Plague Arbitrage

The leaves on the trees withered and curled. The scholar trees, whose shallow roots couldn’t absorb enough moisture from the soil, began shedding yellow leaves, as if autumn had come early. The deep-rooted elms remained green, but they attracted legions of insects. The whole insect kingdom converged on their branches and leaves. Small green worms, spotted ladybirds and yellow beetles turned the elms into private fiefdoms, marching up and down the branches, munching on the stems and leaves.

Volume 7, Chapter 1, Part 1

One of the easier themes to identify in times of plague is of the economy. The link is not difficult to grasp: plagues kill people and leave many stuck in their homes, reducing economic activity and thus business.

The blood selling of The Dream of Ding Village begins with the premise of a “strong and prosperous China (Vol 2, Ch 2)” but results in suffering for thousands and in the end, Ding Village is left empty. In terms of the real benefits, Ding Hui was able to exploit the system and made himself enough money to finally leave the village, with even more to spare, despite the villages and people that were crumbling around him.

COVID was not as debilitating, but the damage done to the economy was very clear – people being forced to leave the workforce, areas destabilized and overall loss of confidence. Yet still, there were many that seemingly were able to profit from this situation.

The S&P 500 Index since November 2019 (

When the virus was very much active, numbers growing and with economies far from recovery, the S&P netted over 60% returns (with NASDAQ over 80%) between March and August of this year. The amount of greed presented in the market parallels that of many officials as well as characters in the novel.

Perhaps on a positive note, the gains weren’t all allocated to those in power as presented in the novel, but there is a concern about the disconnect between a weakened economy (with uncertainty of the future) and a soaring market trying to point out an inefficiency.

1 Comment

 Add your comment
  1. This is something I’ve thought about a lot as well, Jihun. I think the key driver of the wedge between the real economy and the stock market is that the stock market is forward looking.

    While unemployment, inflation and income levels all exist today, the stock market is more interested in what happens tomorrow. COVID-19 is an exogenous shock to the economy where very little capital was lost (and in proportion to the size of economies, very little labour as well). Hence the market confidence, while somewhate premature, is founded in the belief that once there is a vaccine, we can come much closer to previous levels of productivity in the economy (US specifically)

    Additionally, there are the ‘Ding Hui’ companies as well (though not as antagonistic) who had been experiencing growth before the pandemic, but got a huge boost with the pandemic. This would include the FAANG companies (Facebook, Apple, Amazon, Netflix, Google), as well as other technology companies around the world who have become much more essential. This is in contrast with sectors like travel, entertainment and luxury that lost big this year.

    However, there is substantial evidence that the pandemic has widened inequality and pushed marginalised communities closer to poverty than before. If you have some time, I would highly recommend looking at the Opportunity Insights dashboard if you have time, which is an excellent resource to explore how different income groups have been impacted by the pandemic. There are some interesting findings, especially when we look at recovery trends. While spending has recovered in low income households to pre-pandemic levels (probably because most expenses would have been on essential things), it is the gap in the recovery of high-income spending that is contributing to the shortfall in unemployment recovery in low-income households.

    Similar to the Dream of Ding VIllage, even in real life, the disease creates more divides than it closes.

Leave a Comment

Your email address will not be published.