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Weekend reading: Down with dividends?

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What caught my eye this week.

Having fortunately been relatively early into the pandemic pandemonium, I was also early out of it.

Share prices fell so fast that by the time most people had woken up to the economic catastrophe of a global lockdown and begun to panic, markets were already looking ahead again.

Much is uncertain, and who knows what will happen next. It usually pays to be optimistic as an investor though. If the short-term future is a coin flip I’d rather elect to be positive about the medium-term.

I certainly believe rampant talk of everything changing forever from Covid-19 is overblown. Far more will stay the same.

For example, while many are still writing the obituary for the cruise line industry, Saga has already booked two-thirds of its expected cruise revenues for September to January.

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.

I’d be the first to agree the economic – and health – consequences of a protracted universal lockdown would be dire. Think Great Depression dire. But I actually believe they’d be so dire that we’ll have no choice but to modify our approach. (See my thoughts on that in the excellent discussion following last week’s post.) Any step away from deliberately stopping the economy and nailing on a deeper recession should be good for companies.

Hopefully this first – necessary – lockdown is buying us the time to calibrate a more sophisticated response going forward.

Dividends in doubt

Despite my tilt to the bright side, I’m not saying this is a storm in a teacup. It’s a storm in a storm!

Every day has brought something notable or unprecedented to a humble student of the markets – from scary volatility and weird dislocations to almost unbelievably bold Central Bank and State action.

But – putting the all-important health tragedy to one side on what’s mostly an investing blog – the thing that has really shocked me is the mass suspension or cancellation of dividends.

Many companies had no choice but to cancel, because they won’t make any money with the economy turned down to ‘2’. The banks and insurers have been all-but ordered not to pay a dividend. Other firms like Tesco have pushed ahead with a dividend, and been castigated as pariahs for it.

According to the latest Dividend Monitor from financial firm Link Asset Services:

  • 5% of UK companies have already scrapped payouts to shareholders
  • £25.4bn of cuts are sure to hit this year (one-third of the April to December total)
  • A further £23.9bn in dividends are at risk
  • £31.1bn are deemed likely to be safe

This is gob-smacking stuff. It’s been an investing truism for UK investors forever that dividends get chopped much less than share prices fall. This was even true in the financial crisis.

Indeed I’ve often argued as much in debates here on Monevator about @TA-style total return / selling capital drawdown, versus the semi-heretical natural yield approach favoured by The Greybeard and me.

My desire to live off a natural yield is often misunderstood. I’ve never argued you’ll get a higher overall return this way. It could be more or less, depending on luck and or skill.

I have also conceded every time it’s come up that you’d need a bigger retirement pot to live on if you’re not selling down your shares. You’ll leave a fat wodge when you die, too.

However for me, tithing off a steady, ideally growing income in retirement is a more palatable prospect than larking around selling assets in a bear market as a potentially shaky OAP.

True, for many years now I’ve thought such a strategy was best executed via investment trusts and ETFs rather than individual shares (such as the old HYP strategy). Good equity income investment trusts should smooth and soften the cuts, although they obviously can’t escape the underlying hit.

In addition, I’d build cash buckets and reserves into any investment income strategy.

Finally, if we do escape a deep recession and see more of that fabled V-shaped recovery, then dividends should also bounce back pronto.

But still, these cuts are a shock. It’ll be fascinating to see how this plays out in the years ahead.

Gloom aside, have a great Easter Weekend… whatever part of your home or garden you plan to be visiting! 😉

From Monevator

The Slow and Steady passive portfolio update: Q1 2020 – Monevator

Read the Monevator community’s huge 150+ comment discussion on Covid-19 – Page 1, Page 2, Page 3, Page 4 (which includes my thoughts on lockdown and the pressing need for an exit strategy)

From the archive-ator: How to start a fund – Monevator


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

Bank of England to finance UK government’s Covid-19 spending via overdraft extension – Guardian

IMF says Covid-19 pandemic will lead to the worst slump since the Great Depression – ThisIsMoney

UK property market moves into cold storage, transactions may drop 50% [Search result]FT

CEBR estimates the lockdown is costing the UK economy £2.4bn a day; output down 31% – CEBR

UK economy could shrink by 25% if lockdown persists, says NIESR – Yahoo Finance

Property industry calls for a stamp duty holiday to kickstart the market after lockdown – Property Wire

Coronavirus compensation will be the next PPI, reckons convicted fraudster – Guardian

“What I would do is figure out how much you’ll want to have invested by the time the bottom is reached, and spend part of it today. Stocks may turn around and head north, and you’ll be glad you bought some. Or they may continue down, in which case you’ll have money left to buy more. That’s life for people who accept that they don’t know what the future holds.”
– Howard Marks, Oaktree Capital Management, in the FT

Products and services

Passengers left fuming as they struggle to claim cash refunds from airlines – ThisIsMoney

Covid-19 freezes on UK loans and credit card have started – Guardian

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

Why can’t we reschedule our flights or get a refund? – Guardian

Premium Bond millionaires not visited in person for first time in 26 years – ThisIsMoney

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

Family homes with a large garden for sale [Gallery]Guardian

Comment and opinion

The flight to safety – Of Dollars and Data

William Bernstein interview: The only black swans [Video] – Ben Carlson @ The Compound

Larry Swedroe: Actively managed funds fail [again] when needed the most – Advisor Perspectives

This isn’t the next Great Depression – Pragmatic Capitalism

Real-world portfolio de-accumulation returns, updated to the end of 2019 – Retire Early Homepage

Why didn’t the markets see this coming? – Morningstar

The Fed finds another kitchen sink to throw at us – The Reformed Broker

Naughty corner: Active antics

The state of diversification is worse than you think – Klement on Investing

[Once more unto the breach] The case for cash over US government bonds – Movement Capital

Inside Bill Ackman’s $2.6bn big short [Search result]FT

RIT Capital has been a bit of a disappointment in this bear market – IT Investor

Microsoft as an investment in support of a low-carbon future – DIY Investor

An industry petition to extend special State support to reach the start-up sector – Save Our Start-ups

Covid-19 corner

(Click to enlarge)

The impact of self-isolation […and another indication of already wide spread]Covid symptom tracker

The FT’s excellent Coronavirus tracking page is open to everyone – FT

Deputy chief science officer repeats that estimate that 80% of us will eventually get Covid-19 – BBC

Empty non-coronavirus beds raise fears the sickest are avoiding NHS [Search result]FT

Clusterf*cked: How social gatherings were rocket fuel for Coronavirus around the world – Guardian

The Asian countries that beat Covid-19 now have to do it again – WIRED

Germany to run Europe’s first large-scale antibody test programme [Search result]FT

Can we really develop a safe and effective, Coronavirus vaccine? – Scientific American

An interview with leading epidemiologist Larry Brilliant – The Economist

Interesting deep dive into the biology of Covid-19, with scientists – Irish Times

Air pollution linked to far higher Covid-19 death rates, study finds – Guardian

The technology that could free [us] from quarantine – The Atlantic

Why the Coronavirus test gives so many false negatives – Slate

Whack-a-mole: The long run virus – John Cochrane

Is this the end of the hand shake forever? – Newsweek

Addressing climate change in a post-pandemic world – McKinsey

A natural Coronavirus experiment is playing out in Kentucky and Tennessee – Buzzfeed [via A/R]

Masks4All – AVC

More on the question of masks – WIRED

Kindle book bargains

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

Tin Can Cook: 75 Simple Store-cupboard Recipes by Jack Monro – £0.99 on Kindle

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

Elon Musk: How the Billionaire CEO of SpaceX and Tesla is Shaping our Future by Ashlee Vance – £1.99 on Kindle

Off our beat

The cost of surviving the ICU – Slate

Hedging is not just about money – Simple Living in Somerset

Enough little things – Seth’s blog

And finally…

“This is not a race against the machines. If we race against them, we lose. This is a race with the machines. You’ll be paid in the future based on how well you work with robots. Ninety percent of your coworkers will be unseen machines.”
– Kevin Kelly, The Inevitable

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{ 134 comments… add one }
  • 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

    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”


  • 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
  • 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.


  • 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


    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


    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.

    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:

    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?”

  • 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.


    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:
    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

  • 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.

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