One of the key tenants of successful investing is an ability to determine which ‘facts” are relevant. Consider recent headlines noting that U.S. Covid-19 deaths had surpassed total deaths attributable to the 1918-19 flu pandemic. This statement is clearly factually correct. But how relevant is this data when one recognizes that the U.S. population is currently approximately three times larger than in 1918-19?
In order to solve a problem or make an informed investment decision, it is important to fully understand the context. For example, recent press reports are suggesting that Hurricane Ida damages, in dollars, are comparable to 1992’s hurricane Andrew, the most destructive storms to ever hit Florida, in terms of structures damaged or destroyed. This is not an apples to apples comparison. Property values and density have increased significantly over the last 30 years.
Correctly measuring storm intensity is critical to answering the question, are storm/weather events getting more or less severe? Important political and investment decisions should be based on a comprehensive understanding of long-term trends.
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA