introduced a mandatory vaccine mandate (yesterday), and having announced a candidate for mRNA vaccines manufactured by Abogen (also yesterday), that they will have a way out in the next 6-12 months. The vaccination rate in the elderly (of which there are a lot in China), is lamentably low, so there is no way they can extricate from the zero covid policy until the elderly are adequately vaccinated and the public uproar of a high death rate can be averted. Stability is everything.

But until that point, supply chain disruptions are going to be frequent. I do not have many examples to give on the subject, but there was a worldwide shortage of contrast dye last month; so the whole world could not perform decent CT scans because the Siemens factory in Shanghai got shut down due to COVID lockdowns.

There is however, enormous over-capacity in the ports, now. So Shanghai can go offline but there is now nearly exactly the same capacity a mere 1 hr north. So perhaps, supply chains will return to something near normal. From what I read, despite all the talk of western firms moving their manufacturing capacity away from China, this will takes years and be partial at best.

So that might be supply covered.

As to demand: China is screwed. And its consumer is an ever-increasingly important driver of the world economy. Redundancies are increasing, the unemployment rate in the young, sits at nearly 20%. The above mentioned issues are not going away any time soon, so demand will continue to crater, both in goods and services. The communist party's knee jerk response is to announce another round of infrastructure spending. But they have more than enough already. The return on each dollar invested in infrastructure has cratered from $2-3 in the 2000's to under a dollar nowadays: they lose money on building more bridges to nowhere and high speed railways from one village to another. So, it will be interesting, in my opinion, to see how this will pan out over the next few years.

I feel I should stop there.

C

@Chagsy I think the low efficacy rates of their vaccines could be a factor for China's lockdowns.

This is an article from the BBC, and talks about efficacy prior to the Delta strain coming on board: https://www.bbc.com/news/world-asia-china-57817591

Surely though the Russia - Ukraine war could be a game changer to China's economy. With no Western country wanting to do business with Russia, Russia has turned to their neighbour-buddy. When VISA and Mastercard halted their services in Russia, UnionPay cards were still working. China's taking Russian coal now. etc etc...

Interesting discussion and just to chime in on the PCR testing -- there are still drive-thru clinics operating in Nth Queensland, I went to get a PCR test last saturday afternoon and I was the only car there so I think the demand is relatively low, but maybe other times/days are busier. There were about 8 or so staff working so not sure how feasible it will be to keep them operating longer term.

The drive through PCR clinic nearest me (in Sydney) is still running (it's run by a nearby pathology lab)

Thanks @Chagsy I agree keeping the discussion more about economics is better. Although looks like from today you guys might be starting to feel some of the pain we're having down here :D

https://www.theguardian.com/australia-news/2022/jul/08/major-queensland-hospitals-suspend-non-urgent-surgery-amid-rise-in-covid-cases

Reading yours and other people's comments is adding to my feeling that I don't want to buy anything IRL right now. I haven't sold anything in my portfolio, I just sigh every time I look at it. But I remember when Covid was hitting in 2020 yet the market was going up thinking it was insane and there would be hell to pay once the mid-long term effects of living through a pandemic finally were understood by Mr. Market. That's where I feel we are heading now, so I agree with many others that there is likely more pain to come. I'm thinking about saving up over the next 1-2 years instead of investing into individual shares and waiting until the inevitable panic sell off and then slowly buying in.

I know timing the market doesn't work and that's not what I want to aim for, but I think there will be continuing volatility not just from China but other large economies who will suffer with subsequent waves. The US is likely experiencing a new wave, India will most likely have another bad one too as they have no health infrastructure to speak of and they are complacent (I have relatives with a medical background also in India).

In regards to PCR testing - let me clarify what I meant is that yes they will be an important part of testing, but don't count out companies that are making RATs. You guys in Queensland have had some Covid waves but I suspect not as extensive as we have had in Melbourne. PCR testing is rapid until you run out of the rapid tests which during the Omicron wave we did daily. Prior to RATs we had people lining up for the whole day at testing facilities only to be turned away because they had to close or they ran out of tests. So now we have RATs and they are considered equivalent to PCRs people are turning up to PCR clinics less because it's more convenient to self test at home. Currently Melbourne hospitals are using RATs to screen people in ED but if they are negative and have symptoms they still go on to have a PCR. So even in the hospital setting I think they will still be used in low risk populations for some time to come.

Where I think the challenge will lie for these companies is if subsequent variants cannot be detected with the current kits, both PCR and RAT companies are going to have to invest in more accurate tests and I wonder if they will have any trouble with funding - although I would imagine it would be in everyone's best interests to have more accurate testing so I'm sure there would be some government support involved.