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Post by Deleted on Feb 10, 2020 16:11:38 GMT
That 9.6% figure for SARS being thrown around includes data from China... and frankly, data from China in 2003 should be treated as a work of fiction.
I have relatives who worked directly in the quarantined hospitals in HK. After the outbreak, while they were still burying and mourning their dead colleagues, and desparately fighting for the lives of others in intensive care, the HK government lawyers and politicians were busy looking for scapegoats in the medical community to deflect blame from their masters in China.
The ex-China data is far more reliable.
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Post by mrclondon on Feb 11, 2020 1:37:17 GMT
After a lot of reflection I have significantly reduced my equity exposure today. Absolutely not "panic selling" as someone posted when I hinted this was on my mind a week ago, but for me, a sensible de-risking move. It would likely be totally the wrong decision for many, if not most, people whose focus is capital growth.
As per my previous posts, my concerns centre around global supply chains, and the effect on multiple industries over the coming months. Whilst the increase in confirmed cases outside China is a worry, and the contagiousness of this thing seems pretty awful, I think (at least for now) in Europe and N.America the health risks are minimal.
The situation in China though is horrendous. The data being published daily is essentially meaningless, and is probably best ignored, not least because the testing capability in Hubei appears to be limited to a few thousand per day. Without freedom of speech in China, the story is confusing, but the picture that is emerging suggests things are totally out of control in Hubei, and the lockdowns in major cities across China is now believed to affect over 400 million (incl partial lockdowns in Beijing, Shanghai and Shenzhen) a staggering 5% of the planet's population.
In terms of lost productivity, in simple terms just 1 week has been lost due to last week's extension of China's new year holiday. Most global supply chains incorporate extra stock at this time of year, and I get the impression that those in Europe/USA typically run at a couple of months of stock. That Hyundia/Kia have run out of essential bits so quickly in South Korea strikes me as incompetence by that group as much as anything, though Nissan in Japan and Fiat in Europe are now critically low on Chinese components.
Today has been the first official working day of the new year in China. Yet many companies have not yet been given approval to start up, and those that have are reporting labour shortages and/or are refocussing on manufacturing PPE. Quite a few media reports today of desrted public transport, and empty roads. One interesting data set I was directed to today is tom-tom's road congestion data. E.g. Shenzhen the feint blue line is the average level of congestion in any given hour of the day across the city, the red line the actual observed congestion. Put simply there is not enough traffic to cause virtually any congestion. Similiar picture for Beijing, Shanghai, Chongqing, Nanjing etc. Thus far (and its now Tues morning rush hour) no mass drive back to work. OK, many companies have instigated work from home policies, which is fine for the finance hub in central Shanghai, but not great for manufacturing regions.
So, at best there is going to be a further delay of maybe a couple of weeks until production ramps back up. But shipping companies are reporting massive disruption so getting manufactured goods on their way to Europe/N.America is going to be a challenge. Smaller / high value goods are normally air freighted, but there is reduced capacity there as passenger jets routinely have a few pallets of freight as well as passenger luggage on board. Supply chain disruption looks likely to be an issue for months. Whether this is enough to concern the markets is a mute point.
But, I think it is foolish to not at least consider a much more gloomy scenario, one which sees the Hubei situation replicated in other provinces, perhaps not immediately, but in further waves of infection spread as daily life resumes. China's exports from those provinces would cease just as those in Hubei have. The impact on global supply chains would be enormous, the gobal economy would be in deep trouble, and the markets would surely tumble.
Which brings me to my decision to reduce my equity exposure today. My portfolio has increased by 27% (to an all time high) since 1st Jan 2019, i.e. just over 13 months, and another 10% up from today's prices would mean 40% up since Jan 2019. By coming out of the market today, I potentially will miss out on a further 10% rise lets say before I'm confident enough to re-enter. In practical terms (and picking easy round numbers) that means a forgoing an increase in my potential annual pension income from £20k to £22k. On top of which I have a couple of final salary pensions from European owned multinationals.
Buts let suppose this really is global armageddon along the lines of the 1918 Spanish flu or the middle ages plague. Very, very unlikely, but not zero probability. What might happen to world markets ? Absolutely no idea, but lets say they halve, reducing my pension income to £10k pa. In this scenario I imagine my final salary pensions would be worthless as they are already running at huge deficits.
So, my conclusion was in the end a simple one, to have remained fully invested would have represented greed over common sense. It therefore became a no brainer to sell virtually all my single priced equity funds, and to sit in cash for a while. The markets may well go up in the short term, but the global economy was weak even before this epidemic, and I simply can't see there being no impact on company earnings in the coming months. There is to my mind limited upside potential in the markets at present but almost unlimited downside.
(You can all have a good laugh at my folly in a few months time when the markets are 20% up  )
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Post by bernythedolt on Feb 11, 2020 2:32:09 GMT
I knew 2% wasn't right, and for the reason I gave. That figure is "naive and misleading" and "flawed" according to this well written article, which offers a much better methodology which properly accounts for the time lag. you also have to factor in that there will be a large number of unreported, mild cases. Rates will only ever be approximate. Having sad that, and with the caveat that not everything is known yet, the consensus is that it is significantly less likely to be fatal than SARS. The consensus may well say that, but it's not supported by the data. There's now enough data (and empirical evidence) to derive the time period between case confirmation and death, which is on average 12 to 13 days. The only sensible estimator of fatality rate is the number of deaths as a fraction of cases present 12 to 13 days ago. That gives a case fatality rate (CFR) of around 13 - 17%. The link above actually quotes a CFR based on the latest data available of 20%. Yes those deaths are almost entirely within China, but the same was true of SARS (China & HK). I've seen no evidence to suggest it's significantly less likely to be fatal than SARS's CFR of 9.6%, quite the reverse.
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IFISAcava
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Post by IFISAcava on Feb 11, 2020 2:44:18 GMT
you also have to factor in that there will be a large number of unreported, mild cases. Rates will only ever be approximate. Having sad that, and with the caveat that not everything is known yet, the consensus is that it is significantly less likely to be fatal than SARS. The consensus may well say that, but it's not supported by the data. There's now enough data (and empirical evidence) to derive the time period between case confirmation and death, which is on average 12 to 13 days. The only sensible estimator of fatality rate is the number of deaths as a fraction of cases present 12 to 13 days ago. That gives a case fatality rate (CFR) of around 13 - 17%. The link above actually quotes a CFR based on the latest data available of 20%. Yes those deaths are almost entirely within China, but the same was true of SARS (China & HK). I've seen no evidence to suggest it's significantly less likely to be fatal than SARS's CFR of 9.6%, quite the reverse. You might be right, and I already said we don't know for sure, I am just saying it can go both ways - after some outbreaks the initial estimates of CFR go down as the milder cases weren't initially detected/counted.
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Greenwood2
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Post by Greenwood2 on Feb 11, 2020 7:33:01 GMT
On Breakfast this morning the 'experts' were saying it's no worse than flu with a death rate of 1%-2%, and much less severe than SARS.
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r00lish67
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Post by r00lish67 on Feb 11, 2020 8:31:29 GMT
After a lot of reflection I have significantly reduced my equity exposure today. Absolutely not "panic selling" as someone posted when I hinted this was on my mind a week ago, but for me, a sensible de-risking move. It would likely be totally the wrong decision for many, if not most, people whose focus is capital growth. Fair enough. If I applied even a modicum of attempting to forecast things via buying/selling, then I'd be selling too. It does seem crazy in the circumstances that ishares China is up 1.1% today and up 6% in the last 10 days I have to say. Re: the impact of supply chain disruption, this may be a hokum argument, but is there any comfort in the idea that emerging market valuations are crazy anyway? They have a CAPE of only 15 (USA >30), but don't often exceed that apparently because profits "mysteriously" disappear when they arise. Would the same forces that keep EM prices down in normal times relax the leash in a crisis to support the market? I'm talking utter nonsense here, aren't I.
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cb25
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Post by cb25 on Feb 11, 2020 9:21:21 GMT
On Breakfast this morning the 'experts' were saying it's no worse than flu with a death rate of 1%-2%, and much less severe than SARS. If that was true, I doubt they'd be quarantining people.
The John Hopkins map ( here) lists 1018 deaths to 4190 recovered. If that's a valid measure of mortality (and I'm not sure it is), that would make it 19.5%
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r00lish67
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Post by r00lish67 on Feb 11, 2020 9:31:24 GMT
After a lot of reflection I have significantly reduced my equity exposure today. Absolutely not "panic selling" as someone posted when I hinted this was on my mind a week ago, but for me, a sensible de-risking move. It would likely be totally the wrong decision for many, if not most, people whose focus is capital growth. It might not surprise you to find that I disagree with your ultimate conclusion. For example, your view of industries needs to be refined a bit and your idea that equities will halve across the board is somewhat ludicrous. Yes of course if the march of the virus continues equities will drop, some sectors more than others, that cannot be disputed, its the armageddon like halving you propose that I have a problem with. However as an execution-only investor it is ultimately your prerogative to review the information infront of you and come to your own decision based on (a) you appetite for risk, (b) your personal circumstances and (c) your investment timeframe. When doing that you should certainly not be swayed by the opinion of others, whether me or anyone else. Its between you and your brain. To anyone else on this thread reading mrclondon 's post, I would suggest you bear in mind the above paragraph and don't automatically copycat mrclondon . An important part of being an execution-only investor is being able to come to your own wholly independent decision based on your personal circumstances. I think timeframe especially is key. If an event that cuts deep into equities is fatal to one's retirement planning, then doesn't that suggest that the equity allocation was too high in the first place for the circumstances? Equities have proved time and again that there doesn't need to be any foreseeable reason to drop like a stone in the short term. Unless one is making the call that equities will not recover even in the long term, which needless to say is a big call!
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corto
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one-syllabistic
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Post by corto on Feb 11, 2020 9:35:34 GMT
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hazellend
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Post by hazellend on Feb 11, 2020 9:39:38 GMT
After a lot of reflection I have significantly reduced my equity exposure today. Absolutely not "panic selling" as someone posted when I hinted this was on my mind a week ago, but for me, a sensible de-risking move. It would likely be totally the wrong decision for many, if not most, people whose focus is capital growth.
As per my previous posts, my concerns centre around global supply chains, and the effect on multiple industries over the coming months. Whilst the increase in confirmed cases outside China is a worry, and the contagiousness of this thing seems pretty awful, I think (at least for now) in Europe and N.America the health risks are minimal.
The situation in China though is horrendous. The data being published daily is essentially meaningless, and is probably best ignored, not least because the testing capability in Hubei appears to be limited to a few thousand per day. Without freedom of speech in China, the story is confusing, but the picture that is emerging suggests things are totally out of control in Hubei, and the lockdowns in major cities across China is now believed to affect over 400 million (incl partial lockdowns in Beijing, Shanghai and Shenzhen) a staggering 5% of the planet's population.
In terms of lost productivity, in simple terms just 1 week has been lost due to last week's extension of China's new year holiday. Most global supply chains incorporate extra stock at this time of year, and I get the impression that those in Europe/USA typically run at a couple of months of stock. That Hyundia/Kia have run out of essential bits so quickly in South Korea strikes me as incompetence by that group as much as anything, though Nissan in Japan and Fiat in Europe are now critically low on Chinese components.
Today has been the first official working day of the new year in China. Yet many companies have not yet been given approval to start up, and those that have are reporting labour shortages and/or are refocussing on manufacturing PPE. Quite a few media reports today of desrted public transport, and empty roads. One interesting data set I was directed to today is tom-tom's road congestion data. E.g. Shenzhen the feint blue line is the average level of congestion in any given hour of the day across the city, the red line the actual observed congestion. Put simply there is not enough traffic to cause virtually any congestion. Similiar picture for Beijing, Shanghai, Chongqing, Nanjing etc. Thus far (and its now Tues morning rush hour) no mass drive back to work. OK, many companies have instigated work from home policies, which is fine for the finance hub in central Shanghai, but not great for manufacturing regions.
So, at best there is going to be a further delay of maybe a couple of weeks until production ramps back up. But shipping companies are reporting massive disruption so getting manufactured goods on their way to Europe/N.America is going to be a challenge. Smaller / high value goods are normally air freighted, but there is reduced capacity there as passenger jets routinely have a few pallets of freight as well as passenger luggage on board. Supply chain disruption looks likely to be an issue for months. Whether this is enough to concern the markets is a mute point.
But, I think it is foolish to not at least consider a much more gloomy scenario, one which sees the Hubei situation replicated in other provinces, perhaps not immediately, but in further waves of infection spread as daily life resumes. China's exports from those provinces would cease just as those in Hubei have. The impact on global supply chains would be enormous, the gobal economy would be in deep trouble, and the markets would surely tumble.
Which brings me to my decision to reduce my equity exposure today. My portfolio has increased by 27% (to an all time high) since 1st Jan 2019, i.e. just over 13 months, and another 10% up from today's prices would mean 40% up since Jan 2019. By coming out of the market today, I potentially will miss out on a further 10% rise lets say before I'm confident enough to re-enter. In practical terms (and picking easy round numbers) that means a forgoing an increase in my potential annual pension income from £20k to £22k. On top of which I have a couple of final salary pensions from European owned multinationals.
Buts let suppose this really is global armageddon along the lines of the 1918 Spanish flu or the middle ages plague. Very, very unlikely, but not zero probability. What might happen to world markets ? Absolutely no idea, but lets say they halve, reducing my pension income to £10k pa. In this scenario I imagine my final salary pensions would be worthless as they are already running at huge deficits.
So, my conclusion was in the end a simple one, to have remained fully invested would have represented greed over common sense. It therefore became a no brainer to sell virtually all my single priced equity funds, and to sit in cash for a while. The markets may well go up in the short term, but the global economy was weak even before this epidemic, and I simply can't see there being no impact on company earnings in the coming months. There is to my mind limited upside potential in the markets at present but almost unlimited downside.
(You can all have a good laugh at my folly in a few months time when the markets are 20% up )
What was your allocation to equities and what is it now? It seems to me that your allocation was too high for your risk tolerance and you should stick with your new “sleep at night” allocation. Equities have dropped by 50% twice in the current century, so it can and probably will happen again in our lifetimes, maybe more than once. But they still go up a lot in the long term and these crashes can only be predicted in hindsight. I’m almost 100% equities (close to 7 figures) but don’t find crashes in the slightest bit scary. I’ve got at least another 15 years before I’ll be pulling any money from my portfolio, and by then I’ll be able to draw on my DB Pension. In summary, I’m staying on the rollercoaster ride forever.
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r00lish67
Member of DD Central
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Post by r00lish67 on Feb 11, 2020 9:45:57 GMT
Agree as ever with the sentiment hazellend but I would argue that you're not nearly 100% in equities if you have any sort of (semi sizeable?) DB pension to fall back on. That fixed guaranteed annual amount would translate into a huge lump sum if it was capitalised. edit: for the record, I'm 50% in equities. But I don't have a DB pension, that includes my DC pension, and I don't even own a property at present. I also have another 23+ years until I can take the DC money. I would wager my 50% is therefore far more dicey in reality than your near 100%!  |
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Post by bernythedolt on Feb 11, 2020 10:20:17 GMT
On Breakfast this morning the 'experts' were saying it's no worse than flu with a death rate of 1%-2%, and much less severe than SARS. Easily refuted. Even if all the remaining reported cases survive, which is most unlikely, the death rate is already well over 2%. 2% of 43104 cases would be 862. The death toll is already 1018 and counting. Where do they get these 'experts' from? 😁
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hazellend
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Post by hazellend on Feb 11, 2020 11:48:25 GMT
Agree as ever with the sentiment hazellend but I would argue that you're not nearly 100% in equities if you have any sort of (semi sizeable?) DB pension to fall back on. That fixed guaranteed annual amount would translate into a huge lump sum if it was capitalised. edit: for the record, I'm 50% in equities. But I don't have a DB pension, that includes my DC pension, and I don't even own a property at present. I also have another 23+ years until I can take the DC money. I would wager my 50% is therefore far more dicey in reality than your near 100%! Agree. If I didn’t have the DB pension I’d probably go for 75:25
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keitha
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2024, hopefully the year I get out of P2P
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Post by keitha on Feb 11, 2020 14:44:18 GMT
After a lot of reflection I have significantly reduced my equity exposure today. Absolutely not "panic selling" as someone posted when I hinted this was on my mind a week ago, but for me, a sensible de-risking move. It would likely be totally the wrong decision for many, if not most, people whose focus is capital growth.
As per my previous posts, my concerns centre around global supply chains, and the effect on multiple industries over the coming months. Whilst the increase in confirmed cases outside China is a worry, and the contagiousness of this thing seems pretty awful, I think (at least for now) in Europe and N.America the health risks are minimal.
The situation in China though is horrendous. The data being published daily is essentially meaningless, and is probably best ignored, not least because the testing capability in Hubei appears to be limited to a few thousand per day. Without freedom of speech in China, the story is confusing, but the picture that is emerging suggests things are totally out of control in Hubei, and the lockdowns in major cities across China is now believed to affect over 400 million (incl partial lockdowns in Beijing, Shanghai and Shenzhen) a staggering 5% of the planet's population.
In terms of lost productivity, in simple terms just 1 week has been lost due to last week's extension of China's new year holiday. Most global supply chains incorporate extra stock at this time of year, and I get the impression that those in Europe/USA typically run at a couple of months of stock. That Hyundia/Kia have run out of essential bits so quickly in South Korea strikes me as incompetence by that group as much as anything, though Nissan in Japan and Fiat in Europe are now critically low on Chinese components.
Today has been the first official working day of the new year in China. Yet many companies have not yet been given approval to start up, and those that have are reporting labour shortages and/or are refocussing on manufacturing PPE. Quite a few media reports today of desrted public transport, and empty roads. One interesting data set I was directed to today is tom-tom's road congestion data. E.g. Shenzhen the feint blue line is the average level of congestion in any given hour of the day across the city, the red line the actual observed congestion. Put simply there is not enough traffic to cause virtually any congestion. Similiar picture for Beijing, Shanghai, Chongqing, Nanjing etc. Thus far (and its now Tues morning rush hour) no mass drive back to work. OK, many companies have instigated work from home policies, which is fine for the finance hub in central Shanghai, but not great for manufacturing regions.
So, at best there is going to be a further delay of maybe a couple of weeks until production ramps back up. But shipping companies are reporting massive disruption so getting manufactured goods on their way to Europe/N.America is going to be a challenge. Smaller / high value goods are normally air freighted, but there is reduced capacity there as passenger jets routinely have a few pallets of freight as well as passenger luggage on board. Supply chain disruption looks likely to be an issue for months. Whether this is enough to concern the markets is a mute point.
But, I think it is foolish to not at least consider a much more gloomy scenario, one which sees the Hubei situation replicated in other provinces, perhaps not immediately, but in further waves of infection spread as daily life resumes. China's exports from those provinces would cease just as those in Hubei have. The impact on global supply chains would be enormous, the gobal economy would be in deep trouble, and the markets would surely tumble.
Which brings me to my decision to reduce my equity exposure today. My portfolio has increased by 27% (to an all time high) since 1st Jan 2019, i.e. just over 13 months, and another 10% up from today's prices would mean 40% up since Jan 2019. By coming out of the market today, I potentially will miss out on a further 10% rise lets say before I'm confident enough to re-enter. In practical terms (and picking easy round numbers) that means a forgoing an increase in my potential annual pension income from £20k to £22k. On top of which I have a couple of final salary pensions from European owned multinationals.
Buts let suppose this really is global armageddon along the lines of the 1918 Spanish flu or the middle ages plague. Very, very unlikely, but not zero probability. What might happen to world markets ? Absolutely no idea, but lets say they halve, reducing my pension income to £10k pa. In this scenario I imagine my final salary pensions would be worthless as they are already running at huge deficits.
So, my conclusion was in the end a simple one, to have remained fully invested would have represented greed over common sense. It therefore became a no brainer to sell virtually all my single priced equity funds, and to sit in cash for a while. The markets may well go up in the short term, but the global economy was weak even before this epidemic, and I simply can't see there being no impact on company earnings in the coming months. There is to my mind limited upside potential in the markets at present but almost unlimited downside.
(You can all have a good laugh at my folly in a few months time when the markets are 20% up )
You forgot to factor in 10% of pensioners dying and not making further claims on funds and ditto 10% of active contributors, joking aside do whats best for you, my pension is now fixed and guaranteed because I'm drawing it, MY P2P and equities are money for extras in a few years, as I'm trying to get my head around COPE and what it really means for me.
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Post by samford71 on Feb 11, 2020 15:39:57 GMT
Equities have dropped by 50% twice in the current century, so it can and probably will happen again in our lifetimes, maybe more than once. But they still go up a lot in the long term and these crashes can only be predicted in hindsight. I’m almost 100% equities (close to 7 figures) but don’t find crashes in the slightest bit scary. I’ve got at least another 15 years before I’ll be pulling any money from my portfolio, and by then I’ll be able to draw on my DB Pension. In summary, I’m staying on the rollercoaster ride forever. Can people stop saying they are 100% equities when they are no such thing. For a 55 year old (so say 10-13 years before retirement age as you imply you are) the current RPI-linked annuity rate (joint life) is around 1.5%. So multiply your current DB pension income by 67 to capitalize it. Let's say the DB pension income is £40k. So thats about £2.7mm in capital terms. If you equity portfolio is £1mm then in reality you're effectively 27% equities:73% long-duration Gilt linkers. We can argue the numbers to some degree but I doubt you're anywhere near 100% equities.
It's very easy for those on large DB pensions to take aggressive amounts of risk. They essentially have a "floor and upside" strategy where the DB pension provides the floor and equities provides the upside.
For the vast majority of those in the private sector there is no floor. Taking 100% equity risk is then rather risky, even 15 years from drawdown.
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