I presume you have all been reading the news and followed the excellent posts of Tomas Puey on why politicans and business leaders must act now (you can help by staying at home) and what the next 18 months can look like if our leaders buy us time. There is another interesting comparison from the same team that gives you the general idea: If you make a mess early on, you have do some heavy cleaning up afterwards.
Fascinating comparison of measures taken by different countries vs. #coronavirus
Takeaway: If you don’t do your homework early, you pay later. And some countries are still in denial… (US, UK!)
Ongoing work from our team. Send similar sources /corrections if you have them. pic.twitter.com/QuudkTTCzd
— Tomas Pueyo (@tomaspueyo) March 22, 2020
This brings me to this weeks title picture, which is not as far fetched as you might initially think. It’s the depiction of “the drunkard’s progress: from the first glass to the grave“. We are no opponents of some moderate drinking and there might be a chance for everyone in the current situation to either improve his drinking and/or cooking skills:
Half of us are gonna come out of this quarantine as amazing cooks and the other half is gonna come out with a drinking problem. There is no in between
— Mat (@matchu_chutrain) March 19, 2020
But I’m straying from the topic. The drunkard’s progress pictures the rise, summit and fall of mostly men overindulging in drinking (come on, there is no proof that men tend to drink more…damn). It is an organized effort to encourage moderation or abstinence from alcoholic beverages. I must admit that my first thoughts when I saw that picture where not on drinking, but on the business cycle and the current crisis. While the average business cycle takes on average around 4.7 years and an economic bubble apparently has five defined stages, the drunkard’s rise and downfall is compromised of 9 steps with no defined length. But there are similarities, such as initial exuberance, a peak where people are drunk (on performance highs) all the drunken people claim that nobody is drunk (except the usual teetotalers and doomsday enthusiasts) and the inevitable downfall. However, while for the drunkard there seems to be a defined end, the economic business cycle starts again and sometimes creates the ground for extraordinary time periods. For example the renaissance after the Bubonic Plague of 1347-1350 (just to spread some hope).
Another interesting anecdote is that so called “sin” industries seem to outperform the overall market during bad times:
Even though sin stocks are unique because of the addictive nature of sin consumption, they are only as recession-proof as some other industry-comparable stocks. However, I find evidence that sin stocks still outperform the overall market during bad times, meaning that socially responsible investors pay a financial cost when avoiding these stocks because of social and ethical criteria.
So instead of talking about ethical investing, it might be the right time to get into alcohol, tobacco and adult entertainment, as these stock are more tilted to the value factor. Regarding the adult entertainment you should probably limit yourself to the online alternatives as industries with physical contact might face a few obstacles at least in the near future. On the other hand, in times of lapdance drive throughs and nude hand sanitizer wrestling there might be new areas of business we never thought of before.
By the way, during the time of the black plague the word “quarantine” (quarantena, meaning forty days) originated in Venetia. Venetians were a little bit harsher during that time and just sent the infected to an island. Mostly to face a very certain end like our drunkard. So staying inside, having food and plently to drink as well as a more or less stable internet connection does not sound that hard, right? In that sense, keep your head up and #happytrading.