If you were pondering whether we are now out of the woods and it’s a good time to go back into the stock market in a big way you might want to first consider the recent words of some key people.
Paul Romer, Nobel Prize winner in Economics
Paul Romer suggests that the best strategy out of the crisis is to conduct 150m test per week in the USA. He says that by randomly dividing the US population into 14 groups and testing each group every two weeks they’ll be able to monitor to see who has the disease now. The cost is $100bn per year, which he considers cheap compared with the alternatives (Herd immunity or Lockdown).
Thinking of lockdown: “maybe in 18 months in 24 months we get a vaccine, maybe we don’t. It’s costing us 20% of GDP loss every single month. And we might have to do this for years on end. That’s a really horrific alternative – a catastrophe that’s worse than the great depression. That doesn’t just make us poorer; that may destroy our democracy and our entire social life. Think about the political ands social upheaval that we had during the Great Depression. The alternatives to 150m tests per week [herd immunity with 1m deaths or lockdown] are just horrific.” (Heathcare Triage website 2 weeks ago)
Channel 4 News last night: If we don’t test millions every day “we are going to be in a prolonged depression. And I’m using the word depression intentionally. This depression is likely to be worse than the Great Depression of the 1930s. So that will be very harmful to the quality of life, it will cause great hardship for many people, especially poor people.
The most worrisome effect of this could be to further exacerbate tensions. When something bad happens people often start to look for someone to blame…to punish. And that impulse could further exacerbate tensions around the world. It could also undermine our democratic institutions. What’s missing right now is a clear idea of how to contain this virus.”
Gavyn Davies, Economist, Former chair of BBC and Goldman Sachs partner
FT 3 May: “The equity markets are assuming that the storm will blow over very quickly, with GDP growth rates being higher not lower than normal in 2021. On that basis, equities do not look particularly overvalued.
In a normal cyclical downturn, predictions for GDP growth are reduced in successive years once a recession becomes inevitable. This is particularly true in the second year after the recession starts, suggesting no early bounceback to previous peak activity. The decline in output becomes persistent, not a springboard for recovery.
This more normal pattern underpinned the strong concerns expressed by Federal Reserve chairman Jay Powell last week about the medium-term risks to the productive capacity of the US economy following a very deep recession. Mr Powell also said that the course of coronavirus itself is a new form of economic uncertainty. He is clearly right about this.
The grim arithmetic of epidemics strongly suggests that any increase in the R rate significantly above one may lead, sooner or later, to a large second wave in infections that will need to be suppressed.”
FT 5 May: “Do not count on a fast global e
………………To read more subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1
Prof. Glen Arnold
I'm a full-time investor running my portfolio from peaceful Leicestershire countryside. I also happen to be UK´s best selling investment book author and a Financial Times Best selling author.
Originally, I wrote all my ideas out in full on this website. Now that ADVFN publish them they are entitled to display the full version for six months – you can see them here. Thus can I only post the first few paragraphs here for anything younger than six months.
I write 2 to 3 newsletters per week - investing is about making the right decisions, not many decisions.