Blain’s Morning Porridge, 1st October 2020 – Losing the Plot

“You don’t waste October sunshine…”

Two topics this morning. The Outlook for Q4 and The Pandemic.

Let’s start with Q4.

Starts today.. Get set, ready, go! As we enter the final quarter of this incredible year, stock markets are wobbly but remain close to record levels, bond markets have staged record issuance, and yields have never been so low. Yet London’s City is empty, activity is crashing once more, millions face unemployment as second lockdowns bite across the land!

The good news is there will be no Christmas to distract us from the vitally important business of flustering and flaffing about markets. Bah Humbug rules will apply this year.  There will be no New Year either – which means we shall be trapped in perpetuity in the misery that was 2020… Argg….

October is always a fascinating month. It’s not just leaves falling off trees, but the occasional banker jumping out of high windows as the seasonal autumn market crash comes around. Can the gains seen since March be maintained? Or will it all come crashing down on a Manic Monday, Black Tuesday, Woeful Wednesday, Terror Thursday or any normal Friday?

I suspect markets remain flat for the time being. Probably. Maybe. Central banks have little choice but to continue juicing markets through zero rates and QE Infinity. When returns are so low, investors have little choice but to keep taking risk – meaning equity markets are likely to benefit. But it’s getting increasingly selective out there. Even a broadly positive fundamental-led market doesn’t mean bubbles aren’t ripe for popping.

The shape of the global economy remains troubling – China would like us to think their domestic economy is resurgent, but oil and commodities remain weak, while job losses across Occidental economies are rising. Few folk are talking about synchronous recovery in 2021. Markets are rightly nervous.

The key influence this month will be the US election and stimulus hiatus. At present we’re waiting to see if and when the US government gets around to pumping in some fresh stimulus to boost markets higher. Although there is much talk and stimulus posturing – but it’s unlikely in the current fervid US environment. Fears about how good or bad a Democrat or Republican leader will or won’t be for the economy are not as forceful short-term factors as a new dose of stimulus could provide – but in a market desperately seeking direction and nudge, any Political noise is likely to trigger volatility ructions – especially if the market takes a tantrum on the lack of stimulus package.

The other big issue remains the Pandemic. Markets are being driven by the implications of lockdowns on recession and consideration of the K-shaped recovery – whereby the rich with access to capital get richer and the rest of sink further into penury. That’s not an entirely encouraging perspective for the long-term future of QE interventions and social cohesion as Europe enters its next election cycle.

What will markets do? Has the rally run of out steam? Are we in a flat market till a new US administration sets the narrative in Jan?

Its flat markets that can be most dangerous – that’s when suddenly confidence snaps and we get the big tumbles. Will it happen? Watch this space.

Meanwhile… What’s the real story about the Virus?

I am always amused by ridiculous conspiracy theories telling us the world is in the grip of a small number of billionaires with hidden agendas and designs to reset a new world order.. You can understand why weak and feeble minds are drawn to them… But I am increasingly wondering what we aren’t being told about the virus.

Y’day Boris warned us of further restrictions to come – the virus is “not-under-control” wail his scientists. He went all Churchillian and said he is “not afraid” to put measures “more costly than the ones in effect now” to stem the virus. He tells us that we (the great British public) don’t want to “throw in the sponge” when it comes to fighting the virus.

Actually.. many of us do want to stop. We want back to normal. Government, and the Media (which is luxuriating in 24 hour wall-to-wall horror coverage of the pandemic) are just too invested in the crisis to let it take its course.

What is it Boris thinks we are fighting? The virus is not the Black Death, and it isn’t even the much feared Epidemic we’ve been fearing for decades. Nor is it a simple flu – it’s clearly more complex in the way it attacks the body. But it does exactly what the regular yearly flu does – predates the elderly and sick in our population. Sad but that’s life (actually, death..)

What has been achieved locking down commerce and taking massive, potentially terminal, risks with the economic health of the nation? There is a simple cost-benefit to lockdown vs saving lives. At the moment, based on the data, it makes little sense.

Let’s consider the facts about Coronavirus here in the UK. 

The following numbers are all from official statistics taken the NHS website collating all data on English deaths due to Covid.

NHS England official data shows the following:

· 21 people under 20 have died. 4 of them did not have an indentified pre-condition.

· 217 people aged between 20 and 40 have died of Covid. 35 of them had no pre-existing conditions.

· 2312 people between 40-60 have died. 270 had no pre-existing conditions.

· 11343 people under 80 have died. 577 had no pre-existing conditions.

· 15431 people over 80 have died. 514 had no pre-existing conditions.

· Patients with Chromic Pulmonary Disease, Respitory, and Heart Disease figure in 48% of Covid deaths. Dementia is listed in 26% of Covid deaths.

· Obesity is not recorded as a pre-existing conditions, but it is known to increase the risk to people with Covid. Earlier in the pandemic it was suggested ethnic minorities were also more at risk, but the numbers show 15% of deaths are from minorities which is close to their 14% representation in the population.

· There is data on hospitals – but it is only updated monthly. The last snapshot from the beginning of September shows there are over 110,000 hospital beds in England. 468 were occupied by Covid Patients. Its been largely that way since June. Things have changed since then though.

· Over the last 20 years deaths in the UK have ranged between 550k to 620K. Flu accounts for around 30k deaths in a normal year, dwarfed by Cancers, Dementia and Heart Disease.

All the above are facts. If the facts change as we learn more then we can reassess new facts as they emerge.

Now for some opinion: 

As I observed a few weeks ago the UK ran a successful campaign to reduce heart-attacks from 2000 only to see dementia deaths rise by roughly the same amount. The reality is we are all going to die. (Having suffered a massive sudden heart-attack after a botched operation I know they are painful, scary and nasty, but, for choice, I’d rather go quick than slowly losing it.)

· Flu deaths thru 2020-21 are likely to be lower because of Covid has already removed a large part of its target cohort. The same is true for all other major causes of death.

· We know who the vulnerable are. Protect them – shielding if necessary. We know who is less vulnerable – let them get on with life and chose their risk.

· We don’t yet know how deaths from foregone medical treatments, increased mental illness, loneliness, despair and suicide will rise. We know the impact of lost jobs and income is going to be felt most heavily among lower paid workers likely to cause long-term social deprivation issues. The young will suffer most to save the elderly.

Having looked at the data above, the obvious conclusion is the risks are not dissimilar to a bad flu year. My question is what Facts and “Science” has Boris used to determine he is justified in wrecking the nation’s economy? Continued lockdown flies in the face of the data or cost/benefit.

Life is about compromise. You try to get the best out of it – despite the hurdles it throws our way in terms of health, wealth and petty bureaucracy. It’s a constant process of weighing up risks and making choices accordingly.

On balance locking down our economy to protect the elderly sounds like a courageous decision. But it’s not a good decision under any form of analysis. It does not make any economic sense. It’s not callous to suggest we have to acknowledge Covid-19 is a bad break? I am pretty sure my Dad would be furious if he’d lived to see his grand-kids’ futures compromised to give him a few extra months/years. He’d be livid.

My conclusion is Government is now so lost, stumbling and trapped in its own narrative because it committed and went all-on on lockdown/shutdown and “saving the NHS” by scaring the pants off the population so comprehensively that now it can’t face the consequences of what its already done… Boris will no doubt tell us he destroyed the economy to save us all. The only hope for the Tories will be to dump him. With prejudice.

Compare and contrast Sweden and UK.


She-Who-is-Mrs-Blain and I were supposed to be on a state visit to her homeland in Snowdonia. We’d already cancelled a trip back to Edinburgh because of renewed lockdown. We’d heard Wee Nicola Sturgeon wants to go her usual one step-beyond by authorising border guards to shoot anyone trying to escape across the border from plague ravished England. (Ok.. I made that up, but you know she would if she could…)

Five Things Too Read This Morning

FT – Covid: We’re in the same storm but not in same boat

Finance Monthly – Why Do Tech Stocks Outperform?

BBerg – Rolls-Royce to Raise $6.5 Billion After Engine Demand Collapses

WSJ – Stocks Finish Second Straight Quarter of Big Gains

Thunderer – City firms preparing to speed up Brexit exodus as transition period ends.

And Listen to this:

Planet Normal – Ivor Cummings interview (from 27 minutes): “Restrictions are an overreaction when serious Covid-19 cases on “on the floor” claims lockdown-sceptic engineer

Out of time, and back to day job..

Bill Blain

Shard Capital