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  • Christian Armbruester

Dumb Money

Why 2020 taught us that it is much better to be lucky than smart.

It’s amazing how quickly fear turns to greed. In March, we saw the depth of human despair as the virus took hold of the entire world. In November, we had the biggest month for equities since 1928! We all know what happened the year after, but the hope is that 2021 will be different. The US elections are behind us (sort of), Brexit is over (almost), and there is a vaccine (allegedly) to fight the virus. For sure there is light at the end of the tunnel for the first time in a long while. So, looking back upon a tumultuous, trying, and testing year, what are the lessons we should take away from 2020?

For one, we are all the same. COVID-19 did not discriminate amongst people, sectors or regions. It could happen to anyone, anywhere and at any time. All of a sudden, there was no more of the things we used to do and had always taken for granted. No more going to the shops, no more travelling, and nowhere to go out and eat. It changed things, made us look differently at our lives, and all that we went through may lead to a permanent transformation of our societies. Can you even imagine a life without Netflix, Amazon, Ocado, Deliveroo, or whatever it is we now do from the comfort of our homes?

Two, it seems all that I learned over many years about finance and economics was for nought. The risks and rewards have been so utterly skewed this year, that any model seeking answers in the way things make sense no longer works. We have had more bankruptcies than in the last financial crisis, the highest number of unemployed since the Great Depression, and we created more debt in the history of the world. Yet, financial markets are making record highs, valuations are through the roof and interest rates are at all-time lows. With the benefit of hindsight, maybe textbooks in twenty years’ time will explain why pigs do indeed fly. For now, it is highly advisable to stop trying to make sense of it all. Lest we forget, someone will have to pay for it all.

Finally, being clever has got nothing to do with it. Even the best restaurant, with brilliant food, awesome staff and a great business plan, went bankrupt this year. There simply is no way to prepare for everything, and there is only the right place or the wrong time. I guess, nothing could sum up 2020 more than the rise of Tesla, which brought much joy for people who thought a stock split means there is a discount in the share price. Meanwhile, the smart money lost more than $25bn trying to go the other way. Ignorance has truly never been more bliss and a Happy New Year to you all.


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