I've raised some cash, in readiness

The virus' impact on psychology and social interaction (the diminishing of it) encouraged me sell a couple of companies which were already looking quite high.

I've sold my Dewhurst "A" shares (non-voting) at about £7.20p. I first bought at just over £3.
I've also sold my TClarke shares at 112p (bought at 79.16p).

I'll write up why I chose these two in later newsletters.  For now, I thought I'd express why the virus worries me so much.

To focus on the economic cost, leaving to one side the human cost, the death rate of the virus is no great shakes for the economy.  What really matters for businesses is the reaction of humans to fear of an event.

There will be lockdowns; kids off school; parents off work looking after kids; factories unable to get workers to assemble; offices closed up; meetings cancelled; capex postponed; purchases postponed; holidays cancelled; aircraft half empty, and; panic buying of essentials.

The world of business was vulnerable without this virus.  Here are the highlights from this week's The Economist article "Downturn, disrupted" which demonstrate fragility:

In the last recession 11m people lost their jobs in rich countries and the profits of big listed firms in Europe and America dropped by 51% and 30%, respectively.

S&P historic falls:
Dec 2007-Mar 09: 55%
May-sept 2001: 27%
Jul-Oct 1990: 20%
Aug 1981- Aug 1982: 23%
Feb-Mar 1980: 18%
Nov 1973-Oct 74: 42%

In downturns in 2000-02 and 2007-08 sales growth at Amazon and Microsoft slowed sharply. Smartphone sales have already slowed, Apple is struggling to ship phones from China.
Ruthless cost cutting has always been part of playbook for companies outside the tech industry when the economy slumps.

After a bout of dealmaking, goodwill in BS is at a record high of $3.6trn for S&P companies. This can indicate trouble. In 2000-01 and 2007-09 firms made huge goodwill write offs as they confessed to dodgy deals.

In America 97% of S&P firms in 2017 presented at least one metric of their performance in a way that was inconsistent with GAAP, up from 76% in 2007. (Galbraith's "bezzle" is at play at the top of cycles)

Since 2007 overall corporate debt has risen. In Europe non-financial corporate debt stands at nearly 110% of GDP, compared with under 90% in 2007.

In America businesses are now borrowing more than households for the first time since 1991.
In the rich world 1 in 8 established companies makes too little profit to pay the interest on their loans, let alone the principal. That’s up from 1 in 14 in 2007. A recession half as bad as the 2007-9 slump would result in $19trn of corporate debt – nearly 40% of the total – being owed by such straightened companies.

The clincher

I greatly respect Nouriel Roubini, who teaches at NY Stern School of Business and has been an influential policy adviser. He is one of the few economists to predict the 2007-08 (IMF position paper 2006) foreseeing mortgage defaults, mortgage-backed securities unravelling and the global financial system crisis and recession.

Professor Roubini published an article in the Financial Times a few hours ago. Here are the highl
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