How Charlie Morris survived nine past crises, and plans to survive this one

“If you’ve seen one, you’ve seen ‘em all.”

While this old saying may be true of Marvel films, it sadly does not apply to financial crises. They never arrive exactly the same way as they have in the past – even if the falling stock prices and the devastation felt by investors are similar.

For Charlie Morris over at The Fleet Street Letter Wealth Builder, this will be the tenth crisis he’s experienced as a professional fund manager. The experience he’s gained isn’t the kind you can pay for, or learn from a textbook, but he wrote up a synopsis below which I found of great interest.

Primary to what he’s learned is the importance of trusting the free market forces within economies to adapt to change… and to ensure that no matter the scenario, that you pay the right price for any asset you seek to purchase.

Charlie’s insights are always interesting – but right now, they’re more prescient than ever…

All the best,

Boaz Shoshan
Editor, Capital & Conflict


Just my tenth crisis…

I joined the stockbroking firm James Capel back in 1998, just in time for my first crisis. Asian countries had pegged their currencies to the US dollar, which had lower interest rates than they did. They took full advantage of the situation and borrowed cheaply in dollars and went on a spending spree. They did this because the link to the dollar was “guaranteed”.

But sooner or later, their national current accounts sank into negative territory and that put pressure on the system. Before too long, there was a shortage of dollars and they collectively devalued. The Thai baht fell by more than 50% while the Indonesian rupiah fell more than 80%. Asian stockmarkets collapsed.

At the time it felt like the end of the world, as Asia had been the engine of growth. Western markets fell, panicked by the knock-on effect, and investors wondered how we would ever recover. Problems in Asia spread and before you knew it, oil was $10 and Russia defaulted on its debt.

If you had invested £10,000 in the FTSE at the depths of the crisis, you’d have doubled it. Yet that £10,000 invested in the Thai stockmarket could now be £115,500, in Indonesia £154,700, and in Russia £474,500. Better still, most of those gains had been made by 2008.

That’s why the Chinese term for crisis comprises two characters: crisis and opportunity. Those bombed out markets were a great opportunity, but the gains took a while to come through.

More immediately, global technology stocks took off like a rocket. Tech was a fast-growing industry as the world became computerised and we started to dream over the possibilities for the internet. The US Nasdaq Index rose four-fold in a little over a year. You can see why I soon became hooked on financial markets. Not only are there gains to be made, but it’s a fascinating subject to follow.

Asia was my first crisis, which makes the Covid-19 crisis my tenth.

  1. Asia
  2. Dotcom bust
  3. 9/11 attack
  4. US corporate scandals
  5. Credit crisis
  6. Greek crisis
  7. Euro crisis
  8. China slowdown
  9. Fed rates
  10. COVID-19

Some crises were relatively shallow in comparison to others, but each one was terrible for something, somewhere. For example, the US corporate scandals of 2002 were barely felt in Asia. The Greek, euro and China crises were hardly felt in the US at all. Yet 9/11 shook fear throughout the world. We would never fly again.

Of course we did, and once again we’re thinking the same thing. I suspect airports will have a health screen alongside baggage checks. Think of the upside – we all get a free medical every time we travel.

The only thing crises have in common is that each crisis is different. There are no precedents for the current Covid-19 crisis, just as there never are for any crisis. If there were, there wouldn’t be a crisis because we would have a grasp of what to expect.

It is the uncertainty that strikes fear into the market. We have become used to recessions and financial panics, but this time the economic problem is self-imposed to save lives. We understand that and support it. But we have no idea what the long-term economic damage to the economy will be.

The most important thing is not to despair. That is much easier to say the tenth time as opposed to the first time. Once you trust the economic system, and its extraordinary ability to adapt to change, things become slightly clearer.

Did you see the Nightingale Hospital built in seven days? Is your local supermarket now close to being fully stocked? And not to forget the likes of the Mercedes F1 Team and Dyson turning their guns towards medical equipment. And guess what? They’ll do a great job, because making ventilators probably isn’t that difficult if you cast your mind to it.

In WW2, Britain was short of balsa wood for aircraft wings. A brilliant scientist found a substitute using seaweed from the UK beaches. Once you realise that there are thousands of brilliant minds out there, adapting the system is only a matter of time. That’s probably why crises don’t last for too long. Three years seems to be an outer limit, unless of course, there is a societal breakdown such as in Venezuela. 

Yet they do create fear because they present us with the unknown. After the corporate scandals, I couldn’t imagine how anyone would trust a set of accounts ever again. They probably don’t. At least I don’t. Yet they are still a useful guide as to what’s going on. You just take them with a pinch of salt.

For me, the credit crisis was the worst, because banks were collapsing around me, and I was sitting inside one. I felt the professional investors that weren’t inside a bank at the time had a huge advantage as they could look at the situation more objectively. We were in the thick of it, and you could smell the panic in the room.

With the benefit of hindsight, I have no doubt that I would have managed that particular crisis better had I been sitting outside the bank. Still, I didn’t do too badly and reduced a lot of risk early. The problem was that I was slow to buy at the end of the bear market. Why? Because just as the crisis was ending, from my seat, it was in full swing. 

The key point is that financial markets are not economies. Often, they get caught out when things go wrong. But when it feels terrible out there, they shrug it off. As soon as things are no longer getting worse, they may as well be better as far as markets are concerned, and prices rise. And there’s no better marketing strategy than a rising price; everybody wants to jump on board.

For me, this tenth crisis is no easier than the others. For starters, people are dying, which makes it all too real. Putting people’s lives and the financial markets into the same sentence feels wrong. As it should. That is, until you remember that the market has no such graces. All it cares about, I mean the ONLY thing it cares about, is how much money will this or that company be making in the future.

Once you accept the dispassionate nature of the situation, things start to make sense. It’s not evil, just ruthless. In that sense economies and ecosystems have much in common.

I find the best thing about being a professional investor is that the only certainty is change. You can never be complacent and never be overconfident. Financial markets move because millions of people shift vast amounts of money around the world each day, in search of profits. They want to own the profits of the future and that means they must find out when they are being made.

When you do, prices can soar ahead. But if you overpay, you lose anyway, even though the company did what it said it would. So you look for a bargain, and it goes bust… but then sometimes you nail it. You buy the right asset, at the right time and the right price. It’s a fabulous feeling. One we’ll get back when this tenth crisis passes too.

Charlie Morris
Editor, Southbank Investment Research

Category: Market updates

From time to time we may tell you about regulated products issued by Southbank Investment Research Limited. With these products your capital is at risk. You can lose some or all of your investment, so never risk more than you can afford to lose. Seek independent advice if you are unsure of the suitability of any investment. Southbank Investment Research Limited is authorised and regulated by the Financial Conduct Authority. FCA No 706697. https://register.fca.org.uk/.

© 2021 Southbank Investment Research Ltd. Registered in England and Wales No 9539630. VAT No GB629 7287 94.
Registered Office: 2nd Floor, Crowne House, 56-58 Southwark Street, London, SE1 1UN.

Terms and conditions | Privacy Policy | Cookie Policy | FAQ | Contact Us | Top ↑