Optimists avoid hangovers

“Capitalism has not proved as flexible as it was supposed to be. Governments have not been all-wise or far-seeing.  Life is a struggle for many and a puzzle for most. What is happening in our mature societies is much more fundamental, confusing and distressing than I had expected” 
- Charles Handy CBE

“If we want to develop successful scientific theories to help us anticipate the consequences of our choices, mistrusting those with different beliefs is toxic. It creates polarised camps that fail to listen to the real, trustworthy evidence coming from the opposite side.  In general it means that a smaller proportion of the community ultimately arrives at true beliefs”
- O’Connor and Weatherall   (The Misinformation Age)

“Some epidemiologists created faulty lockdown models. The media promoted fear. Politicians assumed worst-case scenarios and big tech suppressed dissenting views. This is how people’s fears grew disproportional to reality and how seemingly short-term lockdowns stretched into months”  
- Yinon Weiss

“When you find yourself in a hole the best thing to do is to stop digging”
- Grannie McKay

Here are my observations about a couple of these quotes.  That wisdom from my grannie goes back over 60 years and probably even further.  And it still makes sense today.  If only our leaders had grannies.  The first quote sounds tailor-made for 2020, but it’s taken from Charles Handy’s “The Empty Raincoat” published in 1994, when a previous cult of celebrity doomsayers saw only a bleak future.  What’s new?

As to stopping digging when you find yourself in a hole, at a time when there’s not a lot to laugh about, the best headline I’ve seen in ages was “Man digs 12ft deep hole without realising his metal detector was picking up his steel toe cap safety boots.”  Unfortunately the article didn’t confirm his full-time occupation, so we don’t know if he was from Imperial College, a news reader or a politician.

Exactly 45 years ago today (18th June) I sat alone in an upstairs office, researching in preparation for the go-ahead to trade as a limited company.  (ASAM was incorporated on the 2nd of July 1975.)  Today, despite having 40 colleagues, I sit alone yet again in my upstairs office, thanks to this lockdown ordered by governments still digging their hole, refusing to recognise that they listened to the wrong scientist whose predictions have proved to be only out by 99%.  Thus keeping up his woeful record since 2001.

You’ll find more detail of the horrendous prediction failures of Imperial College’s Neal Ferguson in previous Letters from Linlithgow and in my articles for Daily Business under Insights and Media on our website.  But I thought you might like to see some statistics on Covid19 that for some unknown reason aren’t being disclosed by Bad News’ channels and being blocked or removed by big Tech.

For example, it’s been calculated by statisticians that a schoolchild has more chance of being struck by lightning than dying from Covid19.  That those aged 60 to 69 have more chance of being murdered.  And for those of you, like me, aged between 70 and 79, statistically you have the same chance as meeting the love of your life on an airplane.  Since my wife discovered that I’ve been banned from flying anywhere. 

It’s difficult to know who to believe these days.  But when you apply “Nullius in Verba” and check for yourself, the dire numbers don’t add up.  Let’s take a virtual journey from Scotland, to the US, and Sweden.  In Scotland, thanks to changes to the usual way that death certification is prepared the fatality rate of Covid19 can’t be properly calculated.  Our local undertaker tells me that in his opinion and that of other undertakers, deaths attributed here to the virus have probably been over-estimated at least twofold.

In New York it’s been established that out of 8 million inhabitants only around 100 people with no pre-existing serious illnesses have succumbed.  In Pennsylvania (the only US region with over 100 year old fatality data) more people have died aged over 100 years old than under 45.  And to put that into perspective, in the US 0.03% of the population is over 100, and well over half is below 45 years old.

In Sweden, where the government allowed voluntary social distancing and had no lockdown, we’re now being told by Bad News that far more deaths have now occurred.  Which is odd when you examine the 30 year official record of total deaths each year between the beginning of November and end of April.  This year is the third lowest on record, and some 17% below the worst period back in 1992.  Strange eh?

If Covid19 had occurred in 2017 we’d discover (from Deutsche Bank Data) that globally, over 3 times more people died from road accident injuries, over 6 times more people died from dementia, 10 times more did from other respiratory diseases, and 44 times more folks died from heart diseases.  Over the last 2000 years from the same research we discover that, right now, out of 24 global pandemics Covid19 sits in 23rd place. 

But what I can’t argue with is the potential economic damage so far that’s been self-inflicted by almost all world governments, except Sweden.  And I’m aware that the “top experts” or pessimists, as I prefer to call them, have resurfaced after a decade of being completely wrong since they predicted collapsing stockmarkets and rampant inflation back in 2009/10. 

I have a chart on my office wall, freshly updated to take into account this pandemic.  It shows 33 separate reasons from headlines since 2009 to sell your stockmarket investments and run for the hills.  And they don’t include the wildly wrong predictions from the usual suspects including Nobel Prize winning economist Paul Krugman and the infamous RBS 2016 advice from their “chief economist” to “sell everything” 

In Charles Handy’s 1994 “the Empty Raincoat” he reminds readers that “Life will never be easy or perfect, nor completely predictable.  It will be best understood backwards, but we have to live it forwards.”  And he tells about a visit he made back to his native Ireland, to the Wicklow Mountain area which he described as a bare and lonely place with unmarked roads where it’s easy to get lost.  So he stopped his car and asked a local to ask the way to his destination. And the chap was happy to help…

And said .. “Sure, it’s easy.  Just keep going the way you are, straight ahead, and after a while you’ll cross a small bridge with Davy’s Bar on the far side.  You can’t miss it.  And Handy replied “Yes, I’ve got that.  Straight on to Davy’s Bar.”  And then the local added “That’s right.  Well- half- a -mile before you get there, turn to your right.”  Now that sounded so logical, even to a Professor at the London Business School that he was well on his way before he realised it made no sense at all.  He would have to drive all the way to Davy’s Bar then turn back and take the road to the left.

Now it’s one thing having to drive half a mile too far before you realise you’ve taken the wrong road.  It’s quite another if you listen to the wrong directions on your journey through life and when it comes to your life savings.  When you get to retirement for example, you can’t turn back to the road you should’ve taken.

In the 45 years since ASAM started in that empty office in June 1975 there’s been many times when pessimists have seen no hope.  But let’s remember one time, the 2008/9 Great Financial Crisis, when Central Bankers, including the US Federal Reserve, flooded the world economy with liquidity.  It was known as QE.  And “top” experts predicted economic mayhem, high interest rates, rampant inflation.  Didn’t happen. 

This time round all Central Bankers acted so swiftly at throwing liquidity to protect economies that it’s been said even Warren Buffett couldn’t act fast enough to snap up bargain shares.  Macroeconomist Richard Koo (whom I’ve mentioned before) believes that it’s for the best for economies, and thus for stockmarkets.  But there are those around (perennial pessimists) who disagree and who say this is unprecedented behaviour.  They’re wrong.  It happened in the summer of 1982 during the Latin American Debt crisis.  And that worked so well that we, and they, have forgotten all about it. 

The pain we all felt, me included, in the middle of March, was as extreme as it gets.  Fortunately these times are few and far between.  Old heads who’ve seen it all before always say it’s best to sit still and make no knee jerk moves on the back of emotional extremes.  This time so far has been no different.  The bounce back in portfolio values since mid-March has been dramatic.  So far optimists are winning.  My best guess is they will keep winning.  There will be setbacks and bridges to cross.  But no hangovers at Davy’s Bar I hope.