Beyond The Headlines
Long Stories and Three Lessons
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Catching up with friends and family recently, I noticed how there are no short and simple stories that cover the last 15 months. Any small question could be prefaced with “it’s a long story.” Some of us stayed put, some of us relocated. Some continued to travel to work; others turned our homes into offices. We’ve all seen many COVID peaks and a variety of responses to them. Though it’s been a long 15 months, with many long stories, there are at least three lessons that stood out.
The first big lesson — a surprise is just that, a surprise, and even the most informed people with a bird’s eye view of the world can miss it. Even if they see trouble ahead, it might be too difficult to acknowledge it and even more difficult to act on it. Only 2-3 weeks before the first series of lockdowns in the US, I was at a weeklong conference in Florida. I spent entire days with CEOs of the largest global consumer goods companies in the world. I heard no bells go off, no red flags; it was business as usual with an occasional mention of a virus in China.
Interestingly enough, I caught a glimpse of what’s to come after checking in with a few friends in Italy toward the end of my conference. I saw the news about COVID spread in Italy and towns under lockdowns, and I figured it was worth investigating further. Despite what I heard at the conference, I told Megan that maybe this is a bigger deal than what I believed it was. Looking back and appreciating the magnitude of the potential surprise was one of the most eye-opening life and professional experiences for me.
The second lesson, and it’s a lesson that I’ve been learning all my life – never underestimate the power of the government response. Looking at the stock market in March 2020 and watching the 30% or so decline, we knew that it’s not forever. Our team quickly assembled a list of stocks we wanted to buy, and we acted on it. We were getting quality businesses at bargain prices. I must confess this was one of the more exciting moments in my investment career. As I shared with many of you, I felt that the stocks were coming my way, and I didn’t have to chase them anymore.
That recovery could have taken a year or five years or more, but the monetary and fiscal response fired up the stock prices and shot them up 25% (S&P 500) above the pre-pandemic peak. History will judge if it was too much for too long and what the long-term consequences could be. As investors, we do our best to play with the cards we were dealt, and that’s what we have done and intend to do going forward. Nonetheless, it’s interesting to pause and reflect on how we got here.
The third lesson has been around how connected the world has become. Obviously, it started with a virus that’s not visible to the human eye going on a world tour to the most remote places where you’d think no one goes. I remember reading a story of this lone backpacker strolling into some Himalayan village bringing the one and only COVID case with him.
It’s followed by the global supply chain that’s both impressive, also somewhat invisible, but most of all immensely fragile. We have seen overcrowded ports and Suez Canal obstruction this year. I actually stood at the edge of the Canal in my teenage years, and I thought what the whole world thought this March – a global trade ocean route connecting continents couldn’t possibly be this narrow!
Finally, we have seen the incredible reach of the government policies creating waves in the economy, prices, and supply and demand. With stimulus checks, and more so, lower cost of borrowing, we see a spike in demand. On the other hand, with business restrictions, we might expect a supply constraint. Higher demand and lower supply usually lead to shortages and higher prices. Do they last? We are yet to see.
If you add to that pent-up demand, “you only live once” post-pandemic shoppers’ mindset, some anxious buying frenzy, we might see shortages of anything from ketchup, chicken wings, to swimming pool chlorine, lumber, and homes in desirable suburbs, and mountain destinations. Do too many people want to have a backyard barbeque all at the same time?
In the early days of June 2021, the world seems to be telling many stories. The US is celebrating vaccination milestones; at the other end of the spectrum, Australia is pushing for local lockdowns to eradicate a handful of COVID cases. There is a wide range of tunes in between.
The stock market collapsed and recovered, the economy and the corporate earnings went through a rollercoaster ride. BBQs are happening; masks are coming off, there is more optimism in the air in more places. I certainly hope we get to enjoy a bit more normalcy soon.
It feels as if we have lived a lifetime in those 15 months. We all have many long stories to tell, and there might be some lessons there, too.
Happy Investing!
Bogumil Baranowski
Published: 6/3/2021
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The information provided in this article represents the opinions of Sicart Associates, LLC (“Sicart”) and is expressed as of the date hereof and is subject to change. Sicart assumes no obligation to update or otherwise revise our opinions or this article. The observations and views expressed herein may be changed by Sicart at any time without notice.
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