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Investing in the face of a disaster

Photo of Lars Kroijer

This guest article is by friend of Monevator and former hedge fund manager Lars Kroijer, who is also the author of Investing Demystified.

The emergence of the coronavirus over the past two months has dominated the news and preoccupied the markets.

The virus is already having a real impact all over the world, as millions curtail travel and social interactions, and suffer financial or – worst of all – great personal loss.

At the time of writing, more than 4,000 people have died globally. The great worry is this number could increase dramatically as the virus continues to spread.

Stock markets plummeted again on Monday before rebounding on Tuesday – and of course nobody can know where they will go next. The expected future risk of the markets have spiked recently, too.

For as long as there continues to be huge unknowns about the path and severity of the virus and its economic consequences, uncertainty will continue to reign.

What – if anything – should we do about all this from an investing perspective?

Getting a VIX on things

In previous posts on Monevator I’ve argued it’s highly unlikely you’re able to outperform the markets, or to find someone who can consistently do so for you.

The world may be in a panic state and markets have declined, but this is still overwhelmingly likely to be true.

Also, markets might be down and you may have lost money, but that doesn’t necessarily mean they will recover – no, markets don’t always bounce back.

The fact is that unless we have genius insights or a crystal ball, we almost certainly don’t know the future direction of the markets or even individual securities.

So what do we know?

We know that the world is now deemed to be a far riskier place for equity investors.

While not a perfect or long-term index, the VIX (a measure of predicted future risk of the equity markets) has increased from an expected standard deviation of under 15% to around 50% at the time of writing1.

This is important because it is the world telling you that your equity holdings are a lot riskier going forward than they were a month ago – though that’s perhaps an obvious point!

With this higher risk, it is not unreasonable to have a higher future expected return from shares from here, but then again the market is also telling you that very bad outcomes have become far more likely, too. Whether that impacts how you should adjust your portfolio really depends on your risk preferences and personal circumstances.

There is also every chance that your other assets – house, job, career prospects, and so on – have been impacted by the virus, perhaps indirectly, though you may not know it yet. This hit to your wider economic life will likely be far more muddled than simply saying you lost 20% in your equity holdings but your government bond holdings did quite well.

If you’re unclear about the potential impact and you have an advisor with insight into your overall financial situation, I would recommend a conversation. Focus especially on the liquidity of your assets and liabilities, and the likely increase in the correlation of the value of your various assets.

Prep school

I don’t have any kind of unique perspective into what will happen with the virus or its impact on the global economy.

But as the volatility index is suggesting, it does seem obvious that the risk of a very bad state of the world has increased dramatically as the virus has spread across the globe.

So I think it makes sense plan accordingly.

In my book Investing Demystified I wrote a chapter called ‘Apocalypse Finance’ about what we should do at such times from an investing perspective, depending on the severity of the financial collapse. We’ve tweaked and republished this chapter below.

While things have obviously changed since it was written four years ago – and it doesn’t discuss any specific kind of disaster, let alone a pandemic – I hope you’ll find some useful insights.

Apocalypse investing

Let’s consider the highly unlikely. Some would say paranoid. How bad can things really get and what might happen to our investments in a worst case scenario?

We obviously don’t know, but I think it is important to discuss how our investments would fare when all our plans are out the window and the world has gone haywire.

Not long before the financial crash of 2008, a book called The Black Swan2 by Nassim Nicholas Taleb was published. It caused quite a stir in the financial community.

The title of the book refers to an age-old assumption that all swans were white. Swans had always been white and it had almost become part of the definition of being a swan – that it is a beautiful, graceful, white bird. The swan-watching community (if there is such a thing) was therefore aghast and confused when a black swan appeared out of nowhere. Everything the community knew and had taken for granted was suddenly in doubt when such a fundamental assumption as the colour of a swan could be shattered in an instant.

Taleb uses this parable to make a mockery of common parameters of risk used in finance. He describes how if you assume the annual standard deviation of the S&P 500 is 15%, then a drop of 45% would represent a three standard deviation move. Without skew or fat tails3 this should happen approximately 0.14% of the time, or about every 700 years. In reality it seems to happen every couple of decades! I’m grossly simplifying, but I think Taleb would forgive me in the interests of getting a complex point across in a paragraph.

Where am I going with this? I think we need to occasionally think about what most of us consider highly unlikely and undesirable scenarios.

Previously I’ve written about the short-term government bonds of the most creditworthy governments in the world, and how there are probably no securities that are lower risk than those.

But what if we, for a moment, allowed for the possibility of a complete collapse of society, with governments going bust and law, order, and property rights all negated?

The unthinkable is unthinkable

It’s hard for most of us to imagine what this kind of complete breakdown looks like without knowing much more about the reasons why it happened.

For instance it struck me as odd when watching the movie Contagion (about a lethal virus) that even with 40 million people dead in the US and in a state of complete panic, the main characters still walked around in clean clothes and drove their cars.

Would there really be functioning general stores and petrol stations with the world in such a state? Would your credit card be working? Electricity and water? Could you get your money from the bank – and if you could would that money be worth anything?

I am going against the logic of Taleb’s book in even discussing how society’s breakdown could happen or its consequences. Taleb discusses the ‘known’ unknowns and the ‘unknown’ unknowns, and to my mind basically concludes that we don’t know squat, other than the fact that unlikely events are more likely to happen than we think.

By even discussing ways in which the highly unlikely may happen and its consequences, in Taleb’s mind I may be missing the whole point that the unknown is exactly that, and trying to forecast it is a doomed undertaking.4

Still, how we protect ourselves and our loved ones from an investing perspective if society breaks would depend slightly on how it happened.

Was the disaster due to a massive natural shock that we survived? Was it war? Was it an epidemic that wiped out half the world’s population over a couple of months of sci-fi style mayhem?

Gold as security

The ownership of gold in such a meltdown may make a lot of sense. Over the past centuries gold has served as a great bartering tool, whether held as gold bars or in the form of jewellery.

Thinking of gold as a good hedge for markets that are so desperate that your investment in assets such as AAA-government bonds is worthless suggests a state of almost complete collapse.

We all remember the horrible stories from World War II when people bartered gold or jewellery for things like food or shelter or the possibility of escape. People who have studied history and worry that it may indeed repeat itself may find that owning gold has some insurance value to them.

One point of caution on owning gold: suppose you get exposure to it by owning a gold-mining company or an exchange-traded fund (ETF) that tracks gold. The value of those assets would track the value of gold closely as the world heads towards turmoil. But would they actually be of value to you in the case of complete breakdown?

Maybe not. Depending on the exact disaster there may not even be a functioning stock exchange where you can sell your gold correlated securities. And the bank where you held the securities in custody might be a ruin.

Perhaps as a cautious investor you have some gold bars at a very conservative bank in a vault that could withstand ten atomic bombs or whatever disease the evil spirits have thrown our way. But again, the gold here may not be of use to us when we need it.

Would the bank actually be open for us to go and collect the gold? In such a desperate state of the world would we trust that the employees of that bank had not broken into the vaults and stolen the valuables if that meant feeding their children?

Even in the case where you were able to go to the bank and pick up your valuables, you may not want to. In a completely broken-down society, imagine what it would be like to walk out of a bank with a bunch of gold?

You’d undoubtedly glance nervously over your shoulder as you exited the bank and police protection may be non-existent.

If not gold, then what?

Obviously the scenarios I describe above are extremely unlikely. Major disasters of such magnitude have only happened a couple of times over the past century. Even in those cases it was not disaster everywhere in the world, simultaneously. Of course those caught up in the horrors of war or mayhem will find it scant comfort that things are better elsewhere; they are forced to deal with what is in front of them.

If you can’t realise the value of securities or even pick up valuables in a safety box at a bank then the breakdown of society as we know it today would be so complete that we individually would probably be worried about other things, such as shelter, security, food, and water. Probably the last thing on our minds would be how to best invest our assets. Indeed people with the paper version of this chapter would probably burn it for warmth, while mocking the memory of the orderly and stable society most investment books take for granted.

In certain circumstances, ancient jewellery has historically been a preserver of wealth in times of great distress. It is easy to store, hide, and transport. That said, as with gold I would caution you against storing lots of expensive jewellery at home: the risk of theft could quickly eliminate any benefit from holding it.

In certain cases property may be a good asset in times of extreme distress – even if it is illiquid for immediate use. Besides the possible benefit of it as arable land, if the crisis passes there may well come the day where the rule of law prevails and you can reclaim your assets. While shares in companies may be worthless with the companies long gone, property may maintain some value.

Finally, there is some protection through the holding of the broadly diversified portfolio. Although the scenarios discussed above are clear calamity scenarios, there is some chance that part of the portfolio will survive and maintain some value as a result.

Even in our highly interconnected world, a global tracker is geographically diversified. Holding securities in companies in diverse locations such as Australia, Brazil, Canada, Europe, the US, China, and Japan may be of some value if calamity strikes your London home base. For all the securities in such a portfolio to be rendered worthless a calamity would have to strike simultaneously all over the world.5

How could 2008 and 2009 have happened?

My point with the crazy stories above is that your best investments in times of great distress depend on how you define ‘great distress’.

If you define great distress as what happened in 2008, then a AAA-rated government bond is indeed a great preserver of value. In fact things could have gone a whole lot worse than what happened in 2008 and that would still be the case.

But although my suggestions of societal breakdown may seem alarmist or like scenes from a bad science fiction novel, if we’re talking about extreme ‘black swan’ events then conventional thinking is redundant.

I remember talking to a few friends at collapsing financial firms during October 2008 and again in March 2009 as they were navigating their way through the mayhem. One phrase I remember hearing a couple of times, mainly as a joke, was: “If this gets any worse, it’s guns and ammo time.”

While I chuckled back then, it was interesting and scary to see how fast the world could go into panic mode, even without a trigger like war, epidemics, or natural disasters. This was a panic caused by the falling house of cards that most of us had helped build through the creation, purchase, regulation, complicity, or ignorance of a crazy, headless, expansion of credit.6

As bad as things were at the worst point of the 2008–09 crisis, they could clearly have been much worse. There were still functioning financial markets, no governments had defaulted (they had in fact been able to oversee large and necessary bailouts), there was no hyperinflation or threats of war, and there was no widespread civil unrest.

Suppose that instead of the world recovering from the darkest days of the 2008–09 crisis, things had taken a turn for the worse.

We would probably have had a complete collapse of the financial system. Virtually no banks would be in business, or at least not be operating like we take for granted they do today. Your insurance policy would probably be worthless, with the underwriter bust. Many governments around the world would be unable to meet their short-term debt maturities and be in default. There would be nobody with liquidity to buy their debt.

With no functioning financial institutions, trade and commerce would completely dry up. Why would you deliver goods to store when there was no real way you could get paid? Similarly, petrol stations might not be working and public transport would be a mess. (An informed friend told me that the UK has about three months of food reserves and six weeks of fuel, assuming normal consumption patterns.)

Tax revenues would plummet further, as there would be far lower incomes to pay tax on and commerce would have come to a halt (so no sales tax or VAT). The absence of tax income and the inability to refinance short-term bonds would cause the government to cut back severely on spending, including benefits, pensions, education and medical care. Sensing what was in store though, the government might increase spending on police and the military. With the inability to fund itself the government might start issuing IOUs (promissory notes), but these could lose credibility quickly as it became apparent that the prospect of repayment was poor.

People who lost out to these major government cutbacks would probably be extremely agitated. Civil unrest might break out. We have seen cases of civil unrest (like the London riots) or larger protests at government spending cuts in relatively normal states of the world. But since the picture I’m painting is much worse, we can assume that even more widespread unrest could dominate. Where all this could lead is anyone’s guess, but probably nowhere good. The whole infrastructure of society would come under great stress.

The scenario I describe above probably won’t happen in my lifetime, the lifetime of my children, or even the grandchildren I hope to have one day. Or at least I hope it won’t! My point is to demonstrate that we must have a flexible mind when we consider all the possible outcomes in our investing lives.

The question is: how should we think about investments in a state of complete societal breakdown, not seen in my lifetime, at least in the Western world? These could include potential scenarios where property rights have broken down, there is no police or food on the shelves of the stores, and your money is worthless anyhow.

As I see it, a simple passive portfolio mixing a global tracker with your minimal risk asset – what I call a ‘rational portfolio’ – remains superior in virtually all states of the world, except in the scenario where the world is left without property rights and all investment assets across the world are worthless.

In a highly unscientific ranking of different levels of societal breakdown here are some thoughts on what you might want to own:

  • Depending on the level of breakdown, we could still be safe with AAA-government bonds (though they would probably not still be AAA anymore) – potentially from countries other than our own.
  • In slightly worse scenarios we would probably want to own fixed assets such as a house or property. There would still be value somewhere in the broadly diversified rational portfolio, as the whole world probably would not go bust all at once.
  • In an even worse scenario than this where property rights are out the window, we would probably want to own high-value yet easy to hide and transfer goods like gold or jewelry.
  • In complete mayhem we’d want shelter, security, food, and water. And indeed guns and ammo.

If you are inclined to think the worst is remotely possible then perhaps Google ‘preppers’ and explore the world of people who are actively preparing for the collapse of the world order as we know it. Personally I think they are paranoid and a bit crazy, but they would equally consider me naïve.

Finally, the emergence of virtual currencies/commodities like Bitcoin may someday provide additional financial shelter and be a potential alternative to gold. These cryptocurrencies are still in the nascent stages, but if they end up as a recognised asset that can be stored securely I wouldn’t be surprised to see their value go up at times of turmoil and stress in the financial markets. I would caution you to consider risk of being hacked though – particularly at times of lawlessness – and also to think about whether there would be enough ways for you to practically utilize your Bitcoins, either via payments for goods, or else to translate them into the fiat currency you’d need to spend.

Oh, and if you’re going to fill your cellar with tins of baked beans then don’t forget to also pack a tin opener!

Want to hear more from Lars? Read his posts or grab a copy of his book – Investing Demystified.

  1. 10 March 2020 []
  2. The Black Swan: The Impact of the Highly Improbable (Penguin, 2008) []
  3. i.e. Big moves that are more likely than suggested by a normal distribution. []
  4. Though paradoxically he also discusses buying government bonds and put options to protect against calamity, which both assume somewhat functioning financial markets to profit from the disasters. []
  5. Many companies in the world equity portfolio have large net cash holdings (Apple has over $200 billion in cash at the time of writing) unlike governments, which are typically large net debtors. In a really nasty world scenario those cash holdings might prove invaluable and ensure they survival longer than many governments! To ensure you actually own those underlying stocks you would want your ETF to be physical, as opposed to synthetic, where you take credit risk with the issuer. []
  6. I recommend reading How I Caused the Credit Crunch by Tetsuya Ishikawa (2009, Icon Books). Tets, who was very involved with crisis events while at Goldman and Morgan, wrote a funny book about the financial crisis. []
{ 116 comments… add one }
  • 1 Joe March 11, 2020, 12:46 am

    Thanks for the article.

    You say “markets don’t always bounce back.”

    However, in terms of the global stock market (and the Dow and FTSE) isn’t it the case that they have always bounced back in the end?

  • 2 AVB March 11, 2020, 1:31 am

    Can’t believe there was no mention of loo rolls as a tradeable asset!

  • 3 Steveark March 11, 2020, 4:34 am

    4000 deaths is small change as disasters go. Normal flu deaths dwarf that. This might trigger an overdue bear market. But it is hardly a big story. The real story is how a constantly voracious internet demands content.

  • 4 W March 11, 2020, 8:40 am

    @Joe I’d agree that global markets have eventually recovered from previous slumps. But it is worth emphasizing that can be vastly underestimated just how long real recovery takes. It’s easy to look at a chart and say that when an index has returned to a previous high it has fully recovered. But in fact it will still lag the previous market peak in real inflation adjusted terms, let alone how much longer before your investments recover in terms of historical inflation adjusted real returns. It really can be a very long time.

  • 5 The Investor March 11, 2020, 9:30 am

    @Joe — Investing on the assumption that markets always bounce back is an excellent working hypothesis. It’s one of the un-examined axioms behind everything from pound-cost averaging and rebalancing our portfolios to the sustainable withdrawal rate (SWR).

    However history is written by the winners, and while markets have come back in the UK, US, and most of Europe, there are countries where markets were effectively wiped out by catastrophe (war) or revolution. Think Russia, China, Germany, Austria, and Japan.

    I thought we’d written more about this, but it seems we only touched on it here: https://monevator.com/world-stock-markets-data/

    You might say those were extreme circumstances, but that is what this article is exploring.

    As Lars concludes, a passive portfolio allocated for risk tolerance between equities and the minimal risk asset (UK government bonds for most of us) is in practice the best we’ve got for most scenarios. But there are scenarios where you’d prefer to have some property, a farm, a pick-up truck…

  • 6 Jonathan March 11, 2020, 10:18 am

    I agree with @Steveark, a sense of proportion has been lost due to the magnifying effect of instant communication. But would the 1918 Spanish Flu have been less deadly if internet-fuelled anxiety had driven early action?

    The Bank of England reduced interests today, which has been predicted but still baffles me. Are there any trained economists out there who can explain how it will help?

    The cut won’t have big effects on private individuals like myself. Holding cash already has a negative incentive so anyone with cash savings is either doing so for strategic reasons (needing risk-free money in shortish term, including emergency fund) or through inertia. Neither group are likely to respond to the change. And half a percent hardly impacts on the most accessible borrowing: interest rates which will in practice stay in the 20% (credit cards) to 40% (some overdrafts) range. Mortgage rates will become more affordable, but house purchase decisions involve much wider reasons than current interest charges and are slow to achieve. And only a fraction of that mortgage borrowing feeds into the larger economy.

    For businesses, well most don’t hold cash reserves beyond what they need operationally. The big block on investment has not been interest rates but a government whose actions are unpredictable and from their pronouncements are likely to include ill-defined changes in the status quo that will massively affect most businesses, quite likely for the worse. Not a moment to invest. The only thing that is important to businesses is access to finance to bridge the cash-flow problem likely if public isolation measures kick in, but that is addressed through the BoE’s newly introduced TFSME scheme rather than the rate cut.

  • 7 The Investor March 11, 2020, 10:56 am

    I agree with @Steveark, a sense of proportion has been lost due to the magnifying effect of instant communication. But would the 1918 Spanish Flu have been less deadly if internet-fuelled anxiety had driven early action?

    Lars isn’t saying this is a disaster where you end up needing baked beans and ammo. He’s using the current crisis as an opportunity to explore such scenarios.

    While I suppose we could be accused of scaremongering (incorrectly in my view, but everyone is entitled etc) I am 100% sure this is a better time to do it than just four weeks ago when people were saying bonds were useless, they were 100% in stocks, and modelling 15% returns a year for the next 10 years should get them retired by 29 3/4. 😉

    As for the severity of this crisis itself, I’ve been saying it’ll probably cause a recession since at least mid-February. I see today the Bank of England is still dodging such language, and the economists interviewed are all mostly saying growth will slow to 0.75%-1% but we will miss a recession. Well we might and I hope we do, but if we don’t then excuse my French if people saying “everyone” knew it was coming. 🙂

    Similarly, commentators on this site regularly describe the market’s “over-reaction” and “irrationality” in the face of this virus. As I’ve said before, I don’t believe the market is being irrational. It’s true that this certainly doesn’t look anything like “the big one” (thank goodness) but the economic impact seems plain enough.

    Markets have to discount further for uncertainty, for the same reason you’d want a discount if you were buying a used car sight-unseen. It’s all pretty understandable. 🙂

  • 8 The Investor March 11, 2020, 11:02 am

    p.s. I’d just add that importantly the 0.5% base rate cut and other mechanisms announced by the BOE today make the recession they fear and are acting to ward off less likely (clearly) though if/when it subsequently doesn’t occur they will be accused of over-reacting! 🙂 The more monetary/fiscal stimulus we see the less a change of a near-term recession, at the cost of other impacts potentially further down the line (e.g. no firepower for next crisis, or increased indebtedness and associated vulnerabilities.)

  • 9 The Rhino March 11, 2020, 11:23 am

    I took the article as the opposite of scare-mongering, i.e. if things get that bad then the typical worries of your average monevator reader become moot at best.

    A completely different skillset would become valuable in the sorts of scenarios described.

    Positive action could be watching Mad-Max a few times, assuming someone hasn’t looted your TV?

  • 10 ZXSpectrum48k March 11, 2020, 12:17 pm

    The BoE has cut rates 50bp today because 36bp was priced for their 26th March MPC meeting by the market, so they did a larger cut, sooner, to show they are “ahead of the market”. The restarting of term lending to SMEs and reducing the banks’ countercyclical capital buffer from 1% to 0% is probably more useful than the actual rate cut. Not hugely useful but the BoE is really quite limited in what it can do. Let’s face it major corporates can borrow for a 50-year fixed term through the swap market at 0.4%. So giving the market an extra 14bp two weeks early isn’t exactly earth shattering.

    Monetary policy is not built to handle a problem like this. At best, it should be a short-term relief, to create breathing space while other measures are brought in. Unfortunately, governments have been asleep at the wheel for over a decade; no structural change, no fiscal expansion. So we end up with monetary dominance and central banks forced to use all their ammo up with little real impact.

    What the markets need here is governments to act decisively. Most especially the US whose reaction thus far has been pathetic. That means fiscal expansion on a major scale. Targeted support to supply chains. Actual government intervention. Governments acting like a genuine back stop for the private sector. Not just fiddling while Rome burns, doing a few billion here or there, like normal.

    Government bonds are giving a huge signal with negative real rates out to 50y. The market is crying out for more public debt, more duration. Governments seem unable to get the joke since they are full of old people, with old dogmas. Fighting a long dead war from the 1970s against inflation. Against big government. Against state intervention. Just the wrong people, wrong time, wrong place.

  • 11 MrOptimistic March 11, 2020, 12:56 pm

    Well done Monevator, you are stars.

  • 12 Ash G March 11, 2020, 2:17 pm

    I don’t really understand how he can jump from AAA rated bonds to jewellery with no mention of cash at all, I’m pretty sure cash would be quite useful until the point of hyperinflation.

  • 13 MrOptimistic March 11, 2020, 2:53 pm

    ‘Could you get your money from the bank and if you could would it be worth anything’
    Roman coins are found so often because in the latter days of the empire in the west the Roman government paid out in money which was considered worthless and not worth the weight to carry about. Everyone seems to have faith in gold and shiny trinkets – including me!

  • 14 Dawn March 11, 2020, 2:53 pm

    What a depressing article.
    Feel like jumping off a cliff.
    After reading this all my hope and optimism and hang on in there, dont sell, has been completely drained .
    Think I’m better off listening to jim collins!
    Life without hope isn’t worth living.

  • 15 The Borderer March 11, 2020, 3:45 pm

    @ZXS48K (10)

    Looking at the time of your post it seems it was before the budget. Do you think the governments splurge will satisfy ‘The market’ that is “crying out for more public debt, more duration”?

  • 16 Simon T March 11, 2020, 3:46 pm

    I have been tracking one of the Lar’s style portfolios for the past year (in fact it may even be in his book – I must check) – last time I checked it was up 10.7867% and that was in 19/2/20 – as at ETF prices on yesterday it was 2.99% up, a fall but not a bad return over the year with the past months volatility. (30% iShares Core MSCI World UCITS ETF Acc GBP, 30% iShares MSCI ACWI UCITS ETF GBP, 20% Vanguard UK Gilt UCITS ETF Inc GBP, 20% Vanguard UK Government Bond Index Inc GBP)

  • 17 Simon T March 11, 2020, 4:01 pm

    EDIT – that portfolio is not in the book, lord knows where I got it from

  • 18 ZXSpectrum48k March 11, 2020, 4:48 pm

    @Borderer. What splurge? Net fiscal expansion was minimal. Deficit/GDP expanded by just 0.2% in 2020/21 to 2.1% (with most of that coming from lower GDP estimate), with a further 0.3% in 2021/22 to 2.4%. The market consensus for Gilt debt issuance for 2020/21 was £170bn. The DMO numbers imply it’s £156bn. That doesn’t include COVID-19 related issuance, which might be up to £30bn more. So actual number might be say £20bn higher. Gilts basically shrugged and are now marginally lower in yield. Didn’t move the dial.

    The media seems very impressed by the “big numbers” but they are not big numbers. Yes, there is some headline stuff like £170bn in infrastructure spending over 5 years but that is offset by reductions elsewhere. Also remember UK GDP is over £2.1 trillion. Government spending is £850bn/year. People just need to get a grip that a billion Pounds is just a rounding error, chump change. That £20bn is probably just about material. Hundreds of billions – now we are talking!

    Rishi brought a handgun to the party when he needed a bazooka. To give him credit at least he brought something. Merkel and Trump can’t even find a pea shooter.

  • 19 The Investor March 11, 2020, 5:05 pm

    Looking at the time of your post it seems it was before the budget. Do you think the governments splurge will satisfy ‘The market’ that is “crying out for more public debt, more duration”?

    I felt the coronavirus spending was fairly chunky, though it’ll probably be made to look laughable either way by ‘events’ (either far too little or far too much! 🙂 )

    The infrastructure spending was unambitious as far as I’m concerned. If I was a government of a rich country with creaky infrastructure who could borrow at real yields of zero I’d be inclined to spend £500bn say.

    Triply so if I’d hoodwinked the country into a foolish GDP-sapping Brexit, and was looking for ways to offset that through fiscal action.

    With that said Rishi may have wisely understood he’d struggle to actually get his infrastructure built under the new immigration rules for EU workers… Although perhaps with our new ‘control’ we could make up special rules to allow, say, China to bring in its own workers to build HS2 etc?

  • 20 SemiPassive March 11, 2020, 5:05 pm

    Well at least they didn’t mess with pension tax relief in the budget, given the annoying annual rigmarole of civil service leaks threatening just that.
    A rare day of IGLT (iShares gilt ETF) heading down at the same time as the equity markets at time of writing. I do wonder when the typical negative correlation of gilts will either reduce to such an insignificant low number, or break down entirely, leaving gilts no better than cash for crash protection, only with the unappealing combination of zero return and interest rate risk.

    But been wrong on this for years and will probably keep being wrong if we head to negative rates here and in the US, mirroring Germany and Japan.
    With hindsight a Harry Browne permanent portfolio would have been nice to have held up to now, but with 3 of the 4 quadrants now yielding virtually nothing and the 4th (equities) tanking it does seem it will have a tough job to beat even CPI inflation.
    Perhaps that is telling us outright deflation is heading our way and the CPI figure will soon be dropping?

    P.S. Even the pros get it wrong – check out the Artemis Strategic Assets fund. He has actually been shorting gilts (rather than just not holding them) for the last few years.

  • 21 The Investor March 11, 2020, 5:07 pm

    Rishi brought a handgun to the party when he needed a bazooka. To give him credit at least he brought something. Merkel and Trump can’t even find a pea shooter.

    The markets seems genuinely rattled by the Trump administration’s inaction. It’s a fascinating subject but we’re wandering off-topic for Lars’ post here, so I’d suggest we park Budget talk here and maybe readers can pick it up on Friday with Weekend Reading? 🙂

  • 22 Tony March 11, 2020, 5:18 pm

    I do wish I’d known and understood passive investing versus pure gambling years ago…. Better late than never though! Lars’ book and articles don’t need endorsement- we all know he speaks sense.
    Falling markets don’t bother me one bit as such. My risk tolerance is high, psychologically, and it’s only truly lost or gained if realised anyway. Different for those not in the accumulation phase. What I’m bothered about presently, is not being able to time the market. Benefit of hindsight. Namely, in those days late last month when market were dropping, not selling much more than I did. Albeit I only sold to rebalance! You can’t time the market. Proven once again.

  • 23 Matthew March 11, 2020, 5:20 pm

    Money has nowhere better to go than back into equities+bonds – and even then low rates mean that the latter is dubious vs cash, so if theres a reason why markets will always bounce back, its because that money has to go somewhere, unless it was deleted (even then you can pretty much qe your way out of any problem)

    Canned food, rice, water well, land, and a shotgun are better than gold. At the end of the day we have limited, fragile lives, and might die anyway, you cant afford to worry about problems you cant solve (like death, which itself has a 100% mortality rate)

    And get good at martial arts and shooting, get physically fit to fight off the looters

  • 24 MrOptimistic March 11, 2020, 5:38 pm

    I read somewhere that the spread of the deserts was as much down to people seeking fuel for fires as to over grazing or anything else. We need energy to boil the water and cook the food. Doesn’t bear thinking about. Btw, The Second Sleep by Robert Harris was a good read in a similar sort of vein.

  • 25 Lloyd March 11, 2020, 5:49 pm

    The Vanguard FTSE Global All Cap Index ACC GBP is roughly where it was 12 months ago. Are we not getting a bit carried away?

  • 26 Adam March 11, 2020, 6:32 pm

    You are right. The correction is just that, markets went up way too much in 2019 20%+ and this is a reversion to the mean, not end of the world.. but may get worse before gets better.

  • 27 Kathrin March 11, 2020, 6:42 pm

    This article is really ill advised IMO. People are already panicking, both in real life and in the investment world. Why fuel this anxiety even more with such doom and gloom scenarios? I get what you‘re trying to convey, but still not a good idea currently. Maybe would have been more appropriate as a retrospective once this whole thing has calmed down.

  • 28 The Investor March 11, 2020, 7:02 pm

    @Kathrin — Perhaps, perhaps not. I don’t know what your job is etc but we’ve spent years trying to warn people there’s a reason to keep bonds in their portfolio, for example, that stock markets don’t always go up and so on.

    Only a month ago I reminded everyone about bear markets *again*…


    It seems surreal that I felt I had to write that post after the plunge of the past two weeks, but at the time I was pretty much whistling in the wind.

    It’s like people on this thread saying “what’s the big deal about the Coronavirus?”

    Guys, this is the calm before the storm for the West. Check back in two weeks and decide if me or the market was over-reacting. Most people aren’t especially good at imagining alternative scenarios unless confronted with something tangible, or good at extrapolation. (Just consider the very slow progress in the climate emergency…)

    With all that said, I stress again nobody on our side is predicting apocalypse from this virus.

    Mercifully the death rate is low and it *mainly* fells those who are unfortunately already ill and were likely to succumb to something sooner rather than later (although ironically I also get criticized when I point that out… sometimes you can’t win as a writer. 🙂 So for the nth time, I’m not saying their deaths are irrelevant. They’re not, they’re tragic. I am saying on an investing site, trying to judge what to do when faced with this threat, that’s a relevant consideration.)

    I’m not convinced everyone is panicking to be honest. The US has been especially slow, and will likely pay a high price in the next few weeks, sadly. But I agree with you panic isn’t appropriate.

    Finally, there’s a whole strand of literature and philosophy saying to contemplate the worst puts present troubles in perspective (e.g. the Stoic philosophers). Personally, as an old-time fan of The Smiths, I find a bit of doom and gloom therapeutic. 😉

    In the long-term hopefully this trial run (if that’s what it proves — i.e. no dire mutation!) will leave us better prepared to tackle ‘the big one’ if/when it comes.

  • 29 The Investor March 11, 2020, 7:18 pm

    p.s. Just read this excellent article of what’s coming with Coronavirus. Makes the point well — it’s not the end of the world but don’t underestimate it: https://medium.com/@tomaspueyo/coronavirus-act-today-or-people-will-die-f4d3d9cd99ca

  • 30 ZXSpectrum48k March 11, 2020, 7:42 pm

    @Lloyd. I agree. I think people are getting a bit carried away in terms of the market reaction (as separate from the reality of COVID-19 in terms of health outcomes). In total return terms (not price terms) the S&P moved from a base of 1100 in Mar-2009 to 6900 in Feb-2020, a return of 18%/annum. The current correction has moved that total return to just over 15%/annum. Oh the horror!

    If we go into a recession then the typical post-war correction is of the order of 25-30%. So at 30% correction, that would SPXT (S&P total return index) at around 4800. Or about where it was at the bottom of the correction in Dec-18! That really shows how much we rallied in 2019. If that happened instantly, that would reduce the total return since 2009 to, a still very good, 13.5%/annum. Even at a 50% drop, the return since 2009 would still be above 10%/annum.

    The repression of asset volatility over the last decade has made some people complacent with regard to risk taking. The S&P used to have a volatility of around 17%/annum. So something like a 20% drawdown would happen once every few years. In the last decade, volatility has fallen to more like 11%, so a 20% drawdown is meant to happen only once every 20 years. Problem is that’s just nonsense. As an ex-physicist, I live by conservation laws. I find that risk and volatility tend to be conserved; you lower the background level of volatility and all that happens is you get a bigger, more brutal move later.

    Those who have a well-diversified portfolio should be finding that that their bonds are seriously offsetting the damage they are taking on risky assets like equities. If you were sensible enough to own long-duration bonds, you might be still up on the year. Those who have more aggressive portfolios (such as 100% equities) will lose a lot more but they also made more so they have nothing to worry about either. They are just giving back some froth.

  • 31 TahiPanasDua March 11, 2020, 7:50 pm

    Gold has proven useless at times of complete collapse.

    In the total breakdown after the fall of the South Vietnam government and before the communists took over, people took to the streets to barter for basic items. Apparently there were absolutely no takers for gold bars (Chinese taels). Cigarettes proved a useful currency.

  • 32 Hare March 11, 2020, 8:31 pm

    Thank you for this. I was wanting an expanded version of this chapter in Lars’ book and it’s rare the subject is even mentioned.

    It’s like thinking about and planning one’s own funeral arrangements after someone dies who is close enough for you to care but not too close so it’s devastating. The situation is close enough for emotions to engage in sensible planning, but not too close that it’s too painful. And yes, someone could argue it’s morbid and it’s doom and gloom and making it worse, but we all die, and situations like this can happen, so a bit of thinking around the subject is not a bad idea.

    I’ve always thought of the people who had to run with nothing but the gold and precious gems they had on the premises – or the people who had everything taken by the government/monarch/whoever (used to happen a lot, why not again?). What’s the point holding gold in someone else’s safe or bonds if the government seizes your assets? In Nazi Germany, I’d have been hauled off to the camps for being creative and in earlier times, burned for being a witch (because I grow plants. It didn’t take much back then).

    Good article. Thank you.

  • 33 Pinkney March 11, 2020, 8:45 pm

    Most helpful thanks for sharing, the link to the medium Coronavirus article is interesting. I made my own calculation based on doubling every 3 days and for Italy this would mean 10m this time next month. The power of compounding is a wonderful thing sometimes but in this case it’s not quite so positive. Stay safe and remember being cautious with your health is very different to being cautious with your investments as you have little to lose.

  • 34 Matthew March 11, 2020, 10:45 pm

    I think that total societal collapse would never happen, the idea we’d suddenly lose all respect for the law, even in a real crisis our civilised nature is too ingrained, we’d form a queue for any supplies (most of us anyway). Even if cards stopped working and people had to steal, they’d keep it moderate – we trust people to self service at the checkout, we leave the supermarket doors open, barely guarded at the best of times, people even work out of honour when the dole would pay better, even our homeless choose not to get themselves chucked in jail even when theyd be better off doing so

  • 35 Dawn March 11, 2020, 11:55 pm

    I totally agree with your comment kathrin.

  • 36 The Investor March 12, 2020, 12:25 am

    @Matthew — There are innumerable examples of societies collapsing in history, albeit usually only for brief periods of time until some kind of order (perhaps despotic) is restored. Dreadful things happen when people are unconstrained by social norms. Civil wars for instance provide plenty of horrible examples. I suppose you could argue that’s not a total societal collapse, rather a war. But when neighbors of 20 years are slaughtering each other, raping their former friend’s daughter, killing children etc, the idea that people would form a queue for whatever food was left would be revealed as incredibly naive.

  • 37 Onedrew March 12, 2020, 12:56 am

    Simon T: your 60/40 world equities/gilts split is perfectly Larsy.

  • 38 The Investor March 12, 2020, 9:20 am

    Market crashing again today, so perhaps some may be growing less sanguine. My view is this is a decent-sized crash but we’ve been here before. I’ve written a short Twitter thread in response to friends, family, and readers who tell me they’re selling out:


  • 39 Pinkney March 12, 2020, 10:22 am

    Time for selling out was last week, looks like this will continue for a while. Now the US has woken up we will see what happens but if the FTSE goes sub 5000 I must admit my current zen like calm is going to get twitchy. A few more years work needed I expect; not a bad worse case scenario really given the main article on Armageddon!

  • 40 Matthew March 12, 2020, 10:47 am

    @ti – you will get opportunist looters and rapists and murderers in a collapse, certainly, and those are the ones we notice, but I mean 90% of people have by and large no desire or would be horrified into behaving in an orderly way – humans are a self policing society anyway, we started with anarchy, even crime synicates could be thought of as mini-nations, as the line gets blurred when you scale it up. I think by and large just keep what you need, keep to yourself, and you probably wouldnt be a target during an anarchy.

    There is also a fear that when order is reimposed, the new administration might punish warcrimes, like how nazi soldiers were doing what was allowed by their regime but came to be tried later on

    Re market “crash” – everybody hold on! All that selling will do is crystalise losses, the risk vs reward of trying to time the market is even worse now, with less to be gained from doing so and more risk that it might find a floor (or not!)

    I wonder, @ti – do you feel this renewed crash is a rational assessment, if you feel the last one was?

  • 41 Nick March 12, 2020, 10:47 am

    How far down do you think it will go Investor? I’m slightly annoyed I didn’t learn the ropes for put options a few weeks ago when I was dismayed the market was trending upwards despite what was happening in China!

  • 42 Neverland March 12, 2020, 11:11 am

    I don’t know…. I just started buying a little bit of equity etf exposure today and will keep adding periodically

    When I start seeing comments above like “And get good at martial arts and shooting, get physically fit to fight off the looters” @Matthew and Trump banning flights from Europe into the USA for 30 days I am very much reminded of Nathan Rothschild’s maxim to “… buy on the sound of cannons…” … or in this case, coughing 🙂

    The stocks I bought in the etf are the same set of stocks that were on sale a month ago with the same ultimate long term prospects… just 20-30% cheaper… and who doesn’t love a sale?

    If everything is cheaper again the next time I buy then great …. I won’t need to sell them for a decade or two

  • 43 ZXSpectrum48k March 12, 2020, 11:18 am

    @Nick. You can’t quantify how much lower things will go. For the first couple of weeks this was about downgrading growth estimates, earnings forecast etc. All very rational.

    In the last two weeks it evolved more into a VAR shock. When that happens, people have to derisk their portfolios rapidly. Macro hedges for risky assets like equities start to fail. For example, long gold and short USD/JPY aren’t really working anymore. Even govt bonds are struggling to rally enough. In some markets yesterday, equities went down and bonds went down, a disaster for risk-parity portfolios that drives more derisking.

    What we’ve seen this week is the start liquidity issues. So traders of corp bond ETFs can’t sell enough of the underlying corp bonds to offset their ETF redemptions. You’re seeing EUR/USD cross currency basis fall more rapidly as market demand for USD liquidity rises. Companies like Boeing, Blackstone etc are calling on their revolver facilities at banks, causing some banks to have to shore their liquidity positions, again by selling assets down.

    So the market just needs to puke all it’s positions out. That puking occurs in much lower levels of liquidity so each market will stretch to whatever level is required to allow derisking to occur. Valuations, fundamentals, levels etc are all irrelevant during this phase.

  • 44 Neverland March 12, 2020, 11:32 am


    Look on the bright side, you can’t have an old fashioned bank run a la northern rock if the banks are all closed and you are banned from gathering in a queue because of the virus 🙂

  • 45 MrOptimistic March 12, 2020, 12:04 pm

    @ZX. Yes agree with you revaluations. I have been surprised ( elsewhere) by people declaring they think equities are now ‘ cheap’ and are buying back in. We have no instinct for value. At least this time we have an exogenous cause we can monitor to a degree. If the US is forced into nationwide ’emergency’ measures petrol might be thrown on the fire. It shows no great insight on my part but seems clear we are only in the early stages and it may indeed be an ‘ opportunity’ but in the falling knife sense.

  • 46 Vanguardfan March 12, 2020, 12:13 pm

    Thanks for this. It’s human nature though to only think about defensive measures when it’s too late!
    I’ve just stopped looking at my portfolio, fingers crossed I got the asset allocation right…

  • 47 W March 12, 2020, 1:33 pm

    At times like this diversification into property really helps to take some pressure off the equities drama and treat it as a rebalancing exercise.

    I see discussions about BLT v stocks and which investment is best, but the benefit of property – if you have the option – it is not simply about maximum returns.

  • 48 cat793 March 12, 2020, 2:11 pm

    I only read Lars’ book 2 months ago having managed to inexplicably overlook it before. I found this chapter very thought provoking and had started to have a reassessment of my assets. I have a low allocation to bonds and no gold but I have a decent amount of cash and my main asset is a property I let and the equity in my home. My equity investments are mainly long term ie pension. The course of action I had more or less settled on was to sell my riskier equity assets ie not index funds and reallocate some to bonds and gold but mainly to paying off a substantial chunk of my remaining mortgage.
    I know many such as Ermine warn against paying down your mortgage and losing the higher returns of equities but my reassessment reminded me how uncomfortable I am owing money. Unfortunately I had only just begun this process when this coronavirus crash intervened and so now I will just have to sit tight. Like Matthew I tend not too worry too much about societal breakdown as I am optimistic that this is unlikely in the countries that I depend upon. If things get so bad that people are killing each other in the streets in well run developed countries then I regard myself as done for at that point anyway.

  • 49 SemiPassive March 12, 2020, 2:29 pm

    In terms of asset correlation investment grade corp bonds, esp the longer dated ones seem to have held up quite well, indeed gained a bit, until the last 24 hours.
    Emerging market $ denominated bonds have been absolutely hammered today, iShares EMHG down over 9% so far today (ZXSpectrum48k I’d love to hear if they have a lot further to go!) which was the worst drop of any single fund I hold. I guess primarily down to fear of oil producing countries defaulting or is there more to it? Perhaps stupidly I topped up just a little. Obviously high yield junk bonds have taken a pasting what with the impact on shale producers and over indebted companies in general.
    I have a couple of UK commercial property trusts that have taken a knock, but green energy infrastructure trusts holding up OK.

    Regarding equities, it seems to be a case of the S&P500 outperforms the rest of the world on the way up, but on the way down everything drops just as much.
    Global equity diversification hasn’t seem to have helped all that much, over the last several years, if not decades vs just holding US equities.
    The poor old UK market in particular is being hammered just as much on the way down despite only climbing part way on the way up relative to the US.

    On COVID-19 that article The Investor just posted is superb if scary. If you look at who the NHS is actually testing (virtually nobody unless you’ve been to northern Italy or China) its clear the real numbers of infected in the UK are likely to be in the thousands, possibly tens of thousands by now. Certainly they will be within a week.
    There was something in the Guardian yesterday where a colleague of Nadine Dorries was told by NHS111 on the phone that they didn’t need a test and to just go to work as normal despite having CV19 symptoms (presumably just before Nadine had been tested positive).
    You can see why we’re likely to go exponential given the absurd advice being dished out.
    They don’t appear to have done anything useful at all in containment or delay measure so far. Just watch the NHS collapse within a month.

  • 50 Matthew March 12, 2020, 2:41 pm

    @semipassive – made me think, we could have zero new confirmed cases tomorrow if only we stop testing people

    No testing = no positive cases = no lockdown

    If they can get away with it, they can avoid putting pressure on themselves, allow herd immunity to take root behind the scenes and just treat the worst cases, you can dispute the cause of deaths and it reduces the future strain on the state to let them die, and you can say that youre trying to get it over with before next winter, ie good intentions, on professional advice

  • 51 Simon T March 12, 2020, 3:00 pm

    I am sat at home in self imposed isolation working, with a heavy chest and feeling like death warmed up. I have been on public transport (rail journeys over 4 hours) and living in hotels up north and south for years during the week (especially the last two weeks). But because I haven’t been in contact with anybody from abroad or somebody who has the virus I am not eligible for testing.

  • 52 Nick March 12, 2020, 3:12 pm


    I appreciate no one can put a figure on it but everyone has their inclinations. I cannot see how it cannot go down plenty further between the oil prices and a US lockdown. That said I wasn’t investing in 2008 so don’t have a sense of such things, from my reading I got the impression I simply won’t want to invest by the time we’re close to the bottom because I’ll feel like I’ve been punched in the gut.

    Rationally, I think we should see a 30-40% drop but I thought things would have dropped when things were bad in China…

  • 53 Matthew March 12, 2020, 3:20 pm

    Can we even remotely trust chinas figures of declining numbers? An unaccountable state that probably got annoyed with every other countries lack of effort, and the trade war, that behind closed doors it just decided to cover it up?

    Are they doing anything differently? If not then only the immunity of the healthcare workers could explain the drop, even then you have a population of 1.3bn, many of which havent officially had it, with some movement between countries, its hard to believe they could have gotten the handle on this theyre claiminge

    Democratic accountability is a n economic handicap in cases like this

  • 54 Simon T March 12, 2020, 3:35 pm

    As I am building up my SIPP for drawdown in November this is interesting. Have been 90% in cash for the past 18 months, and for the rest have been paying into my company pension from my salary. Currently -0.648% since July 2018.
    Now the second £60k (from pure cash) on one of my DC pensions has just come into my SIPP, now there is a dilemma.
    The first was only £1,600 this week, straight into a VLS60 (lost 2.5%), but it’s for the long haul that one
    The others are a pain in the butt to transfer (three with XPS Xafinity) – they are being done manually and one DC with GMP underpin (thats going to take a while)

  • 55 The Investor March 12, 2020, 3:49 pm

    Are they doing anything differently?

    Um, I don’t know if you read the news Matthew, but they literally shut down a major province of 60m people, closed most of their factories, and sealed the country to internal travel.

    No Western country has done anything close until Italy this week.

  • 56 The Investor March 12, 2020, 3:52 pm

    @Simon T — Yes, they would like to test more but they don’t have the capacity basically. They are ramping up to 10,000 tests a day, announced this week. My working hypothesis is at least c.5,000 people in the UK have it now. Possibly 10K.

    I know two people with suspected CV and of one with proven in my friends/family circle. What are the chances?

    As I said at the start, I still think most of us will get it.

    I misunderstood the importance of flattening/delaying the peak though, hands fully up.

    The stories from Italy are heartbreaking.

  • 57 The Investor March 12, 2020, 4:02 pm

    Note: Important edit, I’ve edited my estimate numbers in my previous comment, which were both one zero over, commenting on a phone without glasses, while fighting for toilet roll in Tesco haha! Also my nerdy friends I debate this with say it’s more like 1000 and too early to extrapolate from early death numbers. But I think in an open country like the UK with limited testing 5K seems about right.

    Also one of the people I know is in Ireland, which I guess is a different ‘what are the chances?’ pool.

  • 58 David March 12, 2020, 4:54 pm

    Thanks for sharing the Medium article, that’s the most sensible and useful thing I’ve read about the Covid-19 crisis so far. It’s also quite terrifying, and we have to hope Boris shows better leadership than Trump, otherwise thousands of people will die and the NHS will go into meltdown. If schools aren’t closed by Monday we’ll be in big trouble.

  • 59 Matthew March 12, 2020, 4:55 pm

    @ti – they are further into this to be sure, but can we really believe the numbers are that optimistic? – that they got it down to double digits
    Is italy that optimistic about their measures? Do we believe that level of containment is even possible here?

  • 60 Vanguardfan March 12, 2020, 5:02 pm

    @david, yes I think it’s past time to start systematic distancing measures here. I know of individual companies bringing in work from home policies, but there’s very little point unless it’s done at a population level.
    I do understand that for example school closures could impact on key workers’ availability, not least healthcare workers, but surely schools are going to be one place that amplifies the outbreak (I haven’t seen any evidence that children aren’t infected).

    @matthew – lets give some of the obvious interventions a try before we conclude there’s no point, eh? We can get people working from home, we can advise them to minimise contact with others by not going out, etc etc. If we do nothing, this ain’t going to disappear – there will be carnage in the hospitals, and god help the poor frontline healthcare staff. You should read some of the reports from the Italian doctors.

  • 61 ZXSpectrum48k March 12, 2020, 5:04 pm

    @SemiPassive. EM, whether equities, $-denominated or local currency bonds have been decimated in the last few days. The collapse of OPEC+ was a total surprise to most of the market, which also fed in HY corporate bonds, which triggered a broad rout in most “risky” bonds. Italian BTPs (govt bonds) were at one point today down 8 points.

    In 2008, EM equities lost 65%, EM hard currency debt lost around 30%, both in USD terms (less in GBP). EM hard currency debt is down about 15% thus far. The spread over USTs is currently around 550bp. That spread went to 900bp in 2008 though it spent <6 months above 700bp. Spread duration is 7.2. So perhaps another 10-25%, if UST yields are unchanged.

    To be fair, this isn't a rerating of default probabilities, so a move as large as 2008 shouldn't really happen. Against that, however, liquidity is so much worse. We're seeing here the negative impact of the poorly thought out bank regulations like Volcker and Dodd-Frank. The stronger hands that would normally start buying here off many retail ETFs holders who are panic selling just don't exist now. So the airpocket is much bigger.

  • 62 Vanguardfan March 12, 2020, 5:07 pm

    It’s two – three weeks until the Easter holidays. Let’s get the schools shut early for a month.
    (I say this as someone with school age kids taking final public exams this year, I was hoping to avoid disruption to their preparations, but I think this is a forlorn hope).

  • 63 The Rhino March 12, 2020, 5:50 pm

    Not just Italian, but local medic chatter is pretty horrifying as well, some brutal age-based triaging already occurring in my nearest hospital.

  • 64 SemiPassive March 12, 2020, 6:36 pm

    Thanks ZX, thats really helpful. Will be tempted to back up the truck if they start yielding anything like that much. Well, wheelbarrow perhaps.

  • 65 Edward March 12, 2020, 6:36 pm

    I’m a total novice and was cursing my penchant for procrastination, having read the investor’s warnings about an approaching bear and failing to diversify, panicked and sold at the end of Feb, crystallising a large loss.

    However, I’m feeling a little less upset today seeing all the markets crashing globally, because I’m sitting on a large pot of cash that I should be able to reinvest at various points and eventually make back a lot more than that loss.

    But someone said to me last week that rather than catching a falling knife, buying now would be more like trying to catch a falling snooker table…

  • 66 Jonathan March 12, 2020, 6:54 pm

    More thanks TI for the Medium article. We all know how good you are at picking up good personal investment stories but obviously that talent extends to healthcare.

    As discussed above, one of the big unknowns is the “true” number of cases. Pueyo’s rule of thumb of 800 times the number of deaths is helpful. This morning’s headline was of 10 UK deaths which means around 8,000 total infected. While a small proportion of the total population today, exponential growth could change that very quickly as Italy have found.

    I still suspect there may be more mild cases than acknowledged – suggestive evidence being the lower death rate found in South Korea where there is significant testing of symptom-free individuals, and the lower reported incidence in children which seems likely to be less severity rather than fewer affected. Now the worst is over in Hubei there are apparently studies being undertaken of those showing an antibody response to the virus, which should allow comparison between the proportion of the population who actually got infected and the number diagnosed at the time.

    On the individual level it is not an easy decision about things to do, balancing minimisation of infection with avoiding excessive personal disruption. At the government level that is further distorted by the need to be seen to be doing something, which I suspect was a bigger factor in Trump’s and Vardkar’s actions today than actual serious analysis of risk.

  • 67 FI Warrior March 12, 2020, 7:22 pm

    The coronavirus serving as the pin for the everything bubble might focus minds on the type of health system we want, as reality interrupts political echo-chamber jingoism.

    In the US for example, a gigworker feeling ill will be under pressure to go to work because they need to pay rent on time to avoid eviction and can’t afford health insurance anyway. Even if there’s free testing, if it led to forced isolation and that critical income loss, many would still gamble that they’ll survive the odds and avoid being tested. But in the more enlightened states that still have a NHS you will have more voluntary cooperation, especially if combined with government-led, common sense measures around funding any necessary earning loss.

    With the correction of stocks massively inflated by QE, this is simply (unearned) value destruction returning those prices to an understandable relationship with company earnings, as in sane healthy capitalism. It should be welcomed as a return to normality, with creative destruction weeding out zombie companies only in existence thanks to central bank enabling funny money, in casino capitalism, that undermines faith in currency. Once that trust is lost, we will indeed have chaos, like Venezuela or Zimbabwe.

  • 68 David March 12, 2020, 8:40 pm

    After finding this site in 2015 invested in VGLS 60, things went so well I recently exceeded the compensation limits so I opened an account for my wife while at the same time derisking to the 40. While partially out things began to move in the wrong direction. I know i need to get back in but when. Is this market timing?

  • 69 Matthew March 12, 2020, 8:48 pm

    The good thing about dips in the market is that for a while we pay less in fees 🙂

  • 70 Whettam March 13, 2020, 12:17 am

    I preferred it when we debated / argued about passive vs. active, SWR’s and Asset Allocations.

  • 71 The Investor March 13, 2020, 12:47 am

    FWIW the Government’s chief scientific advisor agrees with my estimate, judging by the latest story on the BBC website:

    “There have been 596 confirmed cases across the country. However, the actual number of people infected could be between 5,000 and 10,000, the government’s chief scientific adviser Sir Patrick Vallance said.”


    (No I am not Sir Patrick, sadly. Not Sir Anything! 🙂 )

  • 72 Matthew March 13, 2020, 12:56 am

    @ti – captain jean-luc picard said that? 😉

  • 73 Learner March 13, 2020, 3:00 am

    @Whettam We settled it though. Passive, targeted date, and the last one is a trick question – there is no SWR! /s

  • 74 MrOptimistic March 13, 2020, 8:28 am

    Interesting times. I wonder what this is doing to the annuity market. It is somewhat disturbing when you see the price of gold and treasuries being hit, this implies a volume of trades buying liquidity. Someone needs cash badly. In the meantime I’ll have to sit this out. As others have said if you were happy with your asset allocation it should be not unexpected nor intolerable ( though I do wish I had been even more risk averse). I don’t think there is any wisdom in trying to catch the bottom of this, it could last a couple of years. If the market falls 50% then the recovery would need to be 100% to regain the February highs. I would be content to let others take the first 20% of that. I do wonder though, how long it might be until the recent highs are challenged again. It’s just possible it’s decades away.

  • 75 Neverland March 13, 2020, 9:13 am


    “I do wonder though, how long it might be until the recent highs are challenged again. It’s just possible it’s decades away.”

    It took about 5 years for the S&P 500 to recover to its pre-2008 level so I think you are being melodramatic

  • 76 wephway March 13, 2020, 10:47 am

    I’ve got just over £10k in my company sharesave scheme but given the company’s current share price is now lower than what I’m buying the shares for I was thinking I might just take the lot out and put it in a Vanguard Life Strategy ISA. But is it too soon? Could the market drop even further? Maybe I should take the money out and then just put in £1k a week for 10 weeks. Is anyone else in the same situation?

  • 77 The Rhino March 13, 2020, 10:59 am

    I am taking a bit of solace from the knowledge that my VGLS holdings are getting re-balanced without me having to do anything. That’s helped psychologically over last few weeks.

    In a perfect world I’d be starting my side project of an ETF/IT portfolio for income now rather than last Nov but there you go..

    That project was a one off due to a house sale, but my main routine is to invest every quarter, with the next coming up just after start of new tax year, so I think best just stick with that system rather than mucking about trying to catch dead-cats and sharpened knives.

    If I were a bit more active, I could spaff the emergency fund on cheap equity but really thats there to help out in times of potential unemployment, so I’m probably best off to resist that urge.

  • 78 An Admirer March 13, 2020, 11:27 am

    Best buying opportunity for a generation over the rest of this year, and especially the next few months. Bear ahead. Fill your pockets.

    Absolutely textbook dead-cat bounce on Tuesday. You couldn’t make it up.

    It’s going to take a lot more than a nasty cold to kill capitalism.

  • 79 SemiPassive March 13, 2020, 11:40 am

    “In a perfect world I’d be starting my side project of an ETF/IT portfolio for income now”
    Amen to that. The last fortnight has certainly proven that income-oriented portfolios are just as likely to be massacared as global equity trackers.
    What isn’t yet clear is how much dividends will be cut across the market as a whole, and whether there will be any odd effects on some of the dividend aristocrat-type ETFs.
    For instance what happens if half the stocks held cut their dividends and breach the rules for inclusion in the first place? Then holdings will be concentrated in ever fewer companies.
    The dumber ETFs that just rely on current dividend yield rather than a long and uninterrupted dividend history will be less impacted I guess.
    GBDV is an example of the former, VHYL the latter.

  • 80 The Investor March 13, 2020, 11:49 am

    Amen to that. The last fortnight has certainly proven that income-oriented portfolios are just as likely to be massacared as global equity trackers.

    @SemiPassive — If your income-orientated portfolio was bought (for some silly reason like) dividend-paying stocks don’t go down, then yes you’re right.

    If it was carefully selected because you believe income payments can be FAR less volatile than stock prices, then nothing has changed.

    Of course e.g. big equity income trust share prices have been smashed, like everything else. Let’s see in five years if they’ve slashed their dividends by 1/3. Anything is possible but I wouldn’t hold your breath.

    There’s no magic here. I expect an income-orientated portfolio built around carefully selected investment trusts to *underperform* a total return strategy in the long-term. But I am very confident the income stream will be far less volatile.

    So if you have the money to get your natural yield of say 4% from such a portfolio, then provided you’ve set it up right I think it’s a boon at times like these.

    Finally, equally, fully agree it’s not the only way. We’re best finding out what works best for us.

  • 81 arty March 13, 2020, 11:55 am

    Isn’t that back to front SemiPassive?

    “The S&P Global Dividend Aristocrats is designed to measure the performance of the highest dividend yielding companies within the S&P Global Broad Market Index (BMI) that have followed a policy of increasing or stable dividends for at least 10 consecutive years. “

  • 82 Brod March 13, 2020, 12:15 pm

    @Neverland – yes, but with massive QE and ZIRP. Which we’re still in. What weapons have we left? Time for Fiscal expansion, methinks. Let’s stop fighting the last war.

    @MrOptimistic – I agree. For me, capital preservation is the key. I don’t mind missing any potential upside. I was out of the market when 2008 happened as I was transferring my SIPP to a new broker and I remember how difficult it was to take the plunge when the (in hindsight) bottom was reached. The market was up about 25 or 30% when I finally did. Still, that gave me 25% uplift for which I am very grateful.

  • 83 Simon T March 13, 2020, 12:19 pm

    Well I didn’t expect the Economic impact to hit companies as quickly as it has. My company has had an immediate hiring freeze and only the Global big boss in my division can authorise in country appointments – even down to a £35k junior programmer. (we are 50,000 strong in my division). One of my clients a Luxury brand is going into internal meeting meltdown at the moment (check out some of the luxury good manufacturers – some have 40% wiped of market capitalisation). Another of my clients is trying desperately trying to protect the factory workers by having the office workers bugger off or use the facilities on different days.

  • 84 The Rhino March 13, 2020, 12:23 pm


    There’s no magic here. I expect an income-orientated portfolio built around carefully selected investment trusts to *underperform* a total return strategy in the long-term. But I am very confident the income stream will be far less volatile.

    Precisely why I did it 😉 But the extra % or so yield would be nice to have If I’d jumped in today!

  • 85 Edward March 13, 2020, 12:34 pm

    As your Admirer wrote, the next six-twelve months should be the buying opportunity of my generation.
    This weekend’s reading should probably be analysis of when to invest in a market like we see now. Trying to call the bottom is futile/pure luck, so one has to probably phase reinvestment into equities based on targets.
    For example, if the FTSE hits 5,000 or the Dow 20,000, stick 25% of your cash back into stocks. If it hits 4,500, stick 50% in etc.
    What if it all goes to toilet and the bottom is found at 3,000 or less, though?!

  • 86 The Rhino March 13, 2020, 12:47 pm

    @Edward – but where does the cash come from? Who is sitting on enough cash to move the dial on the overall portfolio? So unless your properly active and willing to move on your asset allocation its moot, unless you win on the lottery/premium bonds or dear aunt agatha dies in the meantime?

  • 87 Simon T March 13, 2020, 12:50 pm

    @The Rhino
    Well that would be me, retiring in November but got spooked 18 months ago when the market dipped then went back up so put £580,000 of the DC pensions into cash, left £40k in equities and each month invested £2.3k into equity funds in my company pensions. Currently down £5k since then.

  • 88 Vanguardfan March 13, 2020, 12:51 pm

    @rhino you have given me a thought. In one portfolio I have a large holding of LS100, which was sitting on a large amount of capital gain (I should check, it’s possible all the gains have disappeared, so far I have not been able to bring myself to do so). Normally at this time I’d be crystallising capital gains (hollow laugh) and rebalancing with purchases.
    I’m considering selling the LS100 and buying LS80 instead, which would derisk a little and also do that rebalancing thing you mentioned. Of course dealing funds is hard when markets are volatile as it takes days for each transaction to clear.
    Or should I just not look until September.
    (Again, I’d normally fill ISAs and pensions from taxable accounts in April.).
    Buying opportunities are no use to me, I’m not adding anything, I just want to preserve what I can!

  • 89 The Investor March 13, 2020, 12:53 pm

    This weekend’s reading should probably be analysis of when to invest in a market like we see now. Trying to call the bottom is futile/pure luck, so one has to probably phase reinvestment into equities based on targets.

    This site is mostly for passive investors nowadays and properly set-up passive investors should keep doing exactly what they’re doing — feed in new cash automatically every month/quarter, rebalance as required by their plan, consider putting in excess cash and lump sums if they get a windfall.

    Whatever dramatic thing you do now is likely to look silly in 12 months — either like you were nervous and didn’t do enough, or you were reckless and went crazy. (We should not *assume* a speedy bounceback. Even in my lifetime I’ve seen bear markets drag on for years. There’s no rule that says we couldn’t noodle around for a decade, though I think it’s extremely unlikely — unless this becomes a global depression due to inept policy responses or out of control panic or a mutation or whatnot).

    Active people like me will be active, but I’ve never given blow by blow accounts of that. Most readers would be frankly horrified by the size/speed of the actions, the ability/need to change decision and turn on a dime etc, that I’ve experimented with over the past six years or so. Nobody needs to do that!

    Less active active investors (long-term stock pickers, as I once was and aspire to be again!) can perhaps start looking at what’s fallen too much, or what’s held up and can be rotated into unfairly trashed individual stocks, but anyone who isn’t doomed to lose to the market trying to do that doesn’t need my advice. 🙂

  • 90 Matthew March 13, 2020, 1:26 pm

    Someone made the point that banks are had to sell off risky assets to maintain liquidity, so you have equities being sold not because they are bad, but because regulation forced them to be sold, so that is a good reason to expect a bounceback (in time) because assets were sold for the wrong reasons, which will no longer apply, and people will look for a reentry point, but of course recoveries are slower, and the event wouldve sewn fear that should keep prices under control going forward, although I do have to say that near the end of a bull market, fear comes in anyway as people start anticipating a crash, which was what I think 2018 was – a self fulfilling prophesy (albeit just corrections)

    It could be creative destruction, a healthy thing for the market to do

  • 91 Russell Byrne March 13, 2020, 1:39 pm

    Random thoughts for the day:

    1 Is now a good time to cash in the deferred DB scheme (CETV)?

    2 Will there be an impact on P2P solvency?

    3 Preference shares approaching 7% dividend yield, hmm.

    4 Why are the US FI sites so quite given the volatility?

    5 RIT’s OMY or TMY is looking very sensible!

    6 Good time to sell outside ISA investments and buy inside ISA.

    7 hindsight bias is stronger than your realise – clearly it was obvious what was going to happen.

    Good luck

  • 92 The Rhino March 13, 2020, 2:09 pm

    @VF – surely your suggestion is the opposite of my situation? i.e. you’d be selling equities to buy bonds? I’ve effectively been selling bonds to buy equities (well hopefully someones been doing that on my behalf)?

    So in other words, no don’t do it. You’d be buying high and selling low.

    Stick to your guns but if you have genuinely found out something new about your risk tolerance make a note to change your asset allocation in a year or two from now say..

  • 93 The Austrian March 13, 2020, 2:14 pm

    I also strongly recommend Taleb’s Fooled by Randomness – more accessible than Black Swan and very similar themes. However a rampant virus is not strictly a black swan – an unknown unknown or a risk at the very distant end of the ‘tail’. There have been a number of such illnesses in recent years that spread quickly, like SARS, Zika, etc, and countless examples from the past.

    The size of recent market falls are just in proportion to size of recent overvaluation, and a small, fairly predictable wobble in revenue expectations causes chaos. Mad overvaluation of assets is caused mainly by loose money policy – ZIRP and central banks goosing the economy and preventing true price discovery. It favours the insider over the normal investor, the old over the young, the wealthy over the poor. If you are in the lucky position of being able borrow at 2% and buy a blue-chip asset yielding 4%, any fool can make money for nothing. How did Pizza Express, as a recent example, end up with £1m of debt per restaurant? Then add in the leverage that is accessible on the short side, and you have a recipe for a rollercoaster – malinvestment on the way up and crazy falls going down. ZIRP also discourages ordinary people and firms just saving cash – then when income stops they are screwed. So central bank policy creates the seeds for its own undoing. It creates antifragility.

    Interest rates should go up, pretty quick, to something like historical, market-based norms, not down – or we face true and total economic carnage.

  • 94 Vanguardfan March 13, 2020, 2:31 pm

    @rhino I see your point (always good to have another pair of eyes in these circumstances). However I would normally be rebalancing at this time anyway, and that portfolio needed to have its equities trimmed. I’ve looked at the damage, I still have more than a year’s gains to realise, so I should sell part of the holding. The purchase should rebalance a little away from equities…but I will have to check again once the sale has gone through!

  • 95 Don March 13, 2020, 2:38 pm

    Something I’ve been wanting to try for years and now seems like a good time to (carefully) start: take out a margin loan at 1.25%, buy the market while making sure that my government bonds portion would still cover any margin calls in case the market falls another, say 15-20% from here. It seems too easy, even if we “noodle” around for another few years?

  • 96 Don March 13, 2020, 2:41 pm

    Oops, sorry for the duplicate comment.

    But I mean, seriously, how bad can it get? I can’t see the market going down as far as 08/09…

  • 97 The Rhino March 13, 2020, 2:45 pm

    @VF – for sure, if you need to rebalance to an asset allocation that has been around longer than the past 3 weeks then do it.

    I do really like having the acc type VGLSs just chugging away in the background. Its so hands-off! Especially so in ISAs/SIPPs for the no tax-reporting. And having the bonds component is the icing on the cake.

  • 98 Neverland March 13, 2020, 3:03 pm


    “What weapons have we left?”

    Electronically deposit money in voters bank accounts. Issue one-off income tax or VAT tax rebates. Cancel the gilts owned by the BoE. Just three off the top of my head …

  • 99 Edward March 13, 2020, 3:09 pm

    “We should not *assume* a speedy bounceback”

    I can’t see how it can bounce back at all; far more likely a slow recovery that might take years. The damage being done to the wider economy while people are not travelling, shopping, holidaying or spending in any way will be huge.

    All I know is at some point we will find the bottom and want to be investing as close to that mark as possible

  • 100 ZXSpectrum48k March 13, 2020, 3:19 pm

    @Rhino. I’m actually sitting on a pile of cash here, about 30% of my net worth. Over the last month, I’ve derisked the passive parts of my portfolio, netting off positive returns from long bond duration vs. negative returns from equities. This leaves me 30% cash, 30% passive, 40% active (mainly “alts”) plus derivative overlays.

    My view is that in a move like this you need to hold the initiative. Derisking, adding to cash, keeping P&L positive, keeps me on the front-foot. The alternative, taking a large drawdown, just results in paralysis or taking a stop-loss at the base. I understand this goes totally against the passive ideology but I’m not built to wear a 5-10% drawdown in my net worth. Moreover, with most of the investment community in considerable pain, there are going to be some fantastic opportunities to exploit.

    The % cash I’m running though is completely meaningless metric. It’s the amount of risk you run that matters. People need to think much more in terms of VaR and scenario-based stress-loss drawdowns and less about how much cash they have or whether their allocation is 60/40 or 80/20 etc. I target 5% return vol, so 10% VaR. A 100% stock portfolio is running probably 30-40% VaR. You need to be comfortable with those parameters.

  • 101 Vanguardfan March 13, 2020, 3:40 pm

    Ok so I had to google VaR…
    Just back from an inspection of the battleground of my investment accounts. I did still have enough gains to justify some selling, we will see how difficult I find the buy decisions in the next few weeks. The accounts where I hold 100% equities are not looking pretty, but overall, with my 30% cash and 20% bonds, I am happy I can wait for as many years as it takes.
    I did notice that the bond holdings have started to slide as well now. I guess that must be related to what ZXwas talking about further up thread.
    But overall, my portfolio worries are very minor compared with my worries about my loved ones over the coming weeks and months. I would love to be out the other side knowing that I, and those precious to me, had survived.
    Good luck everyone, and special thoughts to anyone in frontline services.

  • 102 The Rhino March 13, 2020, 3:50 pm

    @ZX – that sounds brilliant, but way above my pay-grade! (I don’t really understand any of it;)

    I’d love to see a post with ZX wealth strategy pitted against TI wealth strategy – a clash of the titans, battle to the death. Who emerges victorious?

    I’d say a 7 figure income is also something thats got to help you sleep at night? i.e. knowing you can rebuild if it all goes tits..

  • 103 SemiPassive March 13, 2020, 3:51 pm

    Arty – I was inferring that VHYL was the dumb one, not GBDV. Maybe it read confusingly.

    Edward – “For example, if the FTSE hits 5,000 or the Dow 20,000, stick 25% of your cash back into stocks. If it hits 4,500, stick 50% in etc.
    What if it all goes to toilet and the bottom is found at 3,000 or less, though?!”
    This is the dilemma anyone sitting on cash will find, though that is a possible method.
    For info I am sat on 20% in cash in my SIPP from partially selling out a week and a half ago – note this is frowned upon in here 😉 but as I’ve mentioned in a previous comment my asset allocation was a little too risky going into this whole thing.
    Anyway, another method for getting back in is to drip in a fixed % each and every month over the preferred timespan you want to get back in over. The % will vary depending on whether it be over 3, 6, or 12 months.
    The flaw with your suggestion is (as well as the FTSE hitting 3000) is the FTSE100 for example may never see as low as 5000, so what do you do then?
    The flaw with my suggestion will depend on whether we see a slow or fast recovery vs the time period chosen to scale in over. I guess at least you would be pound cost averaging back so unlikely to make too much of a booboo.
    But choosing that 3, 6, or 12 months timescale is a judgement call in itself.
    Pure passive guys and gals will let periodic rebalancing take care of things, but since I made an active decision to move a portion to cash it requires another active decision to reinvest.

  • 104 Learner March 13, 2020, 5:06 pm

    This is an interesting one, unlike the GFC we can expect a natural end to the virus impact when a vaccine is developed or it runs its course. At some point that recovery will be priced in. There is the risk that unemployment rises, creating a recession that runs independent of the virus though. That possibility looms larger than the health stakes.

    > Interest rates should go up, pretty quick, to something like historical, market-based norms, not down – or we face true and total economic carnage.

    has been the song of the past 8 years at least.. if the longest expansion in history couldn’t get rates above 3%, nothing will. The 21st century economy will not look like the 20th.

  • 105 Matthew March 13, 2020, 5:17 pm

    It helps I think to not think of the portfolio as x% of net wealth but rather as a pot for year Y, my net worth took a big swing, but I can tolerate it because its seperate from my wedding savings and not needed anytime soon – if you cant wait out the dip, and do whats generally best long term (ie not time the market) – then it shouldnt be invested, or at least not in anything stronger than say vls20

  • 106 The Investor March 13, 2020, 5:19 pm

    I’d love to see a post with ZX wealth strategy pitted against TI wealth strategy – a clash of the titans, battle to the death. Who emerges victorious?

    Haha. If you think @ZXSpectrum48k’s strategy is hard to follow, good luck with mine. At least his is explicable, seemingly mathematical, and follows a defined process. I’m old-school active, take what he would see as inordinate idiosyncratic risk, huge turnover, high costs, gut feel (/behavourial speculation) and so on.

    One of the many (many) reasons I don’t often write about the specifics of how I invest actively here is the information would be precisely useless to anyone, except perhaps anyone with a box of popcorn handy. 😉

  • 107 Tony March 13, 2020, 5:20 pm

    Lots of astute points made here. Timing the bottom is gambling. The duration and impact of Covid-19 on the domestic and global economy is presently unascertainable. Timing the recovery is gambling- U, V or L shaped. I like the idea of setting a floor as some have if lump sums are being invested. Although there’s a difference between buy and hold and day trading. Buying at current rates, well it’s pretty likely after 5 years and hopefully much less, markets will be far higher than today. Let’s not also not forget the elephant in the room- Brexit uncertainty is lurking underneath and will rear its head again this year. Double stress to the economy and business.

  • 108 Pre ka March 13, 2020, 5:47 pm

    Months available to buy back in?
    Years for the stocks to get back to record highs?
    What decade are we in?… with information processed within seconds and getting faster as we speak, buying time and recovery times will get faster and faster…
    Wait and you will all be left behind.

  • 109 Matthew March 13, 2020, 5:48 pm

    @tony – there will be less for brexit to destroy now, arguably covid has hastened the demise of a fair amount of brexit vulnerable businesses and therefore the economic adjustments we’ll have to make, and it could affect some countries worse than others, totally changing the value of a deal with x y or z.
    Covid will cause a worker shortage in the short term but might ultimately reduce the number needing social care, and thus worker demand

  • 110 MrOptimistic March 13, 2020, 6:08 pm

    I am surprised the fall of GBP against USD doesn’t get more if a mention. It is quite dramatic and whilst to the apparent advantage of the FTSE, a future unwinding could add a headwind.

  • 111 Edward March 13, 2020, 6:12 pm

    To Tony and Pre Ka’s points, looking back at the FTSE since 1999 shows how fools rushed in where angels feared to tread.

    FTSE was over 6700 in Dec 1999, collapsed to less than 4500 in the summer of 2001, but then rose back to 5200 before plummeting down to 3,600 by Feb 2003. That’s nearly a 50% fall over the course of three years, but no doubt many people were congratulating themselves for buying in around 4500 thinking that was the bottom.

    Having taken another nearly eight years – until July 2007 – to get back to its 1999 peak of 6700 it took less than two years to drop back down to 3750, a 44% fall.

    Obviously we should be diversified both geographically and investments wise, but using the FTSE example as a proxy, who can possibly predict how low we go this time, and how much faster will we get there?

  • 112 Brod March 13, 2020, 6:47 pm

    @Neverland – yes exactly. Fiscal expansion, fiscal expansion and er… dunno. But I’m not sure what effect that would really have. Isn’t that just an accounting trick to make the Govts debt look less so they can spend more? Aka fiscal expansion?

  • 113 Sparschwein March 13, 2020, 6:47 pm

    +1 for the @ZXS vs @TI strategy battle (readying the popcorn)

  • 114 Sparschwein March 13, 2020, 7:10 pm

    Quite like the GFC, there is the possibility of contagion across the financial system.
    Yesterday the FT reported “severe strain” in the US treasuries market, usually the most liquid of all.
    Today’s Economist lays out the systemic risks from corporate debt (“In a sea of debt”).

    In 2007, few predicted the consequences the subprime bust would have.

  • 115 Sparschwein March 13, 2020, 8:06 pm

    @SemiPassive – I am in the same dilemma, largely because of an ill-timed pension transfer. From the first scientific studies about the virus, the reports from doctors in Italy and the bungled response in the US, I had a hunch that this will get worse before it gets better. I believe it is inevitable that the US and the rest of Europe go the way of Italy. We will get overwhelmed healthcare systems and a shut-down of the economy.

    It’s a gamble to stay out of the market of course, and equally it’s a gamble to buy now. It’s a matter of how we assign probabilities.

    Stay safe, everyone.

  • 116 Tony March 13, 2020, 8:38 pm

    Edward: reread.my post as a whole pls. Not much different than yours. And I didn’t mention the FTSE.
    Mr Optimistic- indeed. GBP down against EUR too.

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