Posturing Or Pivoting?

For about the last six years, I have been publishing my thoughts on the financial markets but this will be my first LinkedIn newsletter and is largely taken from my website. I find putting my ideas, views and reasons why I hold certain stocks into writing an invaluable and enjoyable exercise.

Incidentally, my interest in the stock market goes back about 46 years to a project I carried out at school. I was tasked with constructing a dummy equity portfolio. At the time, my eldest brother speculated on the stock market and I put several of his tips into my portfolio. Lessons learned: making above-average returns from the stock market is more difficult than it looks and be wary of tips. As soon as I was able to, I began investing (Speculating) and generally lost money rather than made it. I can recall the elation when a colleague (Andy - you know who you are) and myself made some ￡300 each from "Stagging" the BT IPO in 1984. And I can recall the lows - losing ￡1,500 on London and Liverpool Trust was certainly a hit. As with tennis (I am a terrible player), the highs are not quite as high as the lows are low. Maybe we are hardwired to accentuate the negative? Anyway, the investing bug has never left me. So, about eight years ago I took my interest to a different level. I may be a private investor but I take it very seriously. I enjoy it but I take it seriously. And my approach has changed. The days of speculation are very far behind me. I am most definitely an investor rather than a speculator. A more conservative investor but far more successful and veering towards value investing with a twist of growth. By the way, I am a firm believer in the power of compound growth and not just in a financial sense. I largely agree with the comment made by Warren Buffett that "The stock market is a device for transferring money from the impatient to the patient". I certainly would not recommend it as a get-rich-quick scheme.

The listed companies I discuss are those in which I have a financial interest. They are highlighted in bold (A concise list can be found on my website). Broadly speaking, I cover their progress (Or lack thereof) over the previous month. It's something of a financial diary. And please read the disclaimer.

So, here goes. This is from last month but I will imminently publish my most recent commentary (Dated 15th February 2023). While the next newsletter after that will be due out on 15th March 2023.

January 15th 2023

For a country that has had five Prime Ministers in six years and has only just lost its longest-reigning monarch, the UK still feels remarkably stable. Even if you throw in a wave of strikes and a disastrous short-term spell for the UK bond market. As for Brexit, there’s now a serious debate about the way forward. In my opinion, much is relative. And, relatively speaking, many large economies are facing greater problems than the UK.

In terms of my stock market investments, 2022 was a poor year. My foray into Russia was a disaster, highlighted by the delisting of Petropavlovsk. That was a 100% wipe out. While the sale of my holding in Polymetal was at a substantial loss. On the upside, Rio Tinto performed well while nearly all my defensive plays worked out. More broadly, the overall performance was buttressed by dividends (Most of which are in US dollars). A lesson I learned a long time ago is that diversification may not make you rich but it’s likely to stop you from becoming poor.

As for my crystal balls, they remain in their drawers. So I will not be making any prognostications (Guesses) about the direction of the financial markets over the next year. But I believe the economic consensus is wrong. Western economies are not heading into recession (Two consecutive quarterly falls in GDP), they are already in a recession. It’s simply hidden through years of Quantitative Easing (Money printing) and ultra-low interest rates. Remove the economic crutches and, I believe we are in a slump. And that makes me think that we will be out of a recession before the economic consensus tells us that it’s the case.

Having said that, I noticed a remark by a psychologist and media analyst. It was on the lines of bad news often coming suddenly while the good news is mostly incremental. And, so, we tend to focus on the bad news - it’s the jolt of the sudden that draws our attention. Interestingly, he argued that people in developing countries are often more positive than those in developed countries. Overall, I am optimistic about the long term. It’s the shorter time frame that I find more interesting - there could be stock market bargains for the patient investor. But for anyone who believes in an automatic reversion to the mean, this chart from Kone, the elevator engineering company, may be worth a look. It seems to indicate that work patterns have permanently changed. For many, that’s a blessing but not for the owners of office blocks.

I could be completely wrong but I have the impression that another pandemic is just a matter of time - it may be years or even decades away. But I still believe it’s a good idea to build it into my thinking - I am mulling over a collective investment in the healthcare/biotechnology space. A more virulent and contagious epidemic could be in the offing - I am also wary of business models that require a concentration of people. While geopolitical considerations can seriously impact the best-run enterprises - rocketing energy prices are decimating the UK hospitality sector.

On a broader note, I will be paying more attention to the US stock markets. In my view, home to some of the best-run and best-regulated companies (The Americans actually send some financial miscreants to prison rather than giving them honours). With reshoring now a reality, it’s not just the US mega-cap technology stocks that merit attention. But I’m mindful that the US is also home to some incredibly over-hyped companies. So, I would like to avoid tracking the indices. There is also the possibility of a further price-to-earnings contraction in what are relatively highly-priced US stocks compared to international peers. That could be compounded by a fall in earnings (Earnings on a trailing basis for S&P 500 companies are well above their long-term trend). Around that, as the chart below highlights, savings rates for US consumers have collapsed over the last year (Americans appear to save around 2.3% of their income; last year the Chinese saved about one-third - All right, it was during a lockdown but they generally save more than most Westerners). But with US consumer debt rising and savings ratios falling, I ask myself what sector will lead the charge upwards. Looked at historically, the S&P 500 index leaders seem to rotate every ten or so years. Technology has led the pack in recent years but it may not be the case going forward.

? United States Personal Savings Rate

As for Craptocurrencies, the farce continues. As one commentator recently pointed out, when holders park their tokens on an exchange, generally speaking, the exchange can literally do what it likes with the holding. That includes speculation and lending. It simply promises to repay the holder. It does not appear to be based on segregated accounts. The whole racket seems to operate more like a bazaar (Bizarre?) rather than a regulated market. That reminds me, Cathay Wood (Manager of ARK Investments) has suggested that Bitcoin will reach US$1m by 2030. So presumably she has bought crapto-related stocks on valuations that anticipate that price for Bitcoin? As for fractionalized ownership of JPEG files AKA non-fungible tokens (NFTs), that market appears largely to have gone down the pan. There are even services buying NFTs at a fraction of their original cost so that the losses can be harvested for tax purposes. What I find most concerning is the degree to which many countries appear to have become economically dependent on asset bubbles to fuel economic growth whether it’s the Chinese real estate market or the US stock market. Returning to a more normalised monetary environment raises questions about asset values. Remove the froth and what do you have left? We are about to find out.

These Bank of England figures show the broad direction of travel for UK interest rates up to 2018. And this chart does not cover the peak of some US$18.4 trillion of negative-yielding debt that was reached in December 2020. Viewed in this light, I think it’s no wonder that so many asset bubbles have developed in recent years. Savers have simply been struggling to get a real return on their money.

For sure, the following is only one part of the equation but it gives some idea of why I am avoiding UK-facing companies dependent on discretionary spending. Incidentally, to this could be added rising energy and food costs. Not forgetting the rising cost of renting accommodation. It’s not the end of the world but the UK could be facing a very uncomfortable time. That said, the outlook for large UK-based companies with an international market is completely different. They are generally on far more reasonable valuations than their foreign peers. And their growth prospects are often strong.

UK Fixed-Rate Mortgages Reaching The End Of The Fixed-Rate Period (With the initial fixed-rate shown)

As for looking to the US for a lead in residential finance. The preponderance of fixed-rate residential mortgages for the entire duration of the mortgage may give it a degree of economic stability. But in a rising interest rate environment, moving home means losing out on the low-cost mortgage deal attached to the property being sold. So the US housing market looks likely to seize up as mortgage rates increase. Why move if the cost of your mortgage will skyrocket? With some 1.6 million licensed realtors in the US, this bubble takes up a chunk of the US economy.

The above also points to the need to keep a close eye on corporate balance sheets. The debt profile of companies is likely to come to the fore if there is no near-term interest rate pivot.

By the way, as I write, Paddy Power is offering odds of 10/11 on a Labour party win at the next general election while the Conservatives appear a long shot at 6/1. That could mean that we need to look two years down the line. From our relations with the EU to our energy policies there are likely to be policy changes.

Unsurprisingly, most of my holdings have had little to report on over the past month. So I am kicking off with two funds from the same stable.

JPMorgan Asia Growth & Income announced its final results for the year ending 30th September 2022. The Chairman’s statement points to a grim macroeconomic environment for the period. This includes the usual suspects such as the COVID restrictions in China as well as the war in Ukraine. But it also makes clear that the fund has been an excellent long-term performer. Over a ten-year period, it has achieved annualised returns of 8.5% per annum on a share price basis and has outperformed its benchmark. But viewed over the reporting period, it underperformed its benchmark and its discount to its NAV widened. Its quarterly dividend remains unchanged at 1% of net asset value.

Although it remains generally bullish about Asia’s long-term prospects, it singles out China’s demographic problems. It also highlights just how dependent TSCM (Its largest holding) has become on the North American markets. They now take some 70% of its sales. My main concern with China is its relationship with the US. The tariffs imposed under the Trump administration appear to have been expanded under Biden. This friction can be seen in an opinion piece penned by Robert E. Lighthizer, Former US Trade Representative in the Trump administration. It was published in The New York Times on December 18th 2022. It referred to “Strategic decoupling”, “Technology theft, espionage and mercantilism” and “Balanced trade”. The mood music is poor. But, in my view, any decoupling will be difficult and painful. According to Statista, Apple receives some 15% of its sales revenue from China.

For now, the fund remains ungeared but has a facility that enables it to change that approach at short notice. On a positive note, it managed largely to avoid the disasters in the Chinese property sector. While on the downside, it was underweight India, which it still regards as expensive.

Of course, it’s a managed fund. So, it’s all about the judgement of the managers. But as it points out, its remit covers some 40% of the world’s GDP. While the region’s growth is underpinned by structural and social changes. It’s also a useful vehicle to access Asian tech giants. At the same time, it’s not an area where I am competent to invest so I prefer to use professional managers.

JPMorgan Emea’s stock price has moved up over the past month. An end to the terrible war in Ukraine would, in my view, send the fund considerably higher. But for now, it’s a waiting game. As for trying to ascertain what’s going on in the Ukraine war from the British media. Forget it.

Yes, I am still bullish about Gold. That is, as a commodity that preserves wealth in real terms. I believe that ultra-low interest rates and Quantitative Easing (Money printing) created huge problems that are now playing out. While the impact of Quantitative Tightening (Normalisation) is yet to be felt. And, so, I have a reasonable exposure to the metal via Gold mining stocks.

Putting some meat on the bone, Anglo Asian Mining, issued a preliminary resource estimate for its Gilar deposit. Although this is not a JORC-compliant report, in my view, it probably gives a reasonably good outline as to what investors can expect as a minimum. It points to 135,000 oz of Gold, 21,500 tonnes of Copper and 23,000 tonnes of Zinc. However, it also outlines considerable resources at depth (What it believes is a minimum of 45,900 oz of Gold, 7,800 tonnes of Copper and 7,600 tonnes of Zinc). As for accessing this underground deposit, it’s conducting preliminary work to construct a portal, as a first step in building a tunnel. But it gives no indication of the overall cost or time frame. In an RNS from November 2019 covering its Gilar discovery, it states that “The topographic relief is challenging for drill rig mobilisation”. The map below gives a clearer view of where it sits (Top right-hand corner) in terms of the company’s other assets and processing plant.

Source: Anglo Asian Mining

Should this go as planned, it will bridge the gap between Gedabek’s decreasing production and the huge potential in its other contracted areas.

That leads me to representations the company has made to the UN, the EU, the US State Department and the UK’s Foreign Office. In essence, it appears to believe that its legal rights over its restored contract areas, including ease of access, have been impugned. How successful its actions will be, I have no idea. But I suspect that it’s caught up in complex geopolitics that can only be sorted out by Governments. Hopefully, this can be resolved peacefully.

The company has also recently announced a small (US$289,000) “Follow-on” investment in Libero Copper & Gold. This maintains its 19.8% holding in the Toronto-listed Copper explorer. But for now, there is little information on Libero’s path to production. Nor is there any indication as to how this will be funded.

The recent completion of its Bilboes acquisition, in my view, puts Caledonian Mining on track to become a multi-asset, mid-tier Gold producer. But like most projects in mining, it took a considerable time to come to fruition. At a prospective price of around US$65.7m (Entirely share-based), it's a sizable move for the company. It’s looking at an open-pit operation that, according to the vendor’s feasibility study, will produce some 168,000 oz of Gold per annum over a ten-year life of mine (LOM). But I would expect the LOM to be considerably longer (Its flagship Blanket Mine has been operating, aside from two world wars, continuously since 1906. Although it has 14km of strike on two ore bodies, it has only exploited 3.5 km). Caledonia is now conducting its own feasibility study to optimise the project’s development. This should be completed within the next 12-14 months. However, it’s still unclear how this will be funded - unlike Blanket, Bilboes will be a refractory ore project - adding to the expense of extraction. It has floated the idea of a staged development that will be self-funded (As was its US$67m Central Shaft). Incidentally, it has begun a small oxide project at Bilboes that is expected to go into production in February 2023. It’s not expected to generate huge revenues but it facilitates the stripping programme required for an open pit operation. It’s also worth mentioning that Victor Gapare, the former head of the Chamber of Mines Zimbabwe, will become the largest shareholder with 28.5% of the stock and will be an Executive Director (With a salary of US$470,000 per annum excluding incentives - I thought that 470k would be incentive enough but obviously not).

Gold is one of Zimbabwe’s biggest foreign currency earners. Using recent figures from Fidelity Gold Refineries, the country’s Gold output was up 19.5% on the previous year (2021). Encouraging large producers to up their game by paying them 80% of their additional production in US Dollars rather than the local currency appears to have worked. More broadly, the country is laying plans for a substantial uplift in Gold production. It gives the impression of being open for business.

Centamin recently agreed on a sustainability-linked revolving credit facility of US$150m (Expandable up to US$200m). With interest ranging from 3.5% to 4.5%. This agreement is linked to a variety of measurable sustainability goals. I am not overly concerned at an operational level and it has many opportunities to develop within its current portfolio. The 120MT waste-stripping programme appears to be on track and it's planned to end in December 2024. That should save the company some US$60m per year. So I ask myself whether it’s ahead of schedule. However, I still need to keep a close watch on the local economic situation. The Egyptian pound has slumped against the US dollar over the past year. Moreover, the country has had to seek an IMF bailout. That comes with strings. For example, greater transparency, a floating exchange rate and less state involvement with the economy. If it goes smoothly, it could benefit Centamin. If it doesn’t, it could be bad news. But, to its credit, the IMF appears to have made provision for an extension of help to the neediest in Egyptian society. Incidentally, for anyone interested, the company is holding an Investor Meet presentation on 19th January 2023.

At long last, Fresnillo has commissioned its Juanicipio project. The upshot is that it looks set to go into full production in Q2 2023. That’s an additional 11.7m oz of Silver and 43,500 oz of Gold per annum. With Fresnillo (As operator) taking a 56% attributable share. Very importantly, the mine seems to offer considerable scope for development. Giving that some perspective, the Silver Institute estimates that for 2022, the global mined Silver output would reach some 830m oz. So, this significant mine appears ready to go into production on the back of a strong Silver price (Rising more than Gold over the past three months but still low in comparison to the price of Gold).

It may have perked up as of late but I still have some doubts about Golden Prospect Precious Metals. Using its interim report for the period ending 30th June 2022 and its portfolio consisted of 26 Canadian and 19 Australian listed mining stocks in various stages of development and situated across the globe. For such a small fund, I am unsure how it can monitor so many companies. It’s certainly not a Terry Smith approach based on a small number of large holdings. However, its bias towards Silver seems to have been a good move.

Pan African Resources continues to deliver at an operational level. Its next large project will be bringing its Mintails acquisition into production. Looking at what it has achieved with Elikhulu, I have little doubt about its managerial ability to deliver. But issues outside its control can impede even the best management. So I need to watch the external environment. However, its further expansion in the tailings recycling industry will, in my view, go further to de-risk the business. It may be based in South Africa but it’s now a multi-asset operator - with operations above and below ground. While sitting in the background is an exploratory project in Sudan. More producing assets in more jurisdictions will likely result in a higher valuation for the business. It has delivered on widening its asset base in South Africa. I think that the next stage is likely to be international growth. For now, it sells at some 1.3 times its book value and a price-to-earnings ratio of around five. Considering it has a return on equity of around 26% and operating margins of about 29%, the good news does not appear to be baked in.

In my opinion, there has been a chronic lack of investment in oil exploration in recent years considering the growing middle class in emerging markets, most obviously China and India. To that might be added around two billion combustion engines, not to mention the ships, planes and military hardware that require oil. So, I believe that oil demand will remain strong for many years to come. My two energy holdings are at diverse ends of the spectrum, at least in terms of size. And, yes, I believe that oil companies are part of the solution rather than part of the problem when it comes to achieving Net Zero goals.

BP may be the UK media’s pet hate but it still delivers. The cash pours in from its oil, gas and trading units. While it increasingly pivots towards a more holistic approach to energy that encompasses both hydrocarbons and renewables. For sure, the war in Ukraine has put the global move to renewables into overdrive but it also highlights the problems that this change faces. So long as oil trades above US$60 per barrel, BP can continue increasing dividends and buying back its stock. While expanding its renewable energy portfolio.

It’s a slow burn with Trinity Exploration & Production. If there was a highlight for it during 2022, it may have been the hugely beneficial changes to Trinidad’s Supplemental Petroleum Tax (SPT). However, the authorities have promised further reform to the way they tax the energy industry. Phase 3 of the revision of Trinidad’s energy tax regime is due to be completed in 2023. For the moment, I would like to know the results of Trinity’s most recent drilling campaign. And, not forgetting, it enters 2023, unhedged and without the burden of SPT impacting the profitability of its onshore production. With a breakeven of around US$30 per barrel and the prospect of a maiden dividend later in the year, I believe it has probably turned a corner. Not forgetting that it has many drilling targets in its hopper and has participated in the recent auction for onshore blocks in Trinidad. That auction closed several days ago, so its success or otherwise should soon be known. However, its share price performance has been poor considering its share buyback programme and the price of oil.

Whether the environmental lobby likes it or not, the reality is that much of the transition to Net Zero will be very dependent on the resources that can be extracted by miners. The backdrop is that ESG concerns are making it more difficult to get mining projects off the ground. While many are simply not viable in the current interest rate environment. To that can be added supply chain problems for mining equipment.

As I went through the investment case (As well as the potential pitfalls) for Rio Tinto last month, I will not repeat it. For now, it looks set to benefit from China ditching its zero COVID policy and the resumption of a degree of normality. One caveat I would add to that is the Chinese New Year celebrations will begin at the end of January and end at the start of February. Traditionally a time for family get-togethers, it’s unclear how this will play out with COVID. If it’s a disaster will there be a resumption of lockdowns? And what impact will that have, especially on iron ore demand? Nevertheless, Rio still has other strings to its Net Zero bow with its Copper output and, of course, its newly acquired Lithium project in Argentina. As for reshoring in the US. My understanding is that the origin of the raw materials that go into the products that are impacted by the Inflation Reduction Act (IRA) will also be affected. With Rio’s US Copper operations; at Kennecott as well as its proposed Resolution mine, it’s well-positioned to benefit from the effects of the IRA. While its pivot towards research and development puts it in a different league from most miners.

So long as there is no collapse in Platinum (I don’t believe that internal combustion engines will disappear overnight), Rhodium and Palladium prices, I am quietly optimistic about Sylvania Platinum. It’s a cash-rich, debt-free producer that pays good dividends. Importantly, it’s a low-cost producer. For H1 2022, its total cost was US$1,025 per oz while its Platinum Group Metal basket realised price was US$2,966 per oz. And it’s not in the habit of diluting shareholders’ interests - It has issued no equity since 2009. While it still has avenues for expansion and efficiency upgrades. However, it’s dependent on its host mines. Taking a three-year-plus perspective, its open-cast mine projects at Volspruit and Northern Limb will require significant amounts of capital. It’s also based in a poor jurisdiction and that includes water supply issues. While the demand for its output is indirectly linked to the supply of semiconductors. The recent shortage impacted the supply of vehicles and therefore the demand for Platinum.

No, I am not bullish about the outlook for the UK economy but I am optimistic about the future of UK renewable energy. And I view these as defensive plays.

It may not have made any recent announcements but NextEnergy Solar Fund still performs. With a wide variety of assets and long-term energy agreements, it gives me a degree of resilience in what are turbulent times. Even the windfall taxes on energy companies appear to do little to impact its business model. While its move into energy storage gives it another angle and dovetails with its asset base. It’s also worth pointing out that the Labour party appears far more pro-solar power than the incumbent Conservative Government. The Labour party aims to triple solar power generation by 2030. Presumably, it will be less mindful of planning restrictions in Tory-held seats.

In a similar vein, Greencoat UK Wind has had a quiet Christmas in terms of announcements. But in the event of a Labour party victory at the next general election, it could find that it has the wind in its sails. Labour is looking at doubling onshore wind turbine capacity to 30GW by 2030. With the inference that it will make the planning procedure easier and quicker. As with NextEnergy, it appears little impacted by the windfall taxes recently imposed on energy producers.

These two capital preservation funds have excellent long-term performance records. My only concern for both is whether they can replicate that performance in what appears to be a new investing climate.

In the absence of any strategic update, I thought it might be worth taking a closer look at Capital Gearing Trust’s position, using its December factsheet. In terms of currencies, some 55% of the fund is exposed to Sterling, with around 24% exposed to the US Dollar. Its move over the last 18 months from conventional to index-linked bonds may be worth noting. Some 44% of the fund is now invested in index-linked bonds - mainly UK and US bonds. Over the same period, it has also decreased its exposure to corporate debt and debenture shares. In my opinion, it seems to be positioning itself to deal with stagflation. Considering its long-term record of uncorrelated real returns, this outlook may be worth considering. It’s also worth noting that it took the opportunity created by the Truss/Kwarteng debacle to add to its UK index-linked bonds portfolio. I hold it as a hedge against inflation and the prospect of financial repression (I don’t believe that Western governments have the stomach to get a grip on inflation - especially, as the only tool in the anti-inflation toolbox appears to be interest rates).

Taking a look at Ruffer Investment’s website, there is a recent article penned by Jonathan Ruffer, founder of the business. This makes clear his focus on inflation. It’s obviously at the forefront of the firm’s investment strategy. If he’s correct then inflation may well fall but a resurgence is likely - a volatile inflation environment. He points to using short-term positions which may need to be reversed as a solution to the problems associated with inflation. How this will work in practice, I’m unsure. But looking at his long-term record for delivering real capital growth, I am more than willing to give him the benefit of the doubt. The fund has performed well since I invested in it.

Ruffer’s monthly investment report for December suggests there will be a “Disinflationary lurch on the inflationary journey”. It appears to be basing its strategy on a coming wave of market oscillations and its ability to benefit from these choppy waters. As it points out, it has spent a long time preparing for what is now unfolding (I think that it’s referring to the end of this huge monetary experiment of Quantitative Easing (Money printing) and ultra-low interest rates).

My only concern with Ruffer and I have the same issue with Capital Gearing Trust, is simple. We are now in completely uncharted territory - what has worked in the past, may not work now. But I think there is a logic in aiming for accumulative short-term gains. Ruffer raises the prospect of both inflation and deflation. Incidentally, what I most like about the approaches taken by Peter Spiller of Capital Gearing and Jonathan Ruffer is they both benchmark against inflation. It’s not a case of we are winning because we are losing you less money than our competitors. The aim of both is to offer long-term real returns.

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Moving on to a more volatile holding. Falling stock markets may be bad for the following’s non-leveraged business segment. But its leveraged arm benefits from volatility.

As I covered CMC Markets in some depth last month, I will not repeat the exercise. Even though it has not issued any new information over the past month, I believe the investment case remains the same. In a bull market, it profits from both its leveraged and non-leveraged business units. While in a bear market, it’s generally the leveraged side that provides the profits. More broadly, I think that the founder and major shareholder will sell the company. But the question is when and at what price? In the meantime, the business grows - this includes its recent move into the UK’s self-managed wealth market. In addition, it continues to pursue overseas expansion. It also pays regular and generous dividends based on its free cash flow. My prime concern is the possibility of onerous legislation stymying its business - with the prospect of a Labour government within the next two years, that may need closer attention.

Unless the Government bans pleasure, I think this defensive stock has a future.

The UK’s Labour party is considering a New Zealand-style ban on smoking in the UK. Should it win the next election and go ahead with this idea it will be a hit to British American Tobacco. But I couldn't help but notice that, according to the charity Action on Smoking and Health, smoking costs the NHS some ￡2.4 billion directly plus another ￡1.2 billion indirectly for social care. However, using Statista’s figures for 2021/22 and the UK Government collected ￡10.27 billion in revenue from taxes on tobacco. Going ahead with such a ban will be extremely costly. I tend to think that, at some point, serious questions will need to be raised about maximising life expectancy, regardless of economic costs. Presumably, someone has run the slide rule over the cost of funding an increasingly ageing population. That aside, BAT continues to morph into a healthier provider of enjoyment for large numbers of people. Moreover, it’s building brands and customer loyalty. And, of course, it pays generous dividends. While its debt is largely fixed interest.

There is real estate and then there’s real estate. This company, in my opinion, has a niche in the market that should see it through any likely economic downturn.

With a blue chip client base and a portfolio of modern buildings focused on the growth of the digital economy and its logistical needs, Tritax EuroBox offers defensive qualities to survive what may prove to be troubling times. Its debt is either at a fixed or capped rate while most of its revenue has some form of inflation linkage. It also pays a healthy dividend (In Euros) and has assets across the EU. It’s worth mentioning that support for the European Union has, according to a 2023 poll from Statista, grown stronger since the UK’s departure from the bloc. Considering Tritax’s focus on this market, I believe this is not an unimportant point.

After almost 14 years of turbo-charged, high-octane monetary stimulus, stock markets seem to be getting back to what might be regarded as normality. Viewed in perspective, real interest rates (Adjusted for inflation) are still low and Quantitative Tightening (Normalisation) is only just starting. The big question could be what is the new normal? I don’t know. A huge amount seems to be riding on a Fed pivot. Something that I am quite sure of is that the demography of the financial markets looks bad. There’s a cohort of financial market professionals under the age of 35 years who have experienced nothing but a “Fed Put”, easy monetary conditions and a golden age of Ponzi schemes. I am not convinced that they know just how tough (And cynical - take a look at the craptocurrency markets) the people who really pull the strings can be. So, I ask myself whether they are projecting onto the stock markets what they would like to happen rather than what they should expect.

Just For The Record

In these straitened times, I suspect the UK Treasury may be weighing up the possible revenue from the legalisation of cannabis.

For lovers of Wagner and those who were unable to attend last year’s Bayreuth Festival, this is for you.

I suspect that some bankers at Credit Suisse will shortly be singing along with this one.

If you ever wondered how the UK could end up in this Brexit mess, this prescient sketch has more than a touch of truth.

Disclaimer

The content of this newsletter is for your general information and use and is not intended to address your particular requirements. In particular it does not constitute any form of advice or?recommendation?and is not intended to be relied upon by you in making or refraining?from making any specific investment or other decisions. Appropriate expert independent advice should be obtained before making any such decision.