Take 5 and come back tomorrow

First of all, let’s be clear. The following is not investment research/advice.?And, as such, it involves no investment recommendations. These are my thoughts on Spanish equity issues, which I find relevant. I share them freely (and not just as regards price). As always, I am only trying to help. Please read the rest of the “discomplainer (*)” at the end of the article.

Market environment: Methodical doubt is good for spotting good investments, but not for them to succeed - (Asia-Pacific markets rose modestly with European and US futures pointing to moderate declines) – Asia-Pacific markets rose modestly following the US market but with investors losing faith in a relaxation of China’s zero Covid policy and uncertain about US mid-term election results and inflation. Futures for Europe and the US point moderately down.

Response to the crisis: Give supply a chance - (Spain is toward the bottom in the ranking of OECD countries by economic freedom according to the data from Instituto de Estudios Económicos/Heritage Foundation/The Institute de Estudios Económicos believes that GDP could rise by up to 3% more with lower regulation) – Most of the “solutions” being tried by the Government to prevent stagflation centre on demand although in a contradictory sort of way (large pension/wage increases in the public sector, subsidies for energy consumption but also higher taxes), but very little has been side on the supply side. Removing the legal/regulatory obstacles to increased investment/production could be a solution for increased supply. More of the same doesn’t seem to work. Give supply a chance.

Inditex: The one-eyed king - (Large textile companies boost their stocks 41% in the Jul-Oct period in the midst of a consumption slowdown, with Inditex being the least exposed as stocks represent only 13.2% of sales) – The supply chain distortions caused by different Covid policies and the reverberations of the war in Ukraine and related sanctions on Russia are leading to a difficult environment in which to carry out purchasing decisions. A combination of easing bottlenecks and declining consumption is likely to lead to higher than needed inventories and from there to pressure on margins. In this environment, the tighter the control on supply chains the lower the pressure, which is likely to make Inditex the one-eyed king in the land of the blind.

Energy: Man’s best friend is not the dog, it’s the scapegoat - (The UN wants all countries to tax the windfall profits of energy companies) – The UN is not likely to meet much opposition to proposals for a tax to be applied on energy companies which are currently almost ideal scapegoats for failed past government energy policies. Governments scrounging for cash to fund their energy subsidies are likely to be pleased with the suggestion, even if those energy subsidies/limits to the price of electricity/natural gas undo part of the effort to “save the planet” via energy conservation.

Macro/Transport: Canceling Christmas - (The transport sector calls another strike, alarming the retail sector ahead of Black Friday and Christmas) – Retailers are already facing a worsening outlook due to the impact of inflation on household budgets. A potential transport strike does not help. But spare a thought for the Government which is facing local/regional elections in May. The energy crisis was already likely to lead to a lacklustre Christmas without potential scarcity caused by the strike. This is not a good calling card for the Government to ask for the vote, which is why it may try hard to find a way to call the strike off before it starts next Monday.

*The above information has been read/understood/summarised/evaluated/copied as well as I could to provide a guide to Spanish equities, given available timing/intellectual constraints, and I accept no liability for misreading and/or mistranslating the original copy as set out in my previous article (which I urge you to check, as I am only trying to point you in the right direction, I hope). As for what you may decide to do, after reading the above, please contact your legally approved provider of investment advice on Spanish equities.?