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Quotidian Investments Monthly Commentary – May 2017

June 3, 2017

The huge income inequality between EU member nations is getting worse year by year. Annual income per capita in 2009 was:

  • In Germany           $41,890
  • in Spain                   $32,412
  • in Greece                $29,819
  • in Portugal             $23,122
  • In Poland just        $11,454

Now the differences are even wider:

  • Germany: By 2014 income per capita had grown to $47,852and it would have risen even further since then had the country not taken in over one million impoverished migrants which has had the effect of skewing and suppressing today’s figure
  • Spain: By 2016 per capita income had fallen to $27,012
  • Greece: By 2016 it had dropped to $18,078
  • Portugal: By 2016 it was down to $19,759
  • Poland: By 2016 it had inched up to $12,309

Clearly the richest European country has managed to recover well from the depths of the great Global Recession of 2008-11 but many of the poorer EU countries have continued to slide further into an even darker economic hole.  It is fair and reasonable to conclude that only one country has really benefitted from the EU and the synthetic currency that is the Euro.

As a consequence of that, levels of sovereign debt remain a source of concern and pose a distinct threat to economic recovery and the velocity of it.  Indeed outright default in some cases, whilst unlikely, cannot be discounted

In the UK, sovereign debt is currently running at 85% of Gross Domestic Product.
In France it is over 90% of GDP.
Ireland stands at 117% of GDP.
Italy is at 127% of GDP.
The USA’s indebtedness is 138% of GDP.
Greece sits at 158% whilst Japan is at a resounding 238% of GDP.

Of course, some nations default slyly via the slow drip-drip-drip of a long-term currency devaluation (not possible, of course, in the one-size-fits-all construct of the Euro).  Others beg for a bailout from their central bank or from the IMF (de-facto default by another name) or seek to issue bonds/gilts to unwary, immature or easily pleased investors.  One way or the other, the end of that road is inevitably ugly.

These figures give one pause for thought and they are one of the reasons that Quotidian continues to rely on a tightly focused portfolio which concentrates on a relatively small number of reliable, trustworthy companies.

On 31st May 2017 the FTSE 100 closed at 7485.29 (a rise of+3.91% for the month) and now stands at +0.86% for the 2017 year to date.  By comparison the Quotidian Fund’s valuation on the same date shows an increase for the month of May of +2.53% and for the 2017 year to date the Fund is now up +24.38%.

The fragile nature of global equity markets was tested again in mid-May when the anti-Trump and left-wing biased media in Washington and New York contrived to create a story attempting to link Trump’s sacking of the FBI chief Comey to an alleged leaking of secret information during a meeting with Russia’s foreign minister, alleged attempts to pevert the course justice and yet another re-hash of allegations relating to supposed Russian interference in the 2016 US election (basically throwing any mud they could invent in the hope that some of it would stick).

Without waiting for anything remotely resembling evidence to emerge, the usual suspects immediately began a chorus of calls for Trump’s impeachment.  We live in hope that one day soon the land of the free and the home of the brave will embrace the concept of democracy.

These allegations have all the hallmarks of a politically based stich-up and, from the paucity of evidence currently available, they do not stand up to even the slightest scrutiny.  Intellectual rigour is rarely the forte of the leftist, politically correct media either in the UK or the USA (who much prefer to work on assertion, commentary and opinion). The much touted chain of incriminatory emails and supposedly damning contemporaneous minutes of meetings held in February are, as yet, nowhere to be seen.  The ‘facts’ that have thus far emerged certainly do not support the media’s assertions; indeed, they chime more with the propaganda and inventions we are familiar with from Project Fear.

We are keeping an open mind.  If and when real evidence of wrongdoing does come to light then we will change our views of Trump and of global equity markets.

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