Weekend reading: Down with dividends?

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• 1 FIRE v London April 10, 2020, 7:18 pm

  @TI – I agree with you. The drying up of dividends is the most unusual facet of this stock market crash. And the most nervewracking for those of us who want to build a perpetual motion machine. You did hear it here first, I think – https://firevlondon.com/2020/03/21/the-worst-crash-in-history/

  The Tesco castigation has struck me as outrageous. Tesco is clearly on a roll, has lots of cash, has longsuffering shareholders etc. It’s very troubling. The implication here is that any company that takes “state support” shouldn’t pay dividends. But in the new world, name a company that isn’t taking state support. And what is state support, anyway? Are R&D tax credits state support? Is paid parental leave state support? Are the last few cuts in corporation tax, state support?

  I also consider axing dividends for ex-dividend shares as practically theft.

  I am paying extreme attention to which companies are paying and which aren’t. So I topped up LGEN the day after it confirmed it was paying its dividend. If the PRA/FCA/similar manages to get them to axe that one too, I am seriously wondering who I can sue.
• 2 Matthew April 10, 2020, 7:29 pm

  I think dividends in your home country is a good thing, because foreign investors will pay withholding tax and therefore value the company at less than we would, so to us a small home bias should in theory help us

  Also worth considering that dividend payers have a higher value to tax wrapper investors, and Mr Market as a whole is not entirely tax shielded, so that distorts valuations
• 3 marked April 10, 2020, 7:53 pm

  Yeah I was miffed I missed my HSBC dividend. It was the fat one too. A bit more money to then reinvest somewhere at a low level would have been great. It was a double whammy too, since the banks price cratered after that news from the BOE.

  And HSBC had gone ex-dividend too. I didn’t know they could pull it after the ex-Div date. Shows what I know.

  Stay safe everyone.
• 4 Boltt April 10, 2020, 8:41 pm

  Interestingly RSA, Aviva/GA, Santander all paid out for their Preference share in the last couple of weeks.

  Still waiting to see what AXA do on their ordinary shares – current dividend yield close to 10%.

  P2P – I’m starting to feel more confident that i’ll get all/most of my funds back (Ratesetter).

  Not had the balls to give up my cash funds and buy back into the market.

  Credit risk, inflation risk is rife, not to mention increased future tax rates – thankful I didn’t CETV my deferred DB pension.

  B
• 5 An Admirer April 10, 2020, 9:09 pm

  It seems to be a modern trend (?) of companies hording large cash piles instead of returning money to investors. And I don’t believe the concern is purely tax efficiency. IIRC VW Group was once described by regulators as a “hedge fund with an automotive business on the side” and there are several other large examples in the world. These companies seem to think they better know what to do with your cash than you do…

  This depresses me a bit:

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

  As an existing customer, this is rather like those mobile phone or bank account “deals” – who ends up paying for it? Does this mean they’re now in the game of competing with H-L for giving out freebies, driving up costs for all customers? Uh oh…
• 6 MK April 10, 2020, 11:20 pm

  Thanks for the links. Looks like similar issues for French dividends though with more political pressure. Companies are being told to scrap or at least reduce dividends if they are furloughing any workers at all so some very strong businesses will likely be forced to reduce payouts. Tough time for income focused investors.

  The two articles on face masks are really interesting – it seems clear to me that they should be highly beneficial in preventing a person transmitting the virus to others though probably less so in protecting the wearer since viruses can get in through anyway the eyes.

  I’m intending to buy a mask with a good facial seal for use out and about – very likely this one (www.airhead.cc) made by a UK startup. I found the summary of pros and cons of mask use for virus protection on their website helpful. Surprising there have not been any well run trials on efficacy to date.
• 7 xxd09 April 11, 2020, 9:09 am

  Dividends never crossed my radar while accumulating because I never thought I could save enough to make it feasible
  Turned out to to be the right plan for me-used accumulation units for ease of investing process-made a big enough pile!
  Invested in Funds only-ended up with just 3 -very easy to manage -2 equity 1 bond
  Now retired -continue with same technique except now just sell a number of units from a fund as required
  Often only one transaction a year
  xxd09
• 8 Neverland April 11, 2020, 9:09 am

  Everyone is using the 2009 recession as their benchmark

  That was a bank solvency crisis, the real economy was not affected so much until later

  This is a real economy crisis of short term liquidity

  (It will get to the banks but later)

  Lot of businesses are generating less than 50% of the free cash flow they will have budgeted. None of them will have a downside models for that eventuality prepared

  Now they will have done some and well, surprise, they run out of cash in a couple of months if they make all their scheduled payments

  The classic response to a liquidity issue is not to pay out money and therefore dividends are one of the large obvious things to axe or defer

  It’s just another practical manifestation of what equity risk premium really means
• 9 Vanguardfan April 11, 2020, 9:20 am

  https://www.globalcapital.com/article/b1kqc2ql83dz82/the-coronavirus-graphic-to-watch-us-and-uk-continue-to-worsen

  I thought this set of figures was quite interesting.
  Unfortunately I can’t convince myself we’re anywhere other than at the beginning of a very difficult journey, whatever decisions we make or whatever ‘exit strategies’ are attempted.
• 10 W April 11, 2020, 9:59 am

  In deaccumulation whether the plan is dividend income or selling units, a UK tax payer should of course consider taking income via both from any taxable investments up to the annual tax free allowances, before withdrawing from tax-sheltered investments.
• 11 Gentleman's Family Finances April 11, 2020, 9:59 am

  Dividends are funny as they can be easily spotted and companies like tescos get bad press but money not shared out doesn’t go away – so unless you need the dividends to cover short term spending then the money goes from being a 7.5% / 32.5% tax issue to a cgt problem – and the way markets have been hit cgt us probably less of a concern for most.
  Total returns should be the same less tax.

  One upshot of the crisis that i see is more money going into green / ethical investments. And certainly my own green investments have cone through largrly unscathed.
• 12 ermine April 11, 2020, 10:04 am

  I am tempted to buy some of these so called high dividend yield shares because they have been thrashed for the dividend disappointment. So what if the divi doesn’t show up for a couple of years, I don’t need it over that timeframe. And people seem to hate them for the disappointment. That’s what your two years of cash/cash-like buffer is for, retirees…. There seems to be deep hatred for UK mid caps too, making the future growth to be had in the FTSE250 attractive as they winnow out the weaklings and the zombie companies that have been able to survive on low interest rates after the GFC.

  Having said that, the S&P500 remains over the long-term CAPE which is bloody ridiculous IMO, it’s not like there’s outstanding general value on offer. Hopefully (given most of your readers are still in accumulation mode) there will be a jolly good crunch to come and real value with appear in the markets. At the moment it looks to me like the markets are whistling in the dark. Yes, not everything has been shut down, but a decent amount of it has. The rich world has, in general, made a pig’s ear of managing this and is probably still disproportionately represented in world capitalisations.

  Saga bookings […] I’m pretty sure airlines will eventually fly everywhere again, too. And Instagram influencers will again queue for hours to take photos of themselves alone in beauty spots.

  Sadly I agree with you. Which is a truly depressing thought. It is supported by those tosspots who flew a private jet to France to go on their hols. They shouldn’t have been turned back, they should have spent time in the nick. And of course the MPs who just needed to check on their second homes. Old habits die hard… Were I 20 again, I’d be starry-eyed and believe we would recalibrate out relations to each other and the natural world a bit. But we won’t. We didn’t when the Berlin Wall fell. We didn’t make the world a better place after 9/11, quite the contrary. Let’s hope we do better this time, but perhaps be prepared for the disappointment. Instagram or whatever its successor will be full of vapid pics in two years’ time, and social media won’t have learned to put being a decent global citizen above the easy profit to be had by prioritizing the sensational and the nasty.
• 13 John April 11, 2020, 10:40 am

  In NSW Australia the legislation permits day-trips to second homes for security checks and maintenance.
• 14 The Investor April 11, 2020, 11:04 am

  Were I 20 again, I’d be starry-eyed and believe we would recalibrate out relations to each other and the natural world a bit. But we won’t.

  They came in too late for the links above, but you’d hope these breathtaking before/after photos showing the pollution drops in various capital cities around the world would be a wake-up call:

  https://www.theguardian.com/environment/2020/apr/11/positively-alpine-disbelief-air-pollution-falls-lockdown-coronavirus
• 15 Guido Maluccio April 11, 2020, 11:33 am

  Worth remembering that if dividends don’t get paid then the cash doesn’t just go up in smoke it is retained by the business, and contributes to the bottom line investment case. So if cash-flow is ok the retained dividend is still available to reinvest in the business or distribute to share-holders in the future. I understand the dislike of businesses retaining cash that would be better distributed to share-holders but these are strange times. If there are forced sales of these non-payers, resulting in price falls, then that would strike me as buying opportunity.
• 16 Matthew April 11, 2020, 11:40 am

  What I don’t really understand about this lockdown is if society is still pretty much functioning and we’re not short of anything, what exactly were all those other workers doing? I understand some is done from home, and some luxuries like cafes, electricals, holidays, etc aren’t functioning, but it doesnt feel like enough to explain what services exactly we’ve lost? Why were so many workers commuting for jobs that we seem to function fine without?
• 17 Tony Edgecombe April 11, 2020, 12:01 pm

  That Saga piece seems quite vague to me, I wonder how many of those bookings were made before the crisis really took hold.
• 18 The Investor April 11, 2020, 2:19 pm

  Why were so many workers commuting for jobs that we seem to function fine without?

  @Matthew — This question doesn’t stand up to even a few seconds scrutiny. For a start GDP is down 25-31% as per the estimates in the links, so we are not functioning fine, we are economically crippled. Moreover I could spend the rest of the afternoon listing useful / necessary jobs that currently aren’t being done because we are in an *emergency* lockdown.

  E.g. Everything to do with the housing market. Everything to do with universities and teaching. Everything to do with managing groups of people in one place. Almost the entire retail sector, ex-groceries. The entire tourism and leisure sector. Most non-Covid/non-essential healthcare.

  On top of all this a company doesn’t fire anyone who goes on holiday because the business survived without them for two weeks.

  No doubt there’s some fluff in the economy and this recession will purge it, as it usually does. But that’s a small fraction, compared to the swathes of output being lost (and hence tax revenues, NHS spending. etc).
• 19 Matthew April 11, 2020, 2:59 pm

  @ti – does make you think though, perhaps itd be a good thing for the environment if all teaching, management, conveyancing went online or via post or phone, open university style, might be cheaper too ie less teachers needed, class sizes irrelevant, cities not even needed. Its tamed our consumption, travel wasnt good for climate change

  Possibly the gdp drop is partly due to less income/spending on luxuries. Apart from washing machines and fridges and microvaves I cant imagine what non food retail is really necessary

  I suppose on the other hand, other people unlike me do value these things more as they spend in capitalist society, its just myself my life is hardly any different; still work, still go to tescos, just dont see parents or friend
• 20 John @ UK Value Investor April 11, 2020, 3:06 pm

  “The implication here is that any company that takes “state support” shouldn’t pay dividends”

  That seems quite reasonable to me. If a company needs state support (specifically pandemic-related) then how does it make sense to effectively take some of that money and pay it straight out to shareholders? IMO the pandemic-specific state support should mandate that no dividends are paid until the support ends. Investors would just have to fill the dividend gap with their cash buffer and/or by selling a few percent of their portfolio.

  “This depresses me a bit: Open a SIPP with Interactive Investor by 30 April and pay no SIPP fee until April 2021, saving you £110 – Interactive Investor [Affiliate link]”

  Doesn’t affiliate commission just come out of II’s marketing budget just like any company that uses affiliate marketing? Perhaps Monevator needs a “how we earn money” page to lay out what sort of affiliate income mechanisms it uses (e.g. one off commission vs recurring commission as long as the new customer stays a customer).
• 21 Vanguardfan April 11, 2020, 3:15 pm

  @matthew ‘my life is hardly any different’… maybe you could read a bit more widely? Or just, um, use some imagination?
  Like you, I’m on the lucky side in this lockdown. So far our household income is unchanged, our home environment is lovely, and day to day I can do most of what I used to. My life has hardly changed!!
  However. My spouse works in the energy sector, his company is suffering severe short term income reduction, he may be put on short time or furloughed. Long term, his work (renewables related) will probably be ok, but there will be projects that don’t go ahead. Both my children have had public exams cancelled and effectively 3 months of education have disappeared. Online learning is a poor substitute. I don’t know what the long term consequences may be, but for the one looking at uni application, the course of his future will certainly be different.
  And we are lucky. My brother has lost all his future income, with no clear prospect for when opportunities may reappear. For someone in precarious creative work, approaching 60, that is not trivial.
  That before you even begin to think about the companies that won’t come back, the government spending needed to stop people starving or being made homeless, etc.
  Though I do think that this crisis should make us think about which work is fundamental to our survival, and how complacent we have been about those who do that work.
• 22 jon April 11, 2020, 3:27 pm

  I’m currently living off passive income generated by a natural yield and I was quite surprised by the speed of UK dividend cuts. However, I’ve always attempted to build a deep diversified income strategy. All of my rental properties are still generating income, none of my USA listed Dividend Aristocrat companies have cut dividends and my Permanent Portfolio based SIPP is actually up 5% YTD. I’m also currently taking a course on Tactical Asset Allocation techniques to add a further diversification stream.
  Regards,
  Jon
• 23 Indecisive April 11, 2020, 3:34 pm

  @Matthew, #19
  “Apart from washing machines and fridges and microvaves I cant imagine what non food retail is really necessary”

  Now the elastic has given out on my pajama trousers, Mrs I considers clothing retailers to be necessary. My neighbours agree.
• 24 ZXSpectrum48k April 11, 2020, 3:38 pm

  People need to get some perspective around statements like “GDP is down 25-31%”. This still has aspects of a conventional cashflow recession, albeit, the driver is unconventional (global pandemic) and the recession’s depth will be vastly greater than normal. Against that though, the market is pricing a very short recession: it’s moved from a 1Q “V-shaped” move to a 2Q “U-shaped” move but nothing really beyond that. So yes, GDP drops off a cliff, and some output will be lost permanently, but that is for only a very short period and the market is assuming that much of of that lost output will be regained at a later point.

  The reality is that if GDP was really going to be down 25%+ for any extended period, even with all the monetary and fiscal stimulus, the S&P500 would not be down just over 15% from it highs. We’ve only retraced 50% of the 2019 30%+ return on the S&P and yet people are screaming like we’ve had a major crash.

  Of course, the big problem with all this is the market’s assumption of a two quarter U-shaped move. If the market perceives risk of multiple lockdowns or this is going to still be an issue in 2021, then the correction will be far larger. The market is more simplistic than a decade ago and incapable of of pricing complex profiles, so it could go from pricing a U-shaped to an L-shaped recovery (i.e. no recovery) pretty quick.

  Hence, unless you have a fortress balance sheet, I think it’s very prudent for CFOs to conserve cash here. Not paying the dividend provides a company with cashflow and that buys some optionality. That’s the one thing you want in spades here: optionality. You can always pay an extra dividend later if that so important to your investors.

  Plus, at the end of the day, whether you pay the dividend or not is irrelevant. It will stay as part of the equity price (it’s just a PV). Only total return actually matters. “Living off dividends” doesn’t make any mathematical sense.
• 25 The Investor April 11, 2020, 4:49 pm

  My comments about the dividends being slashed being a shock don’t mean to imply that I don’t understand why they’re being cut, that I don’t think it’s prudent, that I don’t think it’s a good PR move, or that I have a particular view on whether say the Bank of England should mandate it for banks say.

  That’s all interesting, but the point is dividends aren’t usually (ever?) cut like this. Even in prior recessions in living memory or periods of great uncertainty (such as the financial crisis).

  We can all say the financial crisis wasn’t so shocking now we’re 12 years on, but the reality is at the time senior people were worried about the ATMs not functioning. There was plenty of uncertainty around, although of course it was a very different financial crisis.

  In other words, the dividend cut is a symptom of the shock that is itself super-shocking!

  A doctor might know why a disease has produced a super-virulent symptom, but it can still be shock to see it in practice. (E.g. Ebola symptoms).

  I’m not massively moved by arguments about the market pricing in this or that. Two weeks ago it was a 20% deeper drop; it’s bounced back and I’ve followed it up while 99% of commentators say it’s irrational (which I don’t agree with either. I am saying I don’t know.) Sure we’ve had a lot more Fed action since then, but we’ve also arguably had more bad news on the virus (at least by conventional interpretations of what’s going on, which regular commentators will know I do not wholly share 🙂 ).

  Fact is “markets gonna market”. 😉

  Dividends are being cut due to great uncertainty or a lack of cashflow, while at the same time the market (which consists of exactly the same companies cutting dividends) is pricing in a fairly speedy recovery, notwithstanding my skepticism of our knowing what exactly it’s pricing in just mentioned.

  That’s a pretty interesting/contrasting coincidence of factors, I feel.

  Finally, some people like income. I understand fully the total return take on things, and have skimmed my Miller and Modigliani in the distant past. 🙂 But psychological factors in an investment decision are not irrelevant factors, especially for a person versus a robot/institution/endowment.

  E.g. In the case of @ZXSpectrum48k I know you favour lower volatility over maximum returns. That’s fair enough, even if not optimal if seen through some other lens.
• 26 Jonathan April 11, 2020, 5:04 pm

  The mask opinions intrigued me too. To some extent anyway it is all a guess based on other viruses, it will take some time for someone to do decisive tests with SARS-Cov-2.

  But my guess is that while wearing a mask might have a marginal effect (maybe comparable with the difference between washing your hands for 20 secs rather than 10) if the general public were recommended to use one it would make them even more difficult to source for those who really do need them in the NHS. To be honest benefit from their use is likely to be teeny as long as people maintain their 2 metre spacing, but might become relevant as part of the exit strategy from current restrictions. For example in allowing businesses to re-open where social distancing is not an option, like hairdressing.
• 27 Ecomiser April 11, 2020, 5:37 pm

  @ Matthew

  Apart from washing machines and fridges and microvaves I cant imagine what non food retail is really necessary

  There are lots of things which are not everyday purchases for individuals (but are everyday sales for the retailers), which nevertheless are an essential part of life, like computers/smartphones, without which we wouldn’t even be having this discussion and your vision of do everything at home wouldn’t work, clothing, furniture, cleaning materials, housewares (brushes, bins, waste baskets, storage boxes), tools.
  Few people need to replace these RIGHT NOW, but they will wear out or break over time, and there are always more people setting up their first home, who need to acquire these useful objects for the first time.
• 28 Neverland April 11, 2020, 5:58 pm

  @investor

  “dividends aren’t usually (ever?) cut like this”

  Hmm, no.

  Dividends paid by the S&P 500 were about £250bn in 2008, by 2009 they were down by $60bn. I think a lot of companies bailed-out by the US Government were banned from paying dividends, but I can’t remember for sure.

  https://www.deepdyve.com/lp/emerald-publishing/did-dividend-policy-change-during-the-financial-crisis-Gq0ECCtV5p?key=emerald

  https://www.ft.com/content/4d750a32-075b-11de-9294-000077b07658

  So no surprise really.
• 29 Neverland April 11, 2020, 6:01 pm

  @investor

  “dividends aren’t usually (ever?) cut like this”

  In 2007 S&P 500 companies paid out about $250bn in dividends, in 2008 about the same and in 2009 about $60bn less. I think the US government banned companies getting bail outs from paying dividends but I can’t quite remember.

  https://www.deepdyve.com/lp/emerald-publishing/did-dividend-policy-change-during-the-financial-crisis-Gq0ECCtV5p?key=emerald

  None of this is really surprising.
• 30 The Investor April 11, 2020, 6:06 pm

  @Neverland — S&P 500 dividends ultimately fell 23% between 2008 and 2009, compared to the 50%+ cuts being discussed here.

  That’s a very different level of cuts.

  What’s more, prior to 2008-2009 the biggest fall in S&P dividends since World War 2 had been 9.4% in 1973-1975.

  That same period saw *prices* fall 48%. Basically five times the level of dividend cuts.

  So yes, count me as surprised, still.

  Incidentally I well recall us discussing dividend cuts a few months ago, and you suggesting they are more vulnerable than I was arguing.

  What I’ve done above is written an article saying I was wrong, given that they have been cut like this. I have conceded I am shocked, and I’ve directly referenced my prior discussions.

  Whereas you have been wrong about innumerable things over the past 10 years of mostly trolling this website, yet I honestly can’t remember you ever conceding anything.

  Oh well, perhaps there’s a St Peter of Internet commentary that you’ll have to reckon with someday.

  (Source: https://www.simplysafedividends.com/intelligent-income/posts/1038-what-happens-to-dividends-during-recessions-and-bear-markets)
• 31 Rui N. April 11, 2020, 6:09 pm

  @ Matthew just without leaving health most non-elective surgeries, a lot of cancer screening, most clinical trials for new drugs have stopped, etc. Don’t assume just because you are nothing missing anything at the moment, you won’t miss a lot of stuff in the future.
• 32 The Investor April 11, 2020, 6:14 pm

  p.s. UK dividends, which we’re actually discussing here, fell only 14% in the 2008 to 2009 round of cuts during the financial crisis:

  https://www.ft.com/content/f052c376-c4e1-11e9-a8e9-296ca66511c9

  Again that 14% cut in dividends compares to a 40% to approaching-50% fall in UK indices, from memory, depending on which one you look at.
• 33 Neverland April 11, 2020, 6:55 pm

  @Investor

  Brexit will be my reckoning I expect. But then it will be all our reckonings.

  Conovirus recession. Then Brexit recession. Can’t wait.
• 34 Naeclue April 11, 2020, 7:56 pm

  Care must be taken with statements such as “Dividends are less volatile than share prices”. Dividend time series are of a different nature than share prices. Share prices are continuously changing, dividends for individual companies can only really be compared year on year. Share price changes of individual companies are typically lognormally distributed most of the time, and dividends typically being held or rising year on year, with infrequent huge jumps (special dividends, corporate actions) and massive cuts. The only meaningful way to make a comparison between the volatility of share prices and dividends is to consider a large portfolio and sample prices and dividends annually, then the central limit theorem comes to the rescue to create 2 time series that can be appropriately compared.

  ISF is a FTSE 100 ETF. If you sample the price at the end of March each year and dividends paid over the last year to end of March, you get a price time series with volatility of 17% (March 2003-March 2020) and dividend time series with volatility 11%. So yes, on this basis dividends are less volatile than prices, but more volatile than a ;ot of people realise. The worse drop in dividends was for year ending 31/03/2010, when they were down 25% on the previous year. That compares with a 31% drop in prices for year ending 31/03/2009. Measured year on year, dividend drops usually lag share price drops in market crashes.
• 35 Max April 11, 2020, 8:29 pm

  I too have relied heavily on Income Investment Trusts for dividend income and for their revenue reserves to smooth out the bad times. It looks at though most can sustain a 60% in revenue over the next year or two https://ace-your-retirement.blogspot.com/2020/04/will-investment-trust-dividends-hold.html but now there is social pressure for companies to eliminate or cut dividends there is a real risk that some will take the opportunity to retain more earnings (which should improve productivity and total shareholder returns) and that the FTSE 100 will never return to its pre-Covid 4.5% yield and that Investment Trusts will inevitably offer a much reduced dividend yield. Dividend income is a popular means to eliminate sequence risk in the early days of retirement but maybe this will not be a viable option in 2 to 3 years time and retirees will have to investigate variable drawdown strategies such as Prime Harvesting to mitigate sequence risk.
• 36 The Investor April 11, 2020, 8:50 pm

  @Max — Please don’t repeatedly link to your site from our comments. The occasional link every couple of months is fine, provided you’re adding interesting commentary and relevant (which you are here), but more than that is a bit spammy.

  You’re welcome to have your URL attached to your username as you’re doing. 🙂
• 37 Naeclue April 11, 2020, 8:52 pm

  @Max, investment trusts are not restricted to paying out dividends by the amount received in dividends. They can make payments from capital. Actually, when drawing on “reserves”, this is precisely what they are doing. They don’t leave reserves in cash at the bank, but reinvest it in the portfolio. They draw on reserves by selling assets.

  Unlike OEICs, there is no real reason why an investment trust cannot regularly pay more our in dividends than it receives and I am sure some do.

  If you have an IT on a big discount, paying large dividends is a good thing, even from the disposal of assets, as money out of the IT is worth more than in.
• 38 cat793 April 12, 2020, 1:49 am

  Read Bullshit Jobs by David Graeber.

  I think he is being slightly tongue in cheek but it is still true that a lot of white collar jobs are unnecessary and absurdly overcompensated for their negligible productivity.

  Truck drivers, warehouse workers, hospital cleaners, farmers on the other hand……
• 39 Vanguardfan April 12, 2020, 6:04 am

  @zx, surely in all those Covid conference calls you tell us about, there isn’t an assumption this will be over in 6 months?

  I’m starting to think that the way out of this is to pivot and refocus our activities, and quickly, and get a lot more interventionist about it. It’s a waste to pay people to be idle. We need armies of contact tracers (yes, app developers too, but I think people will be quicker to get going), armies of cleaners, we need factories and cottage industries making PPE, we need to think about our food supply. We need to train up health care workers for the frontline, as quickly as possible, focused on the needed tasks. We need a lot more people pumping out consistent communications content, and keeping our remote communication technologies going. And of course a global collaborative effort on testing and vaccine development.

  I think the countries that will do best will be those that can do this, quickly – the ones with ample resources (people, know how, factories, raw materials) and the ability to deploy them effectively. There is work to be done.

  Unfortunately, we are being run by people of a small state laissez faire mindset, and even more unfortunately, we don’t even have anyone in charge right now (we can argue about Boris’s attributes for this task, but I think it’s actually really problematic that he is out of action but has not properly appointed an alternate). Add to that the massive erosion of local government and other public infrastructure over the last decade, and we’re facing a challenge. It doesn’t help that the only really effective control tool we have right now, keeping people apart from each other, makes it harder to get this work going. We need to adapt, quickly. It’s great that 750,000 signed up to volunteer for the NHS, but hardly any of them are being productively deployed yet….that said, we are in a lot better place than many many other countries around the world. We won’t be the best, but we won’t be the worst either.

  I do not see a way through this as being a return to ‘business as usual’. Economic health will depend on successfully adapting to this threat, the better and quicker we deal with it, the quicker we will return to productive activity (and there is much activity in the dealing with it). If we think we can just start up again and hope for the best, I think we’re underestimating the disruption of an uncontrolled outbreak. 1 in 200 dead might feel like a hit we can take when looked at on a spreadsheet, but it’s all the very sick people (the 6% needing critical care, the 10-15% needing hospital), the resultant fear and panic, the depletion of medical expertise and kit, the neglect of other health emergencies….
• 40 ZXSpectrum48k April 12, 2020, 11:15 am

  @Vanguardfan. I’m not saying this is my opinion. I keep my opinion and my professional/personal portfolios in completely separate silos. Professionally, I manage multiple, often diametrically opposed, views in my head simultaneously.

  Here, though, I’m looking at aggregates of forecasts (sellside, buyside and independent groups). So, as always, it’s a probability distribution. Moreover, that consensus view isn’t necessarily reflected in market pricing. Every market (rates, fx, equities etc) can price something different. Nonetheless, most market participants have struggled to be as bearish as most experts on the impact of SARS-CoV-2. In the last three months, they’ve consistently played catch up in terms of downgrading growth forecasts.

  In opinion terms, I’m closer to you. I’m terrified of this virus. Given current hard data on UK health outcomes, I have to assign a reasonable probability that I’m going to die if I catch it. As a male, mid to late 40s, mildly asthmatic, and fat, my probability of survival if I enter an NHS ICU seems to be around 30-40%. Yes, everybody I know thinks “the’ve had it”, despite their symptoms being easily attributable to any other coronavirus. Even I thought I might have had it, given I had a terrible cough for a fortnight in late Jan/early Feb after a flight back from Sing! The problem is anecdotes are worthless. Only large sample statistical data has validity. We don’t have it. What data we do have looks bad.

  I’m amazed that the public and media are not ripping this government and bodies like PHE apart. It seems likely we end up with the worst death rate in per capita terms globally. We have over 10,000 deaths already. Australia, a country with about one third our population, has less than 100. I really regret not moving my family there in Feb for the duration. The UK made only a pathetic attempt at contract tracing and the lockdown could have been put into place easily a month earlier. Countries like NZ are showing real ambition in trying to eliminate the virus (and yes they will fail but that failure will still put them in a far better position than the UK).

  This government has paid lip service to the idea of saving lives. They didn’t buy equipment or testing kits when they could, the’ve refused free drugs. They don’t give a toss. In a choice between letting old, vulnerable and frail people die or old, vulnerable and frail companies die, they made a deliberate decision to let people die. The result will be more deaths but also more economic damage (because the lockdown will need to be longer). This government (plus past Tory governments) and their advisers have blood on their hands.
• 41 Vanguardfan April 12, 2020, 11:43 am

  @zx, thanks. I suppose I meant, aren’t the people making the market listening to the same experts/data that I am? Perhaps they think that the economic damage is all caused by hysterical over-reaction, and that economic recovery can be instituted somehow separately from the progress of the epidemic. Whereas I think that the economic damage will be in direct proportion to the health damage, and dealing with one will enable the other to recover. I agree with you that our late action already made the economic damage worse.

  I sincerely hope we will not have the worst outcomes of any country globally. We may well have among the worst outcomes for richer countries, which is indictment in itself. Generals in WW1 come to mind. I would expect though that countries like India, Brazil, maybe even Indonesia will do badly. The problem with trying to compare countries at a snapshot in time (apart from the obvious issues of data comparability) is that the epidemic progresses in time and space. Give these populous countries a month or two and see where we are.

  But ultimately, we are all connected and that’s how the virus has been able to spread. As well as national leadership and action, we very badly need global leadership and intergovernmental co-operation. And surely global travel is not going to return to normal for quite some time.

  Personally, I look at the stats and think my chances of survival are excellent, although they’d be better if I was 20 years younger. And I still wouldn’t choose to play Russian roulette with those odds. However, my chances of needing hospital or critical care are higher than I would like, and I am aware that the mortality stats (such that we have) assume access to functioning healthcare. I’d sure as hell like to have had it and recovered and have some understanding of whether I have immunity (another huge uncertainty).
• 42 xxd09 April 12, 2020, 12:37 pm

  Goodness cheer up guys
  You chose to live in a free society where we each decide and are responsible for our own outcomes
  You cannot have it both ways-a totalitarian state ( which by the way produces regular outbreaks of these viruses/zoonoses ) can obviously appear to control these pandemics in a more effective authoritarian manner-it has had lots of practice!
  Of course it then continues these methods into day to day living-a police state
  We in this country will always be slower by definition to react-we rely on consensus to govern-to instigate serious infringements of civil liberties ie lockdown-the bulk of the population appears to understand the trade offs
  The older population particularly seem to be displaying a lot of stoicism-impressive
  Boris is rising in the polls-BBC gotcha journalism is widely derided
  You pays your money and you takes your choice
  xxd09(73)
• 43 Factor April 12, 2020, 1:00 pm

  I am 17 years into retirement, and 18% of my current income is the quarterly dividends from my clutch of income producing ITs (fully ISA’d and the only shares that I hold), chosen because of their long-run consistency in rewarding shareholders.

  The two of the ITs that were due to pay a dividend at the end of March did so, on time and in full. One dividend is due at the end of April, two in May, and one in June, so for info I will post an update in each case here on Monevator.
• 44 Vanguardfan April 12, 2020, 1:43 pm

  Xxdo9, I’m looking at the approaches of those well known autocratic regimes of Germany and New Zealand, and thinking we could perhaps learn from them. I don’t think we have to choose between democracy and competence.
• 45 Penelope April 12, 2020, 2:20 pm

  @xxdo9

  I come here for the doom, the gloom and the doleful laments about The Way Things Are Going. And then you go and spoil it all by being reasonable and level-headed. It’s most frustrating.
• 46 Naeclue April 12, 2020, 2:23 pm

  It is curious how the worldwide chaos and stock market volatility has not lead to much larger stock market falls. Year to date the Vanguard Global All Cap Index Fund is down only 12%. There are factors that have helped here:
  – fall in sterling (eg 6% drop in GBP/USD)
  – rapid global stimulus response
  – lockdowns that appear to be working
  – fall in bond yields reducing discount factors (boosting NPVs of forward earnings)
  – lower energy prices (?)

  Even so, I am surprised stock markets are not much lower at this stage than they are. If I was an active investor I would start selling. As it is I gave up on trying to second guess the markets long ago.
• 47 Matthew April 12, 2020, 2:43 pm

  @naclue – everyone now expects crashes to recover, or accepts that they cant market time, increasing passivicity (due to more access to information) has to be a factor in smaller crashings
• 48 Naeclue April 12, 2020, 3:03 pm

  @Matthew, I think saying “everyone expects..” is a generalisation too far! Stock markets prices are an unstable equilibrium, a balance between people (and computers now?) who think prices are too high and too low.
• 49 Al Cam April 12, 2020, 3:05 pm

  @xxd09:
  Thanks for your feedback re how you “survived” the GFC.
  From that post I estimate that in 2007 your withdrawal rate would have been around 2%. [[Your AA had 5% cash and you “Had at least 2 or 3 years expenses in cash”.]]

  Above you mention that now you “Often only [have] one transaction a year”. Is this because your annual needs for income from your investments (albeit adjusted for inflation) are:
  a) fairly predictable and
  b) have also, in real terms, decreased since 2007 as you became eligible for pensions (DB, state, etc)?

  Thanks in advance for any additional info you are happy to share.
• 50 xxd09 April 12, 2020, 4:22 pm

  Al Cam
  My withdrawals are predictable and haven’t changed much in quantity -I suppose therefore have declined in real terms over the last few years
  (Portfolio seems to be able to sustain 3-3.5% Withdrawal rate- therefore more available if I wanted but getting older-travelling less)
  Portfolio continues to increase overall -also some other sources of income are index linked -State Pension/Wife’s Teachers pension so increases there too
  Certainly sitting out this latest downturn out-Portfolio down 4.5% today from its peak in Feb-on its way back?
  xxd09
• 51 Penelope April 12, 2020, 4:35 pm

  @zxspectrum48k re your comment #40 where you say:

  “This government don’t give a toss…In a choice between letting old, vulnerable and frail people die or old, vulnerable and frail companies die, they made a deliberate decision to let people die…This government (plus past Tory governments) and their advisers have blood on their hands.”

  In previous comment threads you’ve said you’ve sat down for various lunches / dinners with Boris Johnson, Dominic Cummings, cabinet members and the like. I’m wondering if you will be brave enough to say this to their faces the next time you are having lunch / dinner with them?
• 52 Al Cam April 12, 2020, 5:34 pm

  @xxd09:
  Thank you very much for the additional info.
  In summary, I conclude you had a relatively low initial withdrawal rate, followed up, in due course, with secure income (pensions, etc) and declining real spending needs.
  A very nice place to have gotten to and fairly bomb-proof using any sensible approach and/or asset allocation for de-accumulation.
  Or, from Bernstein’s famous advice “In other words, once the game has been won by accumulating enough safe assets to retire on, it makes little sense to keep playing it, at least with the “number”: the pile of safe assets sufficient to directly provide or indirectly purchase an adequate lifetime income stream.” which for some reason often gets misquoted IMO as “once the game has been won stop playing”!
  Thanks again.
• 53 SemiPassive April 12, 2020, 6:16 pm

  I had a natural yield portfolio but due to a combination of market tim….erm, tactical asset allocation, and the scope of likely dividend cuts being much wider than previous bear markets due to the nature of this thing, I chose to put most money into a GBP hedged global tracker ETF when I started buying back into global equities on 23rd March (after selling some on the 7th March – good move – and selling more the week after that to go too heavily into cash – a bad move).

  I had been concerned that greatly reduced dividends would not be compensating for capital losses, and a lot of my holdings (divi-biased ETFs and investment trusts) suffered worse on the way down than a global tracker.
  Now I’m still in the accumulation phase for at least another 6 years, so really don’t need any natural yield for now anyway.
  I will still be tempted to go back to that approach when the time for drawing an income arrives – I still have token holdings in GBDV and VHYL for instance – but will need to ensure a couple of years of cash buckets to cover dividend shortfalls like this in the future.

  It is for these reasons I also like to hold some infrastructure trusts, EM and high yield bond ETFs that can be volatile, but more likely to keep their income up.
  I was going to lump commercial property trusts in with the above, but mass rent holidays for tenants are a real concern and could be used to justify cancelling dividends.

  As to what happens next, I have no idea, but now my sidelines cash has been deployed back in, I will just be buying via monthly pension contribution drip feed from this point on, a 50/50 split between global equity and a mixed bond fund.
  I narrowly avoided a disaster in attempting market timing, with one bad call almost negating two good ones. It’s never as easy as you think to skip a loss and buy back in lower.
• 54 MrOptimistic April 12, 2020, 10:43 pm

  The NHS is a wonderful construct. If it fails to deliver or struggles it’s the government’s fault. Limits have to be set, trade offs decided, no you can’t have everything. A huge sprawling bureaucracy, layers upon layers of management, risk assessments which are really blame avoidance. That’s the defence industry btw but I’ll wager health is the same. So when the dust settles perhaps the public will be more rational and allow a thorough review of what we can really expect from a cut priced health service and how it can be efficiently delivered. You think? Nope it’ll be political tenaciousness, the evil Tories are trying to privatise our NHS or sell it to the Yanks.

  Logic. Sweden has a laid back approach to lockdowns. They’re doing pretty well ( how?). But if limited lockdown doesn’t produce a catastrophe, on what basis try to pin the UK experience to the timing of lockdown?

  It is clear that the BJ government balked at shutting down the economy and restricting personal freedoms. The Italian experience, and the media presentation of it, broke their nerve. Perhaps that was a good thing ( guess we wait on Sweden) but you can understand their reluctance in the light of the evidence they then had. Think badly of them if it makes you happy.

  There is plenty of seemingly inexplicable variation and contradictions about this virus and how it effects different regions, different ethnicities, different people. The concept of superspreaders who provide a breeding ground to amplify the virus but with no symptoms. The fit and healthy who get fulminant pneumonia and are gone in a couple of days. But no, it’s the government’s fault: if they had acted X days earlier we would be like Austria. They didn’t so we’ll be Spain on steroids.

  One lesson I have learnt from this is that I must simplify the various portfolios and establish a better way for calculating the changes and the asset allocations. Six separate funds ( 4 ISAs, 2 pensions) for me and Mrs O makes for a lot of excel work and I am behind the curve.
• 55 Ryan @ WantFI April 13, 2020, 1:58 am

  I’ve always been a huge fan of preferred shares since you only don’t get paid in dire circumstances since most of them are cumulative. Even when they aren’t, and common dividends are suspended, firms usually continue to pay out their preferreds. I wrote a guide about 11 factors to consider before buying into them. Most critically the interest coverage must be met or else Chapter 11 is coming since it is still higher in the capital stack. Make sure that the operating cashflow has multiples of coverage. There are tremendous preferred share deals right now.
• 56 Brod April 13, 2020, 8:10 am

  What intrigues me is that once this lockdown is unwound, will business, and consumer, spending just continue as before? Will car buyers really go out and renew the PCPs? Or will they exit them and think ‘you know what, I know the latest model ALQ 333i has a heated coffee holder, but do we need it at £300 a month?”

  Generally, how will the economy start up again? Beyond the basics, somebody had to start spending again, but will they have the money or, more importantly, inclination?
• 57 Snowman April 13, 2020, 8:16 am

  Another excellent article from Malcolm Kendrick “The lockdown is NOT a way of beating this virus”

  https://drmalcolmkendrick.org/2020/04/12/the-lockdown-is-not-a-way-of-beating-this-virus/
• 58 BBlimp April 13, 2020, 8:41 am

  @Brod – I can’t wait to start consuming again ! I was never much into cars, but I’ll be just as happy to sit as close to the front of the airplane as I can manage when I go away and crucially start eating out again and visits to the pub ! I’m waiting on a refund ( a long wait !) for a holiday meant to have over Easter… the refund will go toward a further flung holiday February half time . If this is short lived , demand will bounce right back
• 59 Vanguardfan April 13, 2020, 8:55 am

  @snowman and @TI, you will like this one too:
  https://medium.com/@ali_razavian/covid-19-from-a-data-scientists-perspective-95bd4e84843b
• 60 Vanguardfan April 13, 2020, 9:06 am

  Btw, for what it’s worth, I expect we will start lifting restrictions somewhere between mid May and end June (ie after 8-12 weeks). By then we will have another months data from around the world, which might be providing more clarity. After that, who knows.
• 61 Tony Edgecombe April 13, 2020, 9:17 am

  @MrOptimistic According to the OECD UK spending on health administration is approximately 2 per cent, below the international average of 3 per cent. It’s lean for such a huge organisation.
• 62 Grumpy Old Paul April 13, 2020, 10:24 am

  The comments following Kendrick’s latest article are an excellent example of confirmation bias in action.

  He confidently states “The infection fatality rate (IFR) currently stands at around 0.2% in those countries doing the most testing.”. I looked for a footnote referencing the source for this statistic and none was to be found. Nor was there any confidence interval.
  I think I’ll stick to the professional epidemiologists thank you.

  I
• 63 The Investor April 13, 2020, 10:42 am

  @Vanguardfan — Very interesting article. You are right it fits my confirmation biases — and the conclusions I’ve reached from rough heuristics — pretty well. I don’t have the data (or the maths!) to check his numbers though, so will curb my total enthusiasm.
• 64 Vanguardfan April 13, 2020, 10:42 am

  @grumpy, a quick scan of the worldometers data suggests deaths/diagnosed cases quite variable even among higher testing countries, but more like 0.5-2%. I think he’s perhaps assuming a very large undiagnosed pool (but logically, the undiagnosed pool will be smaller in higher testing countries). The jury is still out on that one.

  @TI I am not clear why a ‘shield the old/vulnerable’ won’t result in increased stress on intensive care units? If we assume that the majority of ICU beds are used by the less vulnerable, then allowing the virus to spread more quickly in this group will result in greater surge pressure in ICU. To be honest, the policy of shielding is in place precisely because it’s the only intervention available to ill and old people, other than a hospital bed and a whiff of oxygen.
• 65 Vanguardfan April 13, 2020, 11:29 am

  @TI, I couldn’t follow his leap from the first graph to the second. Plus the graph axes weren’t fully labelled so I was unsure of precise numerators and denominators.
  And, finally, Iceland has only tested 10% of their population, the vast majority as part of their contact tracing and quarantine policy, rather than mass community testing.
• 66 Vanguardfan April 13, 2020, 11:32 am

  And even Iceland is running out of testing capacity! https://www.covid.is/english
• 67 xeny April 13, 2020, 11:52 am

  @Tony Edgecombe Isn’t that at least partly an artefact of the NHS not having to have a billing department?
• 68 BBlimp April 13, 2020, 12:14 pm

  @Tony Edgecombe – if the supermarket management was in charge of testing and Public Health England in charge of feeding us… we’d be well tested and starving about now.

  The NHS should be a lot better than it is. The staff are brave, and so are medical staff all over the world.
• 69 ZXSpectrum48k April 13, 2020, 1:08 pm

  @Penelope. At these sort of meetings (with other investors), I’m there to listen and question their policy views, not provide opinions. Of course, if they deign to ask for my opinion, I provide it. I doubt they left the meeting with any confusion over my views. They didn’t bother to ask for a donation. But I’m not a Tory. I’ve voted for all 3 major parties in General Elections.

  @TI. “I know you favour lower volatility over maximum returns”. That’s not quite correct. I try to produce comparable returns to major assets classes over the cycle, but at lower vol. More about smoothing the path dependence. That obviously requires active investment and I do try not to discuss that here.
• 70 Snowman April 13, 2020, 1:52 pm

  @Vanguardfan

  Interesting article. But I couldn’t follow his analysis either.

  The way he has applied the Icelandic distribution to the Swedish data wasn’t explained. Perhaps he assumed something like half of the over 80s who had the virus in Sweden had been tested and then applied that assumption and the Icelandic distribution to get the numbers in other age groups. And assumed the age distribution of the populations in Sweden and Iceland are the same and the social interactions between age groups was the same. But it isn’t explained.

  The sources of his data don’t seem to have been given either.

  Even if you add up the numbers in the final graph that seems to give about 100,000 infected people in Sweden which is about 10% of the population. Given that we had 15% in a badly affected region of Germany it’s not a game changing number even if it was right ball park.

  Where he plucks his 1.6% mortality rate from I’ve no idea. If it is deaths/cases detected then of course it won’t allow for those infected and testing positive who haven’t yet sadly died.

  So I think all it shows is that in Sweden most of those infected haven’t been identified though testing. And the % of the infected younger age groups who haven’t been identified through a positive test is higher than the % of the infected older age groups who haven’t been identified. Where testing is biased to those with most serious symptoms as is happening in most countries this is always going to be the case.
• 71 Snowman April 13, 2020, 1:57 pm

  Should have written 1 million cases in Sweden which is 10% of the population (and that assumes the numbers are per age and so the number in each age band are 10x the height of the bars)
• 72 Penelope April 13, 2020, 2:14 pm

  @zxspectrum48k In which case, good for you for not being a hypocrite. But all that lurid prose about “blood on their hands” etc in comment #40 seems rather melodramatic for a comment from a professional investor made on an investment website.
• 73 ZXSpectrum48k April 13, 2020, 2:32 pm

  @Naeclue. Why the stock market isn’t lower? I’m no an equity expert but it’s clearly been a very unusual move. The SPX made a new high as late as 19-Feb (closing 3386) which given the information flow was bizarre. It was driven by massive retail inflows. BTFD is the mantra of the last decade. Similarly, the move from 2600 to 2237 (19 Mar) wasn’t driven by recession fears. It was driven more by a shortage of USD liquidity, exacerbated by quarter-end regs like GSIB. That abated quickly once the Fed threw the kitchen sink at the problem. So we’ve bounced back all the way to 2789 by Thursday close.

  The positive scenario: say 2 months of severe lockdown, some reopening of US economy in May, by July fully reopened. Severe recessionary data from late 1Q through 2Q but 3Q sees major bounce and by 4Q GDP is flying back up, recouping much of what was lost. Net loss of GDP only be a few percent. What is the market left with: pandemic fear has subsided but rate cuts back to zero bound, big QE program, credit easing for corporate bonds. Big fiscal easing. Low chance the monetary easing gets taken back in 2021. Fed eases policy fast but hikes real slow. So SPX goes like a bullet to 3500+ by year-end. Call this scenario “Trump’s wet dream” but it’s not impossible.

  Now it’s always easier to make up a host of negative scenarios. Lockdown tightened further so they can’t even think of starting to reopen economy until 3Q. Therapeutics don’t work, vaccine take full 18 months to mass produce etc. This could easily take the SPX sub 2000. But a level of 1950 would be a 50% retracement of the Mar-2009 to Feb-2020 move in total return terms and so could be regarded as offering a lot of value. By end-year, the pandemic would probably still be considered resolvable at least by 2H21. So, yes, heavy damage has been done to the real economy and jobs but, let’s be honest, the SPX didn’t go up 500% over 2009-2020 due to phenomenal growth in the real economy. Plus that job destruction means that monetary easing is never getting taken back (what’s the Fed’s mandate again …).

  So a level of 2800 could make sense right now but the dispersion of outcomes is clearly huge. What’s clear is, as always, much rests on the assumption that the Fed’s drugs work wonders for asset prices. If only we had such good drugs to stop people dying from COVID-19.
• 74 Grislybear April 13, 2020, 2:33 pm

  Interesting fact Germany and Uk imposed lockdown on March 22 and March 23. The population of Germany approx 83 million with 3000 aprox deaths from covid 19. Population of Uk 67 million approx with 10000 approx deaths from covid 19. The lockdown in Germany is not as severe as the UK, also the German army very kindly donated 60 mobile ventilators to the NHS.
• 75 Neverland April 13, 2020, 2:50 pm

  @Penelope

  Germany, population 83m, virus deaths 3,022. Government in power 15 years

  UK, population 67m, virus deaths 10,612. Government in power 10 years

  Death toll won’t be known for several months but it looks pretty unlikely HMG’s performance has been best-in-class.

  Looks like more than preventable 7,500 deaths already, so I am not sure what else would not count as “blood-on-hands”?

  People see what they want to see and sometimes they choose not even to look.
• 76 The Investor April 13, 2020, 3:20 pm

  @Neverland — It’s far too early to draw any such conclusions. Maybe in six months we’ll have a better understanding of why some countries were hit more by both infections spreading and by people dying.

  I expect a huge confluence of factors, of which government response will be only one. All sorts of countries are showing widely divergent outcomes.

  E.g. To give just one example, read about far poorer South Africa and watch the news reports of very poor kids in townships in “lockdown” clearly playing together in the streets while people queue for hand sanitiser and tell me it’s all about German health care spending and their rigorous testing.
• 77 Grislybear April 13, 2020, 4:22 pm

  @TI. Don’t know about SA but comparing two western European countries it’s fair to say that the state of their health systems and their government actions will be the major factors in their death rate from covid ,19. The UK at the moment is on course to have the highest death rate in Europe.
• 78 The Investor April 13, 2020, 4:41 pm

  @Grislybear — They will certainly be important factors, and yes perhaps will prove the most important factors. But I still think it’s too early to figure out all the causes of higher mortality rates, given the very divergent trajectories of multiple different countries not to mention cities.

  Long-time readers will know I hold absolutely no candle for this government. I think they’re opportunistic chancers and at best disingenuous if not worse in many cases, not least the PM.

  But I’m not persuaded at all that we yet have the evidence to say they have 7,000 extra deaths that count “as blood on their hands”, as it was put here.
• 79 Indecisive April 13, 2020, 5:11 pm

  Extra links for this week:
  Are those getting very seriously ill or dying from COVID-19 already “at death’s door”? An actuary analyses the data.
  https://twitter.com/ActuaryByDay/status/1249366217204338688

  Geoff Mulgan (former director of the UK Government’s Strategy Unit, now professor) is has released a paper on our lack of ‘social imagination’ – the ability of people and governments to think beyond the short-term and picture how they want society to be in 30-40 years. An excellent read, and topical as people talk about how they want the world to change (or not) after the current crisis:
  https://www.geoffmulgan.com/post/social-imagination

  I also recommend his more relevant post, building on his experiences after the fuel strike in 2000: “How should government manage big risks – pandemics to financial shocks?”
  https://www.geoffmulgan.com/post/how-should-government-manage-big-risks-pandemics-to-financial-shocks
• 80 Vanguardfan April 13, 2020, 5:56 pm

  @indecisive, actuary thread interesting but limited- only analyses 870 critical care deaths, which is less than 10% of recorded hospital deaths, never mind all the out of hospital deaths (including those in care homes).
  So it only really shows that those admitted to ICU are mostly previously fit people – which most likely reflects active selection for this scarce resource.
• 81 Matthew April 13, 2020, 6:00 pm

  Do our death rates just look worse on account of hospitalising (and therefore registering) more of them? How can we trust other countrie’s numbers?
• 82 Vanguardfan April 13, 2020, 6:04 pm

  @matthew, I can’t think of any reason why we should be hospitalising more cases, especially given we have among the lowest number of hospital beds per capita in Europe.

  But you’re right, it’s not easy to compare country rates of death, especially the ones being reported in real time. I understand that one reason why we report only deaths in hospital in our daily stats is that that’s what the internationally agreed method is for this purpose.
• 83 Vanguardfan April 13, 2020, 6:07 pm

  In fact you might speculate our death rate is higher than eg Germany because we are hospitalising, and admitting to ICU, a lower proportion of cases.
• 84 Indecisive April 13, 2020, 6:12 pm

  @Vanguardfan, #80: “actuary thread interesting but limited- only analyses 870 critical care deaths, which is less than 10% of recorded hospital deaths”

  Do you know a larger dataset than the ICNARC publish?I haven’t found one, and it’s difficult to do (and revise) the analysis without data being available.
• 85 Vanguardfan April 13, 2020, 6:31 pm

  I’m just pointing out a limitation. The ICNARC data are great, but they are limited (and biased) in coverage. I don’t think we have better at the moment, but it will come.
• 86 The Investor April 13, 2020, 8:06 pm

  Very interesting article in The Economist this weekend. Unfortunately pay-walled.

  I see it as yet more circumstantial evidence that the virus is likely much more widespread in the UK than was believed and the fatality rate much lower, too.

  Just two weeks ago this still seemed like a controversial proposition when I said as much here, even I thought perhaps a bit of a hopeful reach (one Monevator reader described it as “wishful thinking”) but I do feel like it increasingly looks like the best explanation for what’s going on:

  Covid-19 takes 20-25 days to kill victims. The paper reckons that 7m Americans were infected from March 8th to 14th, and official data show 7,000 deaths three weeks later. The resulting fatality rate is 0.1%, similar to that of flu. That is amazingly low, just a tenth of some other estimates. Perhaps it is just wrong, possibly because the death toll has been under-reported. Perhaps, though, New York’s hospitals are overflowing because the virus is so contagious that it has crammed the equivalent of a year’s worth of flu cases into one week.

  https://www.economist.com/graphic-detail/2020/04/11/why-a-study-showing-that-covid-19-is-everywhere-is-good-news

  I definitely wouldn’t die on a hill to support this specific piece of data or its conclusions of course, but evidence is piling up as I see it. (Or I’m collecting more confirmation bias… 😉 )

  RE: The UK, Germany, etc, the UK Government having “blood on its hands”, as I said earlier there’s so much going on here that different testing regimes seem pretty certain to be part of the picture, too, one way or another.

  I am also interested why we’ve not yet seen massive (reported) death counts in places like India and Nigeria. They have dense populations and far worse health systems, and India seemed to get the virus around the same time that we (officially) did. I have a hard time believing their lockdown was massively more well-implemented than ours, given the footage of millions of Indians piling on top of each other into trains to get out of big cities around the commencement.

  Of course it may very well be that they’re not counting them properly. Or it may be in the UK we’re over-emphasizing Covid deaths due to all deaths with a Covid-19 infection being reportable, if very large numbers of Britons turn out to have the virus in the past few weeks.

  Returning to India/Africa, even if the weather/UV theory is right (and I continue to think there’s probably something to it, which is another tilt for my relative optimism about this UK outbreak) India is a big country with lots of different climates.

  Why have New York, London, Madrid, and Milan seemingly suffered so much? What is the confluence of factors? How much of it is local / medical / government failing, how much other things (perhaps more old people living in close proximity to each other?), and how much an artifact of data?

  It’s pretty intriguing, though of course horrible at the same time given the deaths on the ground. And I am just an interested person reading widely, I have no expertise in this field of course.

  Anyway, people will continue to fit the story to the narrative they have chosen, no doubt including me.

  A terrified Government-slamming friend half-screamed at me in a Zoom chat today “As Carole Calderwaler (sp?) says, why have we heard nothing about the Nightingale hospitals since that one in London opened?”

  He (a very intelligent mid-40 something who works in IT) believed it could be because people are being “sent there to die” and they don’t want the cameras there.

  When I suggested it might be because we’re (hopefully!) on our way to turning out not to need too much if any extra capacity… well it did not calm him down. He accused me (me!) of being a Boris Johnson supplicant or similar.

  I’ll repeat for anyone who hasn’t followed my personal musings about this that I do think the Government was right to do a lockdown, especially given what we knew (or didn’t know) at the time. The case for not overwhelming intensive care units was reason enough at that point, in my uneducated view. And of course if it turns out the lockdown has been provably effective then it shouldn’t be criticised if deaths are lower than predicted, either!

  However I have a hunch that in a year or two we may find out there was a lot more going on, given the weird dispersal of data all over the world. Maybe the UK lockdown will prove to be sort of incidental to the natural history of our particular outbreak?

  Or maybe not, perhaps it’ll average out eventually when the virus has finished spreading, and the data has all come in and been normalized. Knightian uncertainty, as @ZXSpectrum48k called it!
• 87 Jonathan April 13, 2020, 9:24 pm

  @TI it would be very nice to imagine that many of us have already had a mild form of Covid-19 and are now immune from further infection – but that is exactly the sort of wishful thinking that leads to confirmation bias. (Disclosure: I have speculated on this very website about having had it myself).

  Unfortunately, to revert to my analytic self there is no decent evidence that is the case. It needs the tests.

  Interestingly France have tonight apparently made an advance notification of their plans to reduce restrictions, a rather different approach from the UK
• 88 Tony Edgecombe April 13, 2020, 9:54 pm

  @xeny Yes and that’s a good thing.

  @BBlimp I doubt it.
• 89 Tony Edgecombe April 13, 2020, 9:59 pm

  An interesting point that came up on todays government briefing was that they felt the replication rate in the general population (outside of hospitals and care homes) was already below 1.
• 90 Jonathan April 13, 2020, 10:12 pm

  @Tony Edgecombe, yes I noticed that including the lack of explanation. Obviously that was the intention of lockdown so it should have been the case ever since 24 March – but the way it was said by the advisors who have always been impressively careful with words implies that there is now evidence behind the scenes supporting it.

  I just hope that also behind the scenes there are data allowing comparison of the effectiveness of different restrictions, ready to inform any decision about an exit strategy.
• 91 Seeking Fire April 13, 2020, 10:22 pm

  “Anyway, people will continue to fit the story to the narrative they have chosen, no doubt including me”

  So true…people should generally be more willing to accept how little they know and continue to question, am I wrong…is my chosen narrative wrong. too many people here stating in absolutes. I agree I can fall into that trap..I have a bug bear UK in decades to come will recognise how foolish it has been in its dealings with China but I could be completely wrong, I accept.

  I really want to believe the Paul Kendrick article. It fits neatly with my chosen narrative. It’s a shame as other people have said he didn’t evidence his data claims. So it’s hard to attach much weight to the conclusions. I don’t believe each life has unlimited value. I guess some people might strongly disagree with me but we implicitly make those choices in the society we create through electing govt – note we seem to continually elect govts who want to limit the amount they spend on public services and HNHS.

  I believe the exit strategy is for (a) elderly / medically vulnerable people to stay isolated long term (b) everyone else to get back to work PDQ (c) seek to enforce measures that help limit the virus spread (d) keep near term NHS spending ramped up. That’s based on the global data so far…most people who die are elderly, yes people who are relatively young get sick (close friend of mine did in his 40’s but he also recovered comfortably with medical help). We all want to know the age split of the 10k people who have died in the UK – I assume the govt wont release the data because if it did, younger people would rebel against the lock down – happy to be told I am wrong.

  I don’t see much evidence to suggest conclusively this government has or hasn’t done a good job as yet. That will likely only become apparent once this has concluded. I don’t remember the electorate asking any questions on preparedness of pandemics in previous elections and yet the risk register has a pandemic as the no 1 risk back to 2015. You could say well ample time to prepare, yup but the electorate wasn’t exactly focussed on that. The evidence currently indicates the govt here has done ok, not great but not woeful. Probably should have shut down things a couple of weeks earlier, pretty hard to test if you don’t have the capabilities as we are all learning we don’t – doesn’t surprise me we don’t but equally I had no idea of our testing capabilities a few weeks ago.

  Getting back to investing…:) I was also super surprised to see the rate of dividend cuts and how its become almost socially unacceptable to pay a dividend. As ermine etc said though, theoretically what does it matter if the cash is retained short term. Actually taking into account tax leakage it should be better for some investors around the edges.

  Who here can honestly say had they been able to forsee into the future six months ago that this would happen that they would have accurately been able to predict the S&P 500. I would have been miles out. Market timing is for the vast majority of people a losing bet. Fix your asset allocation to modelled returns / volatility and don’t adjust unless your personal situation changes.
• 92 Vanguardfan April 13, 2020, 10:53 pm

  @seeking fire, you’re wrong ;-). There’s no deliberate withholding of data on the age breakdown of deaths, it’s included in the daily death stats:
  https://www.england.nhs.uk/statistics/statistical-work-areas/covid-19-daily-deaths/
  Similarly there’s lots of detail, including age, about admissions and deaths in ICU in the ICNARC report discussed above. The association of age with mortality was described very early in the Wuhan data and confirmed globally since.
  Also, I think it’s been pretty clearly communicated that the purpose of lockdown is to reduce spread, and the messaging aimed at young people clearly highlights this.
• 93 Seeking Fire April 14, 2020, 12:13 am

  Hi Vanguard fan thanks very much for correcting me. I had not seen this. The data shows that >91% of deaths in the UK are for people >60 years old (half the deaths for people over 80) thus largely matching global data. In addition the percentage related to elderly people is probably higher as I believe care home deaths for example are not recorded in these stats (say if I am wrong). I am struggling to see that young people deaths are not recorded (say if I am wrong). So I think this is evidence (I appreciate the sample size is small but underpinned by global data) that elderly people need to stay at home long term / isolate, medical spending ramped up and everyone else should get back to work as soon as possible with measures to limit the spread. I’m sure others don’t agree and that’s fine by me.
• 94 Vanguardfan April 14, 2020, 7:43 am

  Seeking fire, surely this isn’t news to you, when TI has been highlighting the ‘90% of deaths in older people’ stat on this blog for weeks??

  You’re correct that this is hospital deaths only (though many care home cases will actually die in hospital).

  The epidemic doesn’t impact only via deaths but more importantly it’s the proportion of very sick people, and the rate at which that is occurring, that determines whether health services can cope. About 20% of known cases are severe, needing hospital care, and maybe 5% need critical care.
• 95 Penelope April 14, 2020, 7:52 am

  @Neverland comment #75

  Re your 3 factor model of Germany vs UK, don’t call Imperial College…they’ll call you
• 96 Old_eyes April 14, 2020, 8:05 am

  Just read this article on the response of central banks to the crisis https://www.theguardian.com/business/2020/apr/14/how-coronavirus-almost-brought-down-the-global-financial-system?CMP=Share_iOSApp_Other

  I am not competent to say how accurate it is or what the long-term implications are, but it comforted me that their action has supported the continuing industrial capacity to ramp up production of testing and PPE and to deliver where it is needed.
• 97 The Investor April 14, 2020, 9:10 am

  @Old_eyes — Will have to read that article after work, but the start is very strong and captures the mode of what… two months ago… bringing back to mind how febrile everything was.

  The ‘Rona rigs’ slang for traders’ working-from-home PCs and the image of them screaming at laggy home wi-fi (no doubt because half their street is streaming Netflix or Disney or Pornhub or playing online games) while the markets tumbled is evocative!
• 98 Snowman April 14, 2020, 10:23 am

  Re the Stuart Mcdonald actuary twitter thread brought up by Indecisive where he was challenging the narrative that those getting very seriously ill or dying from COVID-19 were already “at death’s door”:

  I don’t think that many of those dying with covid-19 were at death’s door, if we define death’s door as likely to die in the next three months say. But it does look like many of those dying have co-morbidities and are amongst the most metabolically unhealthy and so will have had significant reduction in life expectancy relative to others of their age. This virus does seem to be different than some other viruses that have hit the young disproportionately highly relative to their normal age mortality rate.

  Malcolm Kendrick’s suggested that the ‘most likely’ number of years lost for someone dying with covid-19 was 4.5 years (with a range of 3-9 years). He worked on the basis of the average age at death being around 78.5 when the average person of that age can expect another 9-10 years of life. And then halved that because those dying of covid-19 typically have co-morbidities and would be be unhealthier than an average person.

  I think the average remaining life expectancy for a 78.5 year old is 12 years (not 10 years) and as TI’s friend pointed out because of the asymmetries of the age distribution around the average age at death, the average life expectancy of those dying (based solely on age) is greater than 12. But I think the end 4.5 years figure still feels reasonable allowing for the co-mormidities of those dying, but as Malcolm Kendrick says it is virtually impossible to calculate.

  I can’t see what average reduction in life expectancy Stuart Mcdonald comes up with in the end if he does come up with a figure.

  Ultimately we may never know what the average life expectancy reduction is or what strategy was best. We may be able to look at ALL CAUSE weekly deaths in future years from ONS data and see how that compares with all cause deaths for the past 5 years say (before covid-19), and that may give us some clues.

  Obviously every death is a tragedy but we do need to try and evaluate this sort of thing even if it is a very imprecise calculation. There is a real danger that by using too strict lockdown measures over the long term to greatly suppress the numbers of deaths from covid-19, we will actually cause more deaths from other causes, due to lack of access to healthcare for other conditions, and because of the economic affects on long term health.

  It is quite possible that some of those countries with highest deaths to date will come out at the end with overall better outcomes especially where their healthcare systems haven’t been completely overrun, so talk of governments killing so many people so far doesn’t work for me. In those countries with higher deaths now, herd immunity may build up more quickly, and so economic activity and normal medical care can resume more quickly resulting in less future economically related deaths and fewer deaths overall. On the other hand if a vaccine is developed super quickly or if covid-19 treatment protocols improve significantly for those in ICU, then those countries with initially higher deaths may come out with worst outcomes.

  What the best approach is is far from clear, and hindsight will be the only way to know what a ‘good’ approach is now. But my sense is that there is a greater risk that governments will overly concentrate on short term outcomes, rather than concentrating on long term overall outcomes.
• 99 xxd09 April 14, 2020, 11:00 am

  I might be out of line but all this amateur sleuthing on Coronavirus is rather like active investing-(the primary point of this board)
  It is good and right that we should discuss this disease and it’s outcomes as we discuss active investing
  I just have the feeling that “amateurs “ are way out of their depth as they tend to be in active investing and should be aware of this -some humility gentlemen
  This is a fast evolving situation catching everyone including as always the experts on the hop
  The end point is still out of sight but it appears not to be the end of the world -so we will get there but the road is still long and bumpy
  Dodgy statistics,poor tests-a real test of our politicians who will have the final say and responsibility
  We can only wish them well
  xxd09
• 100 The Investor April 14, 2020, 11:19 am

  @xxd09 — Well as you may remember I am an active investor, even if that is mostly not a feature of Monevator anymore (sacrificed in the pursuit of a Benthamite utility for the most gains for the most readers! 😉 )

  So perhaps I am showing my true colours in this amateur sleuthing. My thinking has directly influenced what have been some pretty big portfolio/trading decisions over the past three months for me. But I’ve mostly kept this off the site, for myriad reasons.
• 101 Grumpy Old Paul April 14, 2020, 12:07 pm

  Latest ONS statistics now available at https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/deaths/bulletins/deathsregisteredweeklyinenglandandwalesprovisional/weekending3april2020 .

  A very clear picture of excess deaths in the week up to April 3rd compared with the same week in recent years – roughly 16000 vs 10000 based on 5-year average. ONS stats include deaths in care homes and the community which are not covered by NHS statistics.

  National Records of Scotland release their latest stats tomorrow.

  @The Investor – the differences between different countries and regions are indeed baffling and there must be a number of factors at play. A few that come to mind that haven’t been widely mentioned – correct me if I’m wrong on that – are:

  – Mass transit system (London, Manhattan, Milan etc)
  – Vitamin D deficiency (Watch what happens in the southern hemisphere later this year)
  – Genetics (Is Iceland something of an outlier being a relatively isolated island with a small homogenous population?)
  – Population density

  Factors such as average population age and the prevalence of multi-generational households have been identified but I’m sure that more will be uncovered. I wonder if obesity (independently of the widely-recognised associated diseases) is a factor, the low er incidence of which, might account for the relatively low number of cases in the developing world.

  Something else that I find interesting can be seen on https://www.worldometers.info/coronavirus/country/us/ . Take a look at the stats for California, population 39.5 million. Compared to other US states, a low number of cases, a very low death rate and a testing rate per million lower than that of the UK. Seems like the lockdown began early around 17-19 March which may account for the relatively good outcome so far.
• 102 Snowman April 14, 2020, 12:42 pm

  @Grumpy Old Paul

  And of the 6,000 excess deaths (16,000 – 10,000) only just over 3,000 are recorded as being from covid-19. And this is based on the wider data that includes non hospital deaths.

  Looks like a lot of covid-19 deaths are being missed; other explanations are possible but I think they are just cov-19 deaths being missed.

  Agree vitamin D deficiency is a big issue. I’ve been taking a high vitamin D3 supplement over the past few months, and my mum has been doing the same. Now getting plenty of sunshine and avoiding sun screen (while obviously avoiding burning)
• 103 Snowman April 14, 2020, 12:59 pm

  So maybe 20,000 UK coronavirus deaths so far (rather than the 11K reported). If we work on a 0.3% death rate (say) then that gives us almost 7 million infected in the UK about 3 weeks ago (given the delay between infection and death).
• 104 Snowman April 14, 2020, 1:18 pm

  Around 15% of pregnant women admitted for delivery in New York tested positive for covid-19. And around 86% were asymptomatic (well at least at the time when the test was done).

  So a high proportion of asymptomatic cases at younger adult ages perhaps?

  https://www.nejm.org/doi/full/10.1056/NEJMc2009316
• 105 The Investor April 14, 2020, 1:26 pm

  @Snowman — Yes, that fits my rough musings and 20K estimate a few days ago on the other thread: https://monevator.com/weekend-reading-stuck-in-the-middle-with-you/#comment-1196364

  I think it’s getting very hard to believe there have not been at least five to ten million infected in the UK now, whereas when we began kicking this around 3-4 weeks ago it was still a bit of a hunch.

  Of course if the death rate is higher than 0.3% (which I’d say is at the low-end of the consensus estimates, though I personally wouldn’t be surprised if it’s even lower) in the UK (/London) then those total infected numbers could be lower.

  As most of us have agreed there’s clearly a lot going on here.
• 106 Snowman April 14, 2020, 1:40 pm

  TI, I mentioned a while back that at a care home near me there were sadly multiple covid-19 deaths.

  One report from a son of a resident said his dad was basically unconscious and breathing heavily. He later died and the son said that the cause of death was not listed as coronavirus as his father was not tested, but said he was confident the virus was responsible.

  A mere anecdote but does give a feel that covid-19 deaths have been under-reported.
• 107 Grumpy Old Paul April 14, 2020, 2:51 pm

  @The Investor, @Snowman
  I agree about the under-reporting of covid-19 deaths and the likely number of UK infections being somewhere between 1 and 10 million, probably(!).
  Re the obstetricians’ letter to the NEJM, I’d just urge a little caution in generalising from a sample size of 215 pregnant women in NY. a) I have no idea whether pregnancy has any impact on covid-19 infection rates, rates of asymptomatic infections or on the severity of infections. b) Neither do I know anything about the effect of pregnancy on the immune system in general c) I don’t know anything about the demography of the pregnant women admitted to the two hospitals. The letter is certainly interesting and the conclusions make sense.
  The letter reminded of another thought. Why, as a matter of urgency, isn’t a random sample of people selected nationwide, perhaps in a similar fashion to a political opinion poll, and used for a longitudinal study over the next year or two in order to obtain a better understanding of this epidemic? Yes, it depends on antigen and antibody tests which aren’t perfect but with a relatively small sample of perhaps 3000 people we could quickly obtain an understanding of a host of issues about which we are currently speculating. I’m sure that if people were given a sufficient financial inducement, the participation rate would not be a problem!
• 108 The Investor April 14, 2020, 3:03 pm

  Why, as a matter of urgency, isn’t a random sample of people selected nationwide, perhaps in a similar fashion to a political opinion poll, and used for a longitudinal study over the next year or two in order to obtain a better understanding of this epidemic?

  I asked/proposed this a few weeks ago. I believe the trouble is the antibody tests aren’t reliable enough yet. When you don’t know how many people you *expect* to be infected, and/or the number infected is potentially pretty low, then even with 90% reliability you get counter-intuitively dubious results, with lots of potentially incorrect results screwing up any utility. Bayesian statistics is unforgiving!

  The government had an early programme to do random “live virus” testing in eight or nine hospitals and this went by the wayside, too, seemingly. Or at least we haven’t heard much about it.

  Regarding the pregnancy stats, of course, any one stat can’t be read in isolation much. But IMHO adding up all the data / modelling coming in is really stacking up in favour of many, many millions having had it in the US and the UK now. Of course we can’t know anything like a precise number. But I think you have to really be pretty dogged to think it’s anything like the million or so the conventional view of a few weeks ago might have implied. With that said this may well be my confirmation bias at work, so do your own research etc. 🙂

  Anyway to my mind the utility of this observation has largely passed, compared to reaching conclusions in this direction 2-3 weeks ago. Everyone is putting the market rally down to Central Bank action and I’m sure that’s part of it. But I do wonder if the market has sniffed out that we’re not going to see the truly horrific predictions come anything like true, either because the predictions were flawed (understandably to some extent, given the uncertainties ) and/or the lockdown worked and/or the virus is much more infectious and spread much more widely than initially predicted and/or it’s less deadly. I see a bit of all four, but lean towards the last two, again FWIW.
• 109 Naeclue April 14, 2020, 3:51 pm

  Sorry to poor cold water on to current hopes that millions of people in the UK have been infected, but even if that is true, nobody yet knows to what extent infection, esp. asymptomatic infection, leads to immunity nor how long immunity lasts.

  I have to agree with @xxd09. Be sceptical of anything on the web posted by armchair amateurs (and professionals), even if they claim to be adept with things like MATLAB or R. I used to be good at both and I reckon I could come up with just about any answer you would like after sucking in the stats and building a few simplistic models and making gross assumptions.

  We need peer reviewed stuff from authoritative sources. Talking of which, what happened about the Porton Down serological testing? Must be 2 weeks since Hancock said this was going on.
• 110 ZXSpectrum48k April 14, 2020, 3:56 pm

  @Snowman. “What the best approach is is far from clear, and hindsight will be the only way to know what a ‘good’ approach is now ….”

  Sorry but can’t agree. What did we know by mid-Feb? We knew that we had an exponential process on our hands (the virus) and we also knew that the NHS was an organization that is run at, or very close to, capacity in normal conditions. So surely it’s obvious that you need to smother the exponentiating process as fast as you can, or risk total overwhelming heathcare capacity. It buys you time; time to up capacity, time to find therapeutics, time to firewall the most vulnerable. Plus the faster you smother the process, the less people die in the first wave, the shorter the economic disruption. Long-term, yes, perhaps the same number of people are infected but that’s not the metric.

  So what the hell was our government doing for over 4-5 weeks from mid-Feb through mid Mar? They must have had far better info than plebs like me. These are meant to be the top 0.1%; best schooling, top univs, most initiative, born to lead. So we can’t blame this on inertia or stupidity. Other countries, like Australia, were already instigating forms of lockdown a month before us. I come to the conclusion they just didn’t really give a damn until Prof Ferguson told them 510k might die, at which point they decided that might be a bad look for them.

  It’s perfectly possible that the UK may not come out of this as one of the worst developed countries. That’s a pathetically low bar. Our goverment should be expected to strive to come out of this the best. Right now that looks really doubtful, whether in terms of deaths or in term of economics.
• 111 BBlimp April 14, 2020, 3:56 pm

  I think possibly the antibody test shows if antibodies have been developed for coronavirus ( of which many of us will have had one of the colds) as opposed to covid19. I’m no scientist but I have confidence this will eventually be overcome
• 112 David April 14, 2020, 4:18 pm

  I’m finding the Corona coverage on this site and the comments which follow very interesting and thought provoking reading, so thank you everyone.

  If share prices have gone up again because the market is reaching a consensus that Covid-19 is less serious than feared, what will happen when we get the first confirmed re-infections of individuals who’ve previously recovered? The 1918 flu pandemic came back with a second wave far deadlier than the first. The common cold is caused by only a few types of Coronavirus yet we catch and suffer from colds repeatedly throughout our lives. The SARS-CoV-2 virus is mutating so quickly that there are already multiple strains recognised around the world – this in itself could explain part of the disparity in outcomes experienced by different countries (and make producing a vaccine very difficult)

  Personally I’m terrified about getting it, despite being in theory low risk. Maybe it’s having a young family and not wanting to go before my kids have grown up. Remember that the provinces are a few weeks behind London so it’s very likely I haven’t even been exposed to the virus yet. Even if the optimists are right and if lockdown ended tomorrow I wouldn’t rush off to the nearest pub or restaurant, that’s for sure. I’d remain cautious for a long time, I wouldn’t go and work in an office if I could help it, and I’d creep around town staying 10 metres from other people and wearing a mask at all times as I am now.

  And I think that’s one reason the economy isn’t just going to bounce back to where it was and carry on with the upward trajectory. I was employing more than ten full-time people before this all started. We’re now down to two and struggling to turn a profit. I’d happily bring everyone back from furlough, but there’s no way we’ll get enough orders to pay for that any time soon. What will happen when the furlough scheme ends? We’ll see massive unemployment, less spending money in the economy, and we’ll be in a self-perpetuating downward spiral for a while, perhaps for years. How will the government have the money to get us out of this with rates at 0.1% and debt already well over 100% of GDP?

  I must admit though, this eventually takes me back to thinking equities might not be a bad bet – if printing money and inflating our way out of our debts is the bigger picture exit strategy, we’ll likely see a lot of inflation and this makes equities probably the least worst option. Especially if some are dominated in other currencies.

  As for the Government…. well, the catastrophic and shameful situation unfolding in nursing homes is going to make the social care funding crisis go away for a while, no? Despite all the news stories about their surveillance state, lack of human rights and so on, the Chinese do at least care about their elderly, and I’m sure this is part of the reason they were determined to suppress this virus.
• 113 The Investor April 14, 2020, 4:57 pm

  @Naeclue:

  We need peer reviewed stuff from authoritative sources.

  I agree. However by the time we get them we’ll likely be past the point of uncertainty, by definition! (The peer reviewed stuff will be what dispels the uncertainty).

  From speaking to friends, some of whom find my interest in this virus bemusing, to put it kindly, I’ve really come to understand I’m far more comfortable and familiar with trying to figure things out for myself than many. (Note I didn’t say “figuring things out better than the consensus all the time”. Just with doing it! 🙂 And I’m not some rabid anti-vaxer type. I fully support vaccines! Generally I am happy enough with the consensus. 🙂 )

  I would say this attitude mostly comes from being an active investor, but actually that’s probably chicken and egg. I am probably an active investor because I’m so comfortable following my thinking/gut/whatever, for good or ill. Cover your ears, @TA disciples! 🙂

  I don’t blame anyone who doesn’t read below the line on these articles or feels all this speculation is rather amateurish. However I find it interesting intellectually, emotionally (because I have family and friends I am concerned about, including elderly, vulnerable, and pregnant), and financially (because it informs my active investing).

  I don’t claim to be an expert, but people have been saying to me that this and that was just random speculation for eight+ weeks now (actually longer — I had a debate with a friend about human to human transmission in, IIRC, January!) Mostly they’ve done this on the medical side, but also on the economic side. But FWIW most of my hunches have been right. The virus did come here. It did spread widely. It did cause a lockdown here too. That lockdown is crashing the economy (35%+ GDP downturn predicted just today). The evidence is stacking up for me anyway that is far more widespread than most would countenance even two weeks ago.

  Keen readers with good memories may recall feedback I got in mid-March saying, essentially, “pah, a virus, remember SARS, pfft, efficient markets!” Oh well.

  I think my own way and am happy to share thoughts with the interested, but if anyone is not that’s fair enough.

  Anyway, it’s obvious to anyone who is closely following this (I am reading 4-8 hours a day on the virus et cetera I’d estimate, with some company commentary crossover) that there is *massive* uncertainty around all if it. This is not news. 🙂

  Indeed it’s probably clearest of all to those of who are following and figuring out in fact, compared to those who are just following the official ‘top line’ of the week and then firing up Netflix. 🙂

  @David — All fair enough, except I think you need to insert an “if” or two into your scenarios/questions. We don’t know, for example, whether people will be reinfected, or whether they will anytime soon, whereas you say “when”. From memory other coronavirus immunity after infection usually lasts a year or two, which would hopefully get us to the foothills of a vaccine or more likely a treatment. I don’t see any particular reason why this virus should mutate and become more deadly any more than the dozens and dozens of other viruses circulating around. In fact I’m pretty sure I’ve read it is mutating more slowly, and that mutation is if anything a good thing as it will tend towards less harmful. (Not sure though, if any virologists are reading please shout! 🙂 )

  But let’s say it does become endemic, with a death rate of say 0.25%, overwhelmingly affecting the elderly, but with infection / transmission massively curbed due to most of the population having had it and having some rolling immunity.

  Well, in that case it’s just one of the myriad things out there that kills us already, especially, unfortunately the oldest / weakest.

  We face everything from MRSA to seasonal flu to various cancers everyday, all killing 600,000 of us a year, and life (and the stock market) goes on. It will in that scenario, too.

  Perhaps the virus is a wake up call reminding us that we’re mortal. But sadly this isn’t news to the natural world. 🙂
• 114 Snowman April 14, 2020, 5:48 pm

  @ZXspectrum48K

  Saying ‘What the best approach is is far from clear, and hindsight will be the only way to know what a ‘good’ approach is now’ cannot be reasonably interpreted as some sort of suggestion that I agree with the UK government’s actions to date, can it, ZXspectrum64?

  On 14th March I posted here to say I was uneasy about the lack of action by the UK government to slow the exponential growth. They did eventually act the next week but their action was cavalier and wreckless, albeit it appears that the NHS hasn’t been completely over-run thank goodness although it has necessitated the strict lockdown now.

  When I made the comment above I was talking about where we go from here, not how the UK government got here.

  My comment on not judging things on the numbers of deaths so far seems a reasonable thing to argue.

  Let’s assume no vaccine is developed (I am not aware a human vaccine has ever been developed for any previous coronavirus but perhaps it will be developed and tested quickly) and let’s assume no effective treatments are ever developed.

  Let’s say country A takes long term lockdown action, with testing and tracing, that restricts new infections in each month to an average of 1% of the population perhaps through a series of peaks and troughs but averaging out at 1%pm. You may then end up taking 5 years or more to get through this. Now you could try to eliminate it completely during this period, but how are you going to stop it coming back in from overseas?

  Country B could let infections run at a high level so that the health services weren’t overrun, while protecting those most vulnerable by shielding, and so 10% infections of the population occur on average per month (perhaps a bit less over time) so that the health service isn’t overrun. After 6 months or so there will be herd immunity of sorts and infections will naturally fall away then, and hopefully a disproportionate percentage of the vulnerable are part of the 30% say that never get the virus.

  In that scenario I assess country B comes out better overall when you consider all the indirect health and economic affects and actions required over 5 years to continually suppress the virus.

  Now change the initial assumptions and assume a scalable vaccine is developed in 6 months. Then country A, I would assess, with hindsight comes out better overall.

  I’m not advocating A or B’s approach but through a clumsy example explaining that the right action to take is only knowable in hindsight, the point I was making.

  Until we know what % of the UK population have or have had the virus (perhaps through the Porton Down random sample antibody testing) I think it is hard to suggest the best plan going forward.
• 115 Indecisive April 14, 2020, 5:52 pm

  We need peer reviewed stuff from authoritative sources.

  As my professional scientist friends remind me when I ask about a paper, peer review doesn’t make it valid 🙂

  Quality peer review takes time, and frequently requires reviewers outside the field of expertise of the journal’s main topic (e.g. statisticians, because assumptions made when handling data can throw off everything). In fields where it is possible, reviewers do not normally reproduce the work to confirm the outputs (e.g. simulations) nor check for instability in mathematical methods used. Often they don’t have access to the source code, something there has been pressure for years to change.

  Time is something that’s considered in short supply at the moment. Many papers are being released as preprint (no review) or going through rapid review. ‘Fast’ peer reviews seem to be happening in the rush to publish.

  You might think only less reputable journals are rushing to publish (and as cynical academic friends say, monetize their hard work, and get citations for the journal), but authoritative sources like Proceedings of the National Academy of Sciences [1] and NEJM [2] have published papers that aren’t necessarily the quality that’s expected (for the headlines they’ll generate).

  Summary: Peer review is good. Peer review is far from perfect. Don’t believe every peer reviewed paper that’s published is the truth. Expect quality standards to be lower than usual at the moment.

  1. https://twitter.com/arambaut/status/1248387395201847296
  2. https://twitter.com/GidMK/status/1249537293536210944
• 116 ermine April 14, 2020, 5:52 pm

  > These are meant to be the top 0.1%; best schooling, top univs, most initiative, born to lead.

  Maybe in Empire days that was right. An increasing proportion of our top politicians (Blair, Cameron, Clegg, BoJo) are drawn from private schooling, relative to the grammar skool kids in past decades (Wilson, Heath, Callahan, Thatcher, Major, Brown, May). Private schooling may teach you to be born to lead. It certainly teaches command presence in normal times. But I fear it doesn’t tech competence in leadership in adversity, looking at the results
• 117 Jonathan April 14, 2020, 6:09 pm

  I think (hope) @David is overly pessimistic. I don’t know whether the second Spanish flu wave hit the same people (mutation/no immunity), it might have just hit different people after a warmer weather lull. And the common cold analogy doesn’t help, there are something like 200 recognised viruses causing cold symptoms of which only a handful happen to be coronaviruses. If people maintained immunity for 30 years after an infection that would easily allow the several colds a year most people experience.

  And the mutations that have been described for SARS-Cov-2 are “silent” ones which are useful in tracking its spread but won’t change sensitivity to previous immunity. That doesn’t rule out future changes in antigenicity or virulence, but coronaviruses aren’t thought to be as prone to mutation as flu.

  Like @TI my nature is to try and understand what is going on in the bits of the world that interest me, including making my own guesses of how to interpret scant and imperfect data. And it is fun hearing other people’s attempts in this forum. But in actuality we are all guessing (unless there is one of us privy to unpublished data); I think at the moment you could make a case for anywhere from 1% to 50% of the UK population having had Covid-19.

  I am also curious to read opinions about the economic and market impact – recognising this is something where I have far less confidence in my own interpretations. It is clear that lockdown will only be lifted gradually, and each change will provide a recovery boost but with a lag. And also that some economic activity will be lost forever while for some things there may actually be a temporary compensatory boost. But what does that mean for share prices? If businesses are in recovery across the spectrum and around the world does that mean stock markets will value them downward in relation to the last few years, or will valuations get reset around a worldwide context of different growth expectations?
• 118 Jonathan April 14, 2020, 8:10 pm

  And +1 to @Indecisive. As a former research scientist I know that peer review is an important part of quality control but doesn’t guarantee that something is true.

  Basically it means that some researchers in the same are with no personal commitment to the conclusions of a study have a chance to read the draft paper critically and ask the awkward questions (which the authors should then ensure are answered in the paper or are acknowledged as areas of difficulty). Which means the reader has the confidence that the questions that arise in their own minds when reading the paper have been thought about by the authors. But it only takes one new finding published tomorrow to raise further questions.

  That is why it isn’t the same as a guarantee findings are true. In a fast moving field, as we have here, the background information of the scientists setting up the study, and of the reviewers providing feedback on the paper, may differ so much from what is now known by the reader that the findings are already superseded.
• 119 Naeclue April 14, 2020, 8:10 pm

  @TI, if you think peer reviewed stuff will dispel uncertainty, all I can say is think again! Proper research will be drenched in uncertainty for some time yet. If you read something that isn’t, chances are it is nonsense (or may turn out right by pure fluke). It is very easy to get trapped by confirmation bias in circumstances like this, so best be sceptical of everything. You are right about timescale though, so go for authoritative, but not yet peer reviewed, and treat with more caution.

  @Indecisive, completely agree. Peer review is no magic bullet to reliability, but it is a whole lot better than the myriad stuff being put out there by armchair clowns with time on their hands, even if they are a whizz with a spreadsheet and can write a good story!

  @BBlimp, depends which antibody tests you are talking about. We have been lead to believe that Porton Down have an accurate testing capability, but not one that can be scaled up. I would hope that means being able to accurately determine that C-19 antibody’s are present, as opposed to some other coronavirus antibody AND provide a reliable estimate of concentration, so that an assessment can be made of a person’s level of immunity. Everything seems to have gone quiet on Porton Down though, so maybe their tests were not as reliable as we were lead to believe…

  @Jonathan, nobody knows what will happen to share prices at the best of times, let alone now. They will fluctuate according to events, news flow, supply and demand. Over the long term shares have proven good investments, paradoxically though, most shares have delivered returns that are worse than the market as a whole and the longer the period, the more asymmetric the distribution of returns becomes and the higher proportion of total duds. So if you think history will repeat itself and you can invest for the long term, don’t waste time thinking about what will happen in the short term, but tilt the odds in your favour by buying the market as cheaply as you can, then leave well alone.
• 120 The Investor April 14, 2020, 9:03 pm

  @Naeclue:

  @TI, if you think peer reviewed stuff will dispel uncertainty, all I can say is think again!

  Okay, I don’t particularly and precisely think it will dispel all uncertainty. Rather I was simply conceding your own point — where you yourself asked for peer reviewed material, which would take time to come — but I’m well away that peer-reviewed debate goes on in many areas of even hard sciences, medicine, etc.

  Maybe I should have said “When commentators can’t push back against any particular thesis by saying “we don’t know that for sure” it will be too late.”

  I’m more than happy — it’s helpful — for people to point out why this or that conjecture might be flawed, perhaps logically or pointing to evidence or similar.

  But saying in effect, it’s uncertain just wait until it’s certain… that’s not the sandpit I play in. 🙂
• 121 Snowman April 15, 2020, 9:36 am

  Looking at the ONS figures for the 4 weeks to 3rd April 2020, about 22% of all deaths have been in care homes. But only about 5% of covid-19 deaths are according to official ONS figures in care homes.

  I’d expect the % of covid-19 deaths that are in care homes to be higher than the all cause figure of 22% (easier for the infection to get into and spread in care homes). Other countries data shows as many as half of all covid-19 deaths are in care homes.

  The 6,000 excess all cause ONS deaths in the week to 3rd April is hypothesised to be as a result of covid-19, but the ONS claim only 3.5K are covid-19 deaths so there appear to be 2.5K unexplained possibly covid-19 deaths.

  But if 2,700 of the hypothesised 6,000 covid-19 deaths were in care homes, then subtracting the around 200 official covid19 care home deaths for the week to 3rd April gives us 2.5K, and would explain all of the 2.5K understatement of covid-19 deaths.

  I don’t think care home unrecorded covid-19 deaths are the whole explanation here, the calculation above is just a rough size affect check, but I think the numbers suggest they could be a significant part of the explanation.
• 122 Naeclue April 15, 2020, 11:27 am

  Purely anecdotal, but chiming with the “this is very, very infectious argument”, some friends have just come through the worst on what looks very much like the C-19 infection (sore throats, etc., parents much worse than 20 year old daughter). They have been in lock down, not travelling to work, only shopping for food, exercising locally. They have been very careful, so how did they get this?
• 123 Snowman April 15, 2020, 11:50 am

  Going back to the theme of peer reviewed studies:

  A peer reviewed study is all other things equal better than a non-peer reviewed study. But you need to watch out for all sorts of other things such as financial conflicts of interests and biases that pervade the research.

  I love this video that runs through some of the things to watch for

  Dr. Jason Fung: Financial Conflicts of Interests and the End of Evidence-Based Medicine

  https://www.youtube.com/watch?v=z6IO2DZjOkY
• 124 The Investor April 15, 2020, 11:54 am

  @Naeclue — I guess one could see that as evidence for either extreme of the argument. 🙂

  On the one hand, it’s so infectious that one slip or piece of bad luck got one of them the virus. As you know social distancing reduces transmission, it doesn’t 100% prevent it. Perhaps one of them was just unlucky in what they happened to breath in during a shopping trip? A carrier picked up the milk before them, breathed out, they breathed in something floating around. Even more plausible given most people aren’t wearing masks.

  On the other hand, I could see a counter-argument that it shows how suggestive we all are, and how desperate to have got through it. They have hay fever, say, or a cold, and want to see Covid-19 in every symptom. I’ve no reason to believe this, don’t know your friends etc, but it’s a coherent line of reasoning.

  Even as one of the leading proponents* of the idea it being very infectious in the UK (*in the relatively tiny Monevator community, haha) I do see powerful counterarguments. If it’s so infectious, why was China apparently able to get it locked down so effectively? Was their lockdown really so powerful – and so early – that nobody got this seemingly hyper-infectious virus out of Wuhan and from there into the wild? It’s hard to credit. Perhaps more plausible if there’s some other co-factors going on (much discussed in this and other threads) but I won’t try your patience with those.

  From what you’ve said here and what we’ve seen elsewhere it sounds like they did have Covid-19, but as we all agree we need accurate antibody testing.
• 125 Vanguardfan April 15, 2020, 12:50 pm

  @naeclue, when did the first person start with symptoms? Incubation can be up to two weeks, we have only been in lockdown just over three weeks. My bet is that someone got it just before lockdown. Just a guess mind, but I tend to think we are much less likely to get it from casual environmental contamination than from face to face contact.
• 126 Vanguardfan April 15, 2020, 12:52 pm

  Also, any effectiveness measures to prevent Covid transmission will also reduce other respiratory infections…(Hong King’s flu rate plummeted in the initial phases of the outbreak)
• 127 David April 15, 2020, 1:09 pm

  @ Naeclue

  20 year old daughter sneaked out to see her mates or her boyfriend?
• 128 Naeclue April 15, 2020, 4:06 pm

  @Vanguardfan, the husband showed systems first, last Wednesday, the other 2 on Friday. So could have been in incubation. We met up with them just before lock down and show no systems.

  @David, if I was looking to pin the blame, that would be the way I would go!

  SW London does seem to be a bit of a hotspot.
• 129 MrOptimistic April 15, 2020, 5:27 pm

  Re care homes, think I have posted this before but the last UK flu report showed 600 odd severe respiratory outbreaks from care homes two weeks ago. So the problem was out there if people bothered to look ( figure 2).

  https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/877617/National_influenze_report_2_April_2020_week_14.pdf
• 130 Naeclue April 16, 2020, 4:58 pm

  Back on the dividends cuts, I had a look at another ETF, IWRD iShares MSCI World. Taking annual samples again at the end of March for 2007 to 2020, gave dividend volatility of 13% and NAV value volatility of 22%. Similarly to the FTSE 100 ETF, the biggest fall in dividends was for year ending March 2010, down 28%. All numbers in dollars.

  It will be interesting to see what happens to UK and global dividends this time round.
• 131 Snowman April 17, 2020, 7:28 am

  Doesn’t look like the serology testing is going well and results don’t look imminent. It’s shambolic that they haven’t even sorted out the sampling frame yet. Wouldn’t put much weight on Chris Whitty’s comment ‘but we will probably have a crude ranging shot fairly soon’ given he said something similar weeks ago. Link to the question at yesterday’s briefing

  https://youtu.be/DFB9JKJDjmQ?t=1056
• 132 Snowman April 17, 2020, 9:44 am

  Interesting to hear that the Royal Society has convened a data analytics group to tackle COVID-19 with one of their aims help identify long term solutions to the pandemic

  https://royalsociety.org/news/2020/04/royal-society-convenes-data-analytics-group-to-tackle-covid-19/

  Demis Hassabis and Daniel Kahneman are included. Not difficult to see how their skills are badly needed at the moment.
• 133 Snowman April 17, 2020, 9:12 pm

  Super interesting viewpoint from an advisor to the Swedish government

  https://www.youtube.com/watch?time_continue=872&v=bfN2JWifLCY&feature=emb_logo
• 134 The Investor April 18, 2020, 12:20 am

  @Snowman — Well he feels like my massively more qualified brother from another mother. Thanks for sharing that here.