Panic Journal Season 2 – Year End edition: “This time was different”

While I am writing this, the first vaccine shots have been being provided in Germany already yesterday. Despite a relatively strict lock down including a curfew from 9pm in my home town Munich, in general the mood seems to a certain extent upbeat compared to a few weeks/months ago. Time to do a “2020 Covid-19 recap” with another installment of the “Panic Journal”. 

Recap: This time was different

At first, like many “Westerners”, I thought that Covid-19 was not our problem. Like SARS in 2002/2003, MERS in 2012, Ebola 2014-2016, Zika 2015 or the Avian Influenza , this again looked like a “Third World problem”, where the Third World includes China. The first documented cases in Germany at car supplier Webasto seemed to have confirmed this: The infected persons were identified quickly, isolated and all recovered pretty fast. Webasto actually issued a press release in early March that all infected employees were healthy and eager to go  back to work. So “Business as usual” with this “Exotic virus scare”.

Looking back, I think the picture changed drastically with the pictures from the Italian town Bergamo which triggered the first lock-downs and in parallel the dramatic drop in the stock market from mid-end of February. In pretty short time, everyone went in to full panic mode. People suddenly realized: This time it’s different. This one doesn’t stay in the Third World (where it belongs…..) but is already among us.

Available numbers especially from Italy and China were interpreted out of context, such as “case fatalities” which showed both in Italy and China that up to 10% of people who tested positive died. In this first few weeks of March, it was really really hard to get a grip on what was actually going on. How does the virus spread ? How deadly is the virus etc. etc. 

Some people claimed that there will never be a vaccine because so far there was no vaccine against Corona viruses etc. Then two things happened: As often, US authorities acted quickest, with the Fed leading the emergency measures supported by a big stimulus package from the US government which was followed by similar measures around the world.

Secondly, especially in the hardest hit areas, the lock down showed its effects and infections declined, also aided by the arrival of spring. In addition, more and more studies painted a more realistic picture: Although the virus was highly contagious, “only” 0,5-1% of the infected persons died, compared to estimates of 10% or more in the beginning.

In summer it really looked like that “after the hammer“, the whole Covid-19 thing was pretty “easy dancing“, despite warning from virus experts that the next wave in winter might be (a lot) worse. Unfortunately this also lead to pretty careless behavior of the population.

Then in late autumn, es predicted by the experts, the second wave hit in Europe and it looked worse than the first one. Europe went into (soft) lock downs once more and even the markets were starting to crumble away, also because it looked like that Trump might actually win again.

Then one week later, people suddenly “could see the light”: Biden won the election and Pfizer/BioNTech announced the very convincing phase III result and promised that the vaccine is ready by year end. And they delivered. Plus, just a few days ago even the hard Brexit could be avoided via a last minute agreement between the EU and the UK. Even news on some form of mutation of the virus could not stop the positive sentiment especially in the stock market.

Where we are now and what is next ?

The famous saying is that predictions are especially difficult if they relate to the future. This here is no different. So maybe let’s start what we have learned so far:

  • Covid-19 was not a black swan but a maybe a “grey swan”. The first world was so far lucky not to get any of these predecessors
  • However, with mRNA humanity now seems to have a technology to develop and produce vaccines in very short time. It will be interesting to see what else they can tackle with mRNA technology.
  • Many businesses managed it pretty easily to function with a fully remote workforce. 10-15 years earlier, this would have been a much bigger problem
  • Interestingly, the often mentioned wonder cure actually existed in the form of a very expensive and rare antibody treatment, however only the US President and his close friends seem to be able to access it (this explains maybe also the mask thing)
  • The World’s big institutions prevented a economic meltdown by a coordinated effort of Central Bank and Fiscal stimulus
  • Especially the fiscal stimulus was very generous. In the US, many stimulus recipients made more money being unemployed that they made when they were actually working. In Europe, for the first time a European stimulus with European funding was agreed
  • Especially in Europe, bankruptcies were actually lower than in previous years as the Governments either helped directly via loans (Lufthansa, TUI) and/or suspended bankruptcy laws
  • In most countries, a surprisingly large number of people did somehow either not believe that the virus exists or thought that they need to show their general anger by demonstrating and/or not following emergency rules. This was supported by politicians like Trump and other “trump like” populists like Bolsanaro, BoJo etc.
  • Within the economic sectors, there were huge winners (everything digital, home improvement etc.) and big losers (Malls, Hospitality & Leisure etc.) 
  • Overall stock markets priced in many factors (probability of vaccine, who gains who loses) quite rapidly after the “crash”, long before the public opinion came to more or less the same conclusions which led of course to the interpretation of a “disconnect” between the stock market and reality. AT the time of writing I would say that the market was actually quite efficient, with the exception of some “bubbly” areas such as SPAs, EVs etc.

 That leaves us with the big question: What will happen in  2021 ?

  • There is clearly a chance that in 2021, once again “animal spirits” will kick in in full force and people will keep spending and businesses will once again start investing, creating a big demand push which will then turn into a massive economic rebound
  • However there is also a certain probability, that all the problems that were deferred into 2021 will actually hit in full force. Part of the European economy was already in recession in late 2019 and might not be saved by an rebound 
  • On a more granular level, it is still not clear how many doses of vaccine will be available at what time. If for instance Southern Europe would miss one more tourist season because of a slow vaccination process, things could become really difficult there. I also expect that a “vaccinated status” will allow people to do certain things that “non-vaccinated” people can’t do. The pressure from the economy to allow vaccinated people to behave “normal” is just to big and long distance flights will only be the beginning
  • However the big open question clearly is: What scenario is priced into the market with what probability ? This is clearly something that we will know by the end of next year

Again the question: Permanent effects ?

For me it is still not clear what the permanent effects of this “episode” will be, however I am sure that there will be longer lasting effects. As I mentioned sometimes in the past, it is not too smart to look at ones own behavior and then conclude that everyone else.

However working from home is clearly something that will stay for those who can actually do it. Yes, if you are a super ambitious career guy/girl, you will go back to the office every day. But for everyone else, especially people with family, working from home or another “non-office” location will stay to a certain extent. This was a trend that has been there already and especially with younger colleagues I observed the wish to work from different locations already a few years ago. Being at home on average 2 days a week for a majority of office worker could have a major impact on everything from office rents to downtown businesses, transport, business travel etc. etc. 

Also the push into digitization will not be reversed. E-Commerce is here to stay and retail needs to become much more creative to pull back customers. A super interesting area in my opinion is the energy sector. The economic slump has hit the already beaten up oil companies a lot. Will they benefit from a rebound in oil prices or will the “Electrification + Green energy revolution” supported by multi-billion Government support packages finish them off for good ?

While writing this, it becomes clear that I have no answers but even more questions. To me it is also clear that at this stage, looking back into history and saying: “After a pandemic, this and this is going to happen (Inflation, GDP, technology etc.)” doesn’t make a lot of sense. There are so many unique factors at play that things, as with Covid-19, might be really different this time. 


Somehow, almost every year end review for me ends with an in principle cautious but positive outlook. There is clearly a case for a strong recovery and maybe another bull market, but there are also significant risks and not every sector will “revert to the mean”.

Therefore my strategy will remain at it was in the past: Don’t try to time the market, invest into strong companies with “adaptive” leadership and focus on the future.  









  • Thanks for the long comment. Allow me a few replies:

    -“dead percentage”. Please provide a link because the number you state seems to be off a long way from reality and your arguments are “close to alternative facts” to be friendly.
    – “E-Commerce is just another distribition channel” – no, it is not. It is a very different business model for most traditional businesses (D2C). Those who don’t get this are in deep trouble.
    -oil/EV: Good luck with your trade, i do not know that ticker and I am not interested. I see it VERY differently in the mid- to long term. I am not interested in the short term
    -“Times are never different” – To keep it short I only use one counter argument: Vaccine.

  • “Although the virus was highly contagious, “only” 0,5-1% of the infected persons died, compared to estimates of 10% or more in the beginning.”

    No, the dead percentage is 0.05% according to the world health organisation. That is a 10 x lower percentage level than what you write, on a par / lower than the common cold flu. The real factor to watch is that covid is highly contagious, far more than the common cold flu. That is why far more people are dying from covid than from the flu, depending on the period you look at. The Spanish Flu killed 50 million people worldwide in 1918 to 1920. Covid-19 is not even above a couple Millions in one year. Wearing a mask slows this transmission down, but does not end this, especially when lots of masked people go to a forbidden “masked ball” or Christmas celebration. Only vaccins will contain that transmission rate, since the contamination levels then will collapse, making covid a very manageable disease down the road.

    ” Also the push into digitization will not be reversed. E-Commerce is here to stay and retail needs to become much more creative to pull back customers. ”

    Of course E-commerce is here to stay. That is simply another distribution channel for any seller, making them increase their sales. But when I go street shopping, and see all those ladies clogging the fashions shops, and all those people standing in a row to be able to enter the many other field based retail outlets, I suspect that there is a big difference between what is being written in the press and the reality in the field. I trust my eyes more than what some ‘journalists’ are putting out. That is why I bought ASC.BR at €42.6, it is now up to >€47 as we speak, and I get a 8% gross dividend to boot.

    “A super interesting area in my opinion is the energy sector. The economic slump has hit the already beaten up oil companies a lot. Will they benefit from a rebound in oil prices or will the “Electrification + Green energy revolution” supported by multi-billion Government support packages finish them off for good ?”

    Well, I bought RDSB.AS at €11.7 / share, we are now above €14, I will sell them above €30, while cashing the fat divs in between. RDSB has been hovering between €20/30 per share for a long time (so much for so called beaten up oil companies), before the sudden covid “beating”. And RDSB + their colleagues are forecasting a bonanza next year (2021) or at the latest in 2022, because they closed down many large capex projects, which will significantly decrease future crude oil production levels, while demand is now clearly rebounding (massive air travel demand resuming, boat cruises resuming, diesel freight trains in USA/India/China etc increasing strongly, etc), which is indicated by the WTI and Brent price per barrel having risen by 20% in a couple of months, since the vaccins have been shown to work and are deployed. The market is always right, and the market is now already indicating a future shortage of crude oil thru its price increases. And concerning the EV craze, let’s call a spade a spade. China, the largest EV market who is pushing EV’s like crazy thru many incentives, sold 144 000 pure EV vehicles in Q3 2020, while selling a couple Millions internal combustion engine vehicles in the same time span. I predict that in 2022 at latest, the world will face a temporary shortage of crude oil, due to the above mentioned capex freeze by oil majors. And they then will mint money like midas. Their share price will then strongly rebound. Maybe buy some BP, Total or Shell right now for a good trade, while shorting Nikolas, Tesla and the many Chinese EV sellers quoting at stratospheric share prices ?

    “There are so many unique factors at play that things, as with Covid-19, might be really different this time. ”

    Times are never different, since we humans and our natural instincts and behavioral approaches don’t change. Some things will become extinct, new things will emerge, most of the things will remain as they are (we need to eat, sleep, be distracted, fuck around, be dressed up in the summer heat or freezing winters, drive around, and so on, whatever the century we are in). The smart investor will spread his investments over enough varied instruments and sector and relatively safe prospects. This to avoid systemic ruin from one investment going bankrupt. While slowly trying to increase his money pile in a relatively safe way. Until his/her final breath, which is what await us all, from ashes to ashes, with a beer or a chocolate in between. Have a nice day, Sir, and I wish you a merry christmas, happy new year celebration, and especially strong health which makes all the rest possible.

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