Quotidian Investments Monthly Commentary – August 2021
Traditionally the month of August is the main holiday season in the Northern Hemisphere (which is home to all the major stock-markets of the world) and market-makers abandon their trading desks in droves for a welcome and often extended period of rest and relaxation. At the best of times thin trading volumes leave shares open to volatility and it is a relief to welcome September and the return to what passes for investment normality as the leading players return to their offices.
On 31st August 2021 the FTSE100 index closed the month at 7,119.70 (a rise of +1.24% in the month of August itself) and it now stands at up +10.20% for the 2021 calendar year to date. By comparison the Quotidian Fund’s valuation at the 31st August shows a rise of +3.90% for the month and so the Fund is now up +15.60% to this same date.
One of the economic issues we covered in last month’s report was “The Biden effect” which related to his self-defeating attempt to impose a common global level of corporation tax. That proposal hasn’t survived its first encounter with economic reality but I have little doubt that this buffoon will persist with his blinkered bid to introduce a socialist tax agenda. Socialism, of course, sounds blissfully attractive in theory but has never actually worked in practice and it has a well-earned soubriquet as “the equal sharing of misery”.
Biden has unmistakably shown himself to be weak, incoherent, incapable and way out of his depth but, not content with exposing his own naivety with this ill-thought-through stratagem, he took another false step (a wild lunge in the dark might be a better description) when, without prior consultation with his NATO partners nor with sufficiently early warning, he simply gave an artificially and unnecessarily abrupt period of notice to remove the nation-building and peace-keeping US armed forces from the potential powder-keg of Afghanistan.
The New World Order ushered in following the Second World War saw the USA effectively appoint itself as the world’s policeman. We all know, of course, that with constabulary duties to be done (to be done) a policeman’s lot is not a happy one. This is especially so when the chief of police is a bumbling, incompetent idiot. Biden’s approach to this responsibility and duty of care can seemingly be summarised as “tell me what I need to know but don’t tell me what I don’t want to hear”. But, as a prominent and prescient Sixties philosopher once said; “living is easy with eyes closed, misunderstanding all you see.”
Putting aside the potential consequences of this move in relation to global stability and peace, the longer-term impact on the global economy is highly likely to be profoundly damaging to the western world’s interests.
Afghanistan is a rich source of rare earth metals (cobalt and lithium in particular) which are essential components for the politically motivated, proposed and fast approaching ‘green’ era of electricity replacing carbon-based sources of fuel.
China already provides 85% of the world’s rare earth metals and, as it shares a land border with Afghanistan, it will no doubt seek to absorb unopposed a substantial quantity of that country’s natural resources too until it effectively achieves a monopoly.
China’s obvious ambitions towards world domination will then be given even greater weight. Incidentally, as a light-hearted comment on that weighty note: a valuable recent study has shown that women who carry a little extra poundage tend to live longer than the men who mention it.
Meanwhile, as the West continues its idealistic (not to say naïve) march towards the well-meaning but daft and unrealistic goal of net zero carbon emissions by 2050 (and ultimate commercial suicide), China (closely matched by India) continues to prosper and builds hundreds of new coal-powered power stations whilst Western economies sleepwalk into windmills of confusion, tidal waves of uncertainty and solar rays of eventual economic upheaval, mayhem and calamity. Presumably, whilst politicians pursue their fantasies and virtue-signalling at our expense, the huge levels of carbon emissions produced by China and India will only exist in a parallel universe to the one the rest of us currently occupy.
And finally, much of the volatility in equity markets this year can be ascribed to confected ‘concerns’ expressed by analysts and market-makers in relation to the potential for upward spikes in future inflation (largely in their attempts to justify the irrational marking-down of equity prices).
In a speech delivered on 27th August, and for the umpteenth time in 2021, Jerome Powell (Chairman of the Federal Reserve, America’s central bank) stated that “if sustained higher inflation were to become a serious concern then the Federal Reserve Open Market Committee (FOMO) would certainly respond and use all our monetary tools to assure that inflation runs at levels that are consistent with our goal”.
The message couldn’t be clearer but, no doubt, market makers will continue to blame “inflationary concerns” as a limp excuse to manipulate prices; their cynical actions are designed simply to introduce fear and uncertainty into an investor’s mind and they should be seen for what they are.