The Zimbabwe Event
January 27, 2021·9 comments·Money
Markets are priced for a smooth recovery despite mounting evidence of viral variants that outpace vaccines. While financial media ignores the risk, non-financial media documents variants spreading faster, infecting more severely, and potentially resisting immunity. Three Cabinet ministers died in Zimbabwe in a week. What happens when the virus moves faster than our defenses and the narrative of normalcy finally breaks?
• Financial media and general media are telling completely different stories about the same threat. While business outlets focus on earnings recovery and reflation narratives, medical and general news outlets document a virus that's becoming more infectious and more lethal with each new variant.
• The South African variant is spreading through a vaccination program that already has 40% coverage without slowing down. This suggests that vaccine rollouts won't create the immunity wall that markets are betting on, especially as new variants emerge faster than boosters can be administered.
• Antibody protection from previous infection is significantly less effective against the new variant. Since current vaccines work by mimicking that same antibody response, the implication is obvious but unspoken in financial circles.
• When critical government function collapses due to simultaneous deaths of senior officials, the power vacuum fills quickly and unpredictably. Zimbabwe's situation points to a pattern that could destabilize multiple weak states, triggering refugee crises and regional conflict that markets haven't priced in.
• The question isn't whether markets will take a punch. The question is whether this is one punch before recovery or the beginning of cascading shocks that break the recovery narrative entirely. That difference is enormous.
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Comments
This note hit me different today because I just read a post by Radigan Carter called The Wall Street Insurgency and so regime change is top of mind.
I love the way you describe exponential growth of the virus as “nothing, nothing, nothing … case, case, case … cluster, cluster, cluster … BOOM!” The reason I love that description of exponential growth is because it can describe how ideas, narratives, movements, etc. all grow too. In Radigan’s note he describes how it felt in countries that you describe above as “weak states” when they start to fracture. And I think the reason your post really has me troubled is that I don’t think the US has functioning “political steam valves for the popular discontent and elite conflict” right now as you say above.
Whether it is r/WallStreetBets or the storming of the Capitol or the protests and riots over the summer or Bitcoin or any other of these expressions of popular discontent, I feel like these are the real time data points in the “case, case, case … cluster, cluster, cluster” phase of a movement to reopen our political steam valves. I worry because they don’t seem to be budging and the pressure is building. I wonder if we are too far down a growth path that leads to “weak state” events happening to let off that steam. I believe the US is still a “strong state” but in a weakened position and not sure what type of shape we are in to be taking many more punches.
I also love your phrase “BITFD” and think it is long past necessary for that to happen as your wonderful notes have highlighted. However in this moment, if we aren’t careful, once that fire starts it could enter it’s own growth phase of “case, case, case … cluster, cluster, cluster … BOOM!” that burns down more than we were asking for.
I read the same things this morning and agree the US is in a vulnerable strong state position. My confusion around Covid is how many shots per person are we really talking about? If I were to get 2 shots today for original Covid, then I need 1 booster shot this summer for the new variant and then again 1 booster shot in the fall for the new, new variant? Thanks to the pack for any thoughts or readings on this.
Market is positioned as if no one believes a variant is a serious threat, or maybe everyone is just too obsessed with GME to be paying attention. Short interest is going to be next to nothing after all the covering from Game Stop debacle. Commodities are ripping higher with Powell reiterating green light and ABC news just tweeted, “in the span of 2 weeks, the national 7 day average of daily cases has declined by 34% - the steepest nonholiday drop. The US has seen since the summer.” Everybody is getting ready to take off their mask.
And just anecdotal, Fort Bend ISD (7th largest school district in Texas), has closed 12 schools this week because of rapid spread. 12 schools is not a lot, guessing 8000 students since there’s 3000 at one high school, but they didn’t do this in the fall, is something new. No idea if it’s the new variant or not, but they are taking it seriously.
interesting theory. So we should expect to see a new surge in cases (with deaths on a lag) starting in 2-3 weeks. If not, we dodged a bullet, or it just wasn’t as lethal in the US.
Five trillion units of centrally-planned fear sterilization should fix this. And I thought viral variant spread was a yoga position.
NVAX trial results on UK and South Africa variants were fairly encouraging, although not as positive for South African variant. It still feels like a red or black from a trading perspective where we have no edge for position. Here’s a link to the PDF, conference call is mostly just patting each other on the back, but there are a few nuggets in there. They are in discussion with US FDA for EUA, but it would be 2 to 3 months before formal data is released. That statement seems crazy considering how fast other approvals have been. https://ir.novavax.com/static-files/e8c12211-6544-4106-b8fb-2b74a9a01265
I’m curious on this variation playing out. We’re targeting the elderly as one of the first recipients of most vaccines. This population tends to have weaker response to vaccines in general (hence the “high dose” flu vaccine) and lower immune response in general. We also have a virus which has a degree of immune escape already (re-infection, likely happening in Manaus, Brazil), in addition to transmissibility which causes it to become the dominant strain over base COVID within 2-3 months of introduction.
There is going to be a high degree of contact between vaccinated individuals with limited immune response and this variant that has some immune escape. This seems like it’s the preferred evolutionary ramp to total immune escape - a large number of training grounds against the vaccine at full effectiveness in a younger population. How long until we have a “Florida” variant which carries on the SA or BR efforts and does provide for reinfection?
And if this occurs, does that feed into a narrative of “the vaccine was 5g mind control all along!”
A minor sidenote on this - the UK variant seems to disprove the misused theory that evolution selects for less lethality (no, evolution selects for transmissibility and growth and doesn’t care about lethality so long as it doesn’t hinder the above). No evidence that as it becomes better adapted to humans, that we don’t see at least some further lethality increases.
“The United States is a strong state. It is, arguably, the strongest state in the world, with an institutional legitimacy and broad-based popular loyalty to those core institutions”
This line has been ringing around in my head for a few days.
I certainly wont argue that the institutional legitimacy has relative broad based support.
If , however, that is a major factor - we sure are a MUCH weaker state than we were a decade ago. I need to re-read first the people.
The Long Now indeed.
Ben, “nothing, nothing, nothing … case, case, case … cluster, cluster, cluster … BOOM!” captures exponential spread so well. I don’t recall anything for narratives, maybe in an older note?
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