Que Sera Sera
“Worrying is like rocking in a rocking chair. It gets you nowhere”
“When smart people from a singular background are placed in a decision-making group, they are liable to become collectively blind”
Anthony King/ Ivor Crewe, authors of ‘The Blunders of Our Governments’
“The cure for boredom is curiosity. There is no cure for curiosity”
Ellen Parr, Reader’s Digest 1980
“Epidemiologists fell for the myth that there was no immunity in the population. They also didn’t want to believe that coronoviri were seasonal cold viri. When the initial worse case scenarios didn’t come true anywhere, they now cling to models predicting a second wave. Let’s leave them to their hopes. I’ve never seen a scientific branch that’s manoeuvred itself so much to the offside”
Beda Stadler, Swiss Immunologist
“Optimism is unfashionable today, particularly among intellectuals. Everyone makes fun of it. Someone said ‘Pessimists got that way financing optimists’. But I’m not pessimistic and I advise you not to be. As the fellow said -‘I’d be a pessimist, but it would never work’ “
John Gardner, Author, November 1990.
“A man out walking with his dog is like the economy and the stockmarket. The man walks in a fairly straight line. The dog on the other hand runs off madly in random directions every minute. When the man reaches his destination he will have travelled say 1 kilometre. The dog will have travelled say 4 times that (if not more) but reaches the same destination. The man is the economy. The dog is the stockmarket”
Andre Kostolany, Legendary Hungarian –born investor 1906-1999
One of my LfL fans who always responds positively and therefore is largely responsible for me continuing to write these Letters (so blame him, not me) asked me how I keep them “interesting, month after month, year after year?” (Isn’t that kind of him?) And I replied that sometimes it’s fairly easy and other times it’s anything but. This is one of the latter occasions. So I asked my other fan what I should cover this time and he said - write your thoughts about what’s happening now. And if possible add some perspectives.
Now thanks to my innate curiosity I spend lots of time searching for unusual and thought provoking pieces of wisdom. Not only sticking to money issues. Last week I took in a podcast by Farnam Street (well worth following) that featured US investment legend Howard Marks, asking him what he’d learned over his long career. A big surprise was his admission that being lucky played a hugely significant part in his success.
That isn’t consensus thinking. Golfer Gary Player is credited with the oft quoted “The harder I practise, the luckier I get”. But Howard asks - “What did you do to influence where and to whom you’d be born, never mind how you ended up with your IQ?” Statisticians with far too much time on their hands calculate that there was a 1 in 550 billion chance that you were born in exactly your circumstances to your parents. Wow. That’s equivalent to winning the Lottery Jackpot more than 3000 times. How lucky is that.
Now consider our chances of surviving Covid19. If you’re under 55 it seems you have a 44,999 in 45,000 chance of not dying “with” the virus. Under 25? You’ve a 1.24999m in 1.25m chance of beating it, with or without a face mask. Immunologist and Professor Emeritus, Beda Stadler (quoted above) recommends that instead of wearing face masks we should wear helmets. Because he calculates we’ve more chance of dying from something nasty falling on our heads. Such as discredited Imperial College scientists perchance?
Here’s what “official numbers” show from England and Wales. Even if you’re over 70, if you are not already seriously ill, your chances of dying from Covid if you catch it, are tiny. How tiny? If you keep healthy as I do by eating pies and drinking red wine, and like me you are over 70, you have a 0.01885% chance of joining a queue at the Pearly Gates rather than at Tesco. Across the entire age range if you have 1 or more pre-existing illnesses you are 81 times more likely to die from this virus. Seen that in the headlines?
But now the media have changed their Fake News to a new offensive, the ‘Expected Second Wave’. And they use the dramatic increase of “cases” in Florida and Texas as evidence. But what they fail to mention is that (for some unknown reason) the definition of a “case” was changed by local health authorities on the 18th of May, from one where a positive test equalled 1 case, to a “probable case”. That’s where, if you have a cough or temperature, you become a “case” without being tested. Furthermore up to 15 more “probable cases” are added. That’s people you may have been in contact with in theory. Now go check the huge increases of “the second wave” in these States. And while you’re at it, do check the simultaneously falling death rate. Don’t you think that something strange is going on?
Horror fiction writer Howard P Lovecraft (1890 – 1937) said “The oldest and strongest emotion of mankind is fear, and the oldest and strongest fear is fear of the unknown”. Which sums up why, right now, the general public and investors have become gripped with fear thanks to the hysterical coverage from ‘minute by minute News propaganda’ and the lurid headlines stirred up by today’s non-stop anti-social media.
American finance writer Morgan Housel (whose blogs on Collaborative Fund are well worth following) wrote this week that in the US, from a health point of view, life is as safe as it’s ever been. In 1918 roughly 1000 deaths per 100,000 were from infectious diseases. Now it’s down to 46 per 100,000. And he goes on to say that because over the years local news has finally given way to non-stop global news which makes the world feel perpetually broken because there’s always a tragedy somewhere, you are guaranteed to hear about it. Pessimism sounds more seductive than optimism. And boy do the media milk it.
So who do we believe when a ‘case’ is no longer the same ‘case’ that it was three months ago, or even 10 minutes ago? The ‘facts’ don’t add up when you realise that different countries measure ‘cases’ and deaths differently. And in the UK, people who were untested and/or with serious pre-existing illnesses, when they die, are invariably being categorized as Covid deaths, thus inflating the figures. It’s farcical.
Global Macro Strategist at Ned Davis Research, Joe Kalish, who I often refer to as the fount of all knowledge, sent me an email today with his thoughts - “As to the truth about Covid cases, I’m afraid there isn’t one. The ‘data’ has become political”. I first met Joe in Manhattan in September 2008 only days before the collapse of Lehman Brothers’ triggered the Great Financial Crisis. Joe was the only person I knew who predicted the crisis. So I like to know what he thinks about what’s next. And despite the widespread gloom still spread by ‘investment experts’ on telly, Joe’s quietly confident that Central Bankers (rather than politicians and pessimists) have acted rather well in this crisis, and the futures brighter than most expect. Phew.
A book I’ve read and highly recommend if you can fight your way through the complicated first 3 or 4 Chapters is Christopher Mayer’s “How Do You Know - A guide to clear thinking about Wall street, investing and life”. Christopher raises many questions about the numerous and constant misuse of words and definitions that are now common in investment communications. There’s a wide range of examples. Here’s a few. Why do ‘experts’ compare a stockmarket index from now against it in the past, when constituent parts are completely different? When ASAM launched in 1975 for instance, the S&P 500, meant to represent the ‘biggest’ public companies in the US, had no financial companies at all in the index. So how can you compare todays against it? After the dotcom bust in 2000, 56 companies were booted out the index and replaced. How can you compare now against that index?
How is it we’re told by ‘The News’ that a stockmarket fell because this or that went up (or down) when the global economy is unbelievably complicated? Why is it stockmarkets (and you wouldn’t believe how the constituent parts are measured) seem to behave contrary to ‘commonsense’, and opposite to how the ‘economy’ is doing? How do you measure an economy anyway? What’s a Growth company or a Value company? What’s debt? Why hasn’t inflation rocketed as ‘experts’ predicted in 2009?
Surprise answers to these questions and others can be found in Christopher’s book. Meanwhile we at ASAM prefer to avoid the noise and simply find great fund managers who stick to their knitting whatever pessimists say. We advised you to do the same in March and it’s worked. Finally here’s Morgan Housel on investing - “Live below your means. Invest, diversified with a 10 year horizon. Expect and accept volatility”.