Letter from Bo'ness - Surely it’s five o’clock somewhere?
“Always remember, human nature is your greatest enemy near market lows. At your absolute climax of fear you must do the exact opposite of what you want to do”
“The stockmarket fluctuates. Sometimes it will fluc down. Other times it will fluc up”
“If you take radical measures to lock down a population, confine them to their
homes, shut down the economy and prohibit almost all activity, viruses will
find it difficult to spread. So, sure it could be effective. In the same way that
burning your house down to get rid of ants is effective”
“The most treasured asset in investment management is a steady hand on the tiller”
How you are coping with this lockdown? It’s almost 5 weeks since we returned from Tenerife Airport crammed together with thousands of others in Spain’s attempt to minimise the effects of Covid-19 virus. That didn’t go well. At 402 deaths per million Spain’s the second highest in the world … after Belgium. Work that one out.
Next it’s Italy, with 358 per million. The UK, despite the dire predictions so far has 190 deaths per million, but Sweden, where they decided not to lockdown but just protect the elderly and those with respiratory problems, the death rate per million is only 119. (In percentage terms 0.12%). Mind you they say it’s early days. Worth keeping an eye on the numbers.
Now the last thing I want to do is to be seen to be insensitive. People are dying. Families have lost loved ones and can’t give them the send-off they deserve. That’s heart-breaking. On top of that I have a great friend who has been a wonderful ambassador to ASAM for many years, still fighting for his life having survived major surgery only to catch the virus.
But, dig under the surface of what we’re being told 24/7 about this virus and things don’t add up. Last month I mentioned the Italian medical findings that 99.2% of Covid-19 deaths were mainly elderly with several pre-existing serious illnesses and that many died in Lombardy which has the worst air pollution in Europe. Did you know that air pollution in Lombardy kills 80,000 annually? Never seen that mentioned on the News, have you?
Here’s some more facts unreported but available on Worldometers.info. Births in the world this year (to 17th April) over 40m, all deaths, over 17m, cancer related deaths, 2.4m, road traffic deaths, 397,000, Coronavirus deaths, 147,000. World population 7.8 billion. Google “Facts about Covid-19” and you’ll find fully referenced facts from expert epidemiologists across the world. It is updated daily and gives you realistic risk assessments. You’ll discover that the overall lethality of the virus is up to twenty times lower than originally guessed at by The World Health Organisation.
Their guesses echoed predictions by a few “experts” that the virus could kill up to 500,000 people here and 2.5 million in the US. Hence the panic decisions to lockdown. Last week the same experts conceded their predictions were out by 96%. Now as you probably know by now, apart from being an optimist, I’m a fan of “Nullius in Verba” which means “don’t accept what a consensus says, check for yourself.” So I did, and frankly lots of the “death from virus” statistics don’t add up.
Here’s just one example from the US National Centre for Health Statistics, which tracks ”US Pneumonia Deaths”, and compares pneumonia deaths 2019-2020 against other years from 2013-14. What the analysis shows is that compared to 2013/14, deaths by the end of March 2020 are 40% lower, and against 2014/15 season, they are 47% lower. On average they’re 43% lower. Anybody else thinks there’s something odd going on?
However we are where we are. Lockdown continues despite the evidence from Sweden, and now the bottle banks are shut. When they were open I benefited from herd anonymity rather than herd immunity. I sneaked out at quiet times to our local bottle bank, but alas no more. So out in the black box our empties went on Wednesday to be uplifted by the bin men. Cheeky sods left behind a leaflet for Alcoholics Anonymous.
Now the talking heads on telly and in Twitterland are telling us to be even more anxious given the mass unemployment caused by a draconian lockdown and also the vast amounts of “liquidity” being created by Central Banks worldwide. Pessimists who’ve been predicting doom and gloom for over ten years now are now convinced this concerted effort to support economies will just make everything worse. Really? So what would they do instead? They never say, do they?
Anybody who’s familiar with the works of Nomura chief economist Richard Koo on “the other half of macroeconomics” would see that, given the current circumstances central bankers and governments have probably done the right thing by quickly creating liquidity at all-time low interest rates to protect us from an economic calamity. There’s also talk of vast infrastructure spending. I’m told that a one trillion dollar spend is to be made in the US aimed at road and bridge reconstruction. And it’s estimated that would create around 13 million jobs.
As one optimist put it “I don’t think there will be much of a contest between a Bull armed with a Bazooka and a Bear with just sharp claws.”
Meanwhile we all may be working remotely but we are all doing what we can to stay close to you our clients, and to our favourite fund managers who we selected within our “football team approach.” You hopefully will recall how we put funds in place depending on your risk profile starting “at the back” with “goalkeepers,” then working “up the pitch” from “defence” to “attack.” Well, collectively it has worked fairly well when under attack by these unprecedented times.
It has been a difficult last few weeks. The media hysteria hasn’t helped. And we may have a few more difficult weeks to go, who knows. Let me finish by reminding you of the Charlie Munger and the Rob Arnott quotes at the beginning of this Letter from Bo’ness (birthplace of Grannie McKay, born 1902). Charlie says when you are at your absolute maximum of fear you must do the opposite of what you want to do. Rob says the most treasured asset at times like this is a steady hand on the tiller. Grannie McKay used to say “if it’s no one thing it’s another, but life goes on.”
Me? I hate this lockdown. I hate what it’s done to our quality of life short term. But like Charlie Munger, Rob Arnott and my grannie I believe this is a time to look forward. And hold firm.