Both sides now

“The two most powerful warriors are patience and time”
- Leo Tolstoy

“Never forget that there’s always two sides to every story”
- Grannie McKay

“I’ve looked at life from both sides now.  From win and lose and still somehow
It’s life’s illusions I recall.  I really don’t know life at all”
- Joni Mitchell 1967

In September 1967 when introducing her brand new song ‘Both Sides Now’ that she’d written that month, Joni Mitchell said the following - “This is a song that talks about things. In most cases there are both sides to things and in a lot of cases there are more than just both. But in this song there are only two sides. There’s reality and I guess what you might call fantasy. There’s enchantment and disenchantment.  What we’re taught to believe things are and what they really are”

Just over a week ago I was in Jersey. First proper break we’d had in six months thanks to this Covid situation.  Our last foreign trip was in North Tenerife in March. That didn’t end well when the Spanish Government closed Spanish airspace without any warning, even for the Canary Islands, locking thousands of us up for two days in Stalag-like vast hotels and a chaotic airport stripped of all its basic amenities.

Six months on and Tenerife is still considered by UK Gov’ts to be unsafe for holidays, given that if by a miracle you can find an airline happy to dispatch you appropriately masked up, on your return you’re forced to self-isolate for a fortnight with any duty-free you can plunder for sustenance. How did ‘they’ reach such a decision? Let’s dig into the numbers and see where that takes us…..According to ‘official’ figures on ‘T’internet’ as at the 18th of September, there have now been a grand total of 626,000 ‘alleged Covid cases’ in Spain, of which 1397 were in Tenerife. That’s 0.22% of the total. Or, putting it another way, virtually all Spanish alleged Covid cases have occurred elsewhere in the country, the vast majority of which were in the Madrid and Barcelona conurbations more than 2000 kilometres away. 

As to ‘deaths’ unlike ‘cases,’ official numbers don’t show fatalities for each Island, but out of 30,405 deaths in Spain only 167 have occurred in the Canaries.  That’s 0.55% of the total.  Extrapolating from the data on ‘cases’ it’s reasonable to assume that only 0.22% of all Spanish Covid deaths were in Tenerife. That’s 67 people.  Like everywhere else, most probably they were elderly with pre-existing serious illnesses. 67 out of a resident population of 975,000.  That’s a death rate of 0.0068%. 

And that’s a worst case scenario. Given the shambolic measuring of ‘cases’ and deaths over the world it’s fair to assume that many Covid deaths have been wrongly attributed. So far this year in the world there’s been 42.6 million deaths, 959,500 of which were ‘with’ coronavirus.  By the way, the world population has now reached 7.81 billion. A growing number of experts believe that only around 8% of those dying ‘with’ the virus die exclusively of Covid, which suggests the number of deaths per 1000 globally is 7.612,  compared with 7.579 over the previous year. That equates to an excess death rate globally of only 0.003% over the course of a whole year. Expressed like this it doesn’t make much of a headline, eh?

We live in Bo’ness in the Forth Valley NHS area, population 306,000.  Alleged Covid total deaths locally? 140.  So if we went to Tenerife where there’s 3 times the population and less than  half  the Covid deaths,  our Government tells us it’s more dangerous than a day trip to Falkirk ?  Make sense to you?  Me neither.

On our arrival at our Jersey hotel a caring pessimist advised us that the Stockmarket ‘Tech Bubble’ had burst during our journey and that ‘many fortunes will be lost’. So as not to spoil our holiday (and Jersey was a joy) we stoically avoided ‘The News’ in any format, to discover on our return a week later that our investments had actually risen. However, pessimists will be relieved to note that the world is ending yet again with stockmarkets having a good old wobble to themselves yet again as I write this Letter.

Today I spoke over the phone to George who’s been a client since 1978 when we met in Ardersier during the North Sea Oil Boom, and he reminded me that together we’d been through almost every crisis known to Mankind over the last 42 years and in his own words “I’ve seen it all before. Best to just get on with life” Mind you, it’s alright for him. He plays golf regularly. And he’s younger.  By five whole weeks!

Speaking to another pal Mairi, who like George emigrated many years ago down south, she mentioned that ‘the stockmarket’ seemed to have caught Covid by running a temperature which she hoped wouldn’t prove fatal.  I asked her to guess which month of the year over the last 20, 50, and 100 years was the worst month for stockmarkets? “October” she guessed as most folks do. Nope. September! Hard to imagine, but for some reason September over all these years has had far more of its fair share of financial crises.

We all remember 9/11. September 2001. But anybody remember ‘Black Wednesday’ September 1992?  That was the day that Sterling crashed out the ERM, the UK stockmarket slumped, and UK interest rates jumped to 15% in one day. Headlines had us being in penury for centuries.  Somehow we survived both. Thrived even. 

How about September 2008? That was the month now remembered as the start of “The Great Financial Crisis” when in the US, Lehman Brothers investment Bank collapsed and over here Banks, including the Royal Bank of Scotland, had to be saved by the Government using our money as usual.  I remember both occasions only too well. Scary times.  Especially September 2008.  I was in Nova Scotia on holiday and only 3 days earlier had been with Joe Kalish of Ned Davis Research in Manhattan. Joe was the only person present at that meeting who predicted that ‘a financial Armageddon’ was imminent. I still refer to the black clouds entering the room coincidentally as Joe arrived. Fortunately again we survived.

In September 2010 I attended a lunch of ‘the great and the good’ in Edinburgh (no idea why they asked me) where the consensus was that while we’d survived the crisis, we would pay dearly for it with ‘rampant inflation’ thanks to Quantitative Easing (the printing of too much false money/ too much debt) and in the form of poor performing stockmarket investments for at least the next decade. Never feeling comfortable in a consensus I was in a minority of one prepared to take an opposite view. Being fair though, I have to admit I’d been listening to the likes of Joe Kalish who had turned positive by then.  Ten years later those of us prepared to be positive by ignoring the naysayers have done rather well. So far so good. Fingers crossed.

Unknown to me that day ten years ago was, that in London there was an optimist putting the final touches to an investment fund in his own name, a fund which would invest in a few global businesses he’d hand-pick for their history of excellence in management, products or services and for their consistent record in delivering substantial profits to their shareholders. The fund was finally made available to the investing public in early November 2010. In only 6 weeks it will celebrate its tenth anniversary, and in some style, doubling his investors’ money every four years, after charges.

For some reason UK Regulators regard this fund higher risk because it tends to only hold around 30 holdings of global businesses as opposed to the hundreds typically held in Indices like the FTSE All Share or the S&P 500. But the average market size currently of the companies held in the fund is over £140 billion, and on average the companies held were established in 1928. So they’ve been around the block a few times, and survived the regular slings and arrows of outrageous misfortunes. 

Back in 2017 Professor Bessembinder of Arizona State University decided to study the performances of all the companies that had ever been listed in the US. He found the following

“When stated in terms of lifetime dollar wealth creation, the entire gain in the US stock market since 1926 is attributable to the best performing four per cent of listed companies”

Even more remarkable is that he found that only 90 companies (out of over 24,000) within the four per cent contributed half the wealth created in US equities since 1926 despite all the various crises we’ve endured. And that’s why we at ASAM lean towards finding special funds rather than following indices where most the holdings underperform. The fund I refer to above we found early in its life when it was 95% smaller than it is today. Now it’s our second largest holding behind another long-time holding, our goalkeeper, because it’s less worrying trying to win games scoring goals when you have a safe pair of hands at the back. 

It has been a difficult last six months. Most of us at ASAM have had to work remotely. Our focus has been to guide you through this latest crisis. We’ve tried to keep in touch as much as we can, and to continue our research to ensure the funds we recommend are best in class. And we’ve taken the opportunity too, to invest in state of the art software to improve our selection process. We’re still only 45 years young. Never too old to learn new tricks!!

PLEASE NOTE THE UK GOVERNMENT ADVISES AGAINST ALL FOREIGN TRAVEL.