What is this light at the end of the tunnel?
Author: Value Investor Date: 2020/04/19
There is a joke, that a light at the end of the tunnel actually could be the headlight of an incoming train. So, what light at the end of the tunnel that we are led to believe we see. Is it the end of the worst period in this pandemic crises or is it a signal that much worse is still to come? At this point nobody knows for sure. Only the time and people who can read signs will tell.
So, what should we observe to take clues? The obvious one is the daily number of new coronavirus infections and resulting deaths. But this number game could be tricky: the more testing is done, the more infections are discovered, as not everybody has symptoms or serve symptoms of the infection. The opposite is also true, of course.
What would be really important to know is what percentage of people in the country as a whole have got sick and recovered, and thus acquired an immunity from this virus. In a way it is relatively easy to do by using statistical analysis methods and tests on antibodies. The problem is that there appears to be no reliable anybody tests, nor understanding of how to interpret results from such tests: what level of antibodies in the blood is needed to provide a person with an immunity and for how long?
Before we know with a good degree of certainty this number, however, it is not possible to predict how the situation will evolve with the economy (and life in general) opening again. It’s like playing a roulette. Do we want ta take such chances? Do we even have a choice?
Another thing to observe is a cooperation between the federal and state governments. Unless there is a consensus on what to do next, and actions are taken according to one national plan, it is going to get messy and ugly.
Yes, it’s up to the governors to decide whether to end or extend the lockdown. But such decisions should only be taken in close cooperation with all other states and accbouring to a well-though and agreed upon plan. It is a huge mistake on the part of the federal government just issue guidelines and stay away from the process. It is too bad that the country does not have a national leader or an institution that can bring all parties to the table for a productive and purposeful discussion.
Investing, at the end, is all about evaluating risks and making a decision which risks to take and which to avoid. Quite often deciding not to invest at all could mean foregoing on potential upside - it is also a risk. I don’t know what will happen in the future - nobody does. For me, I just make my investment decisions based on my own personal circumstances and my own assessment of risks and potential rewards. For everybody it is a very individual and generally a very different story.