Client Update & Market Commentary – 22nd March 2020

22nd March 2020 – Following last week’s Client Update, and with recent and ongoing events relating to the financial markets & Covid-19, Michael Garvey provides clients of Glasgow Wealth with our latest approach and thinking…

I think we can turn the tide within the next 12 weeks…

Prime Minister, Boris Johnston

Only when the tide goes out do you discover who’s been swimming naked.

Warren Buffett

Two very different men. Like our clients, one has financial capital at risk, the other with only political capital to lose. Those who listened in may have noted that Prime Minister Johnston added two new words – ‘gradient’ and ‘vector’ – to his lexicon during yesterday’s new-fangled ‘Coronavirus Daily Update.’ This indicates that he is now listening to the scientists at his side which is reassuring. I am no epidemiologist, but I know a little about statistics and quantitative analysis; there will continue to be a clear inverse correlation between the rising number of COVID-19 infections/ deaths and the value in most equity investments for the time being. A hypothetical vaccine announcement made tomorrow would be very welcome. However, scientists say that is unrealistic and remains 12-18 months distant. Nor should we be convinced that a medical solution would lift us out of recession and/or stagflation immediately. To put any time-stamp on a solution to this situation, the Prime Minister offers reassurance, but seems to be reliant upon the (yet unknown) seasonality of COVID-19 as we head towards summer getting used to social distancing and self-isolating like Islands in the Stream. As investors, that kind of faith could be our undoing.

Rishi Sunak, our new Chancellor of the Exchequer, has in stark contrast to the Coward of the County (I genuinely hope that Tommy proves the County wrong and he is on the money with his 12 weeks pitch) conducted himself in exemplary fashion given the length of his tenure. The raft of new financial measures introduced will be well-received and provide some short-term support to those who need it most. It doesn’t go quite far enough and the next few weeks will likely iron out the wrinkles and probably see the addition of more new, artificial money into the system. Fake money backed by nothing that will be added to a vast pile and become to our children and perhaps grand-children the crux of their tax burden. We did not have to wait as long as expected for the helicopter money that I mentioned last week. Be under no illusion, the arsonists here now present themselves as the firemen. Printing money to fuel cheap debt for the profligate was the cause of the financial side of this crisis, albeit, the catalyst to tip it over was a genuine Black Swan event coming out of leftfield. The continuation of printing money gives us a new set of problems to contend with.

Suckers think that you cure greed with money, addiction with substances, expert problems with experts, banking with bankers, economics with economists, and debt crises with debt spending
Nassim Nicholas Taleb

Would I say there will never, ever be another financial crisis? Probably that would be going too far. But I do think we’re much safer, and I hope that it will not be in our lifetimes, and I don’t believe it will be

Janet Yellen, Chair of the Federal Reserve, 2017

Market cycles matter – the kind of ‘boom and bust’ that Gordon Brown said he had indemnified the economy from as Chancellor at the time. The graphic below shows the emotional roller-coaster ride that investors (and, as you can see nightly, politicians) experience at a time like this. Gratefully, for the sake of our most vulnerable in society, we have moved away from initial denial further to my comments last week and those of our leaders in the political class at least. Based on the situations in Spain and Italy at the moment, our own trajectory cannot be expected to be any better if we are to analyse objectively. In the context of our investment strategies, the escalation of the United Kingdom’s experience of a potentially rapid rise in infection statistics and ultimately deaths would precipitate a strong pull on investment values in the wrong direction. As any actuary worth her salt will tell you, Mediterranean mortality and morbidity tables are those cited when studying healthy populations and longevity. The same cannot be said for the ‘sick man of Europe.’ The inescapable reality is that the UK is at least equally vulnerable and Scotland in particular to COVID-19 due to the profusion of underlying medical conditions.

Be aware that as we do move further into a recessionary environment, executives of listed companies will also use the opportunity to hang out any other dirty washing they have been sitting on and further stock market shocks are to be expected. It is my expectation that measures taken by the Chancellor on Friday could provide some relief in the markets and in investment accounts next week. And so, I believe that we should take the opportunity to realign invested portfolios to adapt to the new investment world that we now subsist in. I would caveat this as dependent upon how data and statistics domestically and globally change over the next 48 hours and how global markets open and close Monday into Tuesday.

Portfolio Positioning

Even though rugby and football (in that order) have been cancelled, we continue to see all the sport that we require in client investment portfolios. From peak to trough, the speed of drawdown so far has surprised the most seasoned buy-side investors. Each of the respective drawdowns so far have tested the limitations of their respective models. This is not to say that in their current form, they do not have further to fall.

Office Preparedness

All staff (bar one) at Glasgow Wealth are now successfully working from home and arguably more productive as the office gas-bags get no airtime. Calls are being taken and we have tightened systems to ensure the integrity of information arriving where it is required in timely fashion. Post continues to arrive and the mail from George Square still leaves for Springburn at 7pm giving us more time following market close to dispatch reports et cetera. Our online portal remains the most efficient way for us to communicate with you and likewise in the opposite direction.

Things are moving fast and this remains our biggest challenge if we require decisions made or acknowledgement of something sent. I appreciate that some do not have internet access and we will continue to make allowances to this end. If you do and have still not registered, please do so and familiarise yourself with the system. Speak to our Operations Manager Ian –

Lastly, at times like these, the incidence of fraud can rise sharply. The portal does add a layer of security for correspondence and reduces our reliance on the postal system, with no apology for Royal Mail shareholders. All of our systems and controls remain robust. Most of our clients will know or have spoken to most members of our team. And so, if you have any queries, concerns or questions, then call us on 0141 248 5005. Alternatively, email us at or to reach me directly.

You gotta know when to hold ‘em
Know when to fold ‘em
Know when to walk away
And know when to run
You never count your money
When you’re sitting at the table
There’ll be time enough for countin’
When the dealin’s done.

The Gambler, Kenny Rogers (1938 – 2020)

Yesterday marked the passing of a legend who left us with a back catalogue of timeless classics. It also marked the first day of spring, but any economic green shoots of recovery seem some time away. The pearls of wisdom quoted above in the chorus we all know seem appropriate here for investors; RIP Kenny. As matters develop, one thing is for certain and that’s that the young will have to step up and assist the vulnerable (not just the elderly). With this in mind, if anyone reading is anxious, we are here. We have young men with sharp elbows, transport and shopping lists in our employ if that’s what you need; send us the shopping lists and we can sort out payment later. We also have clients who are farmers and other business owners. My point is, we have a strong local network which usually we have to be discrete about. If you need anything and don’t know where to turn, use us. If you just want a chat or if there is anything you are worried about, then Saimah (the aforementioned office gas-bag) is your gal – 0141 248 5005.

You will continue to have our full attention and best endeavours. I look forward to presenting these updates as seminars in a ‘post-virus’ in Merchants Hall as was our intent for the summer and perhaps raising a glass, from a safe distance of course. Stay safe.

Michael Garvey


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