Its Not Harry

Comment and opinion for retail investors in the UK

Rants

Watching Brief – November 2022

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Pottering About

I will progress to my observations on markets and the investment climate shortly but I want to start by introducing a slight change in the content of my monthly posts – a subtle refresh, if you like.  The Digging Deeper part of this monthly missive has now covered enough topics to form a small reference book and until I have a list of new topics to cover, I am giving it a rest.

A refresh of the content of this blog

Instead, I will return to an idea that long term readers may vaguely recall. This will be headed ‘Hit or myth’ and will each month put a few supposed ‘ facts’ about the economic, financial and investment climate under my quality control spotlight for testing to destruction. 

There are many such ‘givens’ recycled through the mass media every day, often referenced by people who ought to know much better – like politicians and the financial or ‘money’ editors of quite serious publications and broadcasters – but some of these accepted truths are in fact imagined or based on what I think are false premises.

Much of my analysis is on offer because of one of the few advantages of being older now, that is having many decades of working in the financial services sector and just as long reading and viewing extensively to try and understand the human condition.  Not Harry may not have the supposed (Biblical) advantage of ‘grey haired wisdom’ but that is only for want of raw material!

You may well disagree with some or even all of what I suggest is the reality, as opposed to the myth.  The constraints of a blog post mean that I am not able to write a thesis in support of my opinion and in most situations, it does not really matter what I think.  The world will carry on as it wants to, of course. 

I am only hoping that I can prompt my readers to take a skeptical view of the ‘accepted wisdom’’ and that this will better inform your asset allocations decisions. At times, what I predict is a nonsense does eventually prove to be exactly that (eg valuations of shares like Nikola, ASOS and THG, or the incredible track record of certain Baillie Gifford funds) and people who shared my skepticism may well have benefited in their pockets!

You could not make it up

This heading of course refers to political events in the UK over the last month.  If October 1987 gets remembered for Michael Fish and the hurricane that he so confidently dismissed, October 2022 will forever be associated with the name of Liz Truss.

The (predictable, and in fact actually predicted) consequences of the Kamikwasi not a budget mini-budget are now largely behind us, apart from the damage done to the UK’s reputation internationally and the opening of a rip in the relationship between the Treasury and the Bank of England.  Apart from enhancing the case for fixed income assets which I had been exploring anyway,  I can’t find anything relevant to say about what is now a dead event and we must now await for the proper, normal(ish) Autumn Statement due in a couple of weeks.

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A cunning plan!?

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I had been writing about the collapse of bond prices and I will continue to expand my series of posts explaining how to research this market as it becomes cheaper and, as I had I thought , hopefully ‘normalises’.

However, I like everyone else (except perhaps the scribblers at the Daily Mail?) have been truly astonished by the ‘not a budget but still called a mini-budget by everyone’ announced by Mr Kwarting.

There had, in the run up, been suggestions by fixed income market dealers that the expected cost of energy price subsidies would strain the gilt market if the associated levels of extra government borrowing were added to the flow of stock into the market from quantative ‘tightening’. But even those pessimists will have been taken aback by the potential impact of what was announced.

Not being rich, NotHarry is rather upset by recent government announcements

But is it just a cunning plan? Maybe the Chancellor knew that Sterling would bomb (he ought to have done) and thinks that will make British Government debt so cheap that overseas (and maybe a few home) investors will buy it up by the truckload? It might well work, if discounts get big enough to make interest payment in feeble Pounds come at a high enough yield to beat those in strong Dollars.

Personally, I think he and his colleagues are backing the theories of a small number of discredited (some 40 years back) academics who have never worked outside of a university. That is a huge gamble.

Now is, disappointingly, not the time to be buying Sterling assets unless you are very brave. They could end up even cheaper. Is it not odd the the UK government has made it that way? Expect some takeover announcements before long as the private equity vultures go scavenging.

Midweek (a)musing – melt down, down under

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I note that the Reserve Bank of Australia, which like most central (state) banks had been buying bonds to support the economy, has reported a loss of about £30 billion on those assets. Now I have said that there would be pain in the bond markers, but that is more than a headache.

Not a ‘gudday’

The reported comments of the bank’s deputy governor suggest there is talk of the bank being insolvent, but of course his bank, like other state banks, can print money so that would not happen.

If the bank retains the bonds to maturity (the notional loss is based on the collapse in current market value) then the losses may be reduced. In any case, Australians will have to pay in some way: either they will have higher taxes or public service costs, or possibly a higher level of inflation.

As the new UK Chancellor proposes to borrow astronomic amounts of money but does not want his own monitoring body (the OBR) to tell UK citizens what the implications are, there might be reasons to be nervous.

Only fools and horses (and meme stock buyers)….

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A storyline

Delboy Trotter is in the pub with the usual crowd. He is bragging that he has just acquired 500 units of the latest computer gaming toy (the Mistboard console to be precise) that is going to be massively in demand and is in short supply due to global ‘logical’, as he puts it, (logistics) difficulties, retailing at £125 a pop. He only paid £100 a unit and they are already being touted on Ebay at £150 plus. The discussion moves on.

A week later, Del is back in the pub and blathering on about the same subject. The dudes ‘in the know’ reckon that the computer gaming console he stocked up on is going to be selling for at least £250 by Christmas because a container load of them fell off a ship coming out of Taiwan and 200,000 units were lost.

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Midweek Musings – diverse opinions

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A surfeit of material

When I comment on markets with a view to distilling those factors that will help you assess the probability of various possible future trends, what you read is all my own thinking, although it is influenced by the wide range of infomation and commentary that comes my way.

One resource I continue to have on hand is what used to be called the trade press. This is of course delivered electronically these days but it still has the feel of a specialist newspapers such as are issued to all professions, whether it be in a form as grand as the BMJ or Lancet for doctors, or The Caterer for those is the, well, catering profession. Trade papers tend to have obvious names so mine are called Investment Week, Professional Adviser and so on. One Citywire publication used to be called New Model Adviser, now shortened to NMA, but such Cromwellian overtones are rare!

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