Today I deviate somewhat from the financial markets to bring forth a relevant point that equally translates from the medical field. We look at the reported effectiveness of the Pfizer Covid vaccine. Please be advised that I do not have a personal opinion on the vaccine’s effectiveness; however, I merely report what it has been less obvious when reading the government data. Here I will take you through the process by which the reported effectiveness is derived and how it might not necessarily be obvious from the initial CDC reports.
The point above from the CDC is linked to its Morbidity and Mortality Weekly Report where it explains in further detail how the 95% effectiveness is derived. Specifically, the relevant section (copy/pasted below in italics and in parenthesis) states the following [with my comments in brackets]:
“The body of evidence for the Pfizer-BioNTech COVID-19 vaccine was primarily informed by one large, randomized, double-blind, placebo-controlled Phase II/III clinical trial that enrolled >43,000 participants (median age = 52 years, range = 16–91 years) (5,6).”
[My Comment: 43K seems like a large number of people
tested for a vaccine. My mind thinks:
this number of people from where the 95% effectiveness was derived.]
“Interim findings from this clinical trial, using data from participants with a median of 2 months of follow-up, indicate that the Pfizer-BioNTech COVID-19 vaccine was 95.0% effective (95% confidence interval = 90.3%–97.6%) in preventing symptomatic laboratory-confirmed COVID-19 in persons without evidence of previous SARS-CoV-2 infection.”
[My Comment: Here is the first catch: how many “symptomatic
laboratory-confirmed COVID-19 in persons without evidence of previous
SARS-CoV-2 infections” are we talking about? If they clearly call out this
group, it must mean that the 43K sample noted previously included people who
were infected or had been infected, or were not able to be determined. Nowhere
in the CDC article are we told the number of “symptomatic laboratory-confirmed
COVID-19 in persons without evidence of previous SARS-CoV-2 infections”]
“Consistent high efficacy (≥92%) was observed across age, sex, race, and ethnicity categories and among persons with underlying medical conditions.”
[My Comment: Presumably, this is representative of “symptomatic laboratory-confirmed COVID-19 in persons without evidence of previous SARS-CoV-2 infections”.]
“Efficacy was similarly high in a secondary analysis including participants both with or without evidence of previous SARS-CoV-2 infection.”
[My Comment: Here is another clue leading us to conclude
that the 43K sample included a mixed bag of people who were exposed to COVID.
But, again, nowhere in the CDC article are told of this breakdown.]
With that background and question at hand, namely, how many “symptomatic laboratory-confirmed COVID-19 in persons without evidence of previous SARS-CoV-2 infections” are there, we went to The New England Journal of Medicine where they clearly state that “[t]here were 8 cases of Covid-19 with onset at least 7 days after the second dose among participants assigned to receive BNT162b2 and 162 cases among those assigned to placebo; BNT162b2 was 95% effective in preventing Covid-19 (95% credible interval, 90.3 to 97.6).”
When you divide the 162 who did not get COVID by 170, and then multiply by 100, you then get the 95% vaccine effectiveness that is being widely reported. It is not, as you might be led to conclude, based on the 43K total being reported in the CDC article.
Lesson Learned: Always check the data and the critically think through categorical statements being made.
I have written about the exorbitant expansion of the FRB’s balance sheet. An equal important measure is how fast that money injection is multiplying in the economy. Putting it simply, when the FRB injects money in the economy it ends up creating additional money via the banking system. For example, assume the FRB injects $100 in the economy, and assume that banks are required to hold 10% on demand and lend the rest, that would translate in an additional $900 dollar created out of thin air ([100/0.1] – 100). In this example, the money multiplier would be 10%. In the real world there are other variables to consider, but broadly speaking, the example is indicative of how the money creation process works and the importance of taking into account the rate of multiplication. It goes without saying that the extra funds created would chase other goods, and what we would expect to see is prices rising somewhere in the economy. And this is what we have seen starting about May 2020. I have estimated the money multiplier as the ratio between M1 and the Monetary Base.
The graph below shows you the time period from April 2018 to the present. What is obvious that the money multiplier was picking up speed during most of 2018, which fueled the stock market bull run prior to the government-induced shutdown of the economy. The economic shutdown had the obvious effect of decelerating the money multiplication process. But what becomes obvious is that the money multiplier has picked up speed in particular during the latter part of 2020. This has translated at present in record setting numbers in the equity market. It is critical to understand that the money multiplier metric is backward-looking, so we must make some sort of assumption about the future. What we know is that the money creation process is still continuing and that gives support to the continuing rise of the equity market in the very short term (which I define here in the next 2 months), all things being equal. However, as this rate continues to decline, it will be another sign that a correction in prices is soon coming.
Money Multiplier
Posts
All Comments
