A large part of the nation currently seems to be reading Claire Tomalin’s biography of Samuel Pepys. We are too. But my attention has been grabbed not so much by his experiences in the Great Plague as by the aftermath of the Great Fire, which he also survived.
The shock of the fire prompted all sorts of grandstanding. Take the rebuilding of the city. No one wanted to go back to the messy jumble of a fire hazard they had lived with before. Everything must change they said. A Rebuilding Act was passed stipulating that all new buildings had to be constructed of brick or stone. Splendid plans were produced of grid systems with church-filled squares and of long wide streets with plazas and a huge terrace on the Thames (this was Christopher Wren). None made it past the drawing board. Instead, driven by individuals wanting to get back to normal life, London rebuilt itself in “roughly the same shape as it had burned down,” says Charlie Lawrence Jones on CityMetric.
This is, I think, a pretty good metaphor for what will happen post lockdown. We have heard endless grand plans for the fixing of society one way or another over the last few months. There might be a bit of this. Perhaps there will be some improvement to our welfare systems and with a bit of luck to the management of our healthcare systems. Perhaps we will work from home more – although the extent to which anyone wants to do this will depend on how nice their home is and how well they already know their colleagues. And perhaps some of us will even move out of the cities temporarily (25% of London’s newly homeless did so after the Great Fire). But overall, odds are that even as governments bicker over grand improvement plans, ordinary people will return to post-Covid lives that have roughly the same shape as their pre-Covid ones.
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There is no alternative
One thing that definitely seems to be sticking with its shape is the stockmarket. For years now we have been being told that with yields non-existent and world’s central banks increasingly keen on money printing, there is no alternative to being invested in equity markets. That seems to be the case again (Bill Bonner has some ideas on in this week's magazine how modern markets reflect anticipated intervention rather than anticipated revenues). If money is going to keep pouring into the system – James Ferguson of MacroStrategy Partnership notes that the Fed has already produced as much QE in this crisis as it did over six years of the GFC – and rates are to turn negative, what are the options? (If you want to hear more from James, listen to this week's podcast)
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Quite. You might want to invest via funds that give you exposure to gold and silver given the inflationary risks of extreme fiscal and monetary policy. Otherwise, big tech remains an option (this week, we explain why to buy Microsoft) as perhaps do European banks (I’m not sure I am convinced on this one yet). Committed contrarians might try Wetherspoon. Otherwise, given how we expect governments to bump up spending even more, long-term investors should look at infrastructure.
Finally, on a less monetary note, if you need a staycation after lockdown, how about Durham? It’s been in the news lately for the wrong reasons, but once that passes, it will again be remembered as a particularly beautiful city that everyone should visit at least once.
