29th June 2020

The unpalatable truth and why we are being very cautious
Article by Patrick McIntosh, [email protected]

If you can read all the way through this it may help your understanding. There is a good ending …. eventually!

We are privileged to have a client base which allows us to talk with some of the world’s most influential, important and sensible humans, most of whom are working behind the scenes and one of whom you see on your television screens reasonably regularly.

As a consequence of those conversations, and because the age-old adage states that one should “make hay while the sun shines” we have decided to defer deploying the substantial amount of cash that you are holding in your portfolios to make sure that we can all live through the consequences of the pandemic and the outcomes of the virus which remain uncertain.

Markets are remarkably buoyant, and it is gratifying that portfolios have recovered to their values seen a year ago and even made some modest gains. This means that if we see another significant correction then two things are in place:

  1. The values of your portfolios may fall but should then recover just as quickly because of the repositioning in our asset allocation, and we have built up a head of steam to cope with sudden falls and fluctuations.
  2. The cash that you are holding can be put into the market to buy under-valued assets that may become available and thus build strength into the future.

But we remain nervous about the future.  Inflation remains in our minds because although there will be little inflationary trend in the next few months, the velocity of money and the liquidity within global markets may trigger a remarkable inflationary trend in two- or three-years’ time.  So, we make no apology for our defensive position, but we must all accept that if markets do not fall again and recovery continues then there will be a little bit of lost gain in the near future.

Figure 1 – Inflationary? The scale of monetary intervention has been significantly larger and more aggressive than following the financial crisis

We see one of two possible scenarios playing out:

  1. Do we accept a long and drawn out form of lockdown over the next two years while we all get tested and vaccinated? In this case ignorance, confusion and misrepresentation may continue and trust in us all remains very fragile while a new way of living emerges and the social implications of the “haves” vs the “have nots” become manifold and dangerous. Or
  2. Do we allow mass infection by a gradual unwinding of lockdown?  This will cause an increase in the current death rate but in the scheme of things it may not be catastrophic.  Do we allow humanity to drive its way through the crisis with obfuscation, ignorance, confusion, and misrepresentation and allow a new way of living to emerge pretty quickly?  This may include social tensions and a “levelling up” of society, allowing self-determination to evolve naturally so that life can return to some sort of normality with acceptance that this virus is just part of life’s rich pattern of evolution. 
Figure 2 “the haves vs the have-nots” – quantitative easing since the global financial crisis has increased inequality by boosting the prices of assets which were mainly owned by the wealthiest

Medical background

The following synopsis of information has been passed on to us by a range of people who we respect and who have significant knowledge of the pandemic.  We hope you will glean some useful information and that it may help your understanding of the future for yourself as well as for your investment portfolio.

If it is reasonably proven that the virus has little effect upon those who have high levels of T-cells in their blood, this would then probably explain why the herd immunity rate in humanity may evolve at lower levels than was previously reported.

It appears to be the case that children not only rarely get infected but more importantly do not carry the virus to infect others because their immune system appears to destroy the virus; thus there is reduced possibility of infection from young to old people.

Image by Beth Lowell from Pixabay

What appears to be happening is that the older you get the lower your level of T-cells and therefore the greater the possibility of both infection and either mild or reasonable illness.  In America, for example, there is a significant increase in infection because they are not obeying social distancing rules however the incidence of death is not increasing proportionately because the vulnerable are self-excluding. This is quietly allowing a reasonable level of herd immunity to pass through America.  

On the other hand the extreme example of New Zealand where the infection rate has been almost zero means that at some point they will have to accept an infection regime unless a vaccine can be found before they unlock the country to international travel.  Given the evidence in Sweden, New York, and cruise ships, let alone the trajectory of the infection rate in general around the world this does not seem to be an unreasonable extrapolation of information from what we know so far.

If the above paragraphs are reasonably accurate then the next step would be to track and trace, identify and isolate those people who have low levels of T-cells be they black or white, old or young, sick or infirm, overweight, diabetic, etc.  This would allow the rest of humanity to revert to some sort of normality as herd immunity will allow the virus to subside (as it has with SARS and MERS) without causing undue death and suffering amongst the population that does have high levels of T-cells.  The nub of the problem then becomes finding a vaccine to protect the people who are reasonably established as having low T-cell levels (see below for more details on T-cells).

If it is true that science has yet to establish the DNA of the virus, we cannot create a vaccine that does not aggravate white-cell productivity.  We know that white cell over-production in those with low levels of T-cells is what leads to organ failure and suppressing this reaction in vulnerable people is extremely challenging.  Now there appears to be little evidence that a reliable vaccine will be available for the vulnerable people as identified above in the foreseeable future.  For most of us, however, vaccines that are coming along should be effective.

Bringing together the possible current understanding about antibody tests (see more below) with the possible understanding about T-cell immunity the conclusion is as follows: we need to  establish those people who fall into categories which are likely to have low levels of T-cells in their blood and ask them to get tested so that they can be warned to be more careful and self-isolate until a reliable vaccine can be established.  We then allow the rest of humanity to get back to some sort of reasonable normality.

What is the alternative? 

Alternatively, unlock humanity and allow the herd immunity evolution to work its way through the vulnerable population with low levels of T-cells, and gear up the health services and infrastructure required to cope with the inevitable outcome of a significant (but not catastrophic) effect on the population by allowing the virus to effectively stabilise in the same way that all other flu viruses generally tend to evolve.

The trouble with this route, as the Swedes and Brazilians have now discovered, is that it is politically very challenging and most likely to destroy any governments’ chance of re-election.

Herd immunity and lifting lockdown: here is some science

An article published recently in The Lancet reveals that at the time of the decline of the COVID-19 pandemic in Switzerland, about one in ten people had developed detectable antibodies against SARS-CoV-2.

The study used population-based serosurveys among 2,766 people and estimates that the overall seroprevalence* increased from around 5% to 11% of the population over the 5 weeks of study.   This research paper suggests most of the population of Geneva remained uninfected during this wave of the pandemic.  Assuming that the presence of Immunoglobulin G antibodies is associated with immunity, these results highlight that the epidemic is far from burning out simply due to fewer susceptible people in the population.  The authors caution that these findings should be considered as countries look towards easing restrictions.

*Seroprevalence is defined as the number of persons in a population who test positive for a specific disease based on serology (blood serum) specimens; often presented as a percentage of the total specimens tested or as a proportion per 100,000 persons tested.

Positive identification of disease occurrence is usually based upon the presence of antibodies for that disease (especially with viral infections such as SARS-CoV-2). This number is not significant if the specificity of the antibody is low as it is in COVID-19.

Virus identification: The full genome of SARS-CoV-2 was first posted by Chinese health authorities soon after the initial detection, facilitating viral characterization and diagnosis. 

US researchers analysed the genome from the first US patient who developed the infection on January 24, 2020, concluding that the sequence is nearly identical to the sequences reported by China.  SARS-CoV-2 is a group 2b beta-coronavirus that has at least 70% similarity in genetic sequence to SARS-CoV.  Like MERS-CoV and SARS-CoV, SARS-CoV-2 originated in bats.

Image by Daniel Roberts from Pixabay

Finding a vaccine: The research groups across the world are developing different types of vaccine.  The Jenner Institute and Oxford Vaccine Group clinical teams are developing a ChAdOx1 nCoV-19 vaccine based on an adenovirus vaccine vector and the SARS-CoV-2 spike protein.  Accurate understanding and replication of the virus genome is important to any successful COVID-19 vaccine.  

But note, Chief Scientific Adviser Sir Patrick Vallance said: “Just to put some realism on vaccine development, each single project does not have a high probability of success.  So, although everyone goes out with great enthusiasm, and we hope they work, it’s never the case that you know you’ve got a vaccine that’s going to work.”

Importance and relevance of T-cells:  A T-cell is a type of lymphocyte which develops in the thymus gland and plays a central role in the immune response.  T-cells can be distinguished from other lymphocytes by the presence of a T cell receptor on the cell surface.  These immune cells originate as precursor cells, derived from bone marrow, and develop into several distinct types of T-cells once they have migrated to the thymus gland. 

Helper T-cells, regulatory T-cells and cytotoxic T-cells are three broad categories and their functions include direct attacks on bacteria, viruses and foreign tissues and producing substances called cytokines that direct responses and activities in other immune cells.  A T-cell is a type of lymphocyte or white blood cell which is involved in the function of the immune system.  T-cells can bind to various cells in the body to kill off infected cells and attack antigens which could cause someone to get sick.

Lastly, do remember that for most vaccines the immune system in older adults, particularly those over 70, does not make such good responses.  Thus, protecting this group of people becomes much harder, especially if cardiovascular disease, diabetes, cancer and breathing diseases (asthma and COPD) are also complicating patients’ overall health.


The probability is that a vaccine will be effective for the vast majority, around 80%, of the population.

Getting a 100% vaccine solution for all age groups and all medical conditions is very unlikely.

Remarkable discoveries are being made in treatments such as the very cheap and simple Dexamethasone. These treatments will significantly improve the chances of most people surviving the virus whatever their circumstances.

Evidence suggests that false positive antibody testing is negligible and while there is still significant confusion about false negative tests we suspect that during the Autumn, if not before, we will have much more efficient antibody testing systems that will be able to identify the virus in people quickly, cheaply and efficiently.

It is all about time, human behaviour, and acceptance. The world will move on.  It will recover and however uncertain the next six months may look, the next five years look remarkably positive in solving all sorts of amazing issues:

  • Improving the quality of our food and our diets
  • Dramatically reducing carbon emissions and reducing climate change risks
  • Vast amounts of money being printed and pumped into the global system will ultimately expand the global economy, improve our quality of life and, we suspect, will level-up the imbalance between “the haves and the have nots” as we all realise that we must live together and look after each other.