Prolonged Supply Chain Disruptions => Global Economic Recession

Previously I commented some preliminary already tangible aspects on the economy, regarding the coronavirus, yet the most important one remains. Prolonged Supply Chain Disruptions. This crisis has shown the heavy reliance the world has on China fo manufacturing. With a significant portion of its economy shutdown, overseas retailers depend on previous product stock to supply the markets. Nevertheless, since this shutdown doesn't appear to end soon, and neither does Covid-19, remaining stock will run out eventually. Recently, the first crisis-related drug shortage was identified in the US. Now, there are plenty of companies abroad that relay on Chinese manufacturing, and for companies to stay afloat amid less sales due to less product availability, is lo lay off workers. When workers are jobless, they won't spend much, further reducing demand, which is already dimming because of the prioritization on buying essential goods ahead of the imminent crisis.

Markets are tanking with deep corrections as well as bond yields lowering to record levels, neither the market nor the health sector see a near end to the situation.

Momentarily Risking Schengen's Ideal Over Fears of a Coronavirus-Affected European Economy

We've seen how Italy is propagating the coronavirus inside Europe, there are cases in Austria, Switzerland, and more cases in France (via Italy) and Spain, in Barcelona and Tenerife. Still, Schengen border closures have been ruled out by the EU. I would rather say that the Italian border could be closed for the time being, based on the following arguments. First, patient zero in Italy hasn't been located consequently there is no known transmission route. Second, Italy is not a bastion in the European economy. Europe could be most affected by the spread of the coronavirus to the engine and heart of its economy than by the closure of borders with Italy. Since the containment in Italy is failing, the safest option would be to close borders.

Why do I Expect Stocks to Keep Falling

I expect stocks to keep falling through this week, since the failed coronavirus containment in Italy. Some analysts would have expected rebounds for Tuesday after Monday's slide sustaining their predictions on 'normal' precedents on the market. Nevertheless, in this case, we're facing a continuos myriad of coronavirus outbreak related announcements. Since they are not independent and distanced menaces, but continuos ones that risk to keep increasing, a rise on the market in the coming days would be certainly uncanny. With stocks poised to lower prices, investors would rather not buy until the situation becomes stable.

Update
With a statement deeming the spread of the virus over the US as inevitable, the previous arguments make a cause.

Gilead's Remdesivir Touted as Possibly Effective by the WHO

Remdesivir was touted yesterday as possibly effective against COVID-19 by the WHO. As a result of the announcement, the market increased its interest in Gilead Sciences' product, being one of the lone stocks winning market capitalization. Additionally, the results of clinical trials with remdesivir will be available within weeks, possibly in April.

The other pharmaceutical company rising as of Tuesday is Moderna, which announced the shipment of potential vaccines for human testing.

The Beginning of a "Possibly"-Pandemic-Fuelled Global Recession

The coronavirus that first appeared in China, menaces to slow the world economy and start a pandemic. Last week, some sectors in the market and the public became more optimistic on the outcome of the health crisis, given that the increase of cases in China had slowed down. At the dawn of the outbreak, China forcefully had to shutdown areas that represent 80% of its GDP and 90% of its exports, spurring work from home. The slowdown in China doesn't just represent a restraint in production, but in demand too. The demand slump refrains the "world's biggest car market" from buying, with a 92% fall in car sales. Besides, China accounts for the supplier of electronics, such as the iPhone, and a market that will neither buy phones for now, thus tanking Apple shares down. Adding up all the supply-chain disruptions, China's condition will badly hurt other economies. Their central bank has lowered interest rates to stimulate the economy, and taxes have been cut.

Now the spotlight in the outbreak is outside of China. The window to avert the pandemic, becomes smaller. Having the virus spread and spike in South Korea, the Middle East and Italy.

As of 2017, 44% of South Korea's energy consumption accounted for petroleum, ethanol and biofuels and is the eight largest oil consumer in the world. Additionally, Samsung Electronics shutdown a phone factory in South Korea due to a case of coronavirus inside it. Yet, most of Samsung's production is outside of Korea.

If the containment in Italy is to fail, they surely will face recession. It was already an imminent risk because China is Italy's third largest supplier, plenty of their citizens do tourism in Italy and buy substantial amounts of their luxury goods. Notwithstanding, now with a perceptible risk within its borders, coronavirus ill-omens Italy's economy.

Don't Loose Rules on Political Debt

In Costa Rica, parties participating in elections are reimbursed their justified and checked expenses. Thus avoiding fraudulent reported expenses that would seek to steal money from the state.

Now, representatives are discussing to lighten the requirements to ask for these reimbursements, by removing the background checks performed by the state. The approval of such a norm would only boost and encourage corruption. There have been several attempts from some political parties to access this money from the state for inexistent expenses, and these have been discovered and reported with the procedures stated in the current law.

If the mentioned law project is to be approved, Costa Rica's finances and democratic system will be putted at risk.

How Dare you Compare Virgin Galactic Rise to Tesla's

Virgin Galactic has risen lots in market value on the last few weeks fueled by bullish behavior. This company doesn't have any revenue as of yet. It may have risen, but it shall go down soon since its price has been driven by sheer speculation and isn't backed by data.

At least Tesla's latest rally began boosted by announcements on improvements in revenue and production, and later got sustained by bulls and cult buyers, at the latter falling more than $200. So I think it is safe to presume that the risk and volatility of investing in Virgin Galactic is to high at the moment, its shares could fall any day from now, it wouldn't be an intelligent investment. The rise on its value is just obscure and irrational.

Primer on the R Language

Disclaimer: This material is based on my notes during an R course. It also includes content I consider important for starting. The original material may be found in a GITLAB repository.

Introducction and Basic Interface Commands

Clean a session of R: Ctrl + L

Save a script,in Mac OS Command+S; Linux/Windows Ctrl+S

A command may be interrupted using Esc o Ctrl+C You may want to interrupt a command when there is a loop that just won’t finish

Define the workspace (In RStudio you can also use Session > Set Working Directory > Choose directory)

setwd("PATH")
#Insert the path of your workspace

To run a selected line: In Mac, Command+Enter. In Linux or Windows Ctrl+Enter.

Using R for arithmetical calculations

1+100

## [1] 101

The order of arithmetical operations is respected

(3+(5*(2^2)))

## [1] 23

3 + 5 * 2^2

## [1] 23

1/100000

## [1] 1e-05

Exponential notation may be used

3e2

## [1] 300

3e-2

## [1] 0.03

Trigonometrical functions

Trigonometrical functions are incorporated

•          cos(x)

•          sin(x)

•          tan(x)

•          acos(x)

•          asin(x)

•          atan(x)

For default you must use radians

sin(pi/2)

## [1] 1

Logarithms

The function log() is a natural logarithm Be noticed that the number e, is written as exp(1) in the R language

log(exp(1))

## [1] 1

For a logarithm of base ’n’, use logn()

log2(2)

## [1] 1

Rational Operators

•          ‘>’ More than

•          ‘<’ Less than

•          ‘<=’ Less or equal than

•          ‘>=’ More or equal than

•          ‘==’ Equal

•          ‘!=’ Different

4 != 4

## [1] FALSE

Logical Operators

•          ‘!’ Logical negation

•          ‘&’ Logical conjunction by element

•          ‘&&’ Logical conjunction

•          ‘||’ Logical disjunction

Variable Assignation

Use the operator ‘<- o:p="">

x <- span=""> 9 #Assigning 9 to the value of x

x #Check the value of x

## [1] 9

x <- span="">1/3
y <-x span="">+1

Basic rules for variable assignation

a.        They can’t start with numbers or ’_’

b.        There should not be blank spaces within the name

Vectorization

1:10 #Create a vector with all whole numbers from 1 up to 10

##  [1]  1  2  3  4  5  6  7  8  9 10

1+1:10 #Sum 1 to each member of the vector

##  [1]  2  3  4  5  6  7  8  9 10 11

var<- span="">1:10
var*2 #Multiply by 2 every member of the vector

##  [1]  2  4  6  8 10 12 14 16 18 20

Consult the variables created

ls()

Delete elements

rm()

Example:

t=1

rm(t)

Administrating packages

Check for installed packages

installed.packages()

Install package

install.packages()

Update packages

update.packages()

Delete package

remove.packages()

Download package

install.packages()

”Activate” a package

library()

Search for help in R

-->

help()

Semi-Privatization of Health Services in Costa Rica for the Welfare of the State's Finances and the People

In Costa Rica there is free public healthcare, under the tutelage of the state in an institution known as 'Caja Costarricense del Seguro Social'. Public services are by definition inefficient, unsuccessfully attending all the subjects seeking medical care, with extensive lines for appointments. The best approach to minimize economic loses for the state, while offering a better service, is to contract private groups that would administrate and give the healthcare service to all the beneficiaries, but always as a free service. Under this system, the state finances the service while keeping an ongoing development of health service infrastructure and equipment along with a tight supervision of the services given. As seen here, contracts with private entities under a similar system would be more cost effective, cheaper, efficient and receive better reviews from the clients in comparison with those given directly by the state. Therefore, it is an arrangement where social policies remain intact and the finances of the state optimized.

Quick Thoughts on Epidemics

The last big epidemic in human history dates back to a century with the spanish flu. Those dead by the flu exceeded those deceased on WWI.

Today, medical practices and knowledge is far superior than the one possessed one hundred years ago. We’ve developed vaccines and have aquaintances on the nature of viruses. Taking into account only the technology advancements in medicine, we could suppose that we are properly prepared for the next big epidemic. Yet there is another important aspect that didn’t play a role a century ago, globalisation.

Nowadays, almost every spot on the globe is about a day away. Thus, the risk of a rapid spread of a pathogen increases drastically. More people can get sick than before, in a world where interactions between distant places are common and continuous.

So, are we actually safer?

Should China Use a Compulsory License for Medications?

Why isn't China using a compulsory license to produce medications that could possibly curb the advance of the coronavirus? With the Trade War with the United States, China has been accused of stealing Intellectual Property (with forced technology transfers...), and with the phase one agreement in mind, they have not much of a choice, requiring them to avoid any stain while they are under the spotlight. If China where to use a compulsory license to manufacture drugs like remdesivir, they would be surely blamed for violating patents of US companies. On the other hand, if the US were the one poised with a direct threat of the coronavirus and didn't own the patents on the potentially effective drugs, I don't think they would hesitate on bypassing and omitting the true owner of that license.

After all, Covid-19 is not just a threat to China, it is to the world. Even in that case, shouldn't they try to limit the spread of the virus by any means. Half the infected are now being treated with Traditional Chinese Medicine. With shortages in doctors (many are sick, and even dying) and medical equipment, China is overloaded to treat all those affected. The use of a compulsory license might be badly seen by the US, but it remains as one of China's options and it is of everyone's interest that the major outbreak is contained in China.

Thou, Currency Manipulator

Already being hit in recession with tariffs, China's economy will see a major slowdown with the virus on track. The yuan will depreciate even further, sparking Trump's claims like "they are currency manipulators"..."that is dishonest competition". Take as a recent case Argentina. They had a brutal devaluation on the peso, due to a debt crisis. As a consequence, they are slashed with tariffs on their steel because "they made it cheaper".

Behold Rationale in its Demise
Trump's policy is making the way for the coronavirus, dooming America's response to it. He has constantly slashed funds for healthcare and scientific investigations over the last few years. With health threats out there, he even proposes to slash further of the CDC budget.

An already fragile global economy will be hit by the virus. Traditional currency havens like the Japanese Yen, are poised to devaluate due to the virus. The outcome remains to be seen, but it looks bleak.