What to expect of 2022

Time to reflect on 2021 and anticipate a bit of what 2022 will have in store. Obviously, with a focus on the items that I care particularly about.

Covid pandemic dies in 2022

• Provided we do not get some kind of nasty new variant that is at the same time virulent, quick spreading, evades vaccines' protection, and cannot be medicated, I think we will see the end of Covid as a pandemic as the virus will have run out of transmission vectors (people traveling) to infect.
  As per the chart below, we can observe that there has been a new variant taking over and creating a new wave about every 6 months. However, as we can see, the Omicron variant, while a lot more contagious, has also been a lot less virulent (South Africa vaccination rate is about 33% (1st dose) as of January 19th 2022.
  Same trend seems to be forming in the U.S of massive but short Omicron wave (and here), as well as in Canada and other countries (here, here).
  
  It is also what Noubar Afeyan, the co-founder of Moderna believes (He does have a lot of very interesting things to say in his 2022 annual letter/essay. Have a read). It is the belief of many (Euro WHO here, Fauci here)
  
  
• Ezekiel J. Emanuel, Michael Osterholm, David Michaels, Rick A. Bright, and Celine R. Gounder propose, in the Journal of the American Medical Association, a strategy "for the 'New Normal' of Life With COVID", here, here, and here, where "This 'new normal' will occur when total respiratory viral infections, hospitalizations, and deaths inclusive of those from COVID-19 are no higher than what typically occurred in the most severe influenza years before the current pandemic. Integral to achieving and sustaining this “new normal” are both faster development and more efficient deployment of vaccines and therapeutics." 
  
  
• '"With the increase of immunity in population -- and with Omicron, there will be a lot of natural immunity taking place on top of vaccination -- we will be fast moving towards a scenario that will be closer to endemicity," he added." - European Medicines Agency (EMA)
  
  

In summary, the Omicron wave may well be final one in this pandemic as it is so highly contagious that most everyone will catch it, including population in countries that cannot afford the vaccines, thereby building at least short term heard immunity in a very short period of time while not having catastrophic health incidences. This could mean that a new variant would not have the required time to emerge without being knocked-out by immune hosts or by a competing variant, enabling the world to prepare for the next variant and prevent it from going pandemic.

In Hong Kong, the extremely poor performance of Carrie Lam's government should be a reminder of why universal suffrage's built-in accountability is "a good thing" and usually leads to better governance:

• The lack of independent leadership in her administration's management of Covid in the later part of 2021 resulted in the inextricable situation Hong Kong is currently in.
  It follows a ludicrous Zero-Covid policy which will fail because
  1. It is by nature impossible to reach zero Covid cases in the long-run, the same way it is not possible to have no flu season in the long run. This is made further unlikely by China not agreeing on approval of superior vaccines, for political reasons, and
  2. Striking a deal for border re-opening with mainland China requires transparency of case reporting. Otherwise, undeclared Covid cases crossing the border to Hong Kong would result in constant containment policy stop-and-go. This required transparency is inexistent North of the Hong Kong border.
  As the Zero-Covid policy continues to push high-value expats out of the city and locals alike (and here), there will be increasing pressure on Lam's government to reverse her 'China alignment at all costs' attitude. Whether that materializes in 2022 or will the economy need to suffer more until she exits her zero-Covid delusion, time will tell. 
  
  
• It is quite revealing that Beijing's way of leveraging the NSL to quell dissent and force alignment by making any minor offense a NSL one finds an echo in Myanmar's military dictatorship imprisoning Aung San Suu Kyi for having walking talkies in her home and violating Covid protocols. This page from the well-known authoritarian playbook should leave no doubt to anyone as to where this is leading for Hong Kong's rule-of-law. The very pillars of democracy which were present in Hong Kong are being dismantled one by one, much faster than what I had forecasted. 
  
  
• I expect 2022 to see more non-Bejing-aligned press outlets to be targeted by the thought-police until the only remaining ones are topics other than political ones, for fear of retribution. Expect to see more articles about hiking, outings, and about your favorite Canto-pop stars...
  Free media outlets who believe that they can avoid the ire of the NSL Gestapo or the Beijing sycophants by covering politically sensitive subject indirectly by re-publishing international press agency's articles should be careful; the NSL will, for sure, get to a point where they will qualify this activity as 'foreign influence into local politics' and will come down hard on it. I believe we will see the first instance of this in 2022
  
  
• A combination of the Zero-Covid and Beijing's additional restrictions on foreign companies doing business in Hong Kong will result in Hong Kong 2022 GDP growth to be, at best 2%, most likely closer to 0. And that's just because it was starting the year from an exceptionally low base.
  
  

2022, the first of China's lost 10 years?

• For years, Chinese property developers have been overleveraging debt, building empty cities with the local and central government's blessing. And now they are defaulting en-masse (here, here, even the blue-chip ones there). 2022 is expected to see continued property price falls, and sharp drops in land sales. 
  With property accounting for 70% of Chinese people's assets, should the sector collapse, it would spell serious trouble for XI and the CCP, who are boasting to be master managers. It would also deal a major blow to the concept of the Chinese political system being an example to follow. The property slump is so bad that property agencies have to remake their businesses. I have little faith in Xi's push to reign-in developers via the big government's paw; that has never worked anywhere and there is no evidence it would in China.
  
  
• GDP headwinds could become permanent. Goldman Sach already predict an anemic 4.3% in 2022. Rate cuts are on the books, which can only blow the property asset bubble. Little ways out of this conundrum...
  
  
• Some analysts announce a 70% chance of stock compression: that is the canary in the coal mine.
  
  
• Xi is also cracking down on tech industries, the very part of the private sectors he needs to see flourish if there's any hope to China to escape middle-income trap (see here, and more here)
  
  
• Zero Covid policy is completely idiotic, having side effects on all sectors of the Chinese economy (here, here, and here) and on society in general, without delivering any meaningful results as the CCP refuses to admit that China does not have potent home-grown Covid vaccines.
  I write 'meaningful' results as the results the CCP will boast about are nothing but propaganda. The CCP lied at every management level at the pandemic's inception. Why would it be any different now?

"In fact, based on excess mortality calculations, The Economist estimates that the true number of Covid deaths in China is not 4,636 – but something like 1.7 million. 

That is, China’s cumulative death toll is likely at least double that of the United States. "

- Forbes

 

• The true nature of the outbreak can only be seen indirectly via reports comparing Omicron spread vs the Wuhan original.
  
  
• Investments bank turn bullish again on China (some do not) but that is no surprise; where there's risk, there are opportunities. However, I think that in the mid-term (2-5 years), firms and investors are going to get burnt as Xi will continue to lead its crackdown with his Neo-Mao doctrines, (also here, here, and here). The big fallacy here is that you can at the same time increase the market's role in resource allocation and have heavy control of the invisible hand.
  
  
• China neo-imperialism, also known as Belt and Roads is seing a backlash (here, here, here, here, and here) which will strain support for Xi and China in general.
   
• Finally, China is aging... fast! Even with the relaxation of the one child policy, the Chinese do not make babies. 
  "Births fell to 10.6 million in 2021, compared with 12 million the year before. That was fewer even than the number in 1961, when Mao’s Great Leap Forward resulted in widespread famine and death."
  
  And these are the official numbers. As with any number coming from the CCP, it is likely that the situation is far worse and underreported. More details on the impacts on China's GDP here. My bet is that China's population did not reach 1.4 billion, and it never will. History will show that Q1-2022 has seen India pass China to take the number 1 spot of most populous country in the world.  

In Quebec...

• Quebecers are going to re-elect La CAQ (the centrist, populist party founded by retired businessman Francois Legault) with a crushing majority. Legault's team would have to make serious mistakes between now and October 3rd not to get another 4 years term with a lot more seats than they got in 2018.
  
  
• CAQ will gain another 20 seats due to their management of the Covid pandemic, but also as they are now seen by the more "conservative" PQ and Liberals voters as a proven alternative to the old parties.
  
  
• Duhaime's Conservative party will get at most 5% of the popular vote if Covid-19 has abated by then and if the related social restriction measures are removed. Eric Duhaime has failed to make his party anything other than one of the whinos and the antivaxxes, with little substance otherwise. PCQ will get no seat. Duhaime will resign as the PCQ's leader and go back to being an opinion radio host. He will probably write a book about his experience during the Covid-19 years and as the leader of the PCQ. The book will sell less than 2000 copies.
  
  
• Little change for Quebec Solidaire which will remain the default option for the left-leaning electorate.
  
  
• Parti Quebecois will be decimated (less than 5 seats) for the following reasons:
• The identity nationalists (which are not to be confused with the separatists) have found a home with La CAQ via Legault's stance on 'laicite' (Bill 21). That will be a number of percentage points moving from PQ to CAQ
• Since PQ has all but abandoned the idea of pushing for Quebec's secession from Canada, its electors that were lightly right-leaning have migrated to CAQ. A portion of the lightly left-leaning electors will also move to CAQ, and some further on the left, will go to QS.
• PQ does not have a charismatic leader that could sway the electorate. Therefore, only the hardcore independentists will hang on to the party as it slowly fades to oblivion. 
  

In the U.S:

• Trump will NOT announce his run for the 2024 elections this year as doing so would limit his ability to use the funds he raises "on behalf of the Republican party" for personal purposes while he is dangling a potential bid. This is as close to a con as one can get without any legal implications! 
  
  
• Senate will go back to the Republicans
  
  
• Rampant inflation of 2021 should abate in the second half of 2022 (probably set around 3.5-4.5%) as logistic issues are being resolved and buyers move from goods to services spending as Omicron recedes. Inflation was compounded by necessary yet inflationary Covid-related consumption assistance program, and its related price pressure should recede as these programs are phased out. In layman's term, the logistic systems were built for a set and predictably growing quantity of goods being bought. As people became unable to consume services (travel, restaurants, arts, sporting events, etc), they shifted to consumption of goods, very rapidly over the past year, even more so because they were being financially incentivized to do so by the governments, even when they lost their jobs (a lot of free time, and nothing to do). Cost of energy should also go down as national reserves are being used further and OPEP turns the tap.
  The last part of this inflation equation is labor cost; with the great resignation, will people come back to work to move the goods, work retail jobs, and all the other sectors that have seen labor cost increase significantly? That's a harder one. I think that, as businesses increase wages, they will.
  
  
  
  
  
  
  
  
• On the other hand, the U.S economy is doing gloriously. So much so that the Federal Reserve will need to tame the underlying inflation through earlier and faster interest-rate increases than previously expected. 
  
  
• The 2022 redistricting (and here) might not have such disastrous consequences as I initially feared. The reason seems strategic as Republicans, understanding that the Democrats are ideologically better aligned with the majority of Americans that they are, chose to redistrict for the long-term gains rather than making changes that would benefit them now but guarantee future losses (some believe it is actually worse but I believe long term fixes will be unavoidable and so lessen that impact in a 5 years horizon). 
  
  
• Still, mid-terms usually see the house shift party. There is no reason to think that it would be different this time.
  
  
• The infrastructure plan recently passed will yield its benefit 2024 and onwards so, nothing good to reap politically for the mid-terms.
  
  
• Dependency on China for computers parts and cheap products is a clear & present danger as the CCP's non-market driven, senseless, and politically motivated & controlling policies have ripple effects on the U.S (here). I would like to see Biden take bold steps in 2022 to decouple and establish a new "factory of the world". 
  
  
• For the world's sake, it would be good if Trump were found guilty of any of the number of crimes he is accused of (The list is "yuge" !) in the first half of the year. I will have a more extensive bit about this in another post.
  

Various musings

• 2022 might be the year of reckoning for Bitcoin and other virtual currencies. I would not mind. Until these digital currencies show what they are socially and economically useful; besides for speculation and to obfuscate criminal transactions (here, and here), I will certainly abstain from investing my money there. It does not mean there is no money to be made; quite the opposite, there is tons of money to be made. BTW, drug lords make money too.
  
  
• Similarly, in my view, NFT is the bitcoin of the "art" world. I think we may see interest in NFT fade much faster than for digital currencies. But then again, people are willing to pay a lot of money for virtual apartments in the "metaverse". So, what do I know?

In closing, my own 2022 resolutions

• Continue to actively manage my investment portfolio; I achieved 14% growth in 2021 vs previous 3 years average of about 6%. I was too focused on work and other concerns before 2021 but I realized that I could no longer sit idle and watch my portfolio stall. Remember, you will never become rich sitting only on what your employer pays you !
  
  
• May told me I am an information addict. Made me reflect on whether that is true, and whether that can be a bad thing. Yes, and yes! I did spend at least 4 hours a day reading/watching news and other current affairs emails, papers, newsfeed, from all major media outlets. That was the first thing I was doing in the morning (6am) to the last I was doing before falling asleep (around 21:30/22:00). I did get to a point where it became a bit obsessive-compulsive.
  What I did cut from my information stream is the Quebec crazy conspiracy theory bubble... I was spending too much of my time on this (maybe 45 minutes to 1.5 hour a day). I stopped following and interacting with a LOT of the crazy people and their groups. I also got out of many groups on Facebook which are denouncing the crazies as, although entertaining, these guys were also taking a lot of my time.
  
  
• But why was I doing it in the first place? It is not a case of schadenfreude (taking pleasure in someone else's pain) but rather, a belief that in order to understand where things are going, you need to understand where things are coming from. And to understand the anti-vaxx community, you need to be exposed to the way they think and act; to enter their "information" bubble. 
  But nowadays, the anti-vaxx crowd in Quebec has become completely irrelevant, yields no social nor political power. I therefore assessed that there is no longer any knowledge to be acquired by listening to them and no social risks in them continuing to spread lies.
  Their protests have all but shrunk to a few hundred excited lunatics. The few remaining leaders have made a business (here, here, here, and here) of peddling fear of the vaccine, the "great reset", and other utterly debunked fallacies. The same way it is worthless to spend a minute debating or learning about flat earthers.
  
  
• Moderate hyper commitment and do it now attitude: as part of my professional life, I have to commit to everything I do in terms of time to delivery, quality, and quantity. That requires a very high level of effective time management and prioritization, and the pace of change dictates that there be no procrastination. It has work very well for me and I also use the same precepts in my private life. However, 2021 has made me realize that I need to 1. Leave more room for private life as work was taking too many hours of my days and 2. I have to slow down on the projects that I take for myself outside of work and stop having the same level of work commitments and 'do it now'. Otherwise, it creates tensions in my personal relationships due to unfulfilled and unnecessary expectations I may have of others, and/or of myself.