Quotidian Investments Monthly Commentary – October 2021
In last month’s report you may have detected just the slightest scintilla of irritation when we were obliged to report an unnecessary, artificial and short-term markdown in the Fund’s investment performance for September. We clearly felt that this downturn was unjustified, gratuitous and far more related to market manipulation than real economic considerations.
Using nothing more than common-sense and our own analysis and interpretations of the available data, we therefore saw no reason to exit or reduce our holdings and so we held tight. As October’s performance figures shown below can now confirm, market activity and pricing since the artificiality of those three synthetic days at the end of September has proved our cynicism and suspicions to have been well founded.
Indeed, quite predictably and as we had highlighted at the end of September’s report, it was clear and obvious that the third-quarter corporate reporting season would not disappoint (and it didn’t) and equity prices have now regained their poise. Of course, by then, market-makers’ scaremongering had frightened unsteady and easily spooked investors to panic out of the market at artificially low prices and then buy back in again at higher valuations. All in a day’s work for the unscrupulous doyens of the market-making fraternity.
On 30th October 2021 the FTSE100 index closed the month at 7,237.57 (a rise of +2.13% in the month of October itself) and it now stands at up +12.03% for the 2021 calendar year to date. By comparison the Quotidian Fund’s valuation at the 30th October shows a rise of +5.70% for the month and so the Fund is now up +16.11% to this same date.
It is vital for investors to understand that market-makers in equity markets largely comprise global investment banks (in particular US investment banks) and to recognise the devices and techniques they use to mislead amateur shareholders. One can then better interpret the monotonous doses of propaganda, deceptions and misrepresentations emanating from them and posing as ‘serious’ analysis.
All these ruses and contrivances regularly and tediously tapped by market-makers are underpinned by a bottomless pit of greed, arrogance and self-interest. Sadly, in the culture adopted by them over recent years it would seem that the long-standing virtue of ‘utmost good faith’ (that once was proudly the required and substantial foundation of equity markets) has been replaced by ‘devil take the hindmost’ (or the unwary).
Treachery is seemingly now the common characteristic of equity market-makers and so a treachery of market-makers in the appropriate collective noun. In addition, political interference or influence is more apparent since the turn of the century than ever before. Perhaps earlier generations (politically and generally) were more intelligent or, perhaps, cleverer at covering their tracks.
With the COP26 energy symposium currently holding court in Glasgow, world leaders are gathered to discuss energy consumption, future sources of affordable energy and its pricing mechanisms (and, above all, to signal their virtue) now would be an excellent time to capture an unlimited but short-term supply of hot air; no doubt in sufficient supply to drive the global economy for the rest of the year.
Carbon, of course, has been demonised and has had such a concerted and contrived bad press that it’s use is being phased out in Western economies but, very strangely, the combined total of China and India’s continued consumption amounts to 34% of its global use. If we add Russia into that figure then we are fast approaching 50% of the world’s total carbon-based energy emission from just those three countries. Meanwhile, China and India continue to build coal-fired power stations at the gallop.
The leaders of India, Russia and China (IRC) are too busy laughing at the Western world’s commitment to manufacturing and economic suicide to be able to spare the time to attend COP26 in person (and even if they did, they would no doubt pay lip service to whatever ‘agreement’ was cobbled together whist having absolutely no intention whatsoever of joining in with the Mad Hatter’s tea party. Increasingly, therefore, the world will split into an eastern block of coal and nuclear-powered manufacturing industries and a western-based technology and consumption-driven society.
Under the stewardship of Donald Trump (a man who it would be difficult to confuse with a shrinking violet) coal consumption in the USA actually fell by more than 33% (shale gas fracking replacing it). To his credit, at least his expansive and plentiful rhetoric was matched by his actions.
On the other hand, figures released in mid-October indicated that the use of coal at USA power plans has risen by 23% under the limp presidency of Joe Biden. That rather makes a joke of his self-professed green credentials which will no doubt be on full display again at COP26. In contrast to Trump (for all his failings) Biden postures and poses but he has already made it clear that his actions do not match his words; he is an empty vessel (particularly from the neck up). The irony of all this is no doubt lost on the dim-witted and hard-of-thinking ‘ordinary’ Joe.
All this is relevant to investments in that the price of energy is, of course, a vital factor of production costs which, in turn, then has a direct impact on the pricing of the goods and services provided and so, ultimately, on future corporate profitability.
Despite the self-congratulatory noises emanating from the White House (and sustained by a largely left-wing, tame and managed media) real support for Biden’s planned imposition of the anti-business lunacy of a global corporation tax rate (at a minimum starting level of 15%) continues to wane (as it becomes clearer that more and more countries have signed up with no intention of actually participating).
All this whilst the woebegone and unimpressive ‘leaders’ of the world are busy impressing themselves and each other with empty rhetoric whilst achieving nothing more than copious quantities of hot air.
Finally, a word of caution in respect of inflation:
In simplistic terms, when money supply is loose (that is, when money is plentiful, cheap and easy to borrow) then equity markets head upwards.
Conversely, when money supply is tight (when it becomes expensive and difficult to borrow) then stock-markets fall.
In the USA the Federal Reserve has indicated its intention to taper quantitative easing (the printing of money) and use interest rates as a blunt instrument to ‘manage’ inflation. That these actions are taken from a position of economic strength may not prevent a short and temporary negative effect on stock-markets.
Similarly, in the UK the Bank of England has recently expressed concerns that UK inflation is likely to increase to circa 4.50% in November and may go even higher in December. This has more to do with decisions taken by the government a year or so ago in its attempts to deal with the financial effects of Covid rather than what is happening in the UK economy right now.
It would not come as a surprise to see a short correction in global equity markets as and when interest rate increases are eventually announced but this would likely be a temporary phenomenon based on real economic factors rather than confected market-maker manoeuvres. The underlying factors were temporary and so the inflationary effects are most likely to be temporary too. They will work their way through the financial system and their impact may be confined to specific sectors rather than across the board.