So, Let's Raise The Debt Ceiling

June 15th 2023

Relax, disturb and reassure is a technique used in selling. It largely speaks for itself. Relax the prospect, worry the prospect and then present a solution and close the sale. In my opinion, this goes some way to describe the US debt ceiling fiasco. That method may be suitable when selling life insurance but as an approach to economic policy, it appears shambolic. I also find it startling that there seem to be no plans for the US to pay down its national debt and live within its means.

Just a minor point but I have lost count of the public companies that inform shareholders of a webinar or conference call at very short notice. Typically, the details are tagged at the end of a Regulatory News Service (RNS) release. Often on the same day as the event. They may be better attended if they were more widely known and potential attendees were given greater notice. And possibly scheduled to take into consideration different time zones. Maybe the London Stock Exchange could collate them and produce a calendar. Incidentally, if I know of a forthcoming investor event for a company I am invested in, I will pass on the details.

I would also suggest that more public companies use visuals or graphics to support their RNSs. Most managements seem to labour under the assumption that words alone will suffice. I would suggest that living in an audio-visual world, this is not the case. Around that, the concept of the "Attention economy" has taken hold. There is fierce competition for consumers' time. I can understand the legal requirements when releasing corporate information but this could be augmented by audio-visual material on a website. Frankly speaking, I am not convinced that market professionals read what is released by public companies.

Another thought, as an investor you may have met the management. But have you met the workforce? Simply an idea but I suspect that labour relations may be smoother if trade unionists met investors. As it currently stands, dividends to shareholders are often presented in the media as money down the drain or some form of benefit for the rich. The reality is that these dividends often go to very ordinary people or institutions that play a major role in society such as insurance companies and pension funds. In a similar vein, investors may not appreciate employee efforts.

For sure, the US stock markets are still rising. But less attention is given to just how skewed the rise has been. This can be seen from the FT Wilshire 5000 Index, a market-capitalisation-weighted index covering the most widely traded US public companies. For the year to 31st May 2023, it increased 8.80%. Remove the technology sectors and this becomes a 1.2% loss. At the same time, if history is any guide, we are due a rotation. So, who will lead the next charge?

Although Copper and Gold are often found together in mining, they have a very different connection when viewed as a ratio (The Gundlach ratio). In essence, when the Copper price is in the ascendancy relative to Gold, the economic prospects are bright. The reverse holds true when Gold is relatively highly-priced. A more detailed explanation can be found in an article by Russ Mould in Shares Magazine (1st June 2023). If his analysis is correct, then it appears we are heading into a period of stagflation. With rising Gold prices indicating the prospect of inflation and sagging Copper prices pointing towards a recession.

Hopefully, my house hunting in Dorset is at a close. I am now looking at tying up a few loose ends and completing the purchase before my next newsletter. Incidentally, has anyone put together an AI system for residential property searching? It could take into consideration all types of metrics from hobbies and interests to occupations and careers.

And so, onto the portfolio. Starting with the Gold miners.

Anglo Asian Mining announced its full-year results for the year ended 31st December 2022. Its production was in line with guidance at 57,618 gold equivalent ounces (GEO). Its profit before tax fell to US$7.5 million (m) (2021: US$12.6m). Although it's still a low-cost producer, its all-in sustaining costs (AISC) rose 26% to U$1,064 per oz. Unsurprising given the fall in production and inflationary pressures (Fortunately, due to Azerbaijan's energy resources, rising fuel prices are not an issue). While its overall performance was framed by the decline in output at its Gedabek site - it believes it will remain productive until at least 2028. I have already covered much of its progress over the year, so I will not revisit those areas. For 2023, it's guiding 50,000-54,000 GEOs. However, that includes 10,300-11,200 tonnes of Copper and that demonstrates its direction of travel. It aims to produce 36,000 Copper equivalent tonnes per annum (pa) by 2028.

It gave a little more information about the mine and processing plant at Demirli in Kyzlbulag. It believes that this could potentially produce 10,000 tonnes of Copper pa. But, of course, it comes down to a permanent settlement of the regional conflict. As it stands, Russian peacekeepers are due to leave the area in November 2025. In this case, the company is likely to be able to regain control of these assets. But, as it states, it does not know how much it will cost to bring them back into production. It reminds me a little of Vejnaly - it looked like a gift but on closer examination, it became more complex.

Moving on to Vejnaly and the company is pressing ahead with its development. It has a team of geologists on-site. However, it's unclear how much of its resources have been extracted and, more importantly, what is left. At the same time, the company has moved its focus to Gilar. Nevertheless, it's planning on spending US$517,000 on exploration and development at Vejnaly over the year, so it's moving ahead. However, the Government's production share will be higher than the normal 12.75% due to the company having no offsetting costs as the mine was received "Free". That arrangement will also impact the stockpiled ore that is awaiting processing.

As with Vejnaly, its Gosha Gold project (Hasan) has been put on the back-burner as a result of its focus on Gilar. Considering that the Gosha mine lies in a contract area only 50 kilometres from its Gedabek infrastructure and Hasan can be accessed by tunnelling from the existing mine works at Gosha, this appears to be a project that can be conveniently put into its future pipeline.

And, just to recap the prize, its non-JORC compliant mineral resource estimate produced in March 2023 showed that Gilar holds 249,000 oz of Gold, 46,000 tonnes of Copper and 48,000 tonnes of Zinc. However, its most recent drilling programme suggests an extension of its mineralisation and therefore greater Gold and Copper resources than it originally suggested. Incidentally, the company provided useful maps showing the scope and depth of drilling, as well as the results. In my view, more RNSs should contain visuals. It gives greater meaning to the text.

The development of its Zafar mine at Gedabek is underway with the company now sourcing its underground equipment - it will use the existing processing facilities at Gedabek. It's expected to be commissioned in 2024.

The diagram to the right shows Zafar's expected production. It may not be a game changer but if it goes according to plan, it should bridge a production gap as the other pieces of the jigsaw fall into place. And this is based on its current known resources. In my view, it's a conservative estimate.

Looking further out and it expects Xarxar and Garadag to come into play from 2026. For US$4m, it acquired what it describes as "Extensive" historical geological data covering both areas.

It now holds some 19.8% of TSX Venture Exchange-listed Libero Copper & Gold and has an Anglo Asian Director, Michael Sununu, sitting on the Board. But this is no more than an exploration play. During the period, it spent US$3.5m on increasing its shareholding. Nevertheless, in a world that looks set to demand an awful lot more Copper, there is a shortage of large-scale bankable Copper projects.

It continues with its exploration of Ordubad in the enclave of Nakhchivan. But without an adequate road link to Zangilan, the development of any prospects will be difficult. However, as I wrote in 2021, the upside could be substantial.

It's still financially resilient with US$20.4m in cash at the period end plus an unsecured debt facility of US$32m which appears to be undrawn at that point. Its modest buyback programme has a logic that is often lacking in many of these schemes. It aims to sell the purchased stock to institutions. The lack of liquidity in its shares stymies institutional demand. Over the year, it spent US$10.2m on capex and US$7.2m on geological exploration. It anticipates its current effective royalty rate of 12.75% of the value of production to continue until 2025.

In my view, it's not a stock for the fainthearted due to the depletion of Gedabek and its location. However, it has delivered for shareholders over a long period. Moreover, it has a pipeline of projects ranging from the short to the long term. And its focus has moved to a metal that will be pivotal to reaching Net Zero goals: Copper.

Caledonia Mining issued its quarterly results for the period ending 31st March 2023. On the positive side, it reiterated its guidance production figures for the financial year 2023. That is 75,000-80,000 oz of Gold. While the recent technical issues at its Blanket mine appear to be resolved. However, its Bilboes oxide operation seems to have been downgraded to a waste-stripping programme. Towards the end of the period, Bilboes produced around 100 oz of Gold. It appears to be treating Gold produced from this source almost as a bonus. Essentially running on a break-even basis - Bilboes lost US$3.4m for the quarter. But it's worth bearing in mind that Bilboes employs around 150 people who will be retained when the Sulphide operation goes live. In the meantime, the waste stripping is work that would have to be done anyway. Initially, it was looking at extracting some 30,000 oz of Gold over three years. It could still be possible as it moves its oxide operation to other parts of the asset. Nevertheless, the cost associated with Bilboes has hit the company's AISC. It originally guided US$1,150-US$1,250 per oz. It's now excluding Bilboes from its calculations and so is guiding US$935-US$1,035 per oz. Which I think is a little naughty. Even without the costs of Bilboes, its production costs at Blanket increased by 17.5% compared to the same period last year - mainly due to rising electricity costs. By the way, the revised feasibility study for the Bilboes sulphide project should be completed by Q1 2024. It's also worth pointing out that the company is confident that there is no read-across to the sulphide project.

Its solar power plant appears to be performing slightly ahead of expectations and is delivering what it describes as "A substantial reduction" in fuel usage at its Blanket mine. This benefit only covered two months. However, the local electricity tariff has increased. While the technical issues recently incurred resulted in a temporary rise in energy use. For example, employing alternative underground tramming arrangements.

Considering that its operations now cover Bilboes, it was good to see security costs falling a third to US$300,000 compared to the same period last year.

The US$16.5m fundraising went some way to strengthening its balance sheet. At the end of the quarter, it had net cash of US$3.2m. However, by early April this had increased by a further US$7.8m (The Zimbabwe fundraising of US$5m plus US$2.8m of Gold sales under the new export mechanism).

Moving out of its comfort zone was bound to come with issues. Thus far, none seem that outrageous. While many of the issues appear temporary.

Centamin made no notable announcements over the past month. So I thought I would take a brief look at Capital Ltd, the company responsible for Centamin's waste stripping programme. It has just won a major earth-moving and crushing contract in Gabon. Why mention it? Well, if it's winning new business, especially with large miners, then it's almost certainly delivering with its current customers. That delivery is very important for Centamin. With the completion of the waste-stripping programme, the company will have better operational flexibility and improved cash flow. Thus far, it's going according to plan.

Fresnillo announced an end to industrial action at its Herradura mine, an open-pit operation that produces some 55% of the company's Gold output. Production at the mine appears to have returned to normal and it should have no impact on its guidance production figures. The mine was out of action for 14 days and the stoppage was halted with the intervention of the state police. My understanding is that this is related to claims that workers were entitled to a profit share. But the action was not sanctioned by the union. While the company argued that it had agreed structures in place to deal with grievances.

Just a thought but Net Zero ambitions will require great efforts to extract the necessary resources. What if there are global, orchestrated disruptions in the mining industry?

Golden Prospect Precious Metals has not delivered as I expected. Considering its size, I thought it may be nimble and well-informed enough to navigate its way into profit. That has not been the case. And sitting in the back of my mind is a comment from Terry Smith along the lines of investors should prune the weeds and not the plants. That said, it now has in place a subscription rights programme. My understanding is that holders of ordinary shares of the fund can subscribe on a one-for-five basis applicable to shares held on 1st December each year. The subscription price is the net asset value (NAV) on the 30th November of the previous year. For 2023, investors will be able to subscribe at a price of 38.31p. The aim is to grow the fund but cost-effectively. However, that requires a lift in the share price. And that brings me back to Terry Smith.

Pan African Resources highlighted potential electricity supply problems in its unaudited interim results in February. Its guided production was "....subject to consistency in Eskom’s electricity supply". That issue contributed to its revised guidance figures. It had previously guided 195,000-205,000 oz of Gold for this financial year. That has been revised down to around 175,000 oz. While for the 2024 financial year, it's looking at 178,000-190,000 oz. Not a disaster but not well received by the market. It estimated that some 10,000 oz was lost as a result of electricity issues while the balance was a mixture of two factors. The slower-than-expected ramp-up of operations at its Barberton mine (Fairview and Sheba) and problems recruiting skilled labour for its contract mining operation at its Consort mine. However, these issues seem to be largely resolved. More concerning are the technical problems with its underground Evander mine. Production from 24 Level is below expectations. But this looks more like a delay than anything else. While the broader infrastructure development of 24 Level is in line with expectations.

This is important, as the latter should replace the dwindling production from its Evander 8 Shaft Pillar. That paves the way for the exploitation of 25-26 Levels.

Its Mintails project appears to be progressing as planned, the groundwork has already started. With commissioning expected in Q4 2024. A short time in mining but not for the London AIM market. The senior debt component of the financing package has been agreed in principle but it expects this to be finalised in June. Incidentally, looking closer at its guidance figures, the production stability of its overground operations at Elikhulu as well as Barberton stands out. If Mintails goes according to plan, that should add even greater ballast to its operations. The prospective acquisition of the Blyvoor tailings project appears to have been halted. But it gives the impression that this is not over.

At the same time, the Royal Sheba mining project is advancing. Tenders have been put out for the initial works. While a feasibility study for a crushing and milling plant at the mine has been completed. First production is expected in 2025. This will also feed into the Barberton Tailings Retreatment Plant (BTRP). The latter is expected to produce some 25,000 oz of Gold pa from year five onwards. Giving it a life of mine of 18 years. It's also worth remembering that the BTRP is a low-cost operation with AISC at US$725 per oz.

It's still pressing ahead with further development of its Egoli project. Greater clarity for the way forward should be expected in the coming months.

Ironically, its exploration in Sudan seems to have proved reasonably successful. Its US$5m investment has yielded positive results and it has established an analytical laboratory. But, of course, there has been turmoil. Its expat staff have been removed and the operation is now guarded and under care and maintenance.

The reduced production has hit its AISC. It now expects this to be US$1,325-US$1,350 per oz. That said, it has benefited from a strong Rand Gold price. Importantly, it expects its net senior debt to fall to between US$25-US$35m by the end of the current financial year compared to US$49.9m as of 31st December 2022. As for its problems with ESKOM, its move into renewables mitigates rather than solves the issues. But it's worth mentioning that Sylvania Platinum expects an improvement in ESKOM's performance in H2 2023.

Yes, I know that the company pays Edison Research for its work. However, it allows the company to express itself. Unsurprisingly, it argues that based on traditional metrics, Pan African is undervalued against its peer group and also appears undervalued compared to its past share price. It expects production to head "Towards" 250,000 oz of Gold pa from the financial year 2025 onwards. With Mintails, Level 24 and Royal Sheba in full throttle, I think this is very likely.

Sylvania Platinum's share buyback programme is well underway. I will not revisit the investment case. It remains cash-rich, debt-free, pays a good dividend and is a low-cost producer of platinum group metals. For the moment, its output is at a relatively low price point. But I don't expect the slump to continue indefinitely. Incidentally, even at these low PGM prices, it's still a profitable business.

It may not be as sexy as many of its customers but it provides the essentials for attaining Net Zero goals. And it's also constructing "Moats" around its core markets by providing low-carbon output. I believe that will be very difficult, time-consuming and expensive for rivals to emulate.

Rio Tinto's announcement that it had signed a memorandum of understanding with China Baowu "...to explore" and, presumably develop, a range of projects in Australia and Asia aiming to "...to help decarbonise the steel value chain" met with a lukewarm market response. Anything substantial from this will be many years away. But, in my view, it demonstrates how Rio can build barriers to entry in its key iron ore market.

On a more practical note, it announced a US$1.1 billion expansion of its Canadian Aluminium smelter facilities (Complexe Jonquière) with an additional 96 AP60 pots. These will produce some 160,000 tonnes of Aluminium pa. And, as it kindly points out, that is enough for around 400,000 electric vehicles. Moreover, this is low-carbon Aluminium produced from state-of-the-art facilities using patented technology. Again, building barriers to entry. Full ramp-up is expected by the end of 2026 and it's planned to be in the first quartile in terms of price. This largely replaces its lost production from the planned closure of its potrooms at Arvida in 2024. On completion, the enhanced facilities will produce around 220,000 tonnes of Aluminium pa.

What's the price of oil? That's pretty easy. But as someone pointed out, what's the price of Hydrogen? While, as an article in Time magazine recently outlined, hydrocarbons are essential in the production of ammonia, cement, steel and plastics. And, ironically, three of those sectors are essential for the Net Zero revolution to succeed. Scaling up alternatives will be costly and time-consuming. So, I am still bullish about oil companies.

BP's stock price has drifted downwards over the past month. Much in line with the price of oil. While the Saudi Arabian production cut has had little impact on oil prices. For 2023, BP estimates that every US$1 rise or fall in oil prices impacts its pre-tax replacement cost operating profit by US$340m. While for natural gas, every US$0.10 movement in the Henry Hub benchmark price (Measured in mmBtu) has a US$30m impact and every US$1 movement in refining margins equates to a US$400m effect. In essence, it's a reasonable proxy for global economic activity.

Incidentally, covering all bases is something that BP excels at. There may be no market price for Hydrogen. But BP is set to become one of the world's biggest producers of green hydrogen through its Western Australia Asian Renewable Energy Hub. It holds a 40.5% stake and is also the operator of the onshore wind and solar-based project.

Trinity Exploration & Production announced its results for the year ending 31st December 2022. Production was flat at 2,975 Barrels of Oil Per Day (BOPD) (2021: 3,006 BOPD). While revenue increased to US$92.2m (2021: US$66.3m). But the rise did not feed through to profit before tax. This fell to US$2.5m (2022: US$3m), largely as a result of Supplemental Petroleum Tax (SPT) of US$9m. Coupled with its hedging policies - it was aiming to mitigate the impact of SPT and weaker oil prices. So it hedged some 50% of its production. This cost the company a net US$10.4m. That said, its operating profit (Before SPT) for 2022 increased by 104% to US$19m and it has no hedges in place for 2023. While not forgetting that the SPT reforms announced at the end of 2022 should give it a sizeable benefit for 2023. With onshore production of less than 4,000 BOPD, it's classified as a "Small onshore producer". As such, SPT kicks in when the average realised oil price reaches US$75 per barrel during the calendar quarter period. Previously, it was impacted when the price reached US$50. For 2022, its onshore production was 1,655 BOPD. So, with a realisation price of less than US$75 per barrel, it has considerable scope to grow its production outside the SPT regime. And, of course, further amendments to the SPT may be in the offing.

As for its east coast Galeota field, holding some 69% of its reserves and resources, this is under review and a way forward is promised in Q4 2023. But at a cost of some US$200-US$250m, this will almost certainly require a joint venture partner. And it needs further fiscal reform to make the project more attractive. Not forgetting that its producing east coast offshore Trintes field has further scope for development. It's looking at drilling more (Low capex) infill wells to exploit its reserves. It also plans a field development study to convert Trintes' resources to reserves.

Its consolidated break-even rose slightly to US$32.1 per barrel (2021: US$29.2). It's under inflationary pressure but that appears to be an industry-wide issue.

The most significant news could be its new capital allocation policy. It looks set to pay a modest dividend (In total 1.5p) from Q3 onwards. There is also the possibility of special dividends and future buyback programmes. It's guiding that it will pay 15% of operating cash flow back to shareholders when the realised oil price is at least US$50 per barrel. Should oil reach US$80 per barrel, that rises to 20%.

It began drilling its Jacobin well in Palo Seco on 15th May with the expectation that this should be completed in around 35 days. A bit crude, possibly, but it's drilling a deep well (9,800 feet) based on extensive analysis of 3D seismic. So the chances of finding something are heightened. And, as the company points out, this is potentially very impactful. It estimates a mean oil-in-place volume of 5.7m barrels with an upside (P10) of some 10m barrels. So, what's the downside? This is the latest well in its six-well drilling campaign and is based on 3D seismic data bought from Heritage in 2020. The last three wells were quietly forgotten about. They did not work out. The targeted reservoirs were reached but there appear to be technical problems. However, the wells were described by management as being "In line with our expectations". Which is difficult to fathom. Incidentally, Jacobin is an exploration well targeting "Larger, virgin-pressured reservoirs" but it can rapidly become a producing well. If successful, the company is looking at a payback period of one year. It's the first of nine deep wells ("Hummingbirds") that the company has lined up in Palo Seco. Very importantly, it believes that these are repeatable versions of its Jacobin well. It's also worth noting that it has just won the bid for the Buenos Ayres field which runs close to Palo Seco, this will be on better commercial and legal terms than its existing onshore licences. Wasting no time, it announced its plans to fast-track (The next 12-18 months) its drilling on this newly acquired block. So, much rides on the outcome of the Jacobin well. Will it work? The impression that the management gave at a recent Investor Meet presentation was that it had spent a considerable amount of effort on analysing the 3D seismic and that included using world-class consultants. It appeared very upbeat about the chance of success.

That said, as many gamblers have discovered, luck has no memory. It estimates its chance of success with its Jacobin well at 63%. And sitting in the background is the slow grind of depleting reserves. Not a major issue, yet, but year-on-year its 2P reserves fell 9% to 17.96 million stock barrels of oil (mmstb).

For Q1 2023, its production was 2,899 BOPD with an average realised price per barrel of US$67.9. As of the end of Q1, it had a cash pile of US$11.4m and a US$2.4m overdraft. So, it's in pretty solid shape.

However you look at it, the company needs something to take it to another level. So maybe it's unsurprising that it mentions the word catalyst five times in its latest RNS. Without that, it simply stands still. And that comes back to Jacobin. Should it prove successful, I would expect the company to be re-rated. But it needs to deliver and do does its CEO who last year earned a tad over $1m.

My defensive positions have not played out the way I thought. Greencoat UK Wind, NextEnergy, Capital Gearing Trust and Ruffer Investment were all hit by the disastrous Kwartang/Truss mini-budget. That said, taken collectively with my other defensive stocks, they are buttressed with dividends. Moreover, they all have limited downsides. But the aforementioned have struggled to regain their investment mojos.

British American Tobacco issued a pre-close half-year trading update for the period ending 30th June 2023. It gave me the overall impression of a company in transition. With a slow decline in combustible sales by volume while its non-combustible product range is growing both in terms of users and revenue. However, this segment is still loss-making - the company is looking at it reaching profitability in 2024 and attaining ￡5 billion in sales by 2025. Very importantly, it has maintained its guidance figures for 2023. And although it expects the global market for combustibles to fall by around 3% over 2023, its combustible portfolio appears quite resilient. But the key question is whether its new product portfolio can replace its established and highly lucrative combustible product range. In the short term, I think it's very unlikely. But, over the longer term, when consumer habits become ingrained, I think it can gain pricing power. That said, if regulators turn against it, it could be game over.

Greencoat UK Wind announced the completion of its onshore Dalquhandy acquisition. Comprising 10 Vestas V136 4.2MW (Nameplate capacity) turbines. The vendor, a German company BayWa, will continue to provide asset management services for the project. However, the fund remains a victim of the Truss/Kwartang mess with a discount of around 10% to its NAV. That discount kicked in shortly after the disastrous mini-budget and has proved difficult to shift. Incidentally, with a UK general election on the horizon, it might be worth mentioning suggestions coming from the Liberal Democrats. Do I think that they will win the next general election? Forget it. But they could form part of a Labour coalition. So their views may be worth considering. The Scottish Liberal Democrats have proposed a 5% levy on the turnover of windfarms that would then form the basis of community benefit funds. That would hurt Greencoat, so it may be wise to watch the UK political landscape.

NextEnergy Solar Fund still trades at a discount to its NAV. As I write, this is about 9%. As with the above, it's worth considering what the Liberal Democrats may press for should they form part of a coalition Government. A key proposal is scrapping the restrictions imposed on the siting of new solar farms. Obviously beneficial for NextEnergy.

By the way, the company will be making a presentation of its final results on 19th June 2023 at 9.30am (There was no link on its RNS).

Capital Gearing Trust issued its monthly fact sheet for May. However one views it this has been a poor year for the trust. Its NAV is down 1.9% on the year to date. While for 2022, its NAV fell 3.1%. Not disastrous but it's a capital preservation fund so it does merit attention. However, as it points out, its aim is "...to preserve, and over time to grow shareholder’s real wealth." Moreover, these are extraordinary times so I give it the benefit of the doubt. Some 46% of the fund is invested in index-linked bonds. While its previous market commentaries seem to infer that inflation will not be beaten anytime soon - the social and economic costs will be too high. It also has around 15% of the fund invested in conventional bonds. My take on its overall approach is this. Interest rates will have to be cut to avert a financial catastrophe rather than because the objective of beating inflation has been achieved. That will probably result in a re-anchoring of inflation expectations.

Ruffer Investment Company issued its investment report for April 2023. It points to a credit tightening in the US, in part as a result of investors moving money from low-interest bank deposits to higher-yielding money market funds, which are also covered by greater deposit guarantees. It paints two broad scenarios for which it's covered. In the first, the Fed pivots with an interest rate cut and its balance sheet continues to expand, even though inflation has not been defeated. This works in favour of its holdings of index-linked bonds, Gold and commodities. In the second scenario, the Fed does not pivot and pursues its quantitative tightening programme. This benefits its low equity position coupled with its downside protections in the credit market. In essence, it presents a picture of the Fed stranded between a rock and a hard place.

I would add that the Fed may somehow muddle along for several more years. Why? It's the cleanest dirty shirt in the laundry. Simply my view but I suspect the Fed is hoping that something will come along.

Ruffer recently announced its intention to open a New York office. It clearly wishes to increase its assets under management. However, I am unsure what this means for current investors. Over the last ten years, it has generally traded at a premium to its NAV.

Tritax EuroBox announced its results for the six months ending 31st March 2023 (H1 2023). In my view, they were not great but not a disaster. On the downside, the value of its property portfolio fell 9.6% compared to the end of H2 2022. This fed into a 22.7% fall in its IFRS NAV. Unsurprisingly, its loan-to-value (LTV) ratio rose substantially from 35.2% to 44.9% (It has an LTV covenant limit of 65%) over this period. For the full year ended 30th September 2022, its vacancy rate stood at 0.3%. By the end of the last six months, that rose to 5.4%. However, post-period end and that fell to just 2%, largely as a result of it letting its asset at Dormagen, Germany. Presumably, now that Dormagen is completed and let, its portfolio will have a considerably higher value than at the period end. However, Rosersberg I in Sweden was completed in January 2023 but is yet to find a tenant. That said, it has a one-year rental guarantee from the developer (13,181 sqm at €84 sqm). Tritax also describes it as a "Prime sustainable logistics asset". I point that out as the Swedish real estate market looks beset with problems with many Swedish banks being shorted. But Tritax has a niche (High-end logistics) and it's not at the problematic end of the market - no residential or bog standard office space. And it's not adversely impacted by the working-from-home revolution. The reverse seems to be the case. So I ask whether it's getting tarred with the same brush or whether there are deeper problems across the sector.

On a more upbeat note, annualised like-for-like rental growth rose by 5.8% compared to H2 2022. It also managed to squeeze an additional €4.3m of revenue out of the business over this period. Largely as a result of what it describes as its "Asset management activities" (€2.6m) and its index-linked leases (€1.7m). There seems to be an expectation that both areas will deliver further revenue in H2. Not forgetting that it has a portfolio of 36 high-quality customers across a range of activities - it retains its 100% rental collection record. In all, it has 25 assets in seven countries. So it comes with a degree of diversification. And with 88% of its assets less than ten years old, technological obsolescence is not an issue.

While the dividend has been maintained at 2.50c (Fully covered by adjusted earnings per share). As for its costs, these have fallen as the management fee structure has been changed and that is linked to the value of the portfolio. So, it expects lower costs for H2 2023 and higher revenue. At the same time, it has a high degree of visibility - its debt is 100% fixed or capped with the earliest refinancing in Q4 2025. And it still has firepower with €171m of undrawn debt facilities.

My main concern is the possibility of a collapse in the market value of its portfolio and the impact that will have on its LTV covenant. That's largely outside its hands and may come down to US interest rates. I think it's unlikely and it would not be the end of the world. But it's worth considering.

I am still wary about the UK's growth prospects. In my view, whether we like it or not, the rest of the world broadly appears to look unfavourably at Brexit. While the yield on UK ten-year treasuries has shot above where it was at the height of the mini-budget fiasco last year. So I believe that using collective investment vehicles for equity exposure outside the UK makes sense.

JPmorgan Asia Growth & Income published its unaudited half-year results for the six months ending 31st March 2023. Over this period, it points to a narrowing of the discount to its NAV, while its total return to shareholders was 13.2%. As it pays a quarterly dividend based on its NAV, it's worth mentioning the latter increased by 11.4%. It also continues with its buyback programme.

Although it paints a picture of global uncertainty and geopolitical tensions, it also suggests that the Asian growth story is still strong. Digitisation, urbanisation and the growing middle classes underpin this long-term trend. And, it believes that valuations are more attractive than in the US or Europe. That chimes with the argument that China offers more scope for stock pickers as it's a retail-led market. Unlike the US, where very well-informed institutions call the shots and so an index tracking strategy may be more profitable.

Its largest holding, Taiwan Semiconductor, has experienced a weak first quarter. However, it expects a lift in the second half of the year. While over the longer term, artificial intelligence, electric vehicles and factory automation underpin its growth.

As any investor knows, it's not just what you buy, it's also what you don't buy. The trust dodged a bullet by largely staying clear of the Indian market. Over the period, the MSCI India index was down some 14%. At the same time, the fund has benefited from China and China-related stocks.

Its overall view is that Asia has structural tailwinds. While valuations are still attractive. Incidentally, it provides a link to subscribe to regular information on the fund. I have just signed up so I have no idea what will be provided.

As I have mentioned before, Europe is falling behind in the technology race. The really great tech companies are either in Asia or the US. So I want exposure but in an intelligent way. Buying into a tech fund is fine but the managers can only do one thing - buy tech companies. This fund has a choice. And, as it points out, it has a pedigree. Over the ten years to 31st March 2023, it achieved an annualised average NAV return of some 8.3% pa. This compares to its benchmark index which returned 6.2%. Not much of a difference but compounded over ten years and it's substantial.

JPMorgan Emerging Europe, Middle East and Africa Securities?made no announcements of note over the last month. However, its stock price has drifted downwards. As I write, its premium to its NAV is around 122%. It continues to be a high-risk proposition. For the moment, its Russian investments are on ice. In my view, only a comprehensive peace agreement to conclude the awful war in Ukraine will unlock its assets.

I thought it would have greater counter-cyclical qualities. But lacklustre stock markets and range-bound financial markets have hit this spread betting business.

CMC Markets announced its final results for the year ending 31st March 2023. In my view, they were poor. For sure, they were in line with its revised guidance but still poor. Its basic earnings per share was down 40% as was its dividend for the year after it declared a final dividend 56% lower than the previous year. Its active trading active client numbers were down 9%. However, this was offset by an 11% increase in trading revenue per client. It argues that the "Meme stock" phenomenon created a spike in client numbers in Q1 2021. Many of those seem to have drifted away. However, its core wealthy client base appears intact. As for its active investing clients, these fell by 11% largely as a result of lacklustre stock markets. Looking at its profit before tax and this was down 43% from the previous year. But if you take out its interest income (Up 1,569% year-on-year) and that becomes a 58% decline. It also capitalised ￡4.9m of its internal costs ("New Products and functionality"). While cash generated from operations fell 55% to ￡76.584m.

It appears to find it difficult to control its costs with labour costs increasing by 28%, excluding variable remuneration. While its investment in intangible assets increased by around 72%.That said, it's expanding both its geographical footprint and its offering to both institutional and retail clients. I don't object to increasing costs so long as that equates to growing the business. And, not forgetting, it's debt-free. It can ride out the troughs.

CMC's recent purchase of a 33% stake in StrikeX Technologies for an unknown price was not welcomed by the stock market if we take its share price as a guide. The company is described as a "a customer centric blockchain solutions business". Moving away from the hype and, in my opinion, the blockchain offers solutions to real-world problems. So, marrying the theoretical with the practical and monetising the opportunities appears to make sense.

So, what's the next big thing? Last month it was data centres and the cloud. Last week it was the metaverse. This week it's artificial intelligence. And all dominated by a handful of (Mainly US) technology companies. Maybe the party can continue. But I am unsure. I sense there is a growing unease with the monopolies that many of these tech giants have carved out. Around that, serious security concerns. And I can't help but think that the tech sector is yet to face a real challenge. Billions of people are spending a large portion of their lives staring at screens. Laugh you may. But once upon a time, there were no drink-driving laws. What happens if restrictions need to be placed on technology usage? A global technology virus, in my very limited knowledge, seems likely. But what about a virus that could physically impact computer users in ways yet to be conceived (Or at least not publicly aired)? Simply throwing ideas around. It may seem fanciful but so was a global pandemic until it happened. However you view it, there seems to be a lot riding on this everlasting tech boom. It's a very crowded trade indeed.

Just For The Record

Achieving Net Zero carbon emission goals, in my view, means that the world will have to go deep. That's why I am bullish on the mining sector.

The number of listed US companies shrunk by around 50% to about 3,500 over the past 20 years. Slim pickings indeed.

Having achieved little success with cryptocurrencies, this pair of investors got lucky somewhere else.

Talking about luck, Trinity Exploration's management may learn something from this one. Time will tell.

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