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Spring is in the air!

That’s our fourth week of strict lock-down and although we can still expect another three weeks at least, there is a sense that ” Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning” Winston Churchill.

Interestingly, everyone seems to have become an epidemiologist. On one hand, this is good for democracy and in fact the duty of every citizen to look and question what scientists are saying – the verdict of experts should rarely be accepted without scrutiny. For example, it’s far from obvious that strict lock-down is the best way to deal with the current situation when one looks at secondary & tertiary effects as well as the full economic and social cost. As shown by the political scientist Philip Tetlock, experts are often prone to poor judgement at critical moments. They tend to fall in love with their « models » and there are several examples when the public has a richer assessment of risks than experts – what’s known as the “wisdom of crowds”.

On the other hand, it’s obvious that we can take it too far and the “wisdom of crowds” works when everyone is making independent judgement avoiding groupthink & others key psychological traps like availability, over-confidence, confirmation biases. These are the same challenges we encounter as investors and for those interested in refining their forecasting skills I’d recommend the Good Judgement Project.

As I’m writing late afternoonThursday April 9th, the market is approximately 25% up from its recent low.  A lot of people have expressed the view that this increase makes no sense in light of the damage to the economy, unemployment numbers, etc.  Personally, I would be much more tempered in my judgement because of the following three main facts: 1) the temporary/state-forced economic lock-down is being met with unprecedented monetary and fiscal stimulus globally; 2) the market is a forward looking discount mechanism – when valuing an on-going business the next 12-24 months cash flow represents less than 10% of the overall value of the business; and 3) “Insiders” (i.e. CEO, CFO, Directors) have been buying the share of their own companies.  I’d encourage everyone to read the latest memo from Howard Marks, Calibrating.  It seems to me that the range of outcomes is extremely wide but with a wider positive tail than a negative one because of government/central banks interventions.  As Howard Marks reminded us in his memo, the key is to strike the appropriate balance between the risk of loosing money and the risk of missing opportunities within the context of one’s portfolio.


Finding the right balance is also key in pursuing a physical training program. Running in the mountain and/or biking on the home trainer are compatible with social distancing but we also have the societal duty to minimise the chance of getting sick or injured to avoid putting further pressure on our already strained healthcare system. So is our immune system stronger or weaker while training? It turns out to be a fairly difficult question to answer with medical experts having a wide range of opinions (sounds familiar? -:) Alex Hutchinson, the author of Endure: Mind, Body, and the Curiously Elastic Limits of Human Performance, summarised his findings in an interesting articleFind a way to keep exercising and don’t be afraid to push hard now and then. But if you’re planning to run a hard solo marathon around and around your block, make sure to rest up and stay well away from other people for a few days afterwards – you know, like you’re supposed to be doing anyway.

Here you go, no excuse to slack off!

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