Here’s hoping Big Pharma come up quickly with something to beat Covid-19

Stuff’s  headline   ran “Vaccine  hopes  push sharemarket   higher”.

An  intriguing  one,  and sure  enough  Wall St had  rallied  on  news  the   drug  giant  Johnson & Johnson had   reported it  expects to begin human clinical tests  on a  vaccine  candidate  for  Covid-19  by  September.

Point  of Order  went in search  of  other  international  developments  being reported in the battle against  the Covid-19 pandemic.

In  the  UK,  the BBC reported  a breathing aid that can help keep coronavirus patients out of intensive care has been created in under a week.  University College London engineers worked with clinicians at UCLH and Mercedes Formula One to build the device, which delivers oxygen to the lungs without needing a ventilator.

Continuous Positive Airway Pressure (CPAP) devices are already used in hospitals but are in short supply. China and Italy used them to help Covid-19 patients.

The  BBC   said  40 of the new devices have been delivered to ULCH and to three other London hospitals. If trials go well, up  to 1,000 of the CPAP machines can be produced per day by Mercedes-AMG-HPP, beginning in a week’.

The Medicines and Healthcare products Regulatory Agency (MHRA) in the UK has already given its approval for their use.

RITA was counting on a 2019/20 net profit of $165.8 million – but did they expect being nobbled by a virus?

According to a Stuff report:  New Zealand might be in lockdown but at a time when problem gamblers are at their most vulnerable, the TAB and online gambling sites are open for business.

Might be in lockdown?

We wonder where sports writer Mat Kermand was when he wrote that sentence as a prelude to a somewhat huffy article about taking bets not being listed as an essential service.

Kermand noted that under level four of the Covid-19 scale – which says “only businesses absolutely essential to ensure the necessities of life”  can operate – the TAB can trade online because it can run its business with staff working remotely during the Coronavirus outbreak.

He went on:

Lotto is also available online only and overseas gambling and gaming websites are not restricted by New Zealand law despite it not being illegal for Kiwis to use them.

PGF Services entered the narrative with spokesperson Andree Froude calling on all online gambling services to step up their host responsibility, because (apparently) the hundreds of thousands of Kiwis off work, unable to leave home, with excess spare time on their hands, will be to blow whatever money they can struggle to find in these straitened times.

Russia and the airlines – not the conspiracy you think

Russia Today (sometimes referred to as Kremlin TV) does not have a widespread reputation as a fair and balanced news source. But occasionally if they say it’s raining, you might want to check outside to see if you need an umbrella.

So there is some interest in its reporting of ‘Black Swan’ author Nicholas Taleb’s suggestion that the UK government should let Richard Branson’s Virgin Atlantic airline go bust, rather than bail it out.

“Planes will fly w/new owners!” as he succinctly put it.

Alert readers will recall that Point of Order raised this very point last week, less directly and with more technical verbiage naturally.

RT also reported (with ill-concealed glee) some nastier bits – quoting Taleb on Branson as “a tax refugee” who “walks around virtue-faking with [the] TED [and] Davos crowd”.

And made the unevidenced allegation that the airline industry had been hugely influential in preventing governments from halting flights from China in the early stages of the epidemic.

But back to the meat of it – should governments ‘bail out’ businesses and, if so, how.  The same question which arises from the global financial crisis back to the demise of Mosgiel Woollen Mills in 1980 (and before then to be clear).

The orthodox view is simple and principled.

When a complex entity is short of cash because of a crisis, but viable, you can provide loans at a penalty interest rate, that will be paid back.  In general terms, this is what happened for quite a few of the big US banks (leave aside the murkier case of the dodgy mortgage lenders). It’s at the heart of central banking practice and done well, provides support at a price, rather than a moral-hazard inducing capital bailout.

Of course the owners get the upside on recovery, and, if the liquidity is cheaper than the market, a bonus.  And historically those with the best political connections or visibility tend to get the most generous consideration.

If the business is not currently viable, there is a procedure to resolve the competing claims and distribute the losses.  It’s called bankruptcy. If possible, a working business is plucked out of the wreckage by new owners.  

This is what Taleb refers to.  This normally means writing down the value of the shareholders to near-zero, concessions by workers and bankers, and restructuring the business to new patterns of demand.  Note that if Mr Branson keeps his airline, the last two are likely to happen anyway.

And it’s more or less what happened with General Motors during the global financial crisis, except that in that case the government ended up chipping in an extra $11 billion, which helped reduce the pain for the auto workers and the company’s creditors.

To extend the analogy, the capital bailout of an airline by a government without a formal restructuring procedure will probably mean an even bigger increase in government debt (for us all to pay back through later ‘austerity’) in order to reduce shareholders’ capital losses and minimise the concessions which workers and creditors need to make.

This is somewhat different from the rest of us chipping in to help workers whose income has just fallen off a cliff.

But at the time it’s rarely so simple or principled. The politicians who make these decisions and the people who benefit from them are often keen to obscure the difference between temporary support eventually repaid and capital transfers.  Even now when the numbers are added up, who would have thought that Morgan Stanley got the former and GM the latter?

So Mr Branson’s airline – and indeed airlines more generally – are starting to look like a good test cast for who might get favourable consideration at the expense of the rest.

The Covid-19 emergency: constraints on trading and publishing raise price-gouging and censorship issues

Supermarkets and some publishers are favoured by the government’s imposition of severe restrictions on what we can do and from whom we can buy during the Covid-19 lock-down.

But one consumer watchdog is challenging the legality of an edict by Commerce Minister Kris Faafoi which favours supermarkets while Act leader David Seymour is questioning the pricing consequences of the business ban that has closed bakeries, butcheries and green grocers.

The Freedom of Speech Coalition meanwhile is threatening to launch an urgent judicial review of the Ministry of Culture and Heritage decision to deem non-daily newspapers and publications an unessential service for the purposes of the Covid-19 Level-4 nationwide shutdown.

Even while the government is hearing of price gouging by supermarkets, however, it is considering allowing those businesses to open on Good Friday and Easter Sunday.

Whether the Easter Trading Laws are amended to allow this will depend on whether they need the time shut to restock shelves, Prime Minister Jacinda Ardern told RNZ’s Susie Ferguson.

The Government will be talking to them directly about the issue.

The Cabinet meets again today and – according to a report in the Otago Daily Times – it wants to ensure that supermarket supply chains, pricing, and customer and staff welfare are all up to scratch, given their importance to New Zealanders during the lockdown.

“We don’t obviously have legal footing to enforce specials, but we can on price gouging,” Ardern told Newstalk ZB’s Mike Hosking this morning.

She said the government had seen no evidence of that so far.

She had been speaking to Consumer Affairs Minister Kris Faafoi, who had checked directly on claims of price-gouging of items such as cauliflowers.

While there had been issues of chickens being mistakenly weighted – and therefore mistakenly priced – and some supply issues, the Government had not found any price-gouging issues.

Ardern indicated she was keen on supermarkets opening on days that they were traditionally not allowed to, such as Good Friday and Easter Sunday, so as to give New Zealanders maximum access to food and essential supplies.

But she also wanted to check with supermarkets on whether they needed those days to help re-stock shelves. She said she would have more to say on supermarkets later today.

The Consumers’ Union of Aotearoa has challenged the ministerial press statement from  Kris Faafoi’s which instructed the Commerce Commission to relax its standards for supermarkets and telecommunications companies[*].

While Kiwi consumers already pay more for groceries than any other OECD consumers, particularly relative to wages, the Government has decided supermarkets and other businesses should be given a free pass on their competition law obligations.

To add insult to injury, the Minister’s statement is itself illegal.

The Commerce Commission is required to act independently, and the Minister has not exercised any legal powers under the Commerce Act in directing the Commerce Commission on what to do. Instead he has simply proclaimed – absent any legal basis – that the Commerce Commission ought to ignore its legal duties and obligations to Parliament and New Zealand consumers.

The Consumers’ Union says reducing competition law requirements will substantially worsen the economic conditions for New Zealanders who buy groceries and use telco services – but:

The only thing this Minister’s statement will do is to make it easier for the unscrupulous to profit at the expense of the working poor, and particularly those in rural areas, and growing the profits of supermarket owners and telecommunications company shareholders.

The Minister should revoke his statement and apologise to the Commerce Commission and to the people of New Zealand. We cannot welcome profiteering and anti-competitive collaboration at these times, nor at any time.

The Consumers’ Union of Aotearoa describes itself as an action group dedicated to improving the competitiveness of New Zealand’s market for the benefit of average consumers.

ACT Leader David Seymour similarly insists the government must reconsider its restriction on bakeries, butchers and fruit and vegetable stores.

“The Government has effectively given supermarkets a monopoly on food, but it seems surprised that prices have risen. In some areas, that monopoly power is strong. The same Government that recently spent a year bashing petrol retailers for not being competitive enough must now allow competition in an even more essential sector: food.

“In normal times, supermarkets face very real competition from butchers, bakeries, and fresh fruit and vegetable stores. Supermarkets must restrain their prices in order to remain competitive. People are noticing price increases in part because supermarkets no longer face competition from these outlets.

“Allowing fresh fruit and vegetable stores, bakeries and butchers to open would actually help fight COVID-19. At the same time the Government is asking people to restrict travel and maintain physical distancing it is asking people to travel further to visit busier stores. This is illogical.

“Allowing butchers, bakeries, and fresh fruit and vegetable stores to open would also allow the proprietors of those stores a financial lifeline. It makes no sense for those businesses to go broke when they could be serving consumers, providing competition, and reducing the spread of COVID-19 at the same time.

Seymour accepts that any businesses allowed to open should be required to meet physical distancing protocols. But if dairies can manage it, he notes, so too can bakeries, butchers, and fresh fruit and vegetable stores.

Free Speech Coalition spokesperson Jordan Williams,explaining the launch of an urgent judicial reviewof the decision to deem non-daily newspapers and publications a non-essential service, contended:

“ … No High Court is going to uphold a bureaucrat deciding what media can and cannot operate. This decision was done without any consultation, and on the basis of only daily newspapers and broadcast media being deemed ‘essential’.

 “Assuming the smaller publications can take the same distance and health measures as the ones currently publishing, there is no justification in shutting them down.
 
“Even at a time of emergency, no civilised society can justify the Government deciding what parts of the media are important and not important. The maxim ‘this is a dangerous precedent’ is overused, but in this case, it literally is.

Ethnic media, now been banned from publishing, reach audiences that the daily press does not, Jordan pointed out.  Similarly, in smaller or aged communities where online access is limited, “local information is absolutely essential.”

“The decisions made by the Government in the last ten days are probably the most significant in our lifetime. Weekly and monthly publications like North and South, the Listener, and ethnic newspapers serve a vital role in the community’s conscience and holding our leaders to account. That is just as important as daily news. These magazines are functionally no different to the likes of music radio or entertainment television, which is allowed to continue broadcasting.”

Even at times of war censorship, the government didn’t choose who could print and who couldn’t, Jordan noted..

If the government did not rethink this, it would face a judicial hearing to review this abuse of public power.

Coronavirus – analysing the data makes you think we could do with more of it

If you want to understand some of the thinking behind the policy response to the spread of coronavirus, you might want to read the paper from the Imperial College COVID-19 Response Team, which is credited with accelerating the introduction of the current lockdown measures in the UK.

The paper builds a mathematical model for the spread of the infection and then applies another mathematical model for hospitalisation, treatment and death rates (both based on what experts think they might know so far about the virus’s behaviour and impact).  It models possible outcomes for three options: doing nothing, mitigation (ie, slowing down the spread), and suppression (ie, stopping the spread until a vaccine is developed), using judgements on the effectiveness of policies and actions by governments and individuals to achieve these effects.

To simplify, the assumptions put into the model suggest that more than 500,000 people in the UK could die prematurely if the virus is ignored.  Mitigating its spread could reduce this by half. The modelling suggests that suppression could reduce this into a range of 5,000 – 50,000 (compare this to the 10,000 deaths predicted for a typical flu season or the 616,000 annual deaths in the UK ).

Resuscitating a virus-ravaged economy – the answer lies in the soil and the exports it generates

Westpac is forecasting 200,000 jobs will be lost in NZ as a result of the response to the coronavirus pandemic.  Chief economist Dominick Stephens estimates economic activity during the four week lock-down would decline by a third, despite the government and the Reserve Bank having “done a lot to calm financial markets”.

Stephens said his feeling was that GDP in the three months to June would fall by more than 10%— “which is completely unprecedented in our lifetimes”.

The  Westpac  diagnosis  reinforces  the argument  advanced  by  Point of   Order   in  one of  its most intently  read  posts:  “After the lock-down the  economy’s  recovery  will be  dependent on dairy farmers and  their  milk”.

This post  stressed  that  when the   time   comes for the   government to  start  planning  how the  economy   can recover,   it  should be   working hard   to ensure  the  dairy  industry,  along with other  key  pillars of the  primary  sector,  gets  every encouragement to  increase   production.

Many of those who  read  the post  agreed that the  volume  of criticism  dairy farmers  had to  absorb  because  of the methane  emissions of their herds  and  the dirtying of  rivers  and streams  reached    absurd  levels and  affected  industry  morale.

Don’t fret, folks – Hone’s sweet with the mayor so long as he sets up checkpoints and doesn’t mount road blocks

Hobson’s Choice spokesman Don Brash (a former leader of the National and ACT Parties) is not alone in challenging the justification for tribes claiming to have closed roads to protect their people against Covid.

Deputy Prime Minister and New Zealand First leader Winston Peters – his remarks apparently ignored by other media – told Waatea News unofficial tribal militia throwing up checkpoints were more likely to hinder than help the Covid-19 response.

He was interviewed at a time when hapu and iwi on the East Coast were organising such road-blocks and Hone Harawira was arranging checkpoints on roads into the far north.

Peters said the government didn’t need Harawira to ring-fence Kaitaia.

“That’s what the Government is seeking to do now. That’s why there’s a lockdown. That’s why they’re saying don’t travel. That’s why the Government is saying stay at home, look after each other.

“If you ring-fence Kaitaia, it sounds good until you have essentials coming in that are desperately needed for life to continue, food and other resources like that. So you can’t have a bunch of militias standing by the side of the road without any guidelines enforcing a lockdown.”  

Updates from listed companies bring some economic comfort during the Covid-19 crisis

As  New Zealand   faces the  most brutal   recession in  living memory,  the  battle  to preserve   the core  of the  economy deepens.  Companies  are  cancelling  dividends  to protect what cash they have, others  are  reaching  for  financial  aid  from  their banks or  the government.

Yet for   some   businesses, notably  the  big  supermarket  chains,  the crisis  is accelerating    their  cash   flows.

Point of Order   has surveyed an array of   companies listed on  NZX, particularly in  several sectors—food  production, health and pharmaceutical  supplies, transport, agriculture  services—   which  have issued  updates. These should provide   comfort  to  their shareholders, and the market generally.

Latest  to  do so  is   King  Salmon,  the world’s largest aquaculture producer of the premium King salmon species.   Employing 500 people,  it operates  within the primary industry food producer category which has been included in the government’s list of essential services.

In its update to the  NZX, it  says :

Cops help iwi with roadblocks as a cultural response to Covid-19 – and perhaps to portend a policing “partnership”

The proposition that our Police are paving the way for a partnership in which former MP Hone Harawira and other iwi leaders police communities within the borders they define went unchallenged when put to press officers working for the Prime Minister and the Police.

The picture painted in the preceding paragraph was drawn from Deputy Police Commissioner Wally Haumaha’s statement on road blocks Harawira set up in Northland to check tourists’ health.  He declared:

” … we want to model what it looks like when iwi, police, councils and other agencies work in partnership”. 

But nether the Police nor the Prime Minister’s Office directly answered questions put to them by Point of Order about the legality of Harawira’s blocking public roads while policing the a border which he presumably established.

After the lockdown, the economy’s recovery will be dependent on dairy farms and their milk

The planet is  in a state of   flux,   economies are tumbling into  recession, no-one (not even Donald Trump) can predict  when the agony will  end.

Suddenly, the streets  are  empty:  life  as  we have  known  it is  now  very  different. The  nation  is  in   lockdown.

As  the  London  “Economist” put it:

“The struggle  to  save  lives  and the  economy  is  likely to present  agonising choices…As  that  sends economies  reeling, desperate  governments are trying to tide over  companies and  by handing out millions of  dollars in  aid and loan guarantees. Nobody can be sure how these rescues  will work”.

Parliament, in  one of its  last  legislative  actions  before  it too went into lockdown,  passed  an  imprest  supply  bill   which,  as   Finance  Minister  Grant Robertson noted,  was not  “ordinary”.