LATEST NEWS

News Archive

Written by 

The large and medium sized company sectors of the UK market (as represented by the FTSE100 and 250 indexes) continue to wallow in the fog of Brexit and so (with just one exception) we remain shy of anything other than generic exposure to UK smaller companies.

Our only stock-specific company holding in the UK is Fever Tree, the premium tonic water and mixer maker. Fever Tree declared its latest set of results on 26th March and their figures were spectacularly good. The company reported a 40% increase in sales for the 2018 year and a 34% increase in profits for that same period. Sales in the UK rose by 53% and the company’s expansion into the USA is set to add further impetus to this demonstrable success story. Fever Tree’s share valuation is already returning to a level that reflects its continuing growth.

A recent official report from Germany’s ‘Centre for European Policy’ shows that the euro has brought a net gain 0f 21,000 euros per person to the Germans, whereas in France it has cost 56,000 per capita and in Italy 74,000 euros……and both France and Italy are expected to accept this disadvantage on the basis that it is apparently all for the greater good of the European ‘project’.

As we have stated many times over the years, there has only ever been one economic beneficiary of the EU project and that is Germany. We remain deeply sceptical of European stock-markets too as the Eurozone’s three largest economies (excluding, of course, the UK) are in recession and the ECB have run out of ammunition in respect of the financial levers that have papered over the cracks and brought superficial short-term relief in the past. Even the golden tongued Mario Draghi is struggling to put a positive spin onto his usual propaganda as the realities of the EU’s financial and economic woes mount. He is reduced to following his well trodden path of obfuscation, denial and bluff.

Markets are fully aware that the ECB cannot raise interest rates (for fear of turning a recession into a full blown slump) and, with brilliantly inept timing, the ECB terminated its quantitative easing programme at the end of 2018, just as it was about to be needed most.

The incompetent, indecisive and weak ongoing efforts being made by the UK parliament to resolve Brexit in a democratic, realistic and equitable way continue to suppress any substantial and sustainable progress in the UK’s stock market. Devoid of leadership and lacking even basic negotiating skills we are still no nearer to a satisfactory denouement than we were two years ago.

There are fundamental but vitally important differences between the UK and the EU project that never seem to have entered this unending debate. For example, the basis of British law is that an individual is free to do anything he or she wishes unless it is specifically and legally prohibited. An endearing element of British culture to counterbalance any potential misuse of that freedom is that (even in today’s more cynical and less gracious world) the majority of people self-police their behaviour and take care not to infringe, impair or reduce the freedom of others.

The basis of EU law, however, is that nothing can be done unless it is specifically permitted. These differing approaches and the philosophies behind them (freedom of choice , freedom of speech and free trade versus governmental diktat, command and control) are in direct opposition to each other. This has an impact on economics, finance and, in particular, their approach to trade.

Historically the UK has a long-standing belief in free trade and, by extension, its close association with capitalism and democracy.

Free trade is a positive means by which we can spread prosperity as wealth cascades through the economy. Prosperity underpins social cohesion and, in turn, social cohesion underpins political stability. Political stability is the bedrock of a collective (and peaceful) society.

The EU adopts a different philosophy. It is deliberately anti-democratic and its innate protectionist approach abhors free trade (other than internally between the EU27 where it is largely for the benefit of German manufacturing industry and French farmers). Instead, the EU adopts a command and control economic system hand in hand with a tax and spend fiscal philosophy. This can be likened to giving £20 to an alcoholic; you know exactly what he’s going to do with it, you just don’t know which wall he’s going to use.

Taxation is an innately unfair and negative way of redistributing wealth and is typically favoured by a socialist goverment (which of course is what the EU is). Taxation penalises success and progressively reduces the motivation to achieve further success (either through taking business risks or simply by working harder) whilst it encourages a reliance upon a benefit culture within a welfare state and thus rewards idleness and economic inactivity.

Given the very different legal systems, political beliefs and economic cultures between the UK and the EU, negotiations to achieve Brexit were always going to be complicated. Sadly, the ineptitude of the UK side in lacking courage, lacking imagination, lacking belief, lacking even a scintilla of negotiating skill and meekly allowing the EU to hold the initiative and manipulate the agenda has resulted in a cul-de-sac (I wonder what the French for ‘dead end’ is) and an increasing likelihood of the entire circus continuing for a few more years into the future.

In the meantime stock-markets both in Europe and the UK will, by and large, remain hobbled and of little or no investment interest. Much better opportunities continue to exist elsewhere.

Written by 

The large and medium sized company sectors of the UK market (as represented by the FTSE100 and 250 indexes) continue to wallow in the fog of Brexit and so (with just one exception) we remain shy of anything other than generic exposure to UK smaller companies.

Our only stock-specific company holding in the UK is Fever Tree, the premium tonic water and mixer maker. Fever Tree declared its latest set of results on 26th March and their figures were spectacularly good. The company reported a 40% increase in sales for the 2018 year and a 34% increase in profits for that same period. Sales in the UK rose by 53% and the company’s expansion into the USA is set to add further impetus to this demonstrable success story. Fever Tree’s share valuation is already returning to a level that reflects its continuing growth.

A recent official report from Germany’s ‘Centre for European Policy’ shows that the euro has brought a net gain 0f 21,000 euros per person to the Germans, whereas in France it has cost 56,000 per capita and in Italy 74,000 euros……and both France and Italy are expected to accept this disadvantage on the basis that it is apparently all for the greater good of the European ‘project’.

As we have stated many times over the years, there has only ever been one economic beneficiary of the EU project and that is Germany. We remain deeply sceptical of European stock-markets too as the Eurozone’s three largest economies (excluding, of course, the UK) are in recession and the ECB have run out of ammunition in respect of the financial levers that have papered over the cracks and brought superficial short-term relief in the past. Even the golden tongued Mario Draghi is struggling to put a positive spin onto his usual propaganda as the realities of the EU’s financial and economic woes mount. He is reduced to following his well trodden path of obfuscation, denial and bluff.

Markets are fully aware that the ECB cannot raise interest rates (for fear of turning a recession into a full blown slump) and, with brilliantly inept timing, the ECB terminated its quantitative easing programme at the end of 2018, just as it was about to be needed most.

The incompetent, indecisive and weak ongoing efforts being made by the UK parliament to resolve Brexit in a democratic, realistic and equitable way continue to suppress any substantial and sustainable progress in the UK’s stock market. Devoid of leadership and lacking even basic negotiating skills we are still no nearer to a satisfactory denouement than we were two years ago.

There are fundamental but vitally important differences between the UK and the EU project that never seem to have entered this unending debate. For example, the basis of British law is that an individual is free to do anything he or she wishes unless it is specifically and legally prohibited. An endearing element of British culture to counterbalance any potential misuse of that freedom is that (even in today’s more cynical and less gracious world) the majority of people self-police their behaviour and take care not to infringe, impair or reduce the freedom of others.

The basis of EU law, however, is that nothing can be done unless it is specifically permitted. These differing approaches and the philosophies behind them (freedom of choice , freedom of speech and free trade versus governmental diktat, command and control) are in direct opposition to each other. This has an impact on economics, finance and, in particular, their approach to trade.

Historically the UK has a long-standing belief in free trade and, by extension, its close association with capitalism and democracy.

Free trade is a positive means by which we can spread prosperity as wealth cascades through the economy. Prosperity underpins social cohesion and, in turn, social cohesion underpins political stability. Political stability is the bedrock of a collective (and peaceful) society.

The EU adopts a different philosophy. It is deliberately anti-democratic and its innate protectionist approach abhors free trade (other than internally between the EU27 where it is largely for the benefit of German manufacturing industry and French farmers). Instead, the EU adopts a command and control economic system hand in hand with a tax and spend fiscal philosophy. This can be likened to giving £20 to an alcoholic; you know exactly what he’s going to do with it, you just don’t know which wall he’s going to use.

Taxation is an innately unfair and negative way of redistributing wealth and is typically favoured by a socialist goverment (which of course is what the EU is). Taxation penalises success and progressively reduces the motivation to achieve further success (either through taking business risks or simply by working harder) whilst it encourages a reliance upon a benefit culture within a welfare state and thus rewards idleness and economic inactivity.

Given the very different legal systems, political beliefs and economic cultures between the UK and the EU, negotiations to achieve Brexit were always going to be complicated. Sadly, the ineptitude of the UK side in lacking courage, lacking imagination, lacking belief, lacking even a scintilla of negotiating skill and meekly allowing the EU to hold the initiative and manipulate the agenda has resulted in a cul-de-sac (I wonder what the French for ‘dead end’ is) and an increasing likelihood of the entire circus continuing for a few more years into the future.

In the meantime stock-markets both in Europe and the UK will, by and large, remain hobbled and of little or no investment interest. Much better opportunities continue to exist elsewhere.

Written by 

Despite political concerns that are still supressing some areas of the global equity markets we continue to regain some of the ground that had been ceded in the fourth quarter of 2018. Our strategy of focusing on the most attractive companies in the most attractive sectors of the most attractive markets at any given time does help in this process but, given the inherently dynamic nature of stockmarkets, it is sometimes easier said than done. At the moment the most attractive of the world’s equity markets is the USA and it is unsurprising, therefore, that our current holdings are biased in that direction.

The US economy remains in rude health and its central bank (the Federal Reserve) is now more inclined to keep interest rates at their current level (albeit under a degree of political pressure). US inflation is stable and unemployment is now at a very low level indeed (virtually at a level that economists would describe as ‘full employment’).

Taking that as the macro-economic background, the micro-economic position adds support to the assertion that the USA economy is performing very well. The fourth-quarter reporting season in the USA is now done and dusted and, of our 22 company-specific holdings, all have now issued their results. As anticipated in last month’s report, all bar one of them have beaten expectations and posted positive surprises.

Trade tensions between the USA and China have weighed on market sentiment over the past year and President Trump had threatened to expand the range and increase the size of tariffs if a trade deal had not been finalised by 1st March. However, in mid-February he announced that the imposition of these tariffs had been postponed and this has been taken as an indication that the execution of a trade deal is imminent.

Our January report highlighted the extraordinary imbalance of trade between these two countries (significantly in China’s favour) and it would appear that China has now agreed to rebalance that discrepancy by committing to a programme of buying American goods and services to the value of $1.7 trillion over the next six years. That would represent a huge change in China’s historic economic model (which over the last 20+ years has been based on production and exporting) and whilst that, if it happens, would be great news for the USA it would cause less helpful knock-on economic effects around the world.

Quite simply, if China was to spend $1.7 trillion on US goods that would seriously reduce the value of goods it could buy from other countries. The opportunity cost to large areas of global industry could put considerable stresses on the economies of other manufacturing economies (the impact on German car manufacturers is but one example of the critical damage that could be caused). It is worth bearing in mind that:

Trump’s mantra from his first day in power has been ‘America first’ and, whatever one might think of him as a personality and whatever mud the media might like to throw at him, he has demonstrably fulfilled that pledge.

China’s political leaders have a long history of promising one thing and actually delivering something completely different. I recall some sage advice I was given 30 years ago:

You can always do a deal with China but you can rarely do a smart and profitable deal with China.

Before we get too carried away with the potential advantages to the US economy and the commensurate strains elsewhere, let’s wait to see what actually emerges from these ongoing negotiations.

We see no point in commenting further on Brexit, which remains as an albatross around the neck of the UK stock market. The complete lack of political leadership, intelligence and belief shown by Mrs May combined with her shameless mendacity has turned the entire process into a farce of Brian Rix proportions (but without the humour). A market analyst who clearly spent his earlier years following the exciting hobby of train-spotting has calculated that May, in her monotonous fashion, has announced 108 times that Britain would be leaving the EU on 29th March 2019. Last week she reneged on that. It is pointless trying to make any serious investment judgements in respect of the UK and the EU until this long and fruitless saga is over.

Written by 

Global stock markets have ended their fourth-quarter 2018 slide and staged a solid rebound this month.  Reassuringly, one issue that investors had been worried about has also been resolved: following its meeting on 29th/30thJanuary the Federal Reserve (the central bank of the USA) has signalled its intention to abort its quantitative tightening program which (given the extremely negative effect it had had on equity markets) is very good news indeed.

Quantitative tightening is a monetary policy applied by a central bank to decrease the amount of money within the economy.  With the benefit of hindsight it was, inter alia, that policy that had helped send the stock markets into a frenzied tailspin during the fourth quarter of 2018.

On 31st January 2019 the FTSE100 index closed the month at 6968.85, a rise of 3.58% in the month of January itself and it now stands, of course, at 3.58% for the 2019 calendar year to date too.  By comparison the Quotidian Fund’s valuation at the same date shows an increase of 13.09%for the month and so it follows that the Fund is up 13.09% for the 2019 year to date.

It now seems that the severe equity market markdowns in the final quarter of 2018 were largely a reaction to the Federal Reserve’s interest rate policy and monetary tightening.  One could be readily forgiven for saying that this was a gross over-reaction by analysts and market makers.

On the back of a demonstrably strong US economy, the Fed raised interest rates four times in 2018 in a robotic, pre-ordained and seemingly careless “painting by numbers” approach. When it met in December the central bank issued a projection that it expected to raise rates twice more in 2019, albeit that that figure was downgraded from its previous projection of three times.

However, financial markets still continued to tumble substantially, disturbed that in his subsequent news conference, the Fed chairman (Jerome Powell) had given a very positive view of the US economy yet appeared to suggest that the Fed would still resume raising rates in the coming months.

Since then though, Powell and other Fed officials have (under rigorous criticism and, no doubt, impartial and gentle guidance from President Trump) emphasized their firm intent to be “patient” in their approach to rate increases and they have reaffirmed that there is now no “pre-set course” for future increases.

As a result, equity futures markets have put the probability of a rate hike at any time in 2019 at just 22 percent.  In typical Cassandra-like fashion though, a few doom-laden analysts are predicting up to two Fed rate increases in 2019, though not until the second half of the year.

We believe that the Fed has been and will continue to be under extreme political pressure to hold interest rates steady rather than risk tipping the currently buoyant US economy into recession.  Equity markets have risen accordingly.

Conversely, the Mayhem caused and the resulting pig’s breakfast being made of Brexit continues to supress the UK stock-market.  It is clear from the recent unedifying spectacles in the House of Commons that the chief negotiator on the UK side does not know his Acas from his Nalgo.

In Europe, the German and Italian economies are now officially in recession and France is on the cusp.  Despite the bombast from its leaders it is clear that the undemocratic, protectionist and financially incontinent EU project with its half-baked currency is failing. It beggars belief that elements of the British establishment still desperately want to cling to this sinking ship.

The fourth-quarter reporting season in the USA is in full swing and, of our 22 company-specific holdings, ten have now issued their results.  Of these, every one of them has posted positive surprises and their share valuations have been upgraded accordingly.  The remainder of our portfolio holdings will report in February and we anticipate similar positive outcomes above and beyond analyst’s projections.

The palpable fear and negativity that gripped equity markets throughout the last quarter of 2018 have thus far in 2019 been replaced by a sense of optimism, realism and normality.  Long may that persist.  We remain alert to the fact that there are potential headwinds still to be addressed and resolved.

Chief among those is the huge trade imbalance (in China’s favour) between the USA and China.

Overall for the full year of 2018 China posted a trade surplus of $351.76 billion.  Of that, its politically-sensitive surplus with the USA widened by 17.2 percent to $323.32 billion last year; the highest on record. It is abundantly clear as to why the US President has been so focused on redressing that remarkable imbalance.


Reports from the US during January suggest that positive progress has been made to secure an equitable trade deal between these two countries and, if that does become a reality, then another restraint on positive stock-market progress will have been removed.  We take a sanguine view and hope that the timetable of settling a deal acceptable to both sides is indeed executed by the putative 1stMarch deadline.

Despite the Quotidian Fund’s strong performance in January we are intensely aware that we have much more ground to recover before we claw ourselves back to the heights of 30thSeptember last year.  We remain committed and confident of so doing.