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Weekend reading: The alchemy of turning uncertainty into risk

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What caught my eye this week.

When we look back on lockdown in a few years’ time, we’ll each have different memories.

For some of us the period will be marked by the loss of a loved one to Covid-19, or by commuting to essential work on near-empty roads and trains.

But for a majority, these strange weeks will be reduced to a mental mood board made up of just a few memories.

Chatting with friends and family on Zoom. The novelty of virtual drinks over video. Trying to teach the kids something other than how to turn off their screens. Joe Wicks’ workouts. Unlimited Internet porn. Quiet walks around the neighborhood. The birdsong and the incredibly clean air.

I suppose I’ll remember listening to the Ninefox Gambit on Audible while taking my daily wander, marveling at the British weather’s knack to deliver sunny stretches at the most inconvenient of times. I’ll definitely remember Skyping my mother to finally show her the progress of my garden (she’s into week six or seven now of a self-isolation spent mostly in hers). There was that friend’s 50th birthday on Zoom when this was all new, and several dozen of us crammed into the screen like a University Challenge episode on steroids.

Cooking too much as if my friends were coming over for dinner, and then missing them when of course they don’t…

Once in a Lifetime

That’s the sort of stuff memories are made of.

But in reality – as suggested by the number of relevant links below – I’ve spent 4-6 hours each day digging into Covid-19, consuming everything from Tweets and news stories to research papers (or at least their abstracts!)

If you’ve been following the comment threads that have followed Weekend Reading these past few weeks then you might be the same. We’ve had hundreds of contributions, suggestions, and counter-suggestions. Great stuff.

However some readers – and my friends and family as usual – think I’m crazy.

They are happy (or commendably humble) enough to leave Covid-19 to the government experts. They don’t want to second-guess the consensus.

They’re passive pandemic-ists.

Whereas I like to believe that I’ve been trying to figure out the virus in part to inform my naughty active investing.

Or that’s what I tell myself.

Really, I’m sure it’s also my way of coping with Covid-19, just the same as other people are drinking too much or working out twice a day or pressure cleaning the patio.

As Arthur Brooks wrote in The Atlantic this week (my bold):

At present, Covid-19 is more of an uncertainty than a risk.

Will you get the virus? What happens if you do? When will the crisis end? Are we creating an economic depression?

People can opine and make informed guesses, but no one really knows the answers to these questions.

It’s natural to try to convert uncertainty into risk by gorging ourselves on available information.

And I’ve definitely been doing that.

Brooks thinks it’s futile and only liable to make things worse. It makes me think of my late father, who if he were still here would be both vulnerable and sanguine.

I’m sure he’d have quoted the serenity prayer at least once. You know the one:

“Grant me the serenity to accept the things I cannot change, courage to change the things I can, and wisdom to know the difference.”

But I can no more do that then I can sit in a tracker fund, however sensible. It’s not me.

Stop Making Sense

One comment asked last week why I’ve not written an article about the virus, and fully outlined and sourced my hypothesis?

(Which for what it’s worth has basically been that it’s more widespread and not as deadly as commonly believed – all less controversial now than a few weeks ago, I’d suggest – and that an ongoing extreme lockdown could do worse to us via economic damage, including health-wise, so we should phase out of the justifiable emergency measures ASAP, and more directly focus on protecting the most vulnerable.)

The first reason is the one I gave him, which is I have no expertise at all in this area. My hypothesis was simply where my reading and hunches were leading me, and I was happy enough kicking that about with readers.

But the other reason is that word ‘hunches’. It’s perhaps also another reason why I don’t write about active investing here anymore. (The main one being that most people will definitely do better investing passively!)

People want certainties. They want to know sunlight does or doesn’t slow the spread of the virus. They want to know that low P/E stocks will do better than high P/E stocks. They don’t want to wonder too much why one city has had thousands of deaths from Covid-19 but a similar city has not. They want to be told that investing for the long-term is better than being tactical and trading, or vice-versa, and they want evidence to show it.

Me, I’m very comfortable with fuzzy, nuance, intuition, and changing my mind – for good and for ill.

Life During Wartime

One day we’ll know all about this virus and everything will be proven, but by then it’ll be too late to do anything.

And one day we’ll know if the FTSE 100 at 1990s-levels was the buying opportunity of a lifetime, or the opening bell on a multi-year bear market that sloped in ahead of a looming depression.

Again, by then it’ll be too late to do anything about it.

I’m not saying I know what will happen, obviously. I’m saying I’ve got to try to guess. Doing so will be my memory of 2020, in the end. Each to their own. (And incidentally I’m very glad I don’t have to decide for the nation. All governments have made mistakes, but these are crazily difficult times.)

How are you coping with the coronavirus uncertainty and life under lockdown? Let us know in the comments below.

From Monevator

How diversification worked during the Global Financial Crisis – Monevator

The reality behind investment trust reserves – Monevator

From the archive-ator: How to build a risk factor portfolio – Monevator


Note: Some links are Google search results – in PC/desktop view you can click to read the piece without being a paid subscriber. Try privacy/incognito mode to avoid cookies. Consider subscribing if you read them a lot!1

Rates at 0.1% until end of next year due to deepest recession for ‘possibly several centuries’ – ThisIsMoney

UK labor market outlook is ‘horrendous,’ economists warn – Bloomberg

140,000 UK companies apply for coronavirus job furlough scheme – Guardian

Retail sales ‘obliterated’ in record fall over coronavirus – City AM

Coronavirus furlough scheme: what you need to know – Which?

Also: Six tips for filing your tax return to qualify for the self-employed income support scheme – Which?

The collapse of the energy sector – A Wealth of Common Sense

Products and services

Another mini-bond bust: Blackmore owes savers £45m after promising 9.9% returns – ThisIsMoney

Savings rates fell in March along with inflation, but here’s the pick of the accounts – Which?

Open a SIPP with Interactive Investor by 30 April and pay no SIPP fee until April 2021, saving you £110 – Interactive Investor [Affiliate link]

Furloughed? Pension payments into pots based on 80% of salary will be protected- ThisIsMoney

Zero per cent credit card deals fall to lowest level in three years [Search result]FT

Sign-up to Freetrade via my link and we can both get a free share worth between £3 and £200 – Freetrade

Which was the cheapest supermarket in March? – Which?

Admiral is returning £25 to car and van insurance customers after driving collapse – Admiral

Comment and opinion

Grinding halt – Finimus

Income-seeking investors face an uphill struggle [Search result]FT

When something is taken away – Bunker Riley

Why you don’t feel rich – Of Dollars and Data

How much risk should you take? – JustETF

Merryn Somerset Webb: Bypass retail investors at your peril [Search result]FT

Don’t go it alone – Humble Dollar

Stockpickers failed to take ‘big chance’ in market rout [Search result]FT

What lessons should investors take from the coronavirus bear market? – Behavioural Investment

So much for an inside edge: Senators as rubbish as everyone else at picking stocks [Research]NBER

George Costanza at it again – the leveraged ETF episode – Elm Partners

Naughty corner: Active antics

The day oil went to zero – The Reformed Broker

Oil ETF chaos is like Natural Gas ETF’s 2009 plunge – ETF.com

John Lee: Private investors hit by dividend drought [Search result]FT

Barstool Sports founder switched from gambling to day trading – he’s down $647,000 – Business Insider

Netflix roars ahead thanks to captive audience [Search result]FT

Hedge funds hope the slump will make them relevant again – The Economist

Dispersion and alpha conversion [PDF; Research; aka make hay while the bear growls!]Morgan Stanley

One-factor world – Two Centuries Investments [h/t Abnormal Returns]

Coronavirus crisis corner

Kings College London’s symptom tracker suggests UK Covid-19 infections plunged in April – Covid Radar

Coronavirus: Social restrictions in UK ‘to remain for rest of year’ – BBC

Small survey in NYC finds 21% have Covid-19 antibodies [World shocked; I’d hoped for higher]MarketWatch

…these initial numbers are far higher than the 2-3% the WHO suggested earlier this week – Guardian

This ER doctor’s Covid-19 journal entries are a harrowing read – Facebook

Hidden outbreaks spread through U.S. cities far earlier than known, estimates say – New York Times

Thousands could be missing out on cancer diagnosis due to Covid-19 – BBC

Official UK government information on plan to test 300,000 for antibodies [Slowly…]GOV.UK

US authorities reviewing ‘stunning’ universal testing results from Boston homeless shelter – Boston News

Sunlight, warmth, and humidity can dramatically reduce the half-life of the virus, say US scientists – Metro

It looks like remdesivir isn’t going to be the silver bullet – Guardian

Even if it doesn’t kill you, Covid-19 may produce some nasty side effects – David Lilienfeld via Twitter

What’s wrong with the models? – Peter Attia

Coronavirus detected on particles of air pollution – Guardian

Study suggests on average ten years of life lost to a Covid-19 fatality [Research]Wellcome

Nicotine patches to be trialed on patients after a study suggests smokers less likely to catch Covid-19 – Sky

Recovered, almost: The early Chinese patients unable to shed coronavirus – Reuters

The anti-lockdown strategy – Dr Malcolm Kendrick

Hands-free anti-virus door handles for supermarkets [Video]Reuters

Containment and control strategies for Covid-19 [Research, PDF]Berkeley

Coronavirus: Outcry after Trump suggests injecting disinfectant as treatment – BBC

We used to die of infectious diseases all the time, but we got out of the habit – Morgan Housel

Swedish Covid-19 mini-special

Sweden: Physically distancing but no lock down; virus still declining – John Burn-Murdoch via Twitter

Has Sweden got the science right? – BBC

Stockholm expected to reach herd immunity ‘within weeks‘…CNBC

…though one early survey in Stockholm has found only 11% have antibodies [In Swedish]SVT

‘Closing borders is ridiculous’: the epidemiologist behind Sweden’s coronavirus strategy – Nature

Kindle book bargains

Exactly: How Precision Engineers Created the Modern World by Simon Winchester – £0.99 on Kindle

Gordon Ramsay’s Ultimate Cookery Course by Gordon Ramsay – £0.99 on Kindle

Remote: Office Not Required by David Heinemeier Hansson and Jason Fried – £0.99 on Kindle

Side Hustle: Build a Side Business and Make Extra Money by Chris Guillebeau – £0.99 on Kindle

Off our beat

From the Michael Moore stable: Planet of the Humans [Full movie] – via YouTube

It’s time to build – Marc Andreessen

What if we are wrong, about everything? – Indeedably

Why everybody you know is on Zoom – Fast Company

And finally…

“The effects of compounding even moderate returns over many years are compelling, if not downright mind-boggling.”
– Seth Klarman, Margin of Safety [From a post by Novel Investor]

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  1. Note some articles can only be accessed through the search results if you’re using PC/desktop view (from mobile/tablet view they bring up the firewall/subscription page). To circumvent, switch your mobile browser to use the desktop view. On Chrome for Android: press the menu button followed by “Request Desktop Site”. []
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