The Sweet & Sour in Our Contagion
Virus? What Virus?
That’s my rehash of an apocryphal quote never uttered by Jim Callaghan – he of the “winter of discontent” who erred in playing fulcrum to adopting deflationary policies and cuts in public expenditure as mass industrial militancy “went viral” during 1978-1979.
This time again the global isolation fulcrum seeks purchase against the tide of temperance. Or so methought as I peered out over Hong Kong on the Buddha’s birthday last Thursday, as the pleasant view made it hard to fathom that the world was in any sort of crisis.
In truth this pandemic, cold war II, Disinfectantgate, Mrs. Hu’s missing car park pass…all seem to have been replaced by sunshine and V-shaped recoveries.Such as been my winter – and longer still – as I have tried on multiple occasions in the last 12 months to pen something witty and pithy.
But Hong Kong is not conducive to wit or pith at present. The silent coup and the end of our constitutional principle of political “One Country Two Cisterns,” have made life grim.
However, we have soldiered on.
Mrs. Hu and I have both since ripped another page off the birthday calendar, and never was May Day more appropriate. Distress is all around. In fact, it was only yesterday that Mrs. Hu asked me if I liked distress.
No, I said, I prefer dat one.
Crisis? What Crisis?
Stock market crashes, economic turmoil and social isolation are putting the fear of Buddha into many, with many unhappy returns.
I commented to one of my younger colleagues recently that stressful though the virus crisis is, he would look back and marvel at how much he had learned in such a short time about markets and about people.
“I know,” he said. “I am loving it. I wish we could have a pandemic every year.”
I paused and reflected that Wizard may not have been quite so successful if in 1973, Roy Wood had written “I wish it could be a Pandemic every day.”
It is true however that you learn a lot about people’s behaviour and mental fortitude. I have refused to use the word ‘crisis’ in our daily life at the firm. I believe it depresses morale.
People need to be decisive, forward looking, and positive in such times. We did what was necessary, rode out the storm and now have some breathing space to plan for the next phase.
And we have been as pleasantly surprised at how some people have stepped up and done far more than we could have expected of them, as we are saddened by those turned to deer in the headlights.
A Bit Pith-ed Off
The most instructive aspect for me has been those who genuinely believe that injecting Domestos (other brands are available) is a solution to the Covid-19 virus. The fact that one of them is the President of the USA is perhaps less of a surprise.
That Dr Good notwithstanding, the US stock markets have done a remarkable impersonation of Lazarus and dragged a few others North with them, though I have yet to hear any bear admit that this is anything but a dead cat job.
One headline I ignored described it as the most dangerous rally in history. Clearly the writer was never at Nuremberg. And while I have no inkling whether the gravity defying recovery will continue, I do struggle with people feeling aggrieved and / or pith-ed off that we haven’t gone into a deep depression.
Waiting for Gold and Godot?
If like me you had the painful experience - after some considerable evasiveness - of explaining to your spouse that, yes, we had incurred some unrealised losses, and no, I hadn’t sold at the very top, then you too may well have sat down, scratched your head and wondered what surprised you most about the fastest bear market in history.
That said, I have been pleasantly surprised by the resilience of the technology sector - all those memories of the dotcom boom wasted. Some of the tech darlings of today actually make money.
Growth has left Value waiting for Godot. Of course, we all knew the Unicorn had no clothes and it is hard to understand why SoftBank thought WeWork was worth $45bn or whatever sum Masayoshi Son conjured up.
Perhaps Timothy Leary was on the board.
Between Liquidation and Redemption
And maybe I should have been less surprised that the safe havens were not very safe. Gold slid and silver plummeted.
It was what one of my smart young colleagues called Liquidation Day. The Sale of the Century (but not from Norwich this time) as everything had to go.
Repos unwound, margins called, covenants breached - it was for a while complete mayhem.
We may yet see Redemption Day, when all the hedge funds get the redemption notices from disgruntled investors who are wondering where the hedge went.
Most commentators are insisting that the market has to retest the lows because that’s what they do. There could be more disappointment ahead if they don’t.
The smart money shrugs its shoulder, admits it doesn’t know, and positions itself for maximum optionality if the bargain basement reopens.
Long Disinfectant, Short Gilead
We were debating by phone this morning (because HK never really takes a public holiday) as I hiked the Hong Kong Trail what the next big themes might be.
We agreed on Healthcare/Biopharm, Defence and Gold.
We disagreed over Water. Cybersecurity and Surveillance technology are also candidates.
These were our themes for the next 5-10 years.
I am sure we will be wrong with some if not all. but it amuses us to try.
Themes for the next few months may be even more challenging. Going long Disinfectant and short Gilead’s Remdesivir may not have been a smart move.
On the Cusp of Vulnerable
On the personal front I may soon allow Mrs. Ha to know the password reset I did for our fund accounts. She is too preoccupied with our granddaughter to bother much.
And I do worry about the virus, to be honest. My oldest and dearest friend was about to start cancer treatment (again) only to test positive for the wretched thing.
He was completely asymptomatic and had been cleared without ever really knowing he was ill.
We are of an age where we would probably be regarded as on the cusp of vulnerable. So, I treat it with respect and do all the sensible things recommended by the experts.
We have enough masks to keep us going until next year and probably a larger supply of alcohol wet wipes.
So, if I ever feel down, I simply whip out a few and inhale deeply.
Tomorrow the calendar will remind me I have chalked up another milestone year. We will go to the Club in the evening for a quiet dinner and as I cut the cake, I shall make a wish: that HK returns to peace and prosperity and we can all bid farewell to the pandemic.