Turning Point

 5 December 2020

Dear Fellow Investor,

Turning Point

I just finished Wealth, War and Wisdom by Barton Biggs who spent 30 years at Morgan Stanley and was the firm’s leading global market strategist.

He details examples of major market turning points since the beginning of the 20^th century.  One example was the Japanese attack on Pearl Harbour, Hawaii on 7 December 1941. The Japanese had been winning major battles and had taken Singapore, Malaysia, Thailand, Philippines, parts of China  and most of Asia. They were even planning to invade Australia.  Their military forces had the best armaments and equipment and seemed unstoppable.  They were winning battle after battle. They conducted a sneak attack on Pearl Harbour inflicting major damage by killing over 2400 sailors and civilians  and sinking 20 naval ships.  The next day President Roosevelt declared war on Japan and with strong public support and a powerful manufacturing base the tide of battle began to turn.  General Motors, Boeing, Tampa Shipyards and Ford began to produce vast fleets of tanks, bombers, ships  and fighter jets. The battle of Midway  in May 1942 was the turning point in which a good part of the Japanese navy was destroyed.  Now America had a clear path to bomb Japan. That was the bottom of the Dow Jones, the top of the Japanese stock market and the beginning of an 8 year Dow Jones rally. At the time there was great uncertainty and hardship.  There was a military draft and thousands of troops went to war many not returning. There was rationing and austerity. On a positive note, much stimulus was created by the government and there were jobs for all who wanted to work. This stimulus boosted markets.

Now we are at a major turning market point. In the relatively short time of less than a year vaccines have been developed to stop Covid 19. Among the vaccines are Pfizer and BioNtech who have recently passed safety and efficacy tests in the UK.   This vaccine is due to be rolled out next week to millions of UK citizens.    China and Russia have also developed vaccines which are now in use. The whole world has been marshalling stimulus and scientific resources to solve the pandemic.

Stock markets being forward looking have reacted positively and benefit from the stimulus and the chance for an end to Covid.

For one, an effective vaccine will get people back to work, end lockdowns and support the service industries.  Travel, hospitality and the restaurant business will recover.

Characteristics of a turning point are uncertainty and scepticism and this is opportunity. Some shares have yet to recover and this is a low risk chance for us.

Weekly EWH, Hong Kong ETF traded on  NYSE

Hong Kong has recovered over 20 % from March lows on positive vaccine news and China recovery. Singapore, Thailand and Malaysia are also recovering.   

Take care

Bill

Cher rescued Kaavan the lonely elephant who has been alone for 38 years in a zoo in Pakistan.  Cher found an elephant sanctuary for him in Cambodia to enjoy the rest of his life with fellow elephants.