Lessons from history LGT Group

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A look inside the Princely Collections, For more than 400 years the Princes of Liechtenstein have been. passionate art collectors The Princely Collections include key. works of European art stretching over five centuries and are now. among the world s major private art collections The notion of. promoting fine arts for the general good enjoyed its greatest. popularity during the Baroque period The House of Liechtenstein. has pursued this ideal consistently down the generations. We make deliberate use of the works of art in the Princely. Collections to accompany what we do For us they embody. those values that form the basis for a successful partnership with. our clients a long term focus skill and reliability. www liechtensteincollections at, Cover image Giovanni Ghisolfi 1623 1683 detail from. Roman ruins with the three columns of the Temple of Vespasian. LIECHTENSTEIN The Princely Collections Vaduz Vienna. Lessons from history,Coping in crisis, Jonathan Marriott LGT Vestra Chief Investment Officer. When times are difficult there is an inclination to look at. history for some guide to the future A common disclaimer. seen on financial documents is that past performance is not a. guide to future returns but it almost seems instinctive to look. back to try and see the way forward With this warning in. mind I have been looking back to see if there are any lessons. to guide our actions now I have looked back at previous. pandemics as well as natural and financial disasters While the. present personal and financial situation echoes past events in. other ways it is truly unprecedented That being said there are. still some lessons that teach us what has worked and more. specifically what has not worked in the past, This is not intended to be a comprehensive historical review. but rather a top level look at a few past events that may help. us understand the way forward,Early pandemics, Pandemics have occurred periodically since records began.
Records of a flu like disease killing tens of thousands in. Babylon date back over three thousand years It is thought. that Bubonic plague struck the Roman Empire under the. Emperor Justinian in the mid 6th century wiping out as much. as half the population of Europe The economic and social. impact of these early occurrences is hard to assess. Bubonic plague hit again in several waves most notably in. England with the Black Death in the 14th century and the. Great Plague of London in 1665 66 Bubonic plague was. carried by fleas on rats and spread by trade through Europe. Asia and Africa It killed as many as 90 of the people who. caught it It is estimated that 100 000 people died in London. during the last major outbreak In the 14th century the. plague caused a shortage of labour which resulted in a steep. rise in wages for workers There are also suggestions that the. shortage of labour gave more opportunities for women in. the workforce and opportunities to manage the businesses. they inherited The 1665 outbreak in London is well recorded. particularly everyday life in Samuel Pepys s diaries houses. where disease had been found were marked with a red cross. and quarantined funerals were supposed to take place at. night without crowds and people feared to go out Pepys. records people breaking quarantine to attend funerals and. he himself snuck out to visit his mistress However not all. activity ceased and with help from the Great Fire of London. the disease was eventually defeated, Post the disaster the rebuilding of London may well have. contributed to the economic recovery and saw the building. of Christopher Wren s architectural landmarks Cambridge. University closed in 1665 for nearly two years Isaac Newton. had just received his Bachelor s degree and retreated to the. family home at Woolsthorpe 60 miles north of Cambridge. Away from the distractions of University life he started his. work on calculus optics and gravitation that would culminate. in his great work of 1687 Principia Mathematica The lesson. from this is that out of adversity opportunities arise and for. some it can lead to great creativity,The first equity bubble. The first stock market disaster struck in the first half of the. 18th century with what we now know as the South Sea. Bubble The South Sea company was set up for trade with. the South Sea Islands and South America which was largely. controlled by Spain and Portugal at the time The prospects. for the business were talked up and after the shares were. floated the price rose dramatically considerably beyond what. was justified by the company s profits On the back of this. numerous companies were floated many with extraordinary. claims One such example was a company that claimed to. make cannons that fired square cannon balls To cut a long. story short the South Sea company did little actual trade. and instead speculated in government debt When the. inevitable collapse arrived a large number of people were. financially ruined The reaction was to halt all company. listings unless they had a royal charter The most recent event. like this was the dotcom collapse of 2000 01 Isaac Newton. famously commented that I can calculate the motion of. heavenly bodies but not the madness of people Newton. actually took substantial profits on the South Sea company. initially but appeared to have been enticed back in at a later. stage and lost substantially as the share price fell losing the. equivalent of 20 million in today s money, Perhaps the lesson here is that one should look at what a. company does not what it says it does It is important to. know what one owns and beware of the latest fashion. A natural disaster, Situations where a large part of the global economy has shut. down in response to an external event are hard to find Wars. have a big impact but often provide an economic stimulus. in the form of arms manufacture One natural disaster that. had global implications was the 1815 eruption of Mount. Tambora in Indonesia This eruption was one of the biggest in. the last two thousand years and one hundred times greater. than the Mount St Helens eruption in 1980 It cast a cloud of. volcanic ash that caused 1816 to be referred to as the Year. Without a Summer At a time when agriculture was a much. larger part of the economy than today crops failed as far as. Europe and North America In Europe unemployment was. already high following the demobilisation of armed forces. after the Napoleonic wars In England the cost of food rose. with unemployment already high To make matters worse the. Government raised taxes to repay the debt accumulated during. the war The combination of events led to large scale protests. and eventually the notorious Peterloo Massacre in 1819 when. troops attacked 60 000 protesters in Manchester Food prices. were kept high by the Corn Laws that were put in place to. protect the income of farmers mostly the landed gentry. We may learn that at times of economic hardship the poor are. often the hardest hit and raising taxes at a time of economic. hardship risks rebellion From a literary perspective however. Mary and Percy Shelley spent the dark days of the summer. of 1816 in Switzerland with Lord Byron and others confined. to their house exchanging scary stories It was during this. time that Mary s novel Frankenstein was conceived It is also. thought that the artist J M W Turner would have witnessed. spectacular sunsets enhanced by the ash cloud which inspired. some of his best known paintings,Spanish flu and the.
First World War,The worst pandemic of the 20th century came about. following the Spanish flu outbreak in 1918 This had. been present in the trenches of the First World War but. spread widely across the world as troops returned home. It is estimated that as many as 500 million people caught. this H1N1 flu Estimates of the number of people who died. vary but run into the tens of millions The virus appears. to have mutated and the second wave was more deadly. than the first Less fatal third and fourth waves occurred. in 1919 and 1920 Despite causing more deaths than the. war media coverage was of the impact of the war which. resulted in less coverage of the pandemic Thus the true. economic effect is muddied by the impact of the war. Following the war and the flu there was a devil may care. attitude that may have led to excessive risk taking during. the Roaring 20 s that ended in the Wall Street Crash and. the Great Depression,The Wall Street Crash,and Great Depression. US stocks rose dramatically in the late 1920 s and there was a. view that it would go on forever People borrowed money to. buy shares pushing the Dow Jones Index ever higher rising. tenfold in just nine years When the bubble eventually burst. in October 1929 bids for stock disappeared The ticker tape. that communicated share prices could not keep up leaving. panicked investors not knowing what was happening The. stock market dropped 23 in just two days Large investors. such as the Rockefeller family stepped in to stabilise the. market by buying large amounts of stock, The stock market did eventually recover nearly doubling. from its lows until the second sell off started in April 1930. ushering in the Great Depression The speculative boom had. been fuelled by leverage with many investors borrowing. significant amounts to invest Money flowed out of US dollars. into gold To defend the gold standard the Federal Reserve. raised interest rates making the stock market situation worse. To defend the US economy the US government introduced. trade tariffs The UK retaliated by giving preferential. treatment to goods from the British Empire Similar retaliatory. action was taken by other countries causing a reduction in. world trade Thus by defending the gold standard raising. interest rates and introducing trade tariffs the combined. actions contributed to a second round sell off in stocks and. the depression that followed, Former Fed Governor Ben Bernanke studied this period. closely which may have led to the Fed put option where in. recent history every steep decline in the stock market has. been met by a reduction in interest rates Notably those. countries that moved away from the gold standard in the. 1930 s were the first to recover The US authorities have at. least learnt this lesson from history that throwing cheap. funds at the market is better than raising rates What is more. concerning is President Trump s recent threat to re impose. tariffs on Chinese goods, Our attitude towards death and disease seems to have.
changed in the last fifty years In 1968 69 the Hong. Kong flu pandemic did not cause the same wide spread. concern as the present pandemic However the US Centre. for Disease Control estimated as many as one million. people may have died worldwide because of the disease. At the time the Telegraph advised readers to boost. your resistance with a decent breakfast Schools and. businesses did not close and the stock market did not. plummet A vaccine was eventually developed for this. strain of the flu and wide spread outbreaks have mostly. been prevented since then,1970s oil shock, 1974 saw the biggest collapse in UK stocks in recent years. with the All Share Index dropping by around 60 This was. against the backdrop of a quadrupling of the oil price from. 3 to 12 In the run up to the collapse the Bank of England. base rate had risen from 5 to 13 As the stock market fell. and the economy slowed they cut rates but only to 11 5. Following the rise in oil prices inflation took off The Retail. Price Index was up 24 in a twelve month period Unions. demanded wage increases to keep pace with inflation. and labour unrest and strikes became wider spread as the. economy slumped British manufacturing held back by a lack. of modernisation lost out to competition from overseas This. is a very different backdrop to what we see today with oil. prices falling before coronavirus made things worse Today. inflation is low and interest rates are close to zero even. negative in many places, The stock market took time to recover after the collapse in. 1974 however five years later it was on a bull run which. with the exception of 1987 ran for the next twenty years. Unfortunately as much as we would like to draw parallels. during the latest crisis we are seeing low inflation and a. falling oil price so it is a very different scenario. 1987 Black Monday, In 1987 the stock market rose by 40 in the US before. interest rate rises caused a correction and in October the. market went into freefall This coincided with a hurricane. that devastated much of London and the South East of. England making it difficult for many people to get to. work Central banks cut interest rates and the market. stabilised Whilst the 1987 crash was steep and put many. people in the financial industry out of work the US market. actually ended up positive for the year as a whole This. event can be seen as the first of a series of rate cuts in. response to market falls It was however a short lived. event and rates rose in subsequent years until the recession. of 1990 91 Interest rates were cut in 2000 01 and again. in 2008 09 to support asset prices After each of these. subsequent events interest rates were raised once the. markets recovered but not as high as they were before. The Princely Collections include key works of European art stretching over five centuries and are now among the world s major private art collections The notion of promoting fine arts for the general good enjoyed its greatest popularity during the Baroque period The House of Liechtenstein has pursued this ideal consistently down the generations We make deliberate use of the works of art

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