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Low Terrain – Pull Up!

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Vienna (HedgeNordic) – I love airplanes, and everything to do with them. I always have, and always will. As a kid, naturally, I wanted to be a pilot. When I do notice a plane crossing above these days, I realize how rare the sight and sound has become in this extraordinary spring of 2020. You may have seen the pictures of empty spaces, such as St. Peter´s Square, the Kaaba, Grand Central Station, the Champs-Élysées, football stadiums, playgrounds, subway stations and many more such open spaces, totally vacated of humans. They are gloomy, scary, and at times beautiful alike. But the pictures that, strangely, may rattle me the most are those of empty airports. To me, once busy, bustling, loud and vivid airports emptied of travellers are a most striking symbol of this most unusual period.

One angle of my interest in planes, which sometimes seems morbid to those around me, are aviation accidents and plane crashes. A good part of my time spent procrastinating was therefore consumed by the “Air Crash Investigation” series on the Discovery Channel. I find it fascinating, and humbling, how something at the spearhead of our technological abilities costing in the hundreds of millions of dollars, in one of the most regulated, controlled, and scrutinized industries, and handled by fit and able crew and ground support, would simply fall from the sky (it still beats me, though, why they actually fly in the first place).

It very rarely is one, big, fatal error or flaw that brings down an airplane. It is more commonly a chain of events, sometimes the tiniest increments of imperfection, negligence, or fatigue to man or material that could potentially be spotted, prevented, or stopped at any of the junctures that lead to tragic disasters and loss of life.

Stunningly, the culprit is frequently an incident which by nature sounds absurd: a controlled flight into terrain (CFIT). A CFIT is an accident in which an airworthy aircraft, under full pilot control, is unintentionally and unknowingly flown into the ground, a mountain, a body of water or another obstacle. CFITs are typically caused though disorientation, faulty positioning, or subtle navigation equipment malfunctions. It is not to be mistaken with deliberate action, as for instance Germanwings Flight 9525, where a suicidal co-pilot crashed the plane under his command on purpose. In a typical CFIT scenario, the crew, and the plane for that matter, are unaware of the impending disaster. Engineers at Boeing coined the term CFIT in the late 1970s. CFIT was identified as a cause of 25% of Class A accidents between 1993 and 2002 in the US Air Force and is therefore taken most seriously. Already in 1974, the NTSB and FAA required all larger commercial aircraft to be equipped with a ground proximity warning system (GPWS) that would warn pilots with the alarm “low terrain – pull up!”, intended to help minimize CFIT incidents.

Now, as a society, we do not have such a ground proximity warning system. We could just be steering into that obstacle at full throttle, in full consciousness and feeling perfectly in control of the situation, while all systems seem to be functioning perfectly well, giving reasonable information, but equipped with no alarm to go off ahead of the big SMACK!

The spread of the coronavirus COVID-19 has forced governments and societies around the globe to take unprecedented measures. Most countries around the world seem to be following the isolation strategy to protect their population and health care systems. This seems to have been effective in places like China, Hong Kong (initially), and Singapore. The United States was having a hard time weighing off a 1.000 deaths to 1.000 points in the Dow Jones, before they too fell in line. Sweden, of course, is a notable exception to these otherwise near-closed ranks.

In my home country, Austria, we have been under lockdown since March 13th, with schools, bars and restaurants closed, all non-essential businesses and stores closed, and the largest part of the population being asked to stay at home, practice strict social distancing, and contribute to “flattening the curve.”

The problem with these precautionary measures is that they must be taken early, when they don’t really seem necessary. And then, if we get it right and they are effective and succeed in preventing massive damage, not too much will have happened, and it will all feel terribly exaggerated in retrospect. We may not ever get to know the bullets we dodged if they fly by in the distance.

What we see and feel almost instantly, however, is the effect of these steps. Containment measures flatten the infection curve – but steepen the recession curve. The costs to economies of these lockdowns are staggering, the buzzword of “lost generation” already doing the rounds.In the U.S., combined initial jobless claims are close to ten million over just the last two weeks, just to pick one figure.

We all witnessed the decline of stock markets in the last weeks, the fierceness and speed of which was unprecedented. The plunge of the S&P and its subsequent – again, historic – rally technically puts equity markets in bull and bear territory at the same time. There has been much written of whether COVID-19 was a black swan event for markets, or not. In any case, it is unsettling to learn that we were obviously not prepared for something like this and that no government, agency or think tank had a plan, or some modus operandi to pull from the drawer. This is especially in light of near-misses we experienced from SARS, Ebola and other virological threats in the recent years.

It is comprehensible the impact of such a pandemic is initially overwhelming. But how can we run out of such basic things as facemasks, gloves, scrubs and sanitizers for our health care staff? While some C-grade´s intelligence officer´s pillow talk or using the wrong mobile phone to write emails is classified as a matter of national security, production of and stocks of adequate equipment is hustled out to the lowest bidder in China and inaccessible when needed most to sustain a minimum standard of functionality. We are sending tens, maybe hundreds of thousands of people out of work and thousands of businesses to the brink of bankruptcy, while central banks are bleeding money and governments are subsidising more or less everything, everywhere, while at the same time being drained of tax income.

There are, however, voices that are cautioning and sounding the alarm: “Low terrain – pull up.” Kerstin Hessius, the CEO of Swedish state buffer fund AP3, for instance, was among those voices when she urged: “The public health measures that have been taken so far are doubtless warranted to control the spread of the virus and to reduce the risk of hospitals becoming overwhelmed. However, the consequences of the global shutdown are poised to spiral out of control.” “Fiscal and monetary policy cannot solve the economic crisis that is upon us,” Hessius warned. “We need to get the economy moving again as soon as possible. Unemployment is rising by the second. A high rate of joblessness hurts all members of society…” But, Hessius continued, “discussing economic consequences is perceived as implying a trade-off between human life and money. This perception is fundamentally wrong. The economy is synonymous with society, namely every current and future citizen of every country. The economy is us.” And then she asks the key question: “So let us rephrase the question to see the picture more clearly: is it wise to undertake drastic action to limit unnecessary loss of life at the cost of mass unemployment and the destruction of welfare and social wellbeing?”

This is likely a question future generations will judge each of us by, and not just our leaders: “What decisions did you make, and what actions did you take, when we were hit by heavy turbulence on our journey?” Where the economy is concerned, this did not have to be a CFIT-style accident, so it begs the question as to why we seem intent on making it one. The warning signs are clear: “Low terrain – pull up!” Wishing you a secure landing.

Stay safe and be well!


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HedgeNordic Editorial Team
HedgeNordic Editorial Team
This article was written, or published, by the HedgeNordic editorial team.

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