“Everything I have said about Covid vaccines has been absolutely right, and far ahead of the official narrative. But I never expected a victory lap because people have a problem with contrarians – they find them upsetting, and even more so when they end up getting it right,” Barry Norris told Investment Week.
The fund manager, CIO and CEO at Argonaut has cut a controversial figure over the last two years, following his staunch belief that putting the UK into lockdown was “the biggest policy error since World War One” and the short book of his VT Argonaut Absolute Return fund being populated by vaccine manufacturers.
It led to choppy returns on the vehicle, with its performance plummeting peak-to-trough by 14.6% in November 2020 following the news that the Pfizer and BioNTech vaccine indicated an efficacy rate of 95%.
“People were telling me to shut up and that I did not know what I was talking about, that I had blood on my hands,” Norris said. “Some people invited me on podcasts to take the mickey out of me shortly after the 95% efficacy headlines hit.
“Now we think the pandemic is over, not because of the vaccines, but because Covid has morphed into a very mild variant that is less dangerous than seasonal flu – which is what I always said would happen.”
As it transpires, the fund still returned 16.3% in 2020, 10.3% last year and is up 7.7% so far this year at time of writing (9 February). It means that, over the last three years, VT Argonaut Absolute Return is up 62.2%.
One of the more recent drivers behind the fund’s performance has been its exposure to oil and gas stocks in its long book, which has been bolstered by rocketing energy prices and supply chain bottlenecks.
“I think there is quite a strong moral case to invest in fossil fuels because they provide cheap and reliable energy,” Norris argued. “People have just taken climate change apocalypticism as verbatim.
“Firms are outbidding each other to get to zero-carbon emissions as soon as possible, which to me is a sign of piety. I actually think those people are immoral because they are pushing up the cost of power and energy.
“If they insist on decarbonisation over the time period they keep reciting, what that will cause is economic recession, misery, hunger and cold all around the world – particularly in developing markets where a lot of people do not have access to cheap fuel and energy.”
In fact, the manager is shorting wind turbine producer Vestas, because he believes that “putting more wind turbines up does not fix the energy problem”.
“My issue with renewables is that, until you can store renewable power in some form, it will not work. We probably will not reach that point in the next decade,” he said. “A lot of renewable power is totally weather dependent, so therefore needs to be 100% backed up either by fossil fuels – typically gas – or potentially coal, nuclear or hydro.
“If you build out more renewables, you exacerbate the problem. Yet there are virtue-signalling fund managers claiming they can deliver cheap power and simultaneous decarbonisation. The two things are completely opposite.”
He added the growth of the wind turbine industry will “hit an air pocket” because “nobody has asked them the sceptical questions”.
“Everyone has their snouts in the trough of renewable subsidies, and we will soon get to a time when we realise there has been a mistake. That is when the gravy train stops,” Norris reasoned.
Acknowledging that his views on carbon emissions and fossil fuels will likely upset a lot of investors, the manager pointed out that being a short seller is “inherently contrarian”.
“You are going to upset people by saying that stocks should not trade at a particular price or that company is a fraud. But actually, the scepticism that you need to be a short seller has lent itself to my scepticism about Covid,” he said. “Now, I am sceptical about the pace of decarbonisation and its effect on societies and economies.”
The manager is also sceptical about the current price of long-duration assets, given he believes “the era of free money is coming to an end” as central banks begin to tighten monetary policy.
“When you have free money, pretty much every asset class does well. Then, you take the punchbowl away and assets remain in this big hangover stage. This will only end when central banks begin to get dovish, and I think we are only at the start of that process,” he said.
“It could take six months, it could equally take six years, but I am more in the ‘six year’ camp. [Investors] have become rich and complacent because they do not believe the rules of investing will ever change.”
Norris added that a number of high-quality growth investment houses that have been outperforming have “failed to recognise that their investment style has been the biggest beneficiary of zero interest rates”.
“I never see that written in any of their literature. They say they are ‘forever investors’, but they are saying that while inflation is low and while interest rates are low,” he argued.
“Frankly, if the rules of the game have changed and everybody has piled into heavily concentrated growth stocks, it is going to end in disaster. People are complacent, telling themselves: ‘I am down 30% in the last two months, but I am up 500% over the last ten year so who cares?’ But this will all change soon.”
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