The following article, which is an interview with Barry Norris of Argonaut Investments, is a controversial but very interesting read.
Personally, I don’t think we will truly know the answer to this question for some years to come but is easy to imagine how governments around the globe the world might have felt pressured into taking extreme action through fear of recriminations and enormous political damage if they were not seen to do enough.
Interview with Barry Norris of Argonaut
The UK Government's decision to implement a lockdown was one of the "biggest policy errors since 1914", according to Argonaut's Barry Norris, who believes "thoughtful debate" on the Government's response to the pandemic has been "shut down" and that "following expert opinion blindly" is "normally the road to ruin".
The manager, who runs the FP Argonaut Absolute Return, European Alpha and European Income Opportunities funds, believes the UK Government has been "talking to the wrong experts" in terms of how best to deal with the pandemic, and believes a Sweden-style approach would have been more beneficial for the country from both an economic and societal perspective.
As such, he has taken out shorts on "essentially all vaccine developers", although he is still cautious on retail and leisure stocks given the potential long-term impact lockdown will have on their revenues and business models.
"The economic data as a result of this crisis makes 2008 seem like a small blip, so for a fund manager not to have a view on lockdown and the policy response to Covid would mean we are not doing our jobs," he reasoned.
"Somebody asked me the other day whether I was just an armchair epidemiologist. The answer to that is I am an armchair everything, because I have never worked in any of the industries I have invested in but that doesn't stop me from gathering what most people would regard as an informed opinion on those industries.
"Also, having been a fund manager and listened to lots of industry analysts, I can tell you that following expert opinion blindly is normally the road to ruin."
In Norris's personal view, it became "bizarre" how many people "seemed to enjoy lockdown" and therefore "willed" Sweden - whose prime minister Stefan Löfven decided not to impose a lockdown - to fail.
According to statistics from the European Centre for Disease Prevention and Control dated 18 August 2020, Sweden has had 85,045 recorded cases, 5,787 deaths and 4,033 new cases of Covid-19 in the last 14 days overall relative to a population of 10.2 million.
In the UK, there have been 319,197 recorded cases, 41,369 deaths and 13,574 new reported cases over the past fortnight, relative to a population of 66.7 million.
This means that 0.057% (to the nearest three decimal points) of Sweden's population has died from coronavirus, while 0.062% of the UK's population has died as a result of Covid-19.
However, it should be noted that each country has varying measures in terms of how many tests have been administered and how their death rates have been accumulated and calculated.
Population density (the UK has 275 people per square kilometre and Sweden has 25.4 people per square kilometre) and demographics (the UK population's average age is 40.5 and Sweden's average age is 41.2) must also be taken into account, alongside numerous other variables including socioeconomic data and the underlying health of both populations before the crisis.
Norris believes that a large percentage of Sweden's deaths occurred in care homes after people who became infected with Covid-19 were moved there, and subsequently passed the disease onto people with weaker-than-average immune systems.
"If you look at the number of deaths in Sweden aside from care homes the number is pretty similar to a normal flu season," he argued.
"Sweden has probably reached a kind of herd immunity already, so therefore society in Sweden can return to normal.
"Economic growth in Sweden contracted by 8% in Q2 which is obviously still a disaster, but that is predominantly because the rest of the world shut down their economies.
"The American economy contracted by 33% and the UK economy 25% because of lockdown policy."
He added: "There is a trade-off between the economic devastation and the public health benefit, but I don't believe there was any public health benefit.”
"In fact, one of the problems of lockdown was that health services became almost a Covid-only service."
Norris believes the UK Government initially sought to follow Sweden's lead, but Prime Minister Boris Johnson "bottled it" for fear of facing tough allegations from mainstream media.
"Boris was told, if he didn't lock down, journalists will ask him on national television to accept responsibility and apologise to the families of those who have died as a result of Covid-19, because the rhetoric would have been that is was his fault for not locking down," the manager continued.
"Now, they cannot admit that they have made a mistake because it is about saving face. The entire world has been hoodwinked by the initial diagnosis of what Covid-19 was and its severity, and that is why I think it is a fraud.
"I have thought long and hard about whether to use the word 'fraud', but in our lifetime, it has been the most significant negative event for the global economy since WWI, and the biggest policy error since 1914 when the Austrian Archduke was assassinated in Sarajevo."
Despite believing lockdown was an unnecessary measure, Norris believes its impact will be felt across economies over the long term, and in some instances, permanently.
"If you accept my version of the truth, it might be tempting to buy every single airline and cruise ship operator because lockdown has happened once and it won't ever happen again," he said.
"However, that doesn't mean that even if the population's consensus on Covid changes overnight, the government will suddenly throw its hands up and admit to making a mess of this.
"They could even end up doubling down on their policy error. They have potentially become prisoners of their own propaganda.
"You have seen this through random quarantines and the bizarre introduction of face masks. There will probably be future policy error as well."
As such, the manager has shorts on severely-impacted stocks such as Cineworld, as well as holdings in the high-street retail and travel & leisure.
"Industries such as shopping malls are not going to survive lockdown, period," he said.
"With travel stocks, they will spend a whole year without revenues so these will need to be recapitalised, thereby diluting the shareholders through new capital."
"I also think there has been a permanent cultural shift in terms of working from home, which means office properties will continue to struggle.
"It also means we are very bullish on UK housebuilders though, given people will be spending more time in their homes."
That said, Norris holds long exposure to "one or two" airlines which, while they may not do well "over the next few months", have the propensity to be "long-term winners".
Elsewhere, he is short "all vaccine manufacturers" as he said the companies involved have "never brought a drug to market before", and that when a vaccine is approved for widespread use, it will work less efficiently than many people expect it to.
"The mortality rate from patients hospitalised from Covid has fallen significantly and the way they are treating patients in hospitals is through cheap drugs, such as anti-inflammatories or blood thinners - these drugs don't cost a lot of money," the manager argued.
"You have to wonder about the lobbying element among pharmaceutical companies, which obviously do not want solutions for Covid-19 to be cheap, generic drugs, because that will mean a struggle in terms of profit margins.
"I sound like a big conspiracy theorist but I don't categorise myself as that - this policy move and the inability of the government to admit what has happened - it really is that extreme."
I did say it was controversial and as to whether Norris is right, only time will tell.
I hope you have found this communication of interest but if you have any questions, please do not hesitate to contact me at any time.
With best regards,
Yours sincerely
Graham Ponting CFP Chartered MCSI
Managing Partner
