Weekend reading: Would you lend yourself money in an emergency?

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• 1 Brod May 15, 2020, 10:42 pm

  Pete the Planner – pure genius and something I’ve been guilty of before. The emergency savings are just that, but maybe not THIS emergency.

  @TI – blogging complete by 10.30? A couple of weeks ago it was 7.30. Anybody would think you’ve nothing else to do…

  Thanks as always for the links. I’ll have an explore now.
• 2 Ali May 15, 2020, 11:55 pm

  I wouldn’t trust myself not to default.
• 3 Gentleman's Family Finances May 16, 2020, 7:08 am

  Had to borrow recently £15k and was embarrassed by the rates offered – I ended up with a double digit interest rate!
  Loan paid off already within 2 weeks but I do wonder how my rate was not the 2.9% Apr (typical) that was advertised.
• 4 Kat May 16, 2020, 8:02 am

  Wow, I can’t believe you featured my post, thanks! I looked at my stats this morning and didn’t know what hit me 🙂 I’ve been following your posts for a really long time, there’s always so much value here.
  Pete’s article is great and I’m definitely reluctant to use my emergency fund. Seems anticlimactic after putting so much effort into building it up.
• 5 Vanguardfan May 16, 2020, 8:18 am

  I think borrowing is a habit. If you never do it, then it doesn’t occur to you to start.
• 6 The Investor May 16, 2020, 9:01 am

  @Kat — You’re welcome, hope a few of your new visitors stick around. Glad you find our site helpful — thanks!

  @Brod — Yes… I’m starting to wonder how life will be like when we fully leave lockdown! My usual life isn’t wildly different on any given hour, but there’s typical 4-8 more social meetings in it than presently, including most Friday nights something I’m late for due to Weekend Reading writing… 😉
• 7 Far_wide May 16, 2020, 10:03 am

  Re: Brexit negotiations, if we were all fatigued with it before….
  Remember last Summer/Autumn when there was the ongoing No-Deal saga, and many were stockpiling? (well, it did come in handy, at least, in the end!)

  Well, this new chapter appears to be taking a very similar course. Adversarial, arrogant, hubristic – on whatever side you choose to denigrate.

  But are the general population really going to be tolerant of having the threat of disrupted food chain supply again, a second time around and in the midst of ongoing challenges with COVID-19?

  GBP/USD hasn’t collapsed again yet, so perhaps the markets think the current situation is all just bluff and bluster? Or perhaps they just can’t really believe we’d do anything so idiotic during a genuine crisis as self-inflict another one? How naive these markets are!

  So, I don’t know. Does anyone feel that they could just possibly revert to being grown-ups? I just can’t see it though.
• 8 Bigpat May 16, 2020, 10:03 am

  Loved Charlie Brooker’s antiviral wipe this week on BBC. A great satirical review of coronavirus news for anyone in need of a laugh.

  “The stock market has also taken a battering. Some economists fear it may have set capitalism’s destruction of the planet back by up to ten years.”

  Chris Whitty as “Tintin prematurely aged after watching his dog drown”

  https://www.bbc.co.uk/programmes/m000j4bl
• 9 Old_eyes May 16, 2020, 10:30 am

  I liked the “Of Dollars and Data” post on liquid net worth. It goes back to a debate we had a while ago here on whether your home should be included in your assets or not, and explains my thinking better than I did at the time.

  Liquid net worth is what you manage on a reasonable time horizon, and what is available to use in the short term. I don’t know the value of my home, and can’t access it quickly. It is obviously an asset, and is for example included in my will, but is not a number on my spreadsheet because it is (probably) big and distorting, and does not help me make decisions about the rest of my assets and spending plans.

  So yeah, liquid net worth is a useful distinction for me.
• 10 Old_eyes May 16, 2020, 10:38 am

  @Far_wide. Yes, it is off the front pages, but the Brexit clock keeps ticking. If there was any real desire for a ‘good’ trade deal with the EU, you would think that people would recognise that an extension is essential while we (all of us) deal with coronavirus. But apparently macho posturing is the order of the day. When the tactics are so much at odds with the claimed desired outcome of the negotiations, it is hard to understand what they are playing at.

  Obviously the big brains are working at a level way too subtle for me.
• 11 Far_wide May 16, 2020, 10:49 am

  @old_eyes , yes, I’m not even petitioning for a common sense deal, just an end to the posturing. Yet, I have a horrible suspicion we’re in for a ‘Brexit bingo v2.0’ at some point.

  “With this virus, Germany needs us to buy their cars more than ever” etc

  When it resumes, I’m going to follow my strategy of reading the bare minimum to stay abreast, and unfollowing anyone on social media who talks about it frequently. That did my sanity no end of good last year, after reading countless “Can you believe X said that?” type things.
  The one possible salvation on that front is that the Conservatives have been thus far keen to keep it off the front pages (no election, no point I guess, plus of course Brexit is already ‘done’). But if they continue down this line, that’s not really going to be achievable.
• 12 Matthew May 16, 2020, 10:58 am

  Depends what you call an emergency, if you lose work and have to tide yourself over, then you have no choice – i was eyeing up my wedding savings when my work was at risk due to health in 2018 (saved by new medication), but I could survive without a car, boiler, etc – and if you lose work totally you should be entitled to free council tax and food bank, so really for bare bones needs its just about paying the mortgage if UC &food bank &council tax benefit wont do it

  I’m paying down my 0% cards now for credit rating going into a new mortgage soon, it’s not free if it costs your rating, although its worth having the liquidity
• 13 Nearlyrich May 16, 2020, 11:36 am

  An offset mortgage works for me. In effect in provides a flexible source of liquidity for all sorts of reasons including (ahem) leveraged investment.
• 14 Banker On FIRE May 16, 2020, 12:07 pm

  As always, a highly enjoyable read and a great selection of articles. I’ve been following your blog for a long time now so it’s extra special to be included on the list.

  On a separate note, I’ve received a few pingbacks on my blog from websites that seem to be scraping your content. Very disappointing – shoot me an email and I’ll send you the links. Think there may be a way to take them down.
• 15 The Accumulator May 16, 2020, 12:57 pm

  @ TI – thanks very much for posting this one: https://www.erinbromage.com/post/the-risks-know-them-avoid-them

  Extremely helpful to know. Confirms that I am going nowhere near the office for a while, means we can be less neurotic about the supermarket (maybe) and Mrs Accumulator can stop being worried about being overtaken by zippier cyclists.
• 16 ZXSpectrum48k May 16, 2020, 1:39 pm

  Liked seeing an article about ergodicity. Commentators have really bought into a whole bunch of guff about rational agents, efficient market hypothesis, risk-neutrality etc without ever really considering that many of these idea rest on dubious assumptions of orthodox economics. When these ideas are challenged, people rapidly argue it’s behavioural “irrationality” when actually it’s the theory assuming the system is ergodic when the reality is that it’s not. It’s manifests itself so consistently in the inherent probability distributions investors assign to various scenarios. Tail too high, centre too high, mid-wing too low etc. Long may it continue!
• 17 Old_eyes May 16, 2020, 2:36 pm

  @ZXSpectrum48K

  Yes, I enjoyed the ergodicity article. I had come across the topic in signal processing, but was not aware of its use in economics. It makes a lot of sense and explains why rational behaviour for an individual is not necessarily the same as for a large group.

  I have periodically tried to make sense of classical economics, but every time I end up metaphorically throwing the book against the wall and shouting “but people!”. It seems to me that in a desperate desire to be a proper science (you know with laws and equations and everything), some economists have decided that the problem is that reality does not accord to their models and should be changed.

  In real science, we are accustomed to our models being wrong and deploy them carefully. As G E P Box said, “All models are wrong, but some are useful”. We joke about saying “consider a spherical cow” because it is important to know when you have made a gross simplification and what the implications might be.
• 18 Merlotman May 16, 2020, 2:46 pm

  Like @nearlyrich I have an offset mortgage which correctly or incorrectly I treat as our emergency fund. It also raises the interesting question of what represents good debt, as I think discussed on this site last week
  Fully drawn it would represent LTV of around 30% based on my depressed estimate of primary residence value. It’s a tracker at 1.5% /base and expires in 2029. I drew down a third of it in March just in case the lender (HSBC) had liquidity problems.
  I have a 70/30 portfolio (the bond element is nearer 35% if based on the ringfenced equities I hope we can leave to the kids).
  I often wonder why I have bonds in my portfolio when the offset gives me 5+ years of emergency funds if all other income sources dried up. There is also the issue of the fact that the risk on the bonds is correlated with mortgage risk (interest rates).
  Would be very interested to find out what others thought particularly the (lucky?) others with an offset.
  Always great to read Monevator articles and the erudite comments by other readers – thanks.
• 19 Learner May 16, 2020, 3:15 pm

  I was fired over Zoom recently too. Tip: if you join an all-hands and Zoom is in presenter mode so you can’t see the other participants.. be afraid!

  It is hugely disappointing and frustrating. There was no consideration of other measures to avoid layoffs at this uniquely terrible time in history, no pay reduction or even furlough with health insurance, they just picked 1 in 5 to be sacrificed and the rest remain whole. /vent

  Compare to the previous round of layoffs a year ago. It was unpleasant but it was not long before those who left were happily talking about all the job offers they had received, with easily negotiated higher salaries and often a title advancement.

  Now, it’s a different world. The lucky ones will quickly find a job comparable to their last. The unlucky ones will go backward and take a long time to recover. The emergency fund is currently being drawn on, by necessity, for rent and groceries.
• 20 BBlimp May 16, 2020, 3:57 pm

  You missed the Indy was panicking food prices would go down and effect farmers due to brexit ( quite the difference to what we were promised by remain during the campaign and your studies about the benefits of trading with those just around you )

  Also missed Nissan is considering shutting their Barcelona plant and moving production to Sunderland… doesn’t fit the narrative that the single market is valuable i suppose

  Be lovely in three or four years time when the Eurozone is trying to come out of this latest recession and U.K., japan , US and the rest are growing again… lot of hard brexiteers going to be able to say ‘If membership of the single market is so valuable why is it so many members of the single market are doing so badly’

  Oh hang on, we’ve been saying that since summer 2016
• 21 FI Warrior May 16, 2020, 6:10 pm

  This recent govt. viral update – https://www.youtube.com/watch?v=TzriCFzM5Ys
  doesn’t seem terrifying and in any way a justification for lockdown(s). As for the oft-cited distraction point of ‘profit over lives’, well, economic suicide leads to all manner of social ills that end in the destruction of lives anyway.
• 22 Jonathan M May 16, 2020, 7:04 pm

  It is broadly this principle that makes credit unions so successful. You save (which can include payroll deduction to force a regular savings habit) and then when you need money, you borrow against it. It is true that you will pay interest on it, but usually less than if you didn’t have savings, and it allows you to compartmentalise your savings and expenditure.

  The successful credit unions also pay a dividend on savings balances. My own pays 0.80%, which is close to being a best-buy rate for instant access.
• 23 Matthew May 16, 2020, 7:37 pm

  @johnathan m – I don’t really get what is good about credit unions – if you’re paying interest for the privelege of borrowing your own money, what is superior about that? You could borrow unsecured at 40% or so which’d be cheaper than a payday lender, but not cheaper than a standard bank – if someone went to payday lenders because of poor credit, should they be lent money at all? And if they went to payday lenders because they saw a flashy ad on TV, how can a credit union beat that?

  0.8% on savings isnt bad if it’s a permanent rate – again not market leading but not the pits if someone wasn’t shopping around
• 24 Grand85 May 16, 2020, 7:48 pm

  Thanks TI – bueno selection!
• 25 Grand May 16, 2020, 7:56 pm

  I’m glad to see as well that the media is starting to report more on the struggles of coronavirus.

  “There is growing evidence that the virus causes a far greater array of symptoms than was previously understood. And that its effects can be agonisingly prolonged: in Garner’s case for more than seven weeks.”

  I too have been in this group, relapsing 4 times, whilst just being confined to the house (bought air filters, plants and dose up on vitamins, plus scrub the house daily). This experience isn’t so dissimilar to a colleague of mine who operates abroad and was the first at our firm to fall sick. I get the economy needs to open, but more should be done to present the known facts about the disease to the public and more should be done to make busy places safe, cleaning streets, handing out ppe at stations…. etc…. there’s a lot more deaths to come… stay safe!
• 26 Nearlyrich May 16, 2020, 8:32 pm

  @merlotman 65:35 me too! I struggle to categorise my offset but I do know it’s a very useful facility to have available. It’s certainly a leverage if only because it avoids having to hold cash in one’s portfolio and at those easily serviceable tracker rates (1% over base in my case) it would be rude not to. In my case it’s a debt secured against my house and invested across my 65:35. If I hold it until I eventually sell up/downsize then you could say it’s an equity release and an argument for considering my main residence as part of my portfolio …but I don’t. Nor do I by the way consider the annuity I receive as (bond) component of my portfolio but I should because I had the option to transfer instead. In your case you could consider your offset as your ‘dry powder’ for rebalancing as well as your emergency fund. I’ll not complicate matters by mentioning gold, but certainly a bit of both worlds with the offset used alongside your bonds would enhance the diversification in your portfolio so perhaps the answer is a ‘Bernstein-style’ 50:50?
• 27 Nearlyrich May 16, 2020, 8:50 pm

  @Blimp More than a narrative! The Single Market is very valuable. Nissan are being forced into moves they hate namely to try and sell more tariff-free Sunderland cars in the UK and more tariff-free Renaults in the single market. All being planned and forced against a back-drop of a trade deal uncertainty i.e. which end of year does Boris mean. Let’s hope for the sake of Sunderland jobs they increase their UK market share sufficiently.
• 28 MrOptimistic May 16, 2020, 9:29 pm

  Thanks for the Erin Bromate link. Really good.
  Not sure I am much atuned to ergodicity. Are processes stationary is more of a concern when studies look at back testing then project a probability for future outcomes.
• 29 Tony Edgecombe May 17, 2020, 10:08 am

  “Be lovely in three or four years time when the Eurozone is trying to come out of this latest recession and U.K., japan , US and the rest are growing again…”

  @BBlimp you do realise the UK isn’t and has never been in the Eurozone.
• 30 Bob May 17, 2020, 10:47 am

  @Vanguardfan. It’s worse than that for me. Not on lying do I hesitate to borrow from the rain day fund. I hesitate to use the toilet roll and chilli con carne from the stockpile.
• 31 Matthew May 17, 2020, 11:17 am

  @bob – re food, i think this crisis proves that we’re pretty much not going to have zero food in the supermarket in any concievable crisis, and that rationing helps, at most just keep the food you’ll need for quarantine

  I came close to running out of bog roll and was unable to buy it for 3 weeks, so I take that to be approx the necessary stockpile, but in the Olden Days(tm) they used newspaper and managed, or could use a flannel – if you didn’t have toilet paper it might be gross but it’s not death

  It may be worth keeping a petrol can too for different crises, as long as it doesnt spoil(?)

  Re rainy day fund, consider what you would call a “rainy day”, if it really is rarely needed you might consider filling its place with unused cards, or consider the opportunity cost of cash vs what loss you might be willing to take on it if you hypothetically invested it – credit with it’s set cost can in a way put a cap on what hypothetical maximum losses you might experience if in the worst case you need the money during a crash
• 32 jim May 17, 2020, 11:23 am

  I enjoyed this youtube rant of an interview with David Starkey. Suppose it depends which side of the fence you sit on. https://www.youtube.com/watch?v=8S8Js-tEmlg
• 33 Algernond May 17, 2020, 11:32 am

  Jim – The side of sanity, which is the same side he is on 🙂
• 34 Ian May 17, 2020, 11:51 am

  Re: @Merlotman (and @nearlyrich)
  Similar query here from the opposite starting point, I have no bonds currently in my portfolio and considering swapping some of my offset mortgage savings for bonds. Between my offset mortgage savings and smaller amounts in various other accessible cash accounts I have the amount needed for emergencies plus non-equity portion of my portfolio (72/28%).
  To date I’ve never held bonds, mainly through not really understanding them, and when I’ve tried to educate myself I came to the conclusion of why not ust hold cash (despite the various Monevator articles on the subject). Looking again today I still can’t see the point even though everyone says you should hold bonds (bonds are not cash). Not sure if I’m reading the data right but UK (nominal?) bond yields seem to be no higher than 0.64% (http://www.worldgovernmentbonds.com/country/united-kingdom/) and even 6 months ago were no higher than 1.3%, in comparison with my offset mortgage which is 2.05%. What am I missing? Can anybody educate me?
  (offset mortgage is fixed for another 3 years so perhaps the recent ‘good debt’ conversation is applicable for what would happen when that ends).
• 35 PC May 17, 2020, 12:16 pm

  I’m fine with borrowing and lending from myself, but perhaps I’m unusual in having been a money market trader in a previous life. I’m only doing it in a small way – lending my personal money into the interest only current account mortgage for a nice tax free return. Tax gets in the way of me doing this on any scale – I’ve got money built up in my limited company that will stay there until I close it down. I’ve got money built up in my SIPP which I could use to pay off my interest only mortgage but I choose not to.
• 36 Tony May 17, 2020, 1:22 pm

  @Far_wide (7), actually GBP has deteriorated recently against USD and EUR, in direct proportion to no deal uncertainty and that risk escalating.
  @Learner (19) trust you’re aware of what employment rights you may have, aside from notice. If 20+ redundancies, collective consultation was required. If 2 years’ service (or 1 dependent on start date), unfair dismissal. What you describe may not meet fair redundancy requirements including selection, consultation and consideration of alternatives. An additional factor is an employer needs to demonstrate why it chose redundancy without furloughing. They’d arguably need to show the job cuts would only be delayed not avoided by furlough. A factual question they’d have needed to assess and communicate their reasoning to staff in the consultation. Good luck.
• 37 Tony May 17, 2020, 1:34 pm

  @Ian (34) your post about bonds reflects exactly one I posted here several months ago. I still don’t understand them sufficiently, unlike equities and funds, active versus passive etc, although I have a basic grasp from reading here and elsewhere. But, I decided recently, in spite of my uncomfortable lack of comprehension, to follow the orthodox advice of buying a UK gilts (Vanguard) tracker and I’ll continue to add that water to my whisky. Plus I would expect ongoing equity market volatility. I also noted there are differing views on whether to get inflation linked ones or not. So I was comfortable to toss a coin on that, as that was as likely to be right as taking a more informed view (imo). But I fully expect UK gilt prices will probably now fall (!)
• 38 The Investor May 17, 2020, 2:33 pm

  @Jim @Algernond — I’m not secretly David Starkey, but based on that interview I’d be happy to be mistaken for him. He’s quite right throughout.
• 39 Sparschwein May 17, 2020, 2:36 pm

  If I’m reading some of the comments right, people take out mortgages to buy stocks?
  This makes them fragile to an economic downturn such as now, that simultaneously affects house prices, job security, ability to re-mortgage, and stock markets. Limited upside, potential catastrophic downside. Anyone considering this may want to read Nassim Taleb’s books and then think again.

  Re bonds, they hardly yield as much as mortgage interest (and if they do, then it is a reflection of risk). Why would one *pay* to take rate risk and default risk?

  I do see the sense in taking out a generous cash buffer. Liquidity is underrated imo.
• 40 TahiPanas2 May 17, 2020, 2:36 pm

  In addition to each individual’s resources and commitments, it is worth occasionally reminding ourselves of one factor determining perceptions of financial safety, namely personality and psychology. It can be a spectrum from those 100% in shares to the others solely in cash, safe government bonds or gold to hoarders of bags of rice and shotgun shells. It is, of course, risk tolerance and we are all somewhere on that axis. Our position, like our personalities, doesn’t change all that much with the state of the markets. There is really no right or wrong in any approach and what seems prudent to some may appear reckless to others. We should remind ourselves of this when evaluating “ideal” recommendations which seem to abound at the moment.
  Just saying.
  TP2.
• 41 Matthew May 17, 2020, 3:04 pm

  Re risk tollerance I think theres a difference between how much risk someone can stomach and how much risk they can survive – you may be horrified seeing a huge pot girate wildly but if it’s not needed anytime soon it may be ok, the oft quoted opposite would be a cashflow problem for an otherwise strong stomach

  I think it helps to put things into pots mentally – I have different risk levels for different things

  And it helps to be flexible, to have a plan b, to be willing to work longer if necessary or live on less if necessary. We do only get 1 life and it might feel then that we can’t afford to stake that on the offchance of not getting an average result, so risk above & beyond capital preservation is a sign of desperation/not being rich enough already to not need that risk

  On the other hand, if you’re rich you might simply enjoy making money for sport/ego and not be in the business of capital preservation
• 42 Nearlyrich May 17, 2020, 4:07 pm

  @Sparschwein (@Tony, @Ian, @Merlotman)
  I understand your concerns re financing stocks with debt and it’s good stuff from Nassim Taleb. However there is a case for gearing/leverage in the right circumstances and that for me includes a cast iron ability to service (or repay) the debt whatever events may bring plus attractive borrowing costs. I’d also highlight the interesting work by Demonetized on the leveraged Permanent Portfolio.

  I am certainly not advocating the use of an offset to finance short-term bonds; just the opposite in fact because it’s a better return to leave your cash offset. I’m suggesting an offset mortgage, which is a bit like a large overdraft, can be used as an emergency, but serviceable cash facility so avoiding the need to hold a cash buffer,or short term bonds which are often equated to cash anyway. Long bonds are a different matter and deserve their place in a portfolio for their ability to zig when stocks zag as The Accumulator demonstrated in his recent article. They definitely do not equal cash. The UK Gilts Vanguard fund VGOV is pretty long in my book by the way with a duration of about 12 years.
• 43 Old_eyes May 17, 2020, 4:31 pm

  Slightly off-topic for this week.

  I noted this from Monevator on 06/01/2018:

  “And finally…
  “A mighty bubble of wealth is blown before our eyes, as empty, as transient, as contradictory to the laws of solid material, as confuted by every circumstance of actual condition, as any other bubble which man or child ever blew before.”
  – Edward Chancellor, Devil Take the Hindmost”

  Finally got around to buying it, and eventually finished it yesterday.

  Dense, but an excellent read as he ranges from markets in slaves in the Roman Empire through tulipmania and the South-Sea Bubble to railway manias, the Great Depression and up to the Long Term Capital Management debacle. It finishes in 1998 so misses the dot.com bust, Enron and the global financial crisis, but is nevertheless worth following.

  What you learn is that people don’t change much, herd behaviour is always ready to break out, and ‘cleverness’ is frequently fatal. It is always true that ‘this time it is different’! The capacity for self-delusion is ever-present and a warning to those of us who think we are being rational. The same mistakes crop up over and over again, made by the same people for the same reasons. The wrapper and presentation may change, the complexity more compelling, but he draws many parallels between the complex derivatives of today and some of the ‘interesting’ products on offer centuries ago.

  Definitely recommended.
• 44 BBlimp May 17, 2020, 4:44 pm

  @Tony Edgecome … I guess that’s why my comment was discussing the value of single market membership and not eurozone membership.

  That must have passed you by…a bit like the Nissan story and declining food price stories. It’s a good time to believe in hard brexit, but not half as good as it will be in 2025, don’t worry, I’ll be back to compare our performance with the eurozone at that time 😉
• 45 Sparschwein May 17, 2020, 5:48 pm

  @Nearlyrich – You seem to know very well what you’re doing. No doubt this makes sense for you and has some advantages, e.g. diversification and reduced cash buffer. The key phrase being

  > a cast iron ability to service (or repay) the debt whatever events may bring

  People tend to overestimate their job security. Many buy into the narrative that “stocks always go up” while few understand risk. For the average reader, stock investment on margin may be financial Russian roulette. (Back to the ergodicity article…)
• 46 Seeking Fire May 17, 2020, 5:49 pm

  The David Starkey link is great, hard to disagree with much – thanks for sharing.

  I see the pound is under pressure again now people are focussing on the omni-shambles that is brexit (I’m no hard core remainer fwiw) coupled with us possibly being more affected than some other countries due to the service nature of the economy and our current account structural deficit. Somewhat not on topic but related to some of the comments – I keep a sterling mortgage and also keep the bulk of our liquidity in gold and $ TIPS beyond some sterling cash given I have a perma bear view on sterling outlook. Somewhat validated when David Davies gave an interview a while ago saying how sterling depreciation was the way forward to offset competitive friction from leaving the single market. Yup, I suppose if I offer to cut my salary by 20% my employer will see me as more valuable too. Just so happens I’ll be 20% poorer though but let’s keep that on the back burner shall we.

  We’ll muddle through this in spite of the current crop of politicians who are as bad as ever seen on all parts of house but I suspect in a few years time the UK’s positioning relative globally will have declined further…hence the diversification away from £. But I don’t know of course.

  Sparschewin comment is bang on the money. It’s worthwhile thinking about your finances from a what if scenario both positive and negative, associated likelihoods – recognising we generally think tail events are less likely to happen than they are and try to position accordingly to cover the bases if you can – what if i lose my job, what if things go well in the global economy, what if the UK economy goes down the gurgler, what if tech companies don’t continue to outperform, what if tech companies do continue to outperform, what if value never comes back or does, what if bonds fall over, what if rates go really negative, what if my partner dies, what if my partner lives to >100 etc etc etc.
• 47 ermine May 17, 2020, 9:27 pm

  @seeking FIRE 46

  The answer to all those what if’s is ‘work till you drop’. Assuming you can. There is no silver bullet that can shoot every problem in the world. Preserving optionality and resilience always come at a cost. In the FIRE universe, that cost usually translates into ‘working longer’
• 48 Merlotman May 17, 2020, 10:33 pm

  @nearlyrich @Tony @Sparschwein @Ian
  So to the question of why I hold bonds when I have an adequate emergency fund available via an offset for my part it is because 1. I am looking for bonds as a hedge for when equities lurch down again (start of Q2 reporting season my guess) and I might sell some bonds at this stage 2. I didn’t want to move cash out of ISAs /SIPPS because I want to keep the tax shelter, didn’t want to increase equity exposure but wanted at least some sort of return 3. I want to have a mortgage albeit manageable for IHT planning.
  Nevertheless I am wary of bonds in the longer term particularly given where interest rates are currently.
• 49 Learner May 18, 2020, 5:02 am

  @Tony (#36) Thanks – excellent info and useful summary for the UK (and EU?), hope others are aware. Unfortunately, like the Atlantic author, I’m in the US now where no such protections exist. Glorious freedom eh.
• 50 The Investor May 18, 2020, 7:09 am

  @all — Thanks for the solid comments this weekend! Been reading (/checking!) but having a break from the discussion this weekend.

  @Grand — Sorry to hear about your troubles, sounds a right pain. Hope you get permanently better soon.

  I’ve started to wonder this weekend if I’m getting recurring Covid-19 symptoms. As I’ve discussed before, I believe I probably had the virus in late Feb / early March. My symptoms were a sore throat that persisted for a couple of weeks (very rare for me), several days of headaches equally rare, thankfully), and a couple of days of tiredness where I even had to sit on a wall for five minutes to regain my strength in the middle of a 40-minute walk (for context as recently as last summer I did multiple 2-4 hour hikes over rough ground without stopping once).

  The sore throat / headaches were ‘funny’, they didn’t feel like they normally do for me, to the extent I even mentioned it to people. At the time I wasn’t thinking Covid-19 though. It was only towards mid-late March when I got a sense of how rampant the infection had already been that I realized that was probably it.

  I’ve had the sore throat 2-3 times since then. It’s been back for 3-4 days now. Also had a headache out of nowhere last weekend.

  I’m not convinced it’s still Covid-19 (and it’s not a big deal, presuming it eventually goes away and isn’t a sign of worse underlying) but does make me wonder!
• 51 FI Warrior May 18, 2020, 7:15 am

  This is a deeply thoughtful article on the future of our economy from a casualty actuary, working in insurance forecasting: https://ourfiniteworld.com/2020/05/13/understanding-our-pandemic-economy-predicament/

  The whole thing is fascinating, but 3 broad points jump out in conclusion. Despite all the spin in the world, the global economy runs on surplus energy and growth is only possible with a continuous supply. We had a comparable pandemic within living memory, the global response was radically different and with the benefit of hindsight, we therefore already know what the first response results in.

  Finally, the economy and our lifestyles are in irreversible transition towards simplicity, (probably back to something our grandparents would recognise) mindless consumption and systems designed to waste for maximum profit being no longer a sustainable option.
• 52 Snowman May 18, 2020, 8:49 am

  That article FI Warrior, links to the interesting Thomas Meunier pre-print paper. There is a comment in that paper at the end.

  “As a concluding remark, it should be pointed out that, since the full lockdown strategies are shown to have no impact on the epidemic’s slowdown, one should consider their potentially high inherent death toll as a net loss of human lives”

  Certainly looking at the UK data it looks like R0 (or more accurately Re) was already below 1 before 23rd March. Thomas Meunier’s analysis, through just looking at the data, is essentially that not only had R fallen below 1 before the full lockdown, but that full lockdown had no impact on further reducing R in a number of countries.

  I read a lot of people saying the lockdown worked in the UK, because ‘it obviously worked’ or because ‘the number of deaths has reduced’, or ‘the NHS wasn’t overrun’, but these statements are all assumptions, and not data driven arguments because we haven’t compared what happened with what would have happened if there had been no lockdown.

  At the simplest level the UK lockdown was on 23rd March and the death peak was 16 days later on 8th April*. The period from infection to death is on average perhaps 21 days, arguably slightly more, I’m struggling to find good UK data here. And so R0 was below 1 before 23rd March it appears. And if lockdown had added anything then you would expect deaths to fall away much more quickly some time after 13th April (23rd March + 21 days). Note the fall away might be delayed after 13th April, because of secondary infections within households, but it isn’t obviously visible at any point.

  This isn’t a point about whether the lockdown decision was a ‘mistake’, it is about whether the lockdown with the benefit of hindsight added anything. I think the answer to that informs policy going forward. I’m not saying absolutely lockdown didn’t add anything, but I am asking for a data driven argument that it did add something.

  So I’m still wondering if anyone has any UK data to show that the lockdown did add anything to the behavioural changes and distancing measures etc that had already taken place before 23rd March?

  * Hospital covid-19 deaths in England clearly peaked on 8th April, care home covid-19 deaths taken on their own peaked a bit later, but overall covid-19 deaths peaked on 8th April.

  UK covid-19 hospital deaths for England see “COVID 19 total announced deaths 17 May 2020” at

  https://www.england.nhs.uk/statistics/statistical-work-areas/covid-19-daily-deaths/
• 53 Seeking Fire May 18, 2020, 9:45 am

  Ermine. You are right of course. One almost fail safe way to immunise all those risks is to work until grim reaper minus one day, another way is to have a very conservative withdrawal rate (think <2% in your 40's, 6% in your 80's etc). I was thinking less about removing risks and more about managing risks down to a sensible level without impinging to hard on your current or future self. So for most financial risks (a) a globally diversified equity index (b) a globally diversified bond index (c) cash in your current currency (d) gold (e) proper consideration as to where you place those assets in custody can provide incomplete but good enough solutions to these risks. With the objective not to maximise wealth but minimise risk of running out of money, which is related to wealth of course – the downside of being on the street outweighs the upside of a more expensive glass of wine!

  Sounds obvious but I continue to be surprised by the number of people who have large incomes / expenditures and no safety net, people saving for their retirement all in bonds, people holding all their savings in sterling, people not buying a house to immunise rental risk, people not managing their lifestyle to their expenditure, people having all equities in income funds, people thinking the country they live in is a risk free place to be etc etc etc.
• 54 Jonathan May 18, 2020, 9:47 am

  @Snowman, I have noticed that too.

  The data the government love showing on transport use (largely a proxy rather than direct indication of infection) is quite clear that people were changing their behaviour hugely the week before lockdown. Given that the epidemic was largely driven by London infections at that point, I wonder if reduced underground travel had a disproportionate influence on national transmission numbers and subsequent changes were much less.

  Elsewhere in the country the peak was slightly later than 8th April. And in a graph combining NHS data (England) with deaths outside hospitals, although the highest single number fell on 8th April if a smooth curve was constructed it would peak around 5-6 days later. (I looked at https://www.cebm.net/covid-19/covid-19-death-data-in-england-update-15th-may/ for this).

  Going back to your point, it seems clear that not all of the restrictions on normal life have equal effect. It seems likely that people being close packed for significant periods on public transport was a big driver of infection, and probably other crowded indoor activities were similar (pubs, nightclubs). But unpicking the differences seems largely to come down to informed guesswork, though the public health professionals may have some other sources of information. It is almost certainly true that 75% of restrictions could be relaxed without a huge infection surge, but with so many of the public frankly being scared (see parents and teachers) the government needs to back up any decision with convincing data.

  And on top of that is the suspicion, voiced here by @TI, that uncounted mild infections may mean that enough of the country is immune (in London at least) for transmission rates to be much more easily controllable than they were in March.
• 55 ZXSpectrum48k May 18, 2020, 10:50 am

  The issue with Starkey is that he is assigning the bulk of the economic damage to the lockdown. I see no quantitiative evidence of that. Global economic activity was falling since China admitted they had an issue in mid-Jan. It was decelerating rapidly well prior the UK implementing it’s lockdown on Mar 23. Behaviour had already changed, most other countries had already implemented lockdowns. Moreover, places that didn’t implement lockdowns (like Sweden) are showing just as much economic damage as those that did.

  I’m not implying that the lockdown isn’t doing additional excess damage: perhaps an extra 20%. Nonetheless, the narrative being peddled by the libertarian right, that the recession, unemployment etc is being caused by the lockdown, is a nonsense. The recession is simply is due to the pandemic. It was unavoidable. We’ve had over a decade since the last recession. We were overdue and it just needed a trigger. The right just doesn’t like the fact that it’s on their watch and they are trying to find something/someone to blame.
• 56 Grumpy Old Paul May 18, 2020, 11:14 am

  @Snowman, @Jonathan,
  Good points made by both of you. However, the ONS stats for the number of excess deaths for the week ending 1st May is 8000. Looking at the daily death trend of Covid-related deaths for the UK it does look as if it is on a downward path and perhaps running at 2/3 the rate of late April. So let’s assume that the current weekly excess death rate for England and Wales is 5000. That equates to 250,000 per year. Does anyone believe that lockdown is causing an increase in net deaths of 5000 per week?
  In support of what you both are saying, I adduce this report from the Guardian about the measures introduced on 16th March -https://www.theguardian.com/world/2020/mar/16/what-basis-government-coronavirus-measures . My point is to remind folk that the March 16th government exhortations were extensive and powerful and that date is 23 days prior to 8th April.
  Finally, a comment on this year’s deficit which the OBR is forecasting will exceed 15% of GBP. For a historical comparison, it was around 7% in 1975/6, slightly higher in 1993/4 and 11% in 2009/10. Time taken to reduce to zero was 11, 5 and 8 years respectively.
• 57 Snowman May 18, 2020, 11:27 am

  @Jonathan

  That’s a great data link, thanks. And so refreshing to see a proper discussion based on the data.

  Looks like all those graphs are deaths by date of death, rather than the date the death is recorded, which makes what’s going on so much easier to see.

  Are they still using those deaths by recording date and making daft comments about that silly 7 day average line at the press briefings? How can you possibly work out when deaths peaked by seeing their graphs.

  If you look at how reporting delays have changed over time you further realise how silly their briefing graph and the daily hospital death figure is; the (England component of) hospital deaths reported on 7th May occurred on average 11 days previously, whereas the deaths reported yesterday took place on average 2 days previously.

  The red and blue graph with the NHS and additional ONS covid-19 deaths should definitely be shown at the briefings. OK it’s England data, but you can have some UK graphs also.

  Are they genuinely interested in giving clear information to us at the briefings, I don’t know. But expecting us to believe based on ‘faith’ that they know what they are talking about, and failing to publish the data they are using to make decisions, doesn’t work with me.

  I’m certainly hopeful that immunity in London is sufficient to really materially have an affect on controlling things there whatever measures are relaxed.

  And I think a seasonal affect, which I hypothesise may help us in the coming months, isn’t talked about enough as something affecting R. Look at the data from other countries, it’s unclear and multi-factorial but temperature, humidity, changes to outdoor levels and vitamin D levels in some combination appears to be relevant.

  In South Cumbria we appear to have one of the highest rates in the country of people who have seen the virus outside London. I think spread may have started very early here, but there aren’t the mass transit issues so that may be why London has overtaken us some time ago (?)
• 58 Boltt May 18, 2020, 1:04 pm

  Irrelevant trivia – David Starkey is from South Cumbria and went to Kendal Grammar school.
• 59 Mousecatcher007 May 18, 2020, 2:33 pm

  @ ZXSpectrum48K

  ‘Nonetheless, the narrative being peddled by the libertarian right, that the recession, unemployment etc is being caused by the lockdown, is a nonsense. The recession is simply is due to the pandemic. It was unavoidable.’

  I don’t follow. In a year with a bad ‘flu season we can expect maybe 20,000 deaths in excess of the annual average of 600,000. This doesn’t cause us or anyone else to suffer a savage recession, so why would 35,000 excess covid deaths have that effect? The global slowdown that predated our lockdown was surely caused by other countries imposing lockdowns; Sweden’s economy is suffering surely because all their trading partners have chosen to smash their economies into a brick wall. If (and it is a big if) going about our business as normal would ultimately make no real difference to the overall number of deaths – and everyone knew this and so hadn’t changed their economic behaviour – why would anyone, anywhere be in recession? Or am I misunderstanding your point?
• 60 ZXSpectrum48k May 18, 2020, 4:39 pm

  @Mousecatcher. High frequency European/US/UK data, all prior to their lockdowns, shows that their economies were already contracting from a massive collapse in aggregate demand. That was added to an already baked in supply shock out of Asia. Your concept that people were going about business as normal is simply not true. Businesses and households didn’t wait for the government to impose lockdowns. Instead they were radically altering their behaviour based on risk version, fear, panic, uncertainty etc.

  The lockdown is not to blame for the recession. No one is to blame. A pandemic is a major exogenous shock. In a shock you get all the same symptoms, almost irrespective of the cause. Major risk aversion, velocity of money to a standstill, capex stops, credit is not rolled over, supply chains breakdown, aggregate consumption collapses. It leads to recession and lost jobs. End of.

  So I have no idea why everyone is acting surprised about the economic damage and trying to reassign blame to the lockdown. The chain of damage was baked in from, at the latest, mid Feb. This has to be the easiest trade to profit from since 2Q13, 1Q09 or early 08. The market offered you 10:1 or 20:1. All time low implied vol, the market totally over it’s skis, still blindly BTFD on every risky asset, while staring at an abyss. And they say the market’s efficient. The only thing that has saved most risk assets is unprecedented co-ordinated monetary and fiscal action.
• 61 Jonathan May 18, 2020, 4:40 pm

  @Snowman, I tend to follow that website for the data simply because it is based on date of death. It does mean the last week is likely to be revised upward quite a bit; downsides are it is only England and the “other location” data isn’t released daily, so although the Oxford group update the NHS England graph daily the all location graph tends to lag.

  I have become less optimistic about the rate of infections naturally reducing in summer, outbreaks so far have little relationship to location and an attempt to look for a correlation with latitude found only a fairly weak effect (https://www.cebm.net/covid-19/effect-of-latitude-on-covid-19/). There are enthusiasts for a vitamin D theory but the USA (where there is supplementation of milk) doesn’t seem to have benefitted. It could be that the main benefit of warmer weather is simply people spending more of their time outside where airborn virus dissipates much better.
• 62 Sparschwein May 18, 2020, 7:18 pm

  Re economic damage being blamed on the lockdown. Covid-19 reporting is so politically charged that we’re better off reading the original studies. Here’s one from Uni Copenhagen comparing consumer spending in Denmark and Sweden.

  “Denmark and Sweden were similarly exposed to the pandemic but only
  Denmark imposed significant restrictions on social and economic activities. We estimate
  that aggregate spending dropped by around 25 percent in Sweden and, as a result of
  the shutdown, by 4 additional percentage points in Denmark. This implies that most of
  the economic contraction is caused by the virus itself and occurs regardless of whether
  governments mandate social distancing or not.”
  The not-yet peer-reviewed manuscript is here
  https://www.nielsjohannesen.net/

  Sweden has a much higher Covid-19 death rate than their neighbours with more stringent lockdown policies. Sweden (much like the UK) got the worst of both worlds: many avoidable deaths AND similar damage to the economy as countries with better policies.
• 63 Ruby May 18, 2020, 8:07 pm

  @ Sparschwein – but maybe Sweden will emerge from the ordeal faster having pursued lock down lite? Just postulating – the hospitality sector is interesting – in Sweden everything remained open as we know but people generally went to bars and restaurants a lot less and just behaved with a bit of common sense. Just say, for the sake of argument, that restaurant covers dropped from 80% to 30%. Getting them back to 80% sounds like it’s just a question of confidence – the bars have been open, presumably keeping their head above water financially and will likely recover. Contrast that with the strategy in this country – bars went from say 80% to zero, the population were not regarded as capable of behaving with any common sense and we were, and continue to be, bombarded with messages to the effect that COVID -19 is not far off the black death. When the lock down is eventually relaxed and the bars reopen getting occupancy even back to 30% could take a good while – the messaging will have to be completely different and 80% occupancy sounds a very long way away. One suspects an awful lot won’t even bother reopening, there will be casualties all along the way, and permanent economic destruction will be higher here than in Sweden. But what do I know, I just want to go for a pint.

  Separately – with the comments in the press today about the possibility of negative interest rates, a chance of a Noddy’s guide to what it means for a passive investors fixed interest allocation? @ ZK Spectrum – hint hint!
• 64 Snowman May 18, 2020, 8:12 pm

  Latest UnHerd video: Professor Karol Sikora: fear is more deadly than the virus

  https://www.youtube.com/watch?v=uk2YZfnsOPg&feature=emb_logo

  (sorry put this it on the wrong post originally, but it’s a must watch)
• 65 The Investor May 18, 2020, 8:53 pm

  Very interesting couple of days of news in treating Covid-19.

  Firstly, several medical types I know are getting excited about a stronger connection with blood clots that was previously understood in people who ultimately die of the infection. As I understand it, the excitement isn’t so much that this is news (there’s been talk of blood clots for weeks) but that it’s very easy to treat, as it’s a protocol known in all hospitals etc. (For a start there are drugs, obviously, but also standard protocols used to stop bed-ridden patients getting clots etc).

  Secondly, a US company, Moderna, has had a pretty successful first trial of a vaccine in humans, which the markets seemingly went gaga over today (although there’s a lot going on there, too, including Fed comments and an oil price recovery, and the US seemingly coming out of lockdown).

  Here’s a link:

  “The people who were given Moderna Inc.’s coronavirus vaccine candidate in a Phase 1 clinical trial developed neutralizing antibodies, a promising finding that has propelled the vaccine into the next phase of clinical testing.”

  https://www.marketwatch.com/story/modernas-stock-soars-on-compelling-early-data-for-its-coronavirus-vaccine-candidate-2020-05-18

  Some interesting comments on the challenge of fighting the right amount of circulating infection in that article, too.
• 66 The Investor May 18, 2020, 9:05 pm

  Regarding Sweden, recessions, and full lockdown versus what we had just before full lockdown, I agree with everyone. It’s clear that people were isolating before they were forced to. And the global economy was indeed already slowing — most have forgotten it now but the disruption from China’s situation alone was expected to cause problems. On the other hand there were growth kickers coming, potentially, too, such as the unwinding of some of the China / US trade tensions and tariffs etc.

  We also have to factor in for instance a short ‘effective’ harder lockdown (in quotes depending on how much you think full lockdown achieves) versus perhaps a more protracted softer lockdown. There’s not much curve flattening in evidence in Sweden, it seems, so far. Maybe they’ll be in limbo indefinitely?

  Set against that you have the comments from Sweden, our own Whitty, and many others, that we can only really tell what worked when we add everything up at the end. Sweden’s scientists believe most countries will end up with a similar number of deaths, to oversimplify, from repeated waves. (Of course faster-than-anticipated treatments could hit that thesis).

  Regarding the ‘imported recession’ syndrome, there’s clearly some sort of game theory / prisoner’s dilemma thing going on here. If all countries had pursued a softer lockdown, that’d be a different response to all countries doing a hard lockdown. Also we might say for instance “country X only did 3% worse with a full lockdown versus country Y” but remember 3% worse is a normal pretty steep recession.

  As for this, that, and the other being a blindingly obvious trade, well the usual retort is if you’re so clever go make millions in the City. The snag in this instance is the person making it has made millions in the City. 😉

  But in general I remain pretty skeptical that everything has played out in a completely foreseeable fashion. The volatility – down and up – tells you it hasn’t. It tells you, among much else, that people were repeatedly on the wrong side of the trade, and had to get out/reposition.
• 67 Mousecatcher007 May 18, 2020, 9:05 pm

  I see your point. But isn’t the contraction that you say was already evident in Feb a symptom of the lockdown mentality, ie a response to being told night and day that the Black Death was on the way? If the message from day one had been, ‘if you’re healthy and under 60 you don’t really have much to worry about’ would there have been this early economic contraction before governments the world over decided to ban billions of people from going to work?
• 68 Jonathan May 18, 2020, 9:17 pm

  @TI, Moderna’s early data is extremely interesting given the complete novelty of their vaccine. Though by their nature companies tend to err (heavily) towards hype. But to be brutal, no candidate vaccine has actually been shown to protect against infection yet.

  (Not saying they won’t, I personally am optimistic, but it isn’t a vaccine unless it works).

  @Sparschwein, good point, the key thing will be how ready countries are to overcome the current economic downturn. While at one level it looks OK for Sweden, my guess is that like most countries they are so interconnected that they need others to bounce back equally quickly to benefit fully.

  And @Snowman, as it happens Sikora was once a (rather senior) colleague of mine. Very clever guy, but inclined to do things that attract accolation.
• 69 Snowman May 19, 2020, 7:41 am

  Thought this analysis was very interesting. Exploiting the observation that proportionately more males are dying of covid-19 than females, is an obvious first attempt at trying to tease out whether the ONS excess deaths not recorded as covid-19 are really undiagnosed covid-19 deaths.

  https://wintoncentre.maths.cam.ac.uk/covid-analysis-excess-deaths-updated-15th-may/

  ‘The lack of a strong sex-effect suggests that the non-COVID excess deaths are not primarily due to under-diagnosis’
• 70 The Investor May 19, 2020, 8:55 am

  @Snowman — That is interesting, yes. This annoying virus/crisis has the silver lining of reminding me how interesting maths/stats work can be.
• 71 Snowman May 19, 2020, 9:25 am

  @TI

  My guess is that a major contributor to the excess non covid-19 deaths may be say an older person with multiple health conditions, typically living in a care home, and who is in and out of hospital for treatment that is prolonging their lives.

  As a result of the pandemic they haven’t received that ongoing treatment and have died in advance of when they would otherwise have died, not directly because of covid-19 but because of the indirect affects.

  There will be other indirect deaths, such as the stage 1 cancer cases that aren’t diagnosed and will progress to later harder to treat stages that Karol Sikora talks about, but these won’t be materially showing up in figures yet.
• 72 Snowman May 19, 2020, 9:45 am

  Week 19 ONS England figures out

  3,081 excess deaths over the 5 year average for week 19 vs 3,930 covid-19 deaths for that week.

  So more covid-19 deaths than excess deaths!

  That’s a complete turn round from previous weeks. Week 18 there were 8,012 excess deaths and 6,035 covid-19 deaths.

  I think we can guess what is happening here, but I will wait for thorough analyses
• 73 Snowman May 19, 2020, 10:48 am

  Is there some possibility that in the coming weeks, and in the middle of a pandemic, that we will see total deaths in England fall below the 5 year average for that week?
• 74 ZXSpectrum48k May 19, 2020, 11:07 am

  @Mousecatcher. “But isn’t the contraction that you say was already evident in Feb a symptom of the lockdown mentality, ie a response to being told night and day that the Black Death was on the way?”

  You’re rewriting history. Do you write for the Telegraph or Spectator? There was no lockdown in UK/Europe/US in Feb; it didn’t arrive here till Mar23. There was already a massive shock hitting global supply chains from the impact of China (and other Asian countries) locking down. We had the complete disintegration of the OPEC+ agreement on Feb29, causing an oil price collapse. By Mar1, the global economy was going down. It was nailed on.

  You’re also you’re implying that people are being irrational about the risks. The Spain antibody study implies an IFR of 1-1.1.2%, the NY study is not much better. There are other studies implying perhaps 0.3-0.4% but they look increasingly on the backfoot. Yes, this isn’t the Plague of Justinian but it’s still bad. Take the counterfactual: nobody did a lockdown at all, no closing of borders etc. The global spread would have been faster, many countries health systems would have been overloaded, media headlines would incite more panic. You really think many people would be going to restaurants, flying, taking the train/tube to work? Yes, at the margin the economic damage might not be as bad but you would still be staring at a huge global demand shock.

  @Sparchwein made the point. The Scandis show us that the SEK economy is only doing marginally better than NOK or DKK. That’s why I said the impact of the lockdown (hard vs. soft) is about 20%. Even better look at Australia. Feb23 lockdown, per capita deaths at just 4/million vs. UK at 512/million: 128x better in terms of health outcomes. With deaths at such a low level, it’s so much easier to re-open the economy, re-open schools, to get consumption going. The level of uncertainty, risk aversion is so much lower there than here for valid reasons.

  So it’s not economy vs. lives; you can win on both. The UK made a conscious decision to kill more people more in the first wave and, in the process, did more damage to the economy. We lost on both fronts. GBPAUD is 10% lower since Mar23. Investors are voting with their capital. Global policy makers/scientists are just appalled by how badly the UK has handled the pandemic. We keep putting the wrong people in charge of the country. As a country, we’re addicted to self-harm.
• 75 Grumpy Old Paul May 19, 2020, 11:34 am

  Re ONS stats and Winton study.
  Week 19 excess deaths over 5 year average is 3,081.
  In care homes the number of excess deaths above 5 year average in care homes is 2,247.

  An astonishing figure which tends to support Snowman’s hypothesis regarding indirect effects of the epidemic on the treatment of care home residents with serious non-COVID conditions. We need a breakdown of recent non-COVID causes of death within care homes and see how these compare with the 55 year average.

  The Winton study is fascinating but, I notice that if you look at the linear graph of excess non-COVID death rates for the 70+ age groups there is still a sizeable gap between male and female death rates. It looks as if there may still be maybe 10-20% under-diagnosis.
• 76 ZXSpectrum48k May 19, 2020, 11:57 am

  @TI. “in general I remain pretty skeptical that everything has played out in a completely foreseeable fashion. The volatility tells you it hasn’t. It tells you, among much else, that people were repeatedly on the wrong side of the trade …”

  I’d agree with all that but that is not what I implied. You’re thinking too much in terms of ‘views’ and in terms of ‘delta 1’ trades. What I’m saying is that the implied probabilities for something going wrong were incredibly low even in mid Feb. Take the Russian Rouble. USD/RUB implied volatility was 7% at the start of 2020; so a 67% probability of an 7% move over 1 year or about 1% per week. It moved 20% in a week in March as oil collapsed. A 3m option I bought for 0.3%, I took off for over 12%. Similarly, you could position money market lents or flatteners for a max 5bp loss that ended up making you 200bp. All over the place, the market was allowing you to buy constrained downside structures with very high leveraged payouts to the upside if everything did fall apart. It’s something I’ve only seen perhaps 4 times in 20+ years.

  Even at a personal level, it was offering great ways to position. I replaced nearly all my SPX funds with 1-year SPX calls, costing just 4%. For a market that had rallied 30% in 2019 and had dropped 20% in a 4Q18 that is bonkers cheap insurance. It allowed me to redeploy some of the the cash into long-duration USTs, which have made me 25%+ this year. The options themselves, even with only 7 months to expiry and with the SPX down 9%, are still worth about 3% as the positive vega reval has offset some of the negative delta reval.
• 77 Grumpy Old Paul May 19, 2020, 12:05 pm

  Comparison of COVID death rates per million makes interesting reading. No wonder the government isn’t keen on them.

  Spain 593
  Italy 529
  UK 513
  France 433
  Sweden 366
  USA 278
  Germany 97
  Denmark 95
  Finland 54
  Norway 43
  Australia 4
  New Zealand 4

  Figures are taken from the worldometers website and selected to show a) UK and other large west European countries b) Sweden and other Scandinavian countries c) Australia & New Zealand.

  The obvious country to use for UK comparisons is Germany.
• 78 ZXSpectrum48k May 19, 2020, 12:54 pm

  @Ruby. We have a good idea what negative rates will do for government bonds since we have the Eurozone as an example where negative rates have been in place for a while. The ECB went negative with their depo rate in 2014, and it’s currently -0.5%. They are also doing QE + TLTROs. We see that 10-year German Bunds never got below about -0.85% (currently -0.45%) while French OATs at the lows were -0.4% (currently 0%).

  Now, UK Gilts are at +0.27%. So perhaps another 1% lower might be a stretch target in extremis but that implies Bund-like credit quality and scarcity value. That requires the BoE to be hoovering them all up in some QE++ type programme. More realistically, something like current levels to perhaps -0.25% would seem more realistic. That implies perhaps another 50bp or 5% return on 10-year Gilts.

  Of course, they could go lower if, globally, govt bond yields fall further. But I have to emphasise two things. First, even if policy rates go negative that doesn’t mean bond yields have to. The ECB has a negative depo rate since 2014 but French OATs have spent more of their time with a positive yield (typically 0.5%-1.5%). Second, the BoE (and the Fed) are far less keen to go negative on policy rates than banks such as the ECB. Instead they prefer other measures such as QE, yield curve control, credit QE etc.

  Right now, I just don’t see a 3:1 or 4:1 payout ratio from being long Gilts. I don’t own any material position in Gilts. In fact, I see Gilts as probably one of the most expensive Govt bond markets in the world. My feeling here is that, globally, the disconnect is that the market sees a strong mean reversion in earning expectations (high projection rate), keeping equities high, while also seeing no mean reversion in policy rates for a decade (low discount rate). Sort of the total opposite of what we had in early 2009. Then the clear trade was long equities vs. long govt bonds. Now, if anything, the trade seems to be short equities vs. short govt bonds.
• 79 The Investor May 19, 2020, 1:05 pm

  @ZXSpectrum48k — Okay, I see what your saying now — that essentially a state-change was extremely likely but it wasn’t priced-in across all/most available ‘securities’ (for want of a better term). The extra detail is interesting.

  I really need to spend a a few months boning up on options and getting myself an industrial strength brocking account that let’s me trade them. Despite repeated attempts to revert back to my old long-term buy/hold stock picking methodology, I continue to churn with high turnover (fortunately not unproductively, but it’s like sailing into the wind) and if I’m going to keep that up I really need to get more, er, options and take a scythe to my transaction/positioning costs. Would be useful to get more implied risk with less capital on the line, too, given one reason I think I continue to overtrade is I’m subconsciously fearful re: my ‘hidden’ leverage (my mortgage!)

  Then again no sooner have I written that then I think I should cut down on the trading and market-watching and do something more productive and life-affirming instead (/write more for Monevator). Ho hum.
• 80 The Investor May 19, 2020, 1:07 pm

  Second, the BoE (and the Fed) are far less keen to go negative on policy rates than banks such as the ECB.

  I agree this seems to be what they’re saying/implying — just wondering if you have an idea why?

  Do you think it essentially a political issue (i.e. anglo-spheric objection to negative rates) or something structural (e.g. perhaps the Eurozone has to go into negative rates even if the ECB doesn’t want to because of this disparity between different national economies under one currency)?
• 81 Ruby May 19, 2020, 1:16 pm

  @ ZK Spectrum – that’s really kind of you, thank you very much.
• 82 Warren Bogle May 19, 2020, 1:30 pm

  Please could we have commentary on the recent relationship between bonds and equities. My colleague often says ‘what are the alternatives’, so in response to the suggestion that bonds/ equities are expensive/overvalued today we should ask, in relation to what? It would be good to revert back to investment from Covid and Brexit (yawn).
• 83 The Investor May 19, 2020, 1:53 pm

  @Warren Bogle — Been there, done that. 🙂 Have a look at these:

  https://monevator.com/what-is-the-equity-risk-premium/

  https://monevator.com/the-equity-risk-premium-and-you/

  https://monevator.com/investing-for-beginners-uncompensated-risk/
• 84 Matthew May 19, 2020, 4:24 pm

  We will have cheaper mirrors, garden shears and pistachios after the brexit transition ends!
• 85 Snowman May 20, 2020, 10:42 am

  Yet more suggestions out there that immunity is greater than that which will show in mainstream serology testing.

  https://twitter.com/DarrinMDisley/status/1261598977012752387

  And hence the epidemic could fizzle out especially in places like London where infection rates have been relatively high?

  Would love to see some proper studies of the immune response especially in those who are asymptomatic, and those with mild symptoms. Perhaps household members of those who have had covid-19 with symptoms, but not had symptoms themselves need to be studied also.
• 86 Indecisive May 20, 2020, 6:00 pm

  On the Moderna first trial of a vaccine in humans:

  It’s a phase 1 trial which is “to assess whether the vaccine is safe in humans and what immune response it evokes”.

  There seem to have been 45 people in the trial, but information was released only on the 8 people who developed “neutralizing antibodies”. What happened with the other 37? Three developed more serious side effects when testing a higher dose (though these resolved within 24 hours); so longer-term usage will need testing.

  TL;DR: Wait for the paper to be published, and phase 2 results, before reacting like the market.
• 87 The Investor May 20, 2020, 8:21 pm

  @Snowman — According to one of my agreeably data-nerdy friends, if you crunch the numbers today’s “new” reported cases is actually negative. Gov says: “revisions to historical data due to further information being made available to support data processing”.

  Just an understandable quirk I guess, but reminded me of your prediction about excess deaths a few posts earlier…
• 88 Snowman May 20, 2020, 8:57 pm

  @TI

  Why does the new reported cases thing not surprise me!

  Of the hospital deaths announced today one took place back on 24th March and one took place on 27th March, almost 2 months ago!

  But on a positive note we mustn’t forget the ONS have been totally excellent, and I think we can rely on their data being highly accurate.
• 89 Snowman May 21, 2020, 8:33 am

  Lovely to see the pictures of all the people on the beaches yesterday in the sun. Hopefully it is a sign that many are realising it’s safe to come out from behind the sofa now, and the risks aren’t from the virus itself, but from our overreaction to it.

  I’m shocked by comments nationally from councillors and other public figures about beachgoers putting local people’s lives at risk. It seems that people saying these sort of things actually want it to be true, and seem unable to rationally enter into a conversation about whether it is true or not, and want to destroy our freedoms.

  Fortunately haven’t seen too much of it here in Cumbria. But when Cumbria Police were implying it was morally wrong to come to the area for a walk then we need to resist, and remind them their job is to apply the law not to make morale judgements for people. By all means they can link to other organisations’ thoughts on what constitutes a responsible trip to the area, but they’ve come perilously near crossing a line they shouldn’t be crossing. Not having a particular go at Cumbria Police, they’ve done a difficult job reasonably well, but it shows where well meaning but ill thought out behaviour can lead to.

  And NO there is no remote indication that a second peak of death will overrun the NHS whatever media or government scaremongering might want you to believe. And if you don’t belive that, let’s openly talk about that, rather than you just insist that you are right and have the high morale ground here.

  To the extent that the virus doesn’t fizzle out there could be some further infection going on regionally or nationally. But if that happens that is the natural course of the virus, and allowing it to spread amongst the healthy who aren’t hiding behind the sofa is in everyone’s interests. Those going to the beach aren’t being selfish. In the unlikely event (based on scientific evidence) they pass on the virus as part of a trip to the beach, then it will be passed on to other beach goers who have also exercised their freedoms to make the beach trip. Those hiding behind the sofa aren’t going to get the virus because surprise surprise they are hiding behind the sofa. And any spread amongst the beachgoers yesterday will mean they can’t pass it on to the behind the sofa hiders at a later date.

  Of course there are genuinely vulnerable people out there who are shielding. But it is in their interests that the virus is allowed to run its natural course, so that they can come out again sooner rather than later and see their families and friends.

  I don’t expect everyone to agree with me, and it’s a good thing they don’t, but there shouldn’t be any stigma in public figures using science to advocate these sort of views on mainstream media. When we suspend free thought and we suspend open scientific discussion we head into something George Orwell warned us about.

  Fortunately the monevator comments space has allowed for a more sensible discussion between those of differing viewpoints.
• 90 Indecisive May 21, 2020, 9:31 am

  @Snowman, #89

  I’d rather have left this week to the excellent financial discussions (thank you @ZX, learned so much) but I feel this needs commenting.

  > I’m shocked by comments nationally from councillors and other public figures about beachgoers putting local people’s lives at risk.

  I’d say it’s valid in some areas. If you live in west Wales, where the healthcare provision isn’t (shall we say) the best, where your nearest hospital is 1.5 hours away, then yes, people coming in and spreading the virus to locals is going to be more risky than spreading it here on the south coast of England, because of the care available. I see the risk from ppl moving to their second homes as considerably higher, particularly around healthcare capacity (even number of GPs), but it is there.

  > And NO there is no remote indication that a second peak of death will overrun the NHS whatever media or government scaremongering might want you to believe. And if you don’t belive that, let’s openly talk about that

  As my professor used to say, “citation needed”, or “show your workings”. For example do you assume that the NHS stays on the current “war footing” or all normal treatments are resumed? Do you think a peak will be lower/higher than the one we’ve just had? Will there be a change in treatment by that time? Or is it more fundamental that in your view there isn’t going to be a second peak, and some other trajectory (slow burn, sinusoidal, random distribution) will be followed?

  Without that, it’s hard to evaluate your statement that there’s no remote indication the NHS would be overrun. I could see problems, particularly this coming winter, if we decide to protect the health of those without the virus and continue treating other conditions as we did before, without diverting resources away to enlarged ICUs and covid wards.

  > When we suspend free thought and we suspend open scientific discussion we head into something George Orwell warned us about.

  I agree with you, but rather than this being the risk I say we’ve had too much free thought (5G causing coronavirus? Contrails spreading it? Government plot? Catch it by walking past someone?) and yet – thanks to the same channels that have allowed such ‘free thought’, a lot more open scientific discussion than I remember happening before.

  Right, now back to coaxing my investments to a return that will hire an interior designer. After 2 weeks of decorating it’s (now) painfully obvious that colour and choosing complementary styles is not my strength.
• 91 FI Warrior May 21, 2020, 9:34 am

  Most people find it hard to admit they were wrong, to avoid looking like they panicked, so they double down on their refusal to believe what their eyes tell them is right in front of them. Denial kicks in and the brain makes up explanations for what you already wanted to believe, like death cult members shifting the end-of-world date every time it never happens. The couch shelterers will come out when their savings have run down, they realise they’re sh*t-broke and reality forces them to accept the world didn’t end and life has to carry on. Then there’ll be tacit mass amnesia, whereby nobody will ever mention the P word, as if it wasn’t all that was crowding out the media for months, like straight after the turn of the millenium, when suddenly all mention of Y2K vanished.
• 92 Naeclue May 21, 2020, 9:47 am

  Bit late to comment on the weekend reading, but for me the biggest event was the easing of restrictions. Marinas have opened and we have been able to take our boat out. The thing we must not do is spend the night on our boat ;). I guess staying in boats and second homes increases the risk of passing on the infection? I would love to hear the explanation and evidence behind that one.

  We most definitely fall into the mental accounting trap when it comes to inherited money. My wife has a small inheritance from her parents which is kept in a separate account and treated differently to other money. It is earmarked, I think, to be disposed of in a way her mother would have approved of. Charitable giving, assisting other family members. That sort of thing.

  I am currently winding up my father’s estate. My share will now bypass me and go to the kids. I have told them to carefully consider what they do with it as this money did not come easily to my parents. They would not have approved of it being frittered away.
• 93 Al Cam May 21, 2020, 10:07 am

  @snowman:
  +1 for the ONS.
  The more I see from the ONS the more I am impressed – and I started out from a pretty positive position too.
• 94 ZXSpectrum48k May 21, 2020, 11:19 am

  @TI. There is clearly no actual floor on policy rates. Both independent research and central bank research has shown that policy rates down to -3% to -5% are possible without causing financial instability. But there are a variety of economic, political and technical reasons why the ECB have been more keen than the Fed and BoE to go negative on policy rates.

  A key driver is the difference in the balance of payments position. The Euro-area runs a current account surplus unlike the UK or US who run deficits. Now, the ECB targets price stability but there is no doubt that they see a need for a weaker Euro to help achieve that. Running a negative rate differential vs. other countries helps to achieve that. It enhances the use of the Euro as a funding currency for speculative purposes and also drives portfolio outflows. By contrast, the Fed and BoE prefer to leave the currency to it’s own devices.

  The second issue is the ECB has had less flexibility in terms of it’s Asset Purchase Programme (APP), it’s version of QE, primarily due to political issues. The capital key requirement in the APP limits how much of each sovereign govt bond they can buy. The end result is that the’ve had to buy more German Bunds than optimal and less Italian BTPs. The ECB APP results in severe risks of Bund scarcity and too flat a curve, impacting the German financial sector (curve steepeness is more important than level of rates for sustainability). The whole QE proramme is politically charged. By comparison, the Fed and BoE have more freedom and less political influence.

  This are also technical issues. The Euro-area is an amalgam of sovereigns and banking sectors of varying credit quality. The ECB depo really represents the lower bound of that credit spectrum, so to get front-end commercial depo rates lower in some of the lower credit quality countries, they need to run negative rates.

  So I tend to think it was the ECB that was forced to go negative due to political+economic+technical reasons that limited it’s flexibility in other unconventional policy areas, rather than the Fed and BoE being somehow overly resistant.

  I think both the Fed and BoE would go negative if required. It’s just that they know that it’s efficacy is somewhat limited and it has some nasty side effects. It’s somewhat like pushing on string. Instead, they are trying to find other channels by which they can stimulate credit demand in the real economy, whilst not blowing ever larger bubbles in asset prices.
• 95 Snowman May 21, 2020, 12:15 pm

  @Indecisive

  1. My reasons for saying there was not going to be a second peak that would overrun the NHS include

  – experience from the first wave where the NHS wasn’t overrun
  – significant herd immunity effect from the first wave (antibody or innate)
  – the very low prevalence of the virus currently
  – data and analysis (e.g. CEBM) showing infections were reducing even before full lockdown effected (UK and elsewhere), never challenged through data, and even suggesting perhaps no lockdown effect at all cf smart distancing
  – opinion and data driven arguments from the likes of Carole Sikora and Professor Michael Levitt (Nobel prize winner) that the virus is showing signs of petering out
  – experience of other countries who didn’t do mandated full lockdown, deaths fell away anyway and ICU not close to being overwhelmed (e.g. Sweden)
  – experience of other countries coming out of lockdown (infections don’t seem to have increased)
  – changes in social distancing behaviour regardless of policy (rational or fear based)
  – extra NHS capacity e.g. through the Nightingale hospitals
  – better monitoring of infections (e.g. covid-19 symptom study, ONS surveillance) to catch any unexpected large rise in infections at an early stage
  – more testing, contract tracing
  – vulnerable who are more likely to need hospital treatment shielding more now (regardless of whether they are requested to do so)
  – better understanding of how the virus spreads (e.g. outdoor spreading, superspreading events, transmission via children)
  – seasonal affects (if any) during late Spring/summer, and higher vitamin D levels in population reducing transmission
  – if we tried to crush the virus now as opposed to letting the virus run it’s course in a controlled manner, increased infections in winters could be more problematic, but we should know enough by then to avoid that.

  So do you think it is reasonable that we should tell people to fear a second peak that overruns the NHS, and if so why?

  2. Travelling to the beach etc

  You talk about ‘people coming in and spreading the virus’ but you give no reason why they would spread the virus other than that they are physically there. I’m lucky to live in a nice part of the country, but I would much rather someone drove to a local beauty spot in my area and go for a walk away from others, rather than walk in their crowded city environment, albeit both are probably low risk.

  You’ll have to explain why you mention second home owners when the point was about beachgoers (daytrippers). Are you saying that daytrippers should not to travel to the beach, because that may allow others to sneak off to their second homes and overwhelm local healthcare services?

  3. Freedoms

  What do you think of the youtube policy of taking down any video that goes against WHO guidance. What if someone had uploaded a video at the beginning when the WHO said there was not going to be a pandemic.

  4. Scientific discussion

  The open scientific discussion has passed me by. I could list many but what about the response to Professor Ioannidis for example?
• 96 Snowman May 21, 2020, 1:43 pm

  On the subject of censorship, youtube has taken down the discussion between Karol Sikora with unherd.

  https://twitter.com/ProfKarolSikora/status/1263431671426232320

  Here it is for those interested

  https://unherd.com/thepost/professor-karol-sikora-fear-is-more-dangerous-than-the-virus/

  Too much ‘free thought’ obviously.
• 97 Ruby May 21, 2020, 1:56 pm

  @ Snowman #89 & #95 – well said.
  – walking around London it seems the 2m guidance is being ignored more and more when outside. I think people are finally working out the likelihood of catching covid outside is remote.
  – I remain amazed at the variations in risk tolerance – 20 somethings afraid to leave the front door v my mother, for eg, who was out today ‘at the baker, the farm shop, and filling the car up with petrol’ all at 86.
  – I am hopeful that the voices of the contrarians are being heard more widely but have no expectation that life will be anything other than pretty miserable for months to come owing in good part for a generally unwillingness to look upon risk in a balanced way. In time I suspect they’ll be proven right.
• 98 Ruby May 21, 2020, 2:04 pm

  @ Snowman – ps. I don’t really follow the arguments which say that contact tracing is the answer to all of this if 50% or more of infections are asymptomatic and, presumably, still capable of passing it on.
• 99 Snowman May 21, 2020, 2:27 pm

  @Ruby

  Glad to hear your mum is getting out and about.

  My mum (80s also) goes off to Aldi every week to do her shopping. Her wonderful neighbour gives her a lift in her car. It’s her highlight of the week at the moment. I’m very happy she does that. Yes there may be some small risk, but the benefits outweigh the risks to her and that’s all that matters.

  I’ve got a 90 year old neighbour, who I help out with shopping etc. He hasn’t been going out at all until recently, but he now drives down to the farm shop where he get some of his supplies and they put it in his boot for him so he doesn’t have to go in. He’s hugely missing his normal social contact, he goes off on coach trips a lot but can’t do that at the moment. He’s talking of meeting up with some of his friends for a picnic, and I hope he chooses to do so.

  There’s no right or wrong, but unless you avoid the mass media hysteria it’s hard to make an informed decision.

  Apologies Indecisive if any of my posts come across as confrontational, but it’s the unnecessary fearmongering (in my view) that I’m not liking.
• 100 Indecisive May 21, 2020, 3:29 pm

  @Snowman, #95, #96 & #99

  > So do you think it is reasonable that we should tell people to fear a second peak that overruns the NHS, and if so why?

  I think it is reasonable to tell people to fear a second peak, in order to reinforce behaviour changes which a number of your reasons rely on. And if a perceived threat to the NHS is the best way to ensure they act, then I’m fine with that; it’s propaganda.

  Unless the virus fizzles out, and we will only get evidence in 2-3 years’ time if that is the case (vs being suppressed through measures taken) 

  One assumption you reveal in #95 but didn’t explicitly state in #89 is that changes in behaviour are maintained. There is a difference in the likelihood of a second peak and/or overwhelming the NHS if behaviour is different, or if behaviour goes back to a 2019-style (no social distancing, all businesses reopened).

  > You talk about ‘people coming in and spreading the virus’ but you give no reason why they would spread the virus other than that they are physically there.

  There is no way to spread this virus without being physically present.

  > I’m lucky to live in a nice part of the country, but I would much rather someone drove to a local beauty spot in my area and go for a walk away from others, rather than walk in their crowded city environment, albeit both are probably low risk.

  I live on the coast between two cities. The increased chance of spreading to the (predominantly elderly) residents here is down to shared usage of local shops, crowding in the local areas where we exercise, and – non-covid but still disease related – the toilets, or rather lack of: they haven’t been unlocked, so what you now find at the top of the beach is human excrement.

  > You’ll have to explain why you mention second home owners when the point was about beachgoers (daytrippers). Are you saying that daytrippers should not to travel to the beach, because that may allow others to sneak off to their second homes and overwhelm local healthcare services? 

  I said in #90 that “I see the risk from ppl moving to their second homes as considerably higher”. This is because the risk of infection transmission from people who are present and interacting 24/7 is higher than those who are mostly on the beach for a day, and using local shops and takeaways for food at lunchtime and in the evening. I have no evidence to back this up, and once second home dwellers have been in-home for 2-3 weeks, there will be no extra risk.

  > What do you think of the youtube policy of taking down any video that goes against WHO guidance. What if someone had uploaded a video at the beginning when the WHO said there was not going to be a pandemic. 

  Too broad. Like the virus this is another unsolved problem (and one I see less chance of solving) around free speech. Unless one believes in absolutist free speech there are subjects society doesn’t want to see discussed and publicised, and these are usually legislated against. There are also topics that aren’t good for society (my opinion) including fake news and conspiracy theories. As yet society hasn’t worked out how to deal with both. I don’t have an answer, and this is a topic I’ve had to think and read about for 10+ years as part of my job.

  Since you care about this, do keep an eye on the UK’s progressing Online Harms framework (which makes the Youtube policy look sane): https://www.gov.uk/government/consultations/online-harms-white-paper/online-harms-white-paper and on the Open Rights Group briefings.

  > The open scientific discussion has passed me by. I could list many but what about the response to Professor Ioannidis for example?

  It appears valid. His views are not matching with much of the scientific community and neither is the research he’s involved with. He could be proved to be right all along and a true maverick; or totally off-beam. Ditto Sikora, who I follow on Twitter.  I’m keeping an open but skeptical mind; there’s so much uncertainty around the virus and how to handle a pandemic, and what we know is continually being revised, that I see no place for holding a view beyond “The consensus is … and I personally prefer … because of …”.

  > Apologies Indecisive if any of my posts come across as confrontational, but it’s the unnecessary fearmongering (in my view) that I’m not liking.

  Your posts come across as someone with a fixed set of views who is keen to share them, rather than work towards greater understanding. I can be the same but I try to do better.

  I have family aged 65-75 who have been breaking social distancing in many ways since it started, including to work in people’s houses (face to face less than a metre apart) during lockdown, who think we are now in a police state, who are vocal about going to sit inside any restaurant that reopens and don’t want the tables spaced out (because that wouldn’t be economically viable for the restaurant), who think everyone is too fearful, and think others can die because they have underlying health conditions, while they have kept healthy and anyway won’t catch it because they’re taking vitamins.

  I also have others who are agoraphobic and don’t want to go anywhere in case they meet the virus.

  I get to see it all. And frankly the latter are easier to deal with, because once places open back up, the temptation to go to the cinema/for a meal/shopping will get them out. And if they go less I’m happy – it lives up to the FIRE ethos.

  You talk a lot about people “hiding behind sofas”. Are these people you know or a construct you use to describe the English population as you perceive it? As it is not one I recognise, and my totally unscientific estimate would put the fearful ones at <20-25% of the population.
• 101 Snowman May 21, 2020, 3:32 pm

  @ruby

  I’m no expert on it, but I’m dubious about contact tracing also. It’s certainly not a game changer in any way even if the app take up is high.

  If prevalence is at very low levels, then it may be of some use as the number of contacts are manageable. Although you might end up asking a lot of people to unnecessarily quarantine when they are identified as having been nearby for long enough to someone who has the virus. I guess if you can reduce the spread a bit with contact tracing, then perhaps there is a small net gain to it.

  Isolation for 7 days if you’ve got symptoms , and quarantining for 14 days if you are in a household with someone who has symptoms make sense, so I suppose contact tracing is just an extension to this.

  It certainly has worked at some level in Taiwan for example but they are following pretty much an elimination strategy. And if you are following an elimination strategy you really do need contact tracing. Will they be able to keep the virus at bay for good, or for the long period until a safe vaccine arrives (if ever) or the virus dies out globally and what damage will it cause by following such a strategy? I don’t know.

  Given that the virus has already spread widely here, then an elimination strategy doesn’t seem remotely sensible in the UK if it involves major restrictions on going about life. And contact tracing becomes less relevant in my view.

  I guess some of the asymptomatic will be identified when they are tested as contacts of someone who have had symptoms, but of course the asymptomatic do cause problems as the people they infect only get picked up at the next generation or so.

  I think contact tracing has been useful in working out how the virus is spreading. It was after all contact tracing I believe that made them realise outdoor spread was quite rare and it’s helped identify some super-spreading events.

  But yes I share your doubts.
• 102 The Investor May 21, 2020, 6:47 pm

  First result from the UK’s antibody sample study is in: would apparently scale up to 17% in London having had the virus and 5% nationwide.

  Hancock slipping out the news at the briefing: https://www.youtube.com/watch?v=Vvj88qD9RXI

  So a lot of people had it in London as some of us suspected 6-8 weeks ago. But not as many as I’d hoped then, too.

  Of course lots of speculation on what will be enough, nature of immune response, whether it always produces antibodies, whether other coronavirus exposure grants some sort of ability to fight the infection, whether antobodies grant any lasting immunity etc etc.

  Consensus is still that 17% would be nothing like enough for herd immunity. Be interesting to see if London ever gets a second wave.
• 103 Snowman May 21, 2020, 7:18 pm

  Sunetra Gupta on unherd

  https://www.youtube.com/watch?v=DKh6kJ-RSMI

  On antibodies:
  • Many of the antibody tests are “extremely unreliable”
  • They do not indicate the true level of exposure or level of immunity
• 104 The Investor May 21, 2020, 8:46 pm

  @ZXSpectrum48k — That’s a really good and useful answer, thanks! I’d add a few more thoughts of my own but on this I’m sure I’d have nothing of value to add. I’ll probably re-read your comment a couple of times over the next couple of weeks though and test it against a few mental models of mine. Generally I’ve tried to avoid thinking too much about Central Banks and rates as an (equity stock picking) investor over the past couple of decades and it’s served me well versus all the rabbit holes I’ve seen people get lost in, but things are getting so extreme at this point I at least want to make sure my working assumptions are up-to-date. Cheers!
• 105 Snowman May 21, 2020, 9:08 pm

  @TI

  The at least 5% figure testing positive for antibodies for outside London must mean the South West region is 5%. Scaling by hospital deaths and population (assumes same age structure) gets me to that 5% figure.

  Just scaling up by population allowing for relative hospital deaths gives about 11-12% for England as a whole by my rough calculations. So maybe 7 million have antibodies in the UK perhaps (?)
• 106 Snowman May 21, 2020, 9:50 pm

  5,838 deaths in hospitals in London (to date)
  Population of London 8.9 million
  Prevalence of antibodies 17%

  So number who have had the virus = 0.17 x 8.9 = 1.51 million
  So IFR (excluding care home population)= 5,838/1,510,000 = 0.39%

  Or potentially much less if we take into account those who have seen off the virus but don’t have detectable antibodies

  (if my calculations are correct which they might not be)
• 107 Matthew May 21, 2020, 10:15 pm

  @snowman – according to google the average londoner age is 40.5years, so if there was an ifr of 0.39% we must bear the age in mind

  At work in the backwater town i live in theyre building a temporary mortury, so either the existing one is filling up or theyre bracing for a second spike, lets hope people have immunity but I think many people would not be particularly compliant with the lockdown for much longer, and there would be political pressure to not reinstate it too harshly with the economic cost and neglected non covid healthcare, my dad was sent home with non covid pneumonia, my sister risked sepsis out of fear of getting an infection looked at, heart and cancer patients cant be seen as normally, etc

  I think swimming and cinemas should be allowed as a compromise, maybe cafes with distancing, ie no waiters
• 108 Snowman May 21, 2020, 10:20 pm

  Note the BBC are reporting

  “Earlier, at the UK government’s daily briefing, we heard news of a study which suggests that 17% of people in London and around 5% of the rest of the nation have virus antibodies.”

  But I think that’s wrong. Hancock said AT LEAST 5% elsewhere have antibodies, and the region with lowest sero-prevalence is the South West which will be the 5%. So the overall antibody sero-prevalence outside London is probably around 10%
• 109 Ruby May 21, 2020, 10:33 pm

  @ Matthew – I take all this talk about expanding mortuary capacity with a large dollop of salt and its difficult to tell whether it’s driven by the disease, politics or the impending inquiry. While there is all sorts of speculation about a second wave I’m half inclined to think that it’s just cover for sitting on hands and watching how our European neighbours are getting as they lift their lock downs. As you suggest as well, I strongly suspect that the man on the street will work out the severity of this disease long before the hot shot epidemiologists and they’ll show it by increasing non compliance with the ‘guidance’. HMG will then try and claim the credit by saying it’s due to their “nudging” strategy and it gives them further cover to relax things further while saying it what’s the opinion polls say people want. A cynics post I know, but I’m rather firmly of the view that HMG has dug itself into a complete hole here – partly excusable because of the initial data fog but increasingly less so as new data emerges about the long term damage the lock down is causing alongside increasing evidence of general government incompetence.
• 110 ZXSpectrum48k May 21, 2020, 10:36 pm

  @Snowman. He did say “at least 5%” but I didn’t hear him imply that every region (or for that matter every town/village) had at least 5%. Why do you interpret it this way? It might mean that the result was 6% with CL of 1%, hence it’s “at least 5%”.

  Based on 17% for London and say 6% for rUK, the IFR would be around 0.8% using the 36k deaths but 0.9-1.15% if we use say 40-50k deaths that some are arguing for.

  Also once you adjust the London result for age demographics, the IFR would be 0.5-0.6%. Moreover, London has a lower weighting of care/nursing homes than many other parts of the country. It should be coming in with a lower IFR.
• 111 Snowman May 21, 2020, 10:46 pm

  Now Public Health England are being quoted by the BBC as saying antibody prevalence in the North-East is only 4.3% which makes no sense to me. So perhaps it is 5% for the rest of England outside London. We will have to wait and see.

  Typical of the quality of information coming out of the press briefings.
• 112 The Investor May 21, 2020, 11:33 pm

  This week saw deaths (all causes) in hospital running lower that the five-year average.

  Slide 3:

  https://twitter.com/10DowningStreet/status/1263516423114153984/photo/3

  One statistic definitely does not anything like a summer make, triple underline.

  But if we get to the end of the year and total mortality for the year isn’t that wildly out of whack with previous annual averages, this little slide and (potentially just statistically noisy) blip might well have been the harbinger.
• 113 Snowman May 22, 2020, 6:23 am

  @TI

  You might be interested in this chart which compares the current pandemic in Europe with the 2018 flu season. Still not clear where we are going to end up, but this is where we are at the moment.

  https://twitter.com/FatEmperor/status/1263615300651700226/photo/1

  With regards to explanations of excess UK deaths, IanARowe has some interesting stuff on his twitter feed to add to the analyses David Spiegelhater is trying to do.
• 114 Snowman May 22, 2020, 7:06 am

  @ZXSpectrum re
  ‘at least 5%” but I didn’t hear him imply that every region (or for that matter every town/village) had at least 5%. Why do you interpret it this way? It might mean that the result was 6% with CL of 1%, hence it’s “at least 5%’.

  I didn’t know what he meant so I tried to work what interpretation of his words might make most sense.

  I worked off the London 17% figure, went to the hospital death data by region, which if age profile at older ages is the same, and IFR are the same might give you a clue as to what % might have had the virus in the least affected area. This I understood to be the South West and my calculation comes out as 5% which made me think that is what the least 5% meant.

  Good points from you and Matthew about the age structure being different. Hard to adjust for, it’s actually the %s at higher ages where all the deaths are that make the difference. I’ve ignored care home deaths as they may skew the calculations and ignored home deaths which is an issue. It’s back of the envelope stuff.

  The sample was something like 1,000 people from memory so they couldn’t get down to town level. Most data seems to be at regional level e.g. London, East of England, Midlands, North East and Yorkshire, North West, South East and South West.

  I’ve backtracked a bit because some of the other figures now being reported don’t make sense. So I’m now saying let’s wait for the official figures.
• 115 Snowman May 22, 2020, 8:19 am

  At the risk of ignoring my own advice to wait for the official figures

  If there are 17% of 8.9 million cumulative infections in London = 1.5 million

  That’s in the University of Cambridge modelling group range just above their lower estimates, but scaling up their numbers gives (lower estimates in brackets below)

  Cumulative infections in London 1.5 million (1,420,000)
  Cumulative infections in whole of England 5,350,000 (5,060,000)

  Population of England = 56.3 million
  So all England antibody prevalence = 5,350,000/56,300,000 = 9.5%

  Population of England excluding London = 56.3 – 8.9 = 47.4 million
  England exc London antibody prevalence = (5.35 – 1.5)/47.4 = 8%

  Based on 17% in London, the range regionally* in rest of England is roughly 4% to 12%
  (as Cambridge modelling group give regional range if prevalence in London is 20% as between 5% and 14%)

  *Region means East of England, London, Midlands, North East and Yorkshire, North West, South East, South West

  Source of Cambridge modelling group data and estimates
  https://www.mrc-bsu.cam.ac.uk/now-casting/
• 116 Snowman May 22, 2020, 12:12 pm

  Good article on second waves that I hadn’t seen before

  https://www.cebm.net/covid-19/covid-19-epidemic-waves/

  Scaring people that the merest relaxation of individual lockdown measures risks a second wave that will send exponential growth out of control and overwhelm the NHS is unacceptable (in my view), but providing realistic information on the dynamics of previous viruses as a means to understand what might happen with the current one is a completely different matter.