Five Decades of Davos

This week sees the annual jaunt that is the World Economic Forum held in Davos, with 2020 marking its 50th anniversary. While the event tends to generate a collective yawn among financial folk it nonetheless provides fodder for the more obsequious variety of journalist. It can however give insight for gauging consensus opinion which is great tool for contrarian investors. The Forum’s Global Risks Report is a case in point. In 2009 the survey scored an asset price collapse as the number 1 risk just as the bull market was about to begin. Today we see an asset price bubble ranked in the top 10, which is a bullish indicator for those, like us, who follow the maxim that ‘Wall Street climbs a wall of worry’.

The output of its stakeholder survey is the generation of a classic chart of Impact versus Likelihood. The top-right corner contains all the usual risks that make the current news headlines which are too tedious to repeat here. Consensus opinion will always crowd around topics that are the most recent and generate the maximum noise. It is human nature to extrapolate an existing trend in a linear fashion rather than recognise the ebbs and flows of natural cycles. Of far more interest are the themes in the bottom left corner which few expect such as unmanageable inflation, State collapse and food crises. The latter three issues are closely connected and relate to the consequences of a Sovereign debt crisis which we will write about in future.

This year sees a fluffy new manifesto. The first one written in 1973 talks about serving clients, shareholders and society with an emphasis on enterprise. The latest version advocates a competitive playing field with companies paying their fair share of taxes. This sounds a lot like Establishment-speak for higher taxes and more regulation which has of course pushed much of the developed world into economic stagnation – aside of course from the USA which has pursued the exact opposite strategy. The fact that China’s President Xi Jinping is giving the Forum a miss for the second year in a row tells you all you need to know. He will instead continue the tradition of touring smaller towns and cities ahead of the Lunar New Year celebrations to maintain his connection with the public. Other noticeable absentees are senior representatives of both the British and Irish governments.

Many are fed-up with scaremongering and virtue-signalling by pop stars, politicians and the so-called elite that populate Davos. Perhaps the Forum should stick to its original manifesto of service and enterprise rather than following trendy fads that leave it open to accusations of hypocrisy. Ultimately, thought-leadership will never come from committees and conferences but from individuals who are prepared to be unpopular and stand out from the crowd. Such modernisers are often seen as a threat to those who wish to protect their position and maintain the status quo.  One can only hope that the Davos crowd will one day be supportive of these innovators otherwise the next 50 years may see it dwindle into insignificance.