On the Money: Alan Steel
“New beginnings are often disguised as painful endings!” Lao Tzu, 6th Century BC
After I left primary school, I had to cycle a mile and a half to the “big school”. Living in Scotland you quickly learn to establish what the weather’s going to be like before setting off. As you’ll appreciate, rain here doesn’t care what the season is. And we only have two seasons – winter and next winter.
I learned (the hard way) not to bother with the weather forecast because, like today it was more often wrong than right. And that’s why I paid close attention to our barometer. Give it a quick dunk with your fist and it would happily inform you whether it was to be dry or wet every day. And you could rely on it. The air pressure data gathered remained constant and never changed, even today.
Experts in different professions rely on data to forecast what’s next. But is their data as accurate as the data “collected” by barometers? Which brings me to Covid19. Contrary to what we are being told by our politicians, and confirmed by the TV news, statistics used to justify the lockdown were seriously flawed. In computer circles they talk about GIGO, Garbage in, Garbage out. Let’s apply that to Covid19.
I’ve already written at length about the dire forecasting record over 20 years of Prof Neil Ferguson of Imperial College, but a short reminder is worthwhile. From 2001 to 2009, his computer-modelled forecasts of likely death tolls from Foot and Mouth, Mad Cow Disease, Bird Flu, and Swine Flu were over-estimated by more than 99% in each case. You can’t get much more wrong than that. Despite his calamitous record, governments in the UK for reasons best known to themselves, decided they couldn’t take the chance that his prediction of up to 500,000 deaths would be as wrong, yet again. Hence lockdown.
Some 11 weeks later, despite clear evidence from here and elsewhere that more than 90% of deaths allegedly from Covid19 are from the elderly with various serious pre-existing illnesses, our economies remain in danger of collapse.
Seems to me it’s all about cognitive dissonance. Cover up your dreadful error by manipulating statistics and denying you made a mistake. And the errors have been horrendously costly. Thousands of ill patients dumped out of hospitals untested and stuck in care homes. Billions spent on Nightingale hospitals hardly or never used. Billions wasted on commandeering private hospitals that still lie empty. Cancer and heart disease sufferers left to rot. Suicide victims and mental health issues accelerating.
‘History will be the judge and will probably conclude that the economic shutdowns of most economies will prove to be the worst Government decision since economic incompetence by the West led to the Second World War’
Here are some perspectives. Under 50? You have a 99.96% chance of living even if you catch the virus. 50 to 59? You’ve a 99.89% chance of surviving. 60 to 69? – 99.53% chance of staying alive. Actually you’ve a better chance of being murdered. 70 to 79?- You have the same chance of death as you’d have of meeting the love of your life on an airplane. Once my wife found that out I’ve been banned from flying anywhere.
History will be the judge and will probably conclude that the economic shutdowns of most economies will prove to be the worst Government decision since economic incompetence by the West led to the Second World War when 50 million people lost their lives. A fact I was unaware of until lockdown gave me the time to read some books gathering dust in my library. One in particular, while not an easy read, is eye-opening.
Few have heard of Richard Koo. Born in Taiwan and brought up in the US he has for the best part of 30 years tried to advise Japanese governments how to break out of deflation. He was a member of the US Fed. And his work on “balance-sheet recessions” and “fiscal stimulus” following crisis moments have sadly been ignored by too many governments only prepared it seems to accept dire but badly wrong predictions of error strewn experts like Ferguson.
In Chapter 7 of Koo’s 2017 book “The Other Half of Macroeconomics” he explains the errors made by the US, France and the UK that sowed the seeds of discontent amongst a poverty stricken German population with an unemployment rate of 28% in the early 1930s following the Wall Street Crash which had led to the Great Depression.
He explains how politicians and economists at the time failed to make economic decisions that would’ve kept the German people from being desperate enough to vote for Hitler, who then enacted the fiscal stimulus necessary to bring the German economy back to economic health, by spending on infrastructure projects such as the building of all the autobahns. In only four years the unemployment rate fell to only 2%.
It’s a fascinating book. From a positive point of view it looks like most Central Bankers and Governments are at long last listening to Koo, and pursuing economic policies including supporting jobs and industries and being prepared to be the last investor standing by committing to heavy infrastructure spending. If you find this all too hard to swallow, do read his books or check him out on YouTube.
Certainly something in the deep gloom has lit up stock markets after their waterfall panic declines early in March. Since my piece in March I have consistently argued that even when Governments make a codswallop of things, following crises like this, there are always fresh opportunities to invest in great businesses at bargain prices. It has been the case in every such crisis since I became an IFA 47 years ago.
In our client monthly letter, written on the 23 March I reminded readers that a true legend of investment in the US , Bill Miller, had said only days before that there had been only four outstanding stock market buying opportunities in his lifetime: 1974, 1987, 2001, and 2009. “This,” he said “is the fifth one.” Great timing.
Being a perennial optimist I think that somehow we’ll get through this mess. Fingers crossed.
Alan Steel is chairman of Alan Steel Asset Management
Alan Steel Asset Management is regulated by the Financial Conduct Authority. This article contains the personal views of Alan Steel and should not be construed as advice. Do check your individual circumstances with your advisers.