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China: Reopening Should Drive Growth

After a year of anemic growth—by China’s standards—we expect a recovery in Chinese economic activity to gradually take place in 2023. The government…

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After a year of anemic growth—by China’s standards—we expect a recovery in Chinese economic activity to gradually take place in 2023. The government has abandoned its zero-COVID policy and re-pivoted to growth, and the reopening, combined with a benign inflationary environment that gives China’s policymakers room to increase stimulus, we believe is a reason for optimism in 2023. That said, major policy questions and geopolitical risks cloud the outlook.

Note: Due to rapidly changing circumstances in China, this article has been updated since it originally appeared in our 2023 emerging markets outlook paper.

How has the Chinese economy performed in 2022?

Vivian: Consensus estimates for gross domestic product (GDP) growth in 2022 are about 3%, which would be China’s lowest in several decades, except for 2020, the first full year of the COVID outbreak. While 3% growth compares well with the developed economies, it is equivalent to a recession in China.

Exports were quite strong in the first half of 2022, driven by both the global economic recovery and the Russia-Ukraine war, which exacerbated supply shortages and led to additional demands for Chinese exports. But domestic consumption has been very weak in 2022. This is primarily due to lockdowns under zero-COVID, which are creating physical constraints on consumer activity while also severely damaging consumer and business confidence.

At the start of 2022, there were hopes that more fiscal stimulus or infrastructure spending would materialize, but it did not. Given the lockdowns, and with local governments diverting resources to manage COVID, the government likely assumed that more aggressive spending would be ineffective.

Clifford: Coming into 2022, investors did not expect the government to be so passive in dealing with falling property prices and so rigid in addressing COVID. The property market cannot make a comeback when public mobility is far below normal due to lockdowns. This has wider repercussions because property is entwined with so many other economic sectors.

A third surprise in 2022 was the deterioration in U.S.- China relations, in particular the sanctions on China’s access to high-end chip technologies. This will be a setback as China tries to advance its high-tech industries.

What is the latest on the zero-COVID policy? How does it relate to China’s Common Prosperity and growth goals, if at all?

Vivian: The Chinese government has drastically abandoned its zero-COVID policy in the past couple of months. The policy direction, intensity, and speed surprised the markets. Zero-COVID and Common Prosperity are linked, but they also conflict in some ways. The government’s strict COVID policy acknowledges the public’s desire for health and security. But there is a divergence of attitudes within China’s vast population. The elderly and less urbanized populations, in general, are much more fearful of COVID and more suspicious of vaccines than younger and more urbanized groups. This puts the Chinese government in a difficult position. It may have vast authority and power, but it also has unlimited liability for protecting the public’s health.

Meanwhile, zero-COVID has hurt growth, and the unemployment rate among younger people is more than 20%. The government cannot tolerate this either because it will lead to social unrest. So it has to solve the dilemma.

It seems increasingly clear to the Chinese government that reopening and resuming growth have become an acute priority given the anemic economic growth and increased discontent they saw among the people after prolonged lockdowns and restrictions.

In the meantime, the pandemic has evolved globally, with dramatically reduced mortality as most countries have fully reopened. And China’s initial plan to protect public health interests and maintain economic growth at the same time has not worked. I had expected China to gradually exit its zero-COVID policy in 2023 precisely due to the factors mentioned above, but was nonetheless surprised by the fast pace.

In the near term, we expect disruption to the Chinese economy as a result of surging infections and increased deaths post-reopening. Once infections subside, economic activity should resume and recover throughout 2023, similar to the reopening experiences in other countries. I believe consumption and services would benefit from reopening the most.

The policy update doesn’t contradict the broader goals for Common Prosperity; it is just that the priorities have been reset and focuses rebalanced to tilt toward managing risk while reviving growth. — Clifford Chi-wai Lau, CFA

Clifford: China’s zero-COVID policy has finally come to an end after three years of exhausting implementation. The government probably realizes it can’t afford to delay the reopening of the economy any further when economic data releases have been weak and people have been suffering from restricted mobility for too long. Apparently, there has been a shift in the government’s attitude on COVID policy such that it now sees delivering growth and prosperity to be as important as protecting lives. The policy update doesn’t contradict the broader goals for Common Prosperity; it is just that the priorities have been reset and focuses rebalanced to tilt toward managing risk while reviving growth.

What indications of future economic policy came out of the 20th Party Congress?

Vivian: One new theme was national security—not only regarding U.S.-China tensions and geopolitical risk but also embracing food safety, energy safety, supply chain safety, cybersecurity, and even ideological security. Other than that, the key messages were similar to what the government under President Xi Jinping has promoted in the past. One exception is that policymakers seem to be putting more emphasis on high-quality growth—focusing on the quality and sustainability of growth versus the magnitude of growth.

I do not foresee major changes in monetary policy, which has been moderately accommodative for the past two years. — Clifford Chi-wai Lau, CFA

The Western media portrayed the new party leadership alignment as Xi surrounding himself with loyalists, but that is too simplistic. Several people added to the standing committee of the Chinese Communist Party Politburo, the seven-person inner circle that leads policymaking, are all from China’s southern provinces, which are the wealthiest and most pro-growth parts of China. These new members have solid track records of successfully leading economic growth in various towns, cities, and provinces in these areas, including Zhejiang, Fujian, Guangdong, and Shanghai.

The Central Economic Work Conference (CEWC), held in mid-December and convened by the new Central Committee of the 20th Party Congress, stated “unwavering” support for private companies and laid out the growth agenda for 2023. This largely reflects the unchanged pro-growth and pro-market stance of the new leadership of the party, although the market remains skeptical. The next key meeting for the economic policy is the State Council’s reporting to the National People’s Congress and the Chinese People’s Political Consultative Conference in March 2023, when the new premier and leadership team of the State Council will be confirmed. It’s important to wait and see the new leadership’s further economic policies and subsequent execution to properly assess and reassess the China investment case.

Clifford: It is likely a good thing from an economic perspective that the congress is over. These events are preceded by months of lobbying and political wrangling, which means the political agenda was prioritized in 2022 at the expense of economic policy.

I do not foresee major changes in monetary policy, which has been moderately accommodative for the past two years. For now, China does not face high inflation like Europe and the United States, so China can keep interest rates low and stimulate growth, which gives it a competitive edge relative to the rest of the world.

What is your projection for China’s GDP growth in 2023?

Vivian: The consensus GDP growth forecast for 2023 is about 5%, which factors in certain benefits of reopening. There could be upside to the forecast if the economy and consumption recover much faster and stronger post-reopening, combined with more effective property market policies, as well as monetary and fiscal stimulus. I believe the improved regulatory backdrop for the internet industry and continued growth of domestic technology substitution and energy transition trends should also help drive upside to GDP growth in 2023.

Exports drove growth in 2022, especially in the first half, when both demand and commodity prices were strong. We are unlikely to see accelerated export growth in 2023 amid a global economic slowdown and coming off a tough comparison year, so the Chinese economy will have to rely more on domestic consumption and demand.

The consensus GDP growth forecast for 2023 is about 5%, which factors in certain benefits of reopening. — Vivian Lin Thurston, CFA, Partner

The collapse in consumption in 2022 was due to both an inability to consume (because of lockdowns and closures) and unwillingness to consume because of a collapse of confidence. Essentially, people were hoarding money. China’s household savings rate jumped to 40% in 2022, well above its historical level of 25% to 30%. The excessive savings mean that pent-up demand could be strong as the country continues reopening. I believe this should provide strong support for consumption recovery and GDP growth in 2023, with potential upside.

Clifford: With the end of China’s zero-COVID policy and both domestic and international travel now fully enabled, I believe China’s economy will gradually return to its full growth potential as things continue to normalize. 2023, however, is set to be a challenging year on the global front, as global growth is slowing, inflation remains high, and the war in Europe is prolonged. Chinese and Asian exports have already been trending down in recent quarters, so export growth should be less of a contributor for China’s economy this year. However, the strong expected rebound in consumption due to pent-up demand could nevertheless act as an effective tailwind for China to deliver above-average growth this year.

How did China’s debt markets perform in 2022, and what are your expectations for 2023?

Clifford: On an unhedged basis, Chinese government bonds, based on the J.P. Morgan Government Bond Index-Emerging Markets (GBI-EM) Global Diversified, have returned –6.36% in 2022 year-to-date through December 13, 2022. While negative, this is significantly better than the broader J.P. Morgan GBI-EM, which is down 13.21% year-to-date.

The offshore renminbi has fallen 8.92% against the U.S. dollar in 2022, so on a hedged basis, stripping out currency effects, year-to-date performance in Chinese government bonds has been positive. The benign inflation environment and easier monetary policy helped push yields lower and enhance returns. China was definitely an outlier among government bond markets in 2022.

Looking forward, interest rates in China are moving opposite to global interest rates, which makes the Chinese government bond market currently one of the most expensive. Two years ago, the Chinese 10-year bond offered 175 basis points of pickup over 10-year U.S. Treasurys, but now that relationship has inverted—so the Chinese bond market has lost its competitive edge as global interest rates jumped.

I do not expect Chinese interest rates to rise much in 2023—unless consumer spending comes in too strong or unexpectedly high food prices make inflation a real threat.

We see value in having some exposure to the Chinese government bond market because of the resilience of the underlying economy, but we do not believe it warrants an overweight position. I believe the technicals of investing in China’s lower-return fixed-income market, such as Chinese government bonds or onshore credits, are likely to weaken as the broader reopening of China could inspire reallocation from fixed income to stocks.

I believe other markets are more likely to deliver better returns, especially if central banks around the world start pivoting away from rate hiking.

How did Chinese equity markets fare in 2022? What opportunities do you see for quality growth investors in 2023?

Vivian: Even though Chinese interest rates declined in 2022, China’s equity market returns resembled what you would expect to see in a rising-rate environment. Higher-valuation, growth-oriented sectors dramatically underperformed lower-valuation, lower-quality stocks.

In addition, valuations for Chinese quality growth companies contracted dramatically in 2022, and consumption and economic activity overall were hurt by ongoing COVID lockdowns and property issues. This made for a very challenging environment for investors focused on quality growth.

Looking ahead to 2023, we are focusing on reopening as a key theme. Beneficiaries could be consumer, internet, and digital economy companies.

We have exposure to quality growth companies in the consumer space—the leading liquor company, the leading duty-free company, the leading ingredients company, the leading cosmetics company, and so on. We believe they have the potential to benefit strongly as the reopening plays out.

We also have substantial exposure to internet companies. These are out of favor among global investors, but we take a long-term view. Valuations now appear attractive, in our view, and regulatory measures affecting these companies have been stabilizing.

Clamping down on China has become a bipartisan effort in the United States. This creates a risk factor for investors that has little to do with fundamentals. — Vivian Lin Thurston, CFA, Partner

Another longer-term structural story we like is energy transition, including electric vehicle batteries, solar panels, and companies related to these industries. These higher-valuation segments underperformed traditional energy companies in 2022, but we remain bullish on the long-term opportunities related to the transition to a lower-carbon economy.

We pay close attention to fundamental corporate earnings, which are already in recovery after earnings expectations came down dramatically year-to-date. If you combine earnings recovery with attractive valuations and a stabilizing regulatory environment, plus reopening and policy support, we believe 2023 may be a good year for quality growth investors.

How does the geopolitical environment affect China’s investment landscape?

Vivian: Clamping down on China has become a bipartisan effort in the United States. This creates a risk factor for investors that has little to do with fundamentals. If you look at restrictions on semiconductor sales to China, for example, China could deal with the problem technically and practically over time, but it raises bigger concerns about the investability of Chinese equities. A U.S.-based investor must ask whether the U.S. government may eventually put China-based tech companies on the restricted entity list.

Clifford: In the bond market, we are dealing with the same investability issue. Several Chinese companies deemed to have close connections to the military have suddenly been put on the restricted list. You cannot research this kind of risk, because you do not know the rationale behind it and it is hard to anticipate. It also raises the question of whether these restrictions will extend to the sovereign side. If we talk about tail risks in Chinese investment, this is a big one.

Final Takes?

Vivian: Growth-oriented, higher-valuation companies underperformed in 2022 despite China’s accommodative monetary environment. If you combine earnings recovery with attractive valuations and a stabilizing regulatory environment, plus gradual reopening and continued policy support, we believe 2023 may be a good year for quality growth investors.

Clifford: Being able to manage down the risk from this abrupt end of China’s zero-COVID policy is the key now. If it proves a success, the economy could surprise to the upside. While we believe a strong return in domestic consumption looks a lot more promising as we start 2023, better-than-expected export performance is also possible as the prospects for a global economic soft landing improve.

Vivian Lin Thurston, CFA, partner, is a portfolio manager on William Blair’s global equity team.

Clifford Lau, CFA, is a portfolio manager on William Blair’s emerging markets debt team

Want more insights on the economy and investment landscape? Subscribe to our blog.

The J.P. Morgan GBI-EM tracks the performance of bonds issued by emerging market governments and denominated in the local currency of the issuer, and is broader than the similar J.P. Morgan GBI-EM Global Diversified. (Index information has been obtained from sources believed to be reliable but J.P. Morgan does not warrant its completeness or accuracy. The indices are used with permission. The indices may not be copied, used, or distributed without J.P. Morgan’s prior written approval. Copyright 2022, JPMorgan Chase & Co. All rights reserved.)

Emerging Markets 2023 Outlook Series

Part 1 | Outlook 2023: Better Than Feared
Part 2 | Emerging Markets Equities: Positioned for a Rebound?
Part 3 | Emerging Markets Debt: Clearer Skies Ahead?
Part 4 | China: Zero-COVID Remains Key Growth Variable

The post China: Reopening Should Drive Growth appeared first on William Blair.

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Growing Number Of Doctors Say They Won’t Get COVID-19 Booster Shots

Growing Number Of Doctors Say They Won’t Get COVID-19 Booster Shots

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

A…

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Growing Number Of Doctors Say They Won’t Get COVID-19 Booster Shots

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

A growing number of doctors say that they will not get COVID-19 vaccine boosters, citing a lack of clinical trial evidence.

I have taken my last COVID vaccine without RCT level evidence it will reduce my risk of severe disease,” Dr. Todd Lee, an infectious disease expert at McGill University, wrote on Twitter.

A vial of the Pfizer-BioNTech COVID-19 vaccine is seen in a file photograph. (Justin Sullivan/Getty Images)

Lee was pointing to the lack of randomized clinical trial (RCT) results for the updated boosters, which were cleared in the United States and Canada in the fall of 2022 primarily based on data from experiments with mice.

Lee, who has received three vaccine doses, noted that he was infected with the Omicron virus variant—the vaccines provide little protection against infection—and described himself as a healthy male in his 40s.

Dr. Vinay Prasad, a professor of epidemiology and biostatics at the University of California, San Francisco, also said he wouldn’t take any additional shots until clinical trial data become available.

“I took at least 1 dose against my will. It was unethical and scientifically bankrupt,” he said.

Allison Krug, an epidemiologist who co-authored a study that found teenage boys were more likely to suffer heart inflammation after COVID-19 vaccination than COVID-19 infection, recounted explaining to her doctor why she was refusing a booster and said her doctor agreed with her position.

She called on people to “join the movement to demand appropriate evidence,” pointing to a blog post from Prasad.

“Pay close attention to note this isn’t anti-vaccine sentiment. This is ‘provide [hard] evidence of benefit to justify ongoing use’ which is very different. It is only fair for a 30 billion dollar a year product given to hundreds of millions,” Lee said.

Dr. Mark Silverberg, who founded the Toronto Immune and Digestive Health Institute; Kevin Bass, a medical student; and Dr. Tracy Høeg, an epidemiologist at the University of California, San Francisco, joined Lee and Prasad in stating their opposition to more boosters, at least for now.

Høeg said she did not need clinical trials to know she’s not getting any boosters after receiving a two-dose primary series, adding that she took the second dose “against my will.”

I also had an adverse reaction to dose 1 moderna and, if I could do it again, I would not have had any covid vaccines,” she said on Twitter. “I was glad my parents in their 70s could get covid vaccinated but have yet to see non-confounded data to advise them about the bivalent booster. I would have liked to see an RCT for the bivalent for people their age and for adults with health conditions that put them at risk.”

The U.S. Food and Drug Administration (FDA) granted emergency use authorization to updated boosters, or bivalent shots, from Pfizer and Moderna in August 2022 despite there being no human data.

Observational data suggests the boosters provide little protection against infection and solid shielding against severe illness, at least initially.

Five months after the authorization was granted, no clinical trial data has been made available for the bivalents, which target the Wuhan strain as well as the BA.4 and BA.5 subvariants of Omicron. Moderna presented efficacy estimates for a different bivalent, which has never been used in the United States, during a recent meeting. The company estimated the booster increased protection against infection by just 10 percent.

The FDA is preparing to order all Pfizer and Moderna COVID-19 vaccines be replaced with the bivalents. The U.S. Centers for Disease Control and Prevention, which issues recommendations on vaccines, continues advising virtually all Americans to get a primary series and multiple boosters.

Professor Calls for Halt to Messenger RNA Vaccines

A professor, meanwhile, became the latest to call for a halt to the Pfizer and Moderna vaccines, which are both based on messenger RNA technology.

At this point in time, all COVID mRNA vaccination program[s] should stop immediately,” Retsef Levi, a professor of operations management at the Massachusetts Institute of Technology, said in a video statement. “They should stop because they completely failed to fulfill any of their advertised promise[s] regarding efficacy. And more importantly, they should stop because of the mounting and indisputable evidence that they cause unprecedented level of harm, including the death of young people and children.”

Levi was referring to post-vaccination heart inflammation, or myocarditis. The condition is one of the few that authorities have acknowledged is caused by the messenger RNA vaccines.

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Tyler Durden Thu, 02/02/2023 - 19:10

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Inside The Secret Government Meeting On COVID-19 Natural Immunity

Inside The Secret Government Meeting On COVID-19 Natural Immunity

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

Four of…

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Inside The Secret Government Meeting On COVID-19 Natural Immunity

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

Four of the highest ranking U.S. health officials—including Dr. Anthony Fauci—met in secret to discuss whether or not naturally immune people should be exempt from getting COVID-19 vaccines, The Epoch Times can reveal.

National Institute of Allergy and Infectious Diseases Director Dr. Anthony Fauci during a Senate hearing in Washington on May 17, 2022. (Shawn Thew/Pool/AFP via Getty Images)

The officials brought in four outside experts to discuss whether the protection gained after recovering from COVID-19—known as natural immunity—should count as one or more vaccine doses.

“There was interest in several people in the administration in hearing basically the opinions of four immunologists in terms of what we thought about … natural infection as contributing to protection against moderate to severe disease, and to what extent that should influence dosing,” Dr. Paul Offit, one of the experts, told The Epoch Times.

Offit and another expert took the position that the naturally immune need fewer doses. The other two experts argued natural immunity shouldn’t count as anything.

The discussion did not lead to a change in U.S. vaccination policy, which has never acknowledged post-infection protection. Fauci and the other U.S. officials who heard from the experts have repeatedly downplayed that protection, claiming that it is inferior to vaccine-bestowed immunity. Most studies on the subject indicate the opposite.

The meeting, held in October 2021, was briefly discussed before on a podcast. The Epoch Times has independently confirmed the meeting took place, identified all of the participants, and uncovered other key details.

Dr. Jay Bhattacharya, a professor of medicine at Stanford University who did not participate in the meeting, criticized how such a consequential discussion took place behind closed doors with only a few people present.

“It was a really impactful decision that they made in private with a very small number of people involved. And they reached the wrong decision,” Bhattacharya told The Epoch Times.

An email obtained by The Epoch Times shows Dr. Vivek Murthy contacting colleagues to arrange the meeting. (The Epoch Times)

The Participants

From the government:

  • Fauci, the head of the U.S. National Institute of Allergy and Infectious Diseases and the chief medical adviser to President Joe Biden until the end of 2022
  • Dr. Vivek Murthy, the U.S. surgeon general
  • Dr. Rochelle Walensky, the head of U.S. Centers for Disease Control and Prevention (CDC)
  • Dr. Francis Collins, head of the U.S. National Institutes of Health, which includes the National Institute of Allergy and Infectious Diseases, until December 2021
  • Dr. Bechara Choucair, the White House vaccine coordinator until November 2021

From outside the government:

  • Offit, director of the Vaccine Education Center at Children’s Hospital of Philadelphia and an adviser to the U.S. Food and Drug Administration on vaccines
  • Dr. Michael Osterholm, director of the Center for Infectious Disease Research and Policy at the University of Minnesota and a former member of Biden’s COVID-19 advisory board
  • Akiko Iwasaki, professor of immunobiology and molecular, cellular, and developmental biology at Yale University
  • Dr. Peter Hotez, co-director of Texas Children’s Hospital Center for Vaccine Development and dean of the Baylor College of Medicine’s School of Tropical Medicine

Fauci and Murthy decided to hold the meeting, according to emails The Epoch Times obtained.

“Would you be available tonight from 9-9:30 for a call with a few other scientific colleagues on infection-induced immunity? Tony and I just discussed and were hoping to do this sooner rather than later if possible,” Murthy wrote in one missive to Fauci, Walensky, and Collins.

All three quickly said they could make it.

Walensky asked who would be there.

Murthy listed the participants. “I think you know all of them right?” he said.

Walensky said she knew all but one person. “Sounds like a good crew,” she added.

From top left, clockwise: Dr. Vivek Murthy, Dr. Francis Collins, Dr. Anthony Fauci, and Dr. Rochelle Walensky. (Getty Images)

‘Clear Benefit’

During the meeting, Offit put forth his position—that natural immunity should count as two doses.

At the time, the CDC recommended three shots—a two-dose primary series and a booster—for many Americans 18 and older, soon expanding that advice to all adults, even though trials of the boosters only analyzed immunogenicity and efficacy among those without evidence of prior infection.

Research indicated that natural immunity was long-lasting and superior to vaccination. On the other hand, the CDC published a paper in its quasi-journal that concluded vaccination was better.

Osterholm sided with Offit, but thought that having recovered from COVID-19 should only count as a single dose.

“I added my voice at the meeting to count an infection as equivalent to a dose of vaccine! I’ve always believed hybrid immunity likely provides the most protection,” Osterholm told The Epoch Times via email.

Hybrid immunity refers to getting a vaccine after recovering from COVID-19.

Some papers have found vaccination after recovery boosts antibodies, which are believed to be a correlate of protection. Other research has shown that the naturally immune have a higher risk of side effects than those who haven’t recovered from infection. Some experts believe the risk is worth the benefit but others do not.

Hotez and Iwasaki, meanwhile, made the case that natural immunity should not count as any dose—as has been the case in virtually the entire United States since the COVID-19 vaccines were first rolled out.

Iwasaki referred to a British preprint study, soon after published in Nature, that concluded, based on survey data, that the protection from the Pfizer and AstraZeneca vaccines was heightened among people with evidence of prior infection. She also noted a study she worked on that found the naturally immune had higher antibody titers than the vaccinated, but that the vaccinated “reached comparable levels of neutralization responses to the ancestral strain after the second vaccine dose.” The researchers also discovered T cells—thought to protect against severe illness—were boosted by vaccination.

There’s a “clear benefit” to boosting regardless of prior infection, Iwasaki, who has since received more than $2 million in grants from the National Institutes of Health (NIH), told participants after the meeting in an email obtained by The Epoch Times. Hotez received $789,000 in grants from the NIH in fiscal year 2020, and has received other grants totaling millions in previous years. Offit, who co-invented the rotavirus vaccine, received $3.5 million in NIH grants from 1985 through 2004.

Hotez declined interview requests through a spokesperson. Iwasaki did not respond to requests for comment.

No participants represented experts like Bhattacharya who say that the naturally immune generally don’t need any doses at all.

In an email obtained by The Epoch Times, Akiko Iwasaki wrote to other meeting participants shortly after the meeting ended. (The Epoch Times)

Public Statements

In public, Hotez repeatedly portrayed natural immunity as worse than vaccination, including citing the widely criticized CDC paper, which drew from just two months of testing in a single state.

In one post on Twitter on Oct. 29, 2021, he referred to another CDC study, which concluded that the naturally immune were five times as likely to test positive compared to vaccinated people with no prior infection, and stated: “Still more evidence, this time from @CDCMMWR showing that vaccine-induced immunity is way better than infection and recovery, what some call weirdly ‘natural immunity’. The antivaccine and far right groups go ballistic, but it’s the reality.”

That same day, the CDC issued a “science brief” that detailed the agency’s position on natural immunity versus the protection from vaccines. The brief, which has never been updated, says that available evidence shows both the vaccinated and naturally immune “have a low risk of subsequent infection for at least 6 months” but that “the body of evidence for infection-induced immunity is more limited than that for vaccine-induced immunity.”

Evidence shows that vaccination after infection, or hybrid immunity, “significantly enhances protection and further reduces risk of reinfection” and is the foundation of the CDC’s recommendations, the agency said.

Several months later, the CDC acknowledged that natural immunity was superior to vaccination against the Delta variant, which was displaced in late 2021 by Omicron. The CDC, which has made misleading representations before on the evidence supporting vaccination of the naturally immune, did not respond to a request for comment regarding whether the agency will ever update the brief.

Iwasaki had initially been open to curbing the number of doses for the naturally immune—”I think this supports the idea of just giving one dose to people who had covid19,” she said in response to one Twitter post in early 2021, which is restricted from view—but later came to argue that each person who is infected has a different immune response, and that the natural immunity, even if strong initially, wanes over time.

Osterholm has knocked people who claim natural immunity is weak or non-existent, but has also claimed that vaccine-bestowed immunity is better. Osterholm also changed the stance he took in the meeting just several months later, saying in February 2022 that “we’ve got to make three doses the actual standard” while also “trying to understand what kind of immunity we get from a previous infection.”

Offit has been the leading critic on the Vaccines and Related Biological Products Advisory Committee, which advises U.S. regulators on vaccines, over their authorizations of COVID-19 boosters. Offit has said boosters are unnecessary for the young and healthy because they don’t add much to the primary series. He also criticized regulators for authorizing updated shots without consulting the committee and absent clinical data. Two of the top U.S. Food and Drug Administration (FDA) officials resigned over the booster push. No FDA officials were listed on invitations to the secret meeting on natural immunity.

Fauci and Walensky Downplay Natural Immunity

Fauci and Walensky, two of the most visible U.S. health officials during the pandemic, have repeatedly downplayed natural immunity.

Fauci, who said in an email in March 2020 that he assumed there would be “substantial immunity post infection,” would say later that natural immunity was real but that the durability was uncertain. He noted the studies finding higher antibody levels from hybrid immunity.

In September 2021, months after claiming that vaccinated people “can feel safe that they are not going to get infected,” Fauci said that he did not have “a really firm answer” on whether the naturally immune should get vaccinated.

“It is conceivable that you got infected, you’re protected—but you may not be protected for an indefinite period of time,” Fauci said on CNN when pressed on the issue. “So I think that is something that we need to sit down and discuss seriously.”

After the meeting, Fauci would say that natural immunity and vaccine-bestowed immunity both wane, and that people should get vaccinated regardless of prior infection to boost their protection.

Walensky, before she became CDC director, signed a document called the John Snow Memorandum in response to the Great Barrington Declaration, which Bhattacharya coauthored. The declaration called for focused protection of the elderly and otherwise infirm, stating, “The most compassionate approach that balances the risks and benefits of reaching herd immunity, is to allow those who are at minimal risk of death to live their lives normally to build up immunity to the virus through natural infection, while better protecting those who are at highest risk.”

The memorandum, in contrast, said there was “no evidence for lasting protective immunity to SARS-CoV-2 following natural infection” and supported the harsh lockdown measures that had been imposed in the United States and elsewhere.

In March 2021, after becoming director, Walensky released recommendations that the naturally immune get vaccinated, noting that there was “substantial durability” of protection six months after infection but that “rare cases of reinfection” had been reported.

Walensky hyped the CDC study on natural immunity in August 2021, and the second study in October 2021. But when the third paper came out concluding natural immunity was superior, she did not issue a statement. Walensky later told a blog that the study found natural immunity provided strong protection, “perhaps even more so than those who had been vaccinated and not yet boosted.”

But, because it came before Omicron, she said, “it’s not entirely clear how that protection works in the context of Omicron and boosting.”

Walensky, Murthy, and Collins did not respond to requests for interviews. Fauci, who stepped down from his positions in late 2022, could not be reached.

Murthy and Collins also portrayed natural immunity as inferior. “From the studies about natural immunity, we are seeing more and more data that tells us that while you get some protection from natural infection, it’s not nearly as strong as what you get from the vaccine,” Murthy said on CNN about two months before the meeting. Collins, in a series of blog posts, highlighted the studies showing higher antibody levels after vaccination and urged people to get vaccinated. He also voiced support for vaccine mandates.

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Tyler Durden Thu, 02/02/2023 - 21:10

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Apple Pares Much Of Drop During Earnings Call

Apple Pares Much Of Drop During Earnings Call

Update 6:00pm:  Apple has staged a remarkable reversal after hours, and erased almost the entire…

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Apple Pares Much Of Drop During Earnings Call

Update 6:00pm:  Apple has staged a remarkable reversal after hours, and erased almost the entire loss after the company said that it expects a 5% impact from FX rates in Q2, and also expects iPhone revenue growth to accelerate in Q2. CEO Tim Cook was also asked whether the move to higher ASPs for the iPhone is sustainable in light of the sharp decline in sales, and whether this will continue in a worsening economy. Cook said the 14 Pro and 14 Pro Max did extremely well until the supply-chain constraints. He says this is definitely a “strong Pro cycle” and credits the new features in the device. He says he’s happy that Apple is now shipping to the demand.

Tim Cook also said that AI is critical to Apple and mentions features like crash-and-fall detection and the use of AI in features like EKG on the Apple Watch. He says AI will effect everything the company does, including all products and services.

Apple is quite bullish on India and other emerging markets, with CEO Tim Cook saying the company will soon open its first retail stores in India. He also said Apple saw marked improvement in China in December (versus November) after another round of Covid re-openings.

As Bloomberg notes, the company also stuck to a line that revenue and sales of individual product categories would have been higher if not for supply-chain constraints and issues stemming from the macroeconomic environment.

* * *

With both Amazon and Google sliding after reporting disappointing earnings and mixed guidance, it was all up to the world's biggest company, AAPL, to provide some hail mary for the tech earnings season which for better or worse is concentrated in a one hour stretch this afternoon. Alas, it was not meant to be and after missing on the top and bottom line, AAPL has joined the parade of selling and tumbled after hours due to numbers which the market was clearly not impressed with.

  • EPS $1.88 vs. $2.10 y/y, missing estimate $1.94
  • Gross margin $50.33 billion, -7.2% y/y, missing estimate $52.03 billion
  • Revenue $117.15 billion, -5.5% y/y, missing estimate $121.14 billion
    • Products revenue $96.39 billion, -7.7% y/y, missing estimate $98.98 billion
    • IPhone revenue $65.78 billion, -8.2% y/y, missing estimate $68.3 billion
    • Mac revenue $7.74 billion, -29% y/y, missing estimate $9.72 billion
    • IPad revenue $9.40 billion, +30% y/y, beating estimate $7.78 billion
    • Wearables, home and accessories $13.48 billion, -8.3% y/y, missing estimate $15.32 billion
    • Service revenue $20.77 billion, +6.4% y/y, beating estimate $20.47 billion
    • Greater China rev. $23.91 billion, -7.3% y/y, beating estimate $21.8 billion
  • Cash and cash equivalents $20.54 billion, -45% y/y, estimate $29.91 billion

And here is AAPL's diluted EPS in context: needless to say, could have been better.

Commenting on the quarter, Tim Cook said that “during the December quarter, we achieved a major milestone and are excited to report that we now have more than 2 billion active devices as part of our growing installed base.”

CFO Luca Maester chimed in: “our record September quarter results continue to demonstrate our ability to execute effectively in spite of a challenging and volatile macroeconomic backdrop. We continued to invest in our long-term growth plans, generated over $24 billion in operating cash flow, and returned over $29 billion to our shareholders during the quarter. The strength of our ecosystem, unmatched customer loyalty, and record sales spurred our active installed base of devices to a new all-time high. This quarter capped another record-breaking year for Apple, with revenue growing over $28 billion and operating cash flow up $18 billion versus last year.”

Going back to the results, Apple missed consensus revenue in most product categories, with the exception of iPads, to wit:

  • IPhone revenue $65.78 billion, missing estimate $68.3 billion
  • Mac revenue $7.74 billion, missing estimate $9.72 billion
  • Wearables, home and accessories $13.48 billion, missing estimate $15.32 billion
  • IPad revenue $9.40 billion, beating estimate $7.78 billion

Of note: Apple recorded its first decline in iPhone revenue since the third quarter of 2020; yet in context, the 8% drop was still less than the 20% decrease reported by Samsung. Other major smartphone providers that have yet to report are expecting to see double-digit losses. Ironically, Apple may have fared comparatively well on smartphone revenue.

The silver lining: service revenue $20.77 billion, +6.4% y/y, beating estimates of $20.47 billion...

... and rose 6.5% Y/Y, an improvement from last quarter's 5.0%

One other place where investors were pleasantly surprised was China sales, which at $23.91 billion, beat the estimate of $21.8 billion by more than $2 billion.

None of that changes the fact that AAPL's sales by region were uniformly negative across the board.

And another potential problem: AAPL's gross cash continues to slide, dropping to $165 billion, the lowest since June 2014...

... while cash net of debt rebounded modestly from $49 billion to $54 billion, just above a 12 year low with the company having spent hundreds of billions on stock buybacks. Let's hope that Apple doesn't actually need to use that cash.

Commenting on the results, Bloomberg writes that the results show that Apple hasn’t been able to dodge the tech slowdown afflicting many of its competitors. Demand for smartphones and computers has slumped in the past year, and Covid-19 restrictions in China added to Apple’s woes during the holiday sales period. Timing was another issue: The company didn’t launch new Macs and HomePods until recent weeks, missing the end of the first quarter.

In response to these disappointing earnings, the stock predictably slumped as much as 4% before recouping some losses, although even with the drop it is back to where it was... yesterday.

Tyler Durden Thu, 02/02/2023 - 18:05

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