“It’s going to take years to get over the last months of emotional mistakes.”
Quick comment on markets this morning before I go back to looking at the Coronavirus.
We seem to be in a phoney war at present. Markets are waiting for direction. Tech stocks continue to recover from last week’s down-blip – although Apple stumbled following the new iWatch and iPad launches y’day. Maybe it’s time they actually invented something new rather than just fleecing Apple Addicts with product upgrades every couple of years…?
I suspect we will experience another bout of pain in October. That’s often the worst month.
The main factors keeping the market buoyant include:
1) Relative Value – stocks are massively inflated, but look much better value than anything else.
2) Central Banks – still in “do-anything-it-takes-mode”, although they may struggle as governments rein back economic support.
3) Improving expectations on a Coronavirus outcome – treatments and vaccines
4) The ongoing retail bubble driving momentum trades – Tesla is only worth more than good more profitable firms with equal longevity only because the fanboys think so. Reality ain’t getting a look in.
Reasons to be fearful are equally simple:
5) The global economy has undergone a massive demand/supply shock that won’t be undone quickly – whatever the bulls think.
6) Trade Tensions are escalating and could become geopolitical.
7) Oil and Gas prices look vulnerable to correction and trigger a wider economic activity crash selloff.
And then there is the US election. The bookies say Biden. The polls are mixed. And the reality is we don’t know…
Coronavirus and Lockdowns
Yesterday I was bombarded with more articles, comments, graphs, data and YouTube links following a Morning Porridge than ever before. I made a conscious effort to check as many as I could out. Some of them were excellent. Some less so. There is still an awful lot of badly-written unsupported conspiracy-theory corona-denial out there. There is some very good fact-based commentary. There is plenty of data and good science - and I missed much of it till y'day!
I’ve put together a list of some YouTubes to watch and articles to read at the bottom.
My conclusion is simple. The evidence shows the coronavirus is not what we feared it might be. It is not the Medical Armageddon we closed down our economy to avoid. As a result we just hot our Economy in the foot. Lockdowns probably achieved very little – aside from wrecking whole swathes of industry, business and commerce.
Covid-19 is serious, it makes many people very ill, and it has culled large number of vulnerable people. Many people remain in danger. But it is not the Big One. It is not a repeat of the 1918 Spanish Flu or the Black Death. The story of the Novel Coronavirus Pandemic started with the assumption it was going to be a global disaster killing millions, but it’s turned out to be something very different and less threatening.
We should be thankful for that. The Big One is surely still coming. What we’ve experienced over the last months allows us to figure out what worked and what didn’t for next time. Hopefully we can face the tragedy and challenges of the next real pandemic without creating economic misery as well. At some point mankind will accidently unleash a new SARs or other virus that could kill millions. COVID-19 wasn’t the killer we thought it might be.
The facts, science and data around Covid have been evolving ever since March, but the narrative surrounding it has barely changed. It still dominates the news flow as if it was killing millions rather than a few. It is influencing policy, markets, economies and everyone's daily lifes to a more massive extent than is justified.
For all the flaff of lockdowns, working from home, the dangers of kids going back to university and everything else the corona-Nazis fulminate about – there is actually far far less risk around Covid than the “received” narrative continues to scare us with. The lower threat-level, the real numbers and the real risks can be explained by science. It’s the real data and real science that should have driven the reaction – but, that’s not the way our emotions handle threat. It’s not how politics handles reality. The media isn’t excited by a “this isn’t as bad as we thought it was” story. Politicians don’t generally accept they might have been wrong – even though experience teaches us Boris invariably is…
As the virus struck, like most people I accepted the need for Lockdown – but the data and evidence I read and weighed yesterday shocked and surprised me. I don’t like surprises when it comes to markets and the economy. Niether should investors.
Reality is that Lockdown achieved little. The Swedes were right and we were wrong. We have shattered out economy for little gain. Some careful social distancing and pragmatic shielding would have achieved similar or better results.
I suspect large swathes of the market don’t yet understand that. They still think the prospects for global growth depend on the magic of a vaccine being found.
To understand why we’ve all be dragged along by Lockdown we need to understand government and policy. It’s looking clear the whole pandemic response has been a chronic over-reaction – but governments didn’t do it deliberately. For a start, they acted in unison – meaning when some other country locked-down, they looked over their shoulders and did the same. Why? To avoid the charge of complacency if they didn’t. The Swedes took enormous international criticism when they didn’t – but stuck with their own plan. Well done them!
Since January when Covid entered the public domain I’ve diligently followed the news on coronavirus. I’ve considered and opined on successive policy announcements. I ploughed through the now discredited Imperial College report that triggered western lockdown – and its predictions of 500k UK deaths.
I will admit as the spring turned to summer the briefings were getting tediously boring. I found myself scanning the coronavirus in minutes rather than hours. As I warned of the economic disaster unfolding around us – I found myself focusing less on the virus but more on the failures in terms of PPE provision, the avoidable deaths in care-homes, and the search for a vaccine. Vaccine rumour and sigh was far more interesting as a major factor driving the market.
Governments have not acted maliciously. They tried to do the right thing. But they are politicians. At some point early in the pandemic the UK government recognised the worst possible outcome would be the vision of failing hospitals on the TV. I suspect avoiding the impression of crisis became the political imperative behind lockdown and fright campaign – save our NHS. The economy and jobs took second place as we clapped the NHS each Thursday evening. It became overly emotional.
How silly will government look if we didn’t need all that emotional twaddle?
I suspect everyone else was looking at much the same stuff. Economies being scared into slowdown. Failures to put in place coherent strategy. As governments put bailouts, rescue packages, furloughs and helicopter money programmes in place we focused on the economic consequences of massive fiscal and monetary stimulus.
Which meant we looked less and less at the virus. Like how the numbers from each nation all showed the same fast peak and slow down slope. How the virus had peaked in Northern Europe and North USA by early summer and how numbers were falling because the virus has run out of victims. How the virus in Southern states and elsewhere behaved differently – but predictably.
The numbers show Sweden’s decision not to lockdown has made zero difference relative to other nations. The data shows the effects of the Virus are much like a bad flu. Its now clear the virus is a significant danger to a limited number within any population – the elderly and a those with co-morbidities. We increasingly understand the consequences of the medical focus on the virus will trigger a host of other deaths as a result.
One final caveat: We can’t be certain of anything to do with COVID, or issues like herd-immunity or reinfections, till we get much better testing data – both who has it and who has had the virus. However, it does look like places like Sweden, London and New York have achieved effective herd-immunity on the simple basis there are few people still to be infected!
I now reckon Lockdown has been a terrible mistake – done for all the right reasons, but without understanding the data or science. The challenge now is to change the politics, get economies reopen, figure out and ameliorate the real economic damage, and deal with the consequences created by monetary and fiscal crisis spending… it might take a while..
Meanwhile. Viewing list.
Please find time to listen to this erudite explanation of what has happened in Sweden and elsewhere:
The guy is not a doctor – but has engineering/science/IT background. Senior medics don’t dismiss him out of hand.. but don’t accept everything he claims either.
The Royal Society of Medicine has been doing a great series of briefings – lengthy but very useful:
That video suggests we could clear up much of the uncertainty by better testing regimes.
And to remind yourself what triggered lockdown: The Times: Covid Predictions Should Not Have Been Used.
"The response to Covid-19 in the UK, the US and other countries was shaped by the dramatic headlines in mid-March, suggesting 550,000 deaths in the UK and 2.2 million in the US. Faced with widely publicised, alarming figures, as demonstrated by Imperial College’s Professor Neil Ferguson, governments were forced to react with the unprecedented lockdown to suppress Covid-19. No one looked at his ten years of predictions that were wrong..."