Winners in a risky game

The coronavirus outbreak provides an important, unfolding case study

- GREG HOFFMAN

This column comes to you from Tokyo in early February. There’s a cool chill in the air and, many fear, perhaps something worse: the deadly, novel coronavirus. Early cases were linked to a seafood and animal market in the city of Wuhan, China. Japan has reported its 20th case of the virus as I write, and it’s on the minds and lips of many people in public places.

After shrugging off news of the virus early in the outbreak, financial markets began responding more noticeably in the final week of January.

The copper price, a traditional signal of global economic health, pulled back more than 10%. The world’s major share markets turned down and individual stocks began reacting strongly, for better and worse.

Some say this will merely be a blip and that those selling today will regret it.

Others are calculating the potentially major costs of disruption to the flow of people and products between Australia and China. Some are going even further in imagining the virus turning into a global pandemic and potentially mutating further. One well-followed Twitter account was suspended after countenancing the view that the virus may have been a biological weapon that either unintentionally or otherwise emanated from the Wuhan Institute of Virology.

Time will tell but, for investors, the truth is most likely to end up somewhere in the middle. Many investors seem overly concerned with being publicly “right” about their views on this outbreak. They want to be on record early with their predictions that it will either blow over quickly or become a more significant issue.

I’m in neither camp. “There are two types of people: those who try to win and those who try to win arguments,” wrote Nassim Taleb, the successful author, and former trader. “They are never the same.”