Report on Q2 2018

Report on Q2 2018

5 Jul 2018

In Q1 the main UK indexes fell by between 6% and 8%. In Q2, they rose by 7% to 8%. The chart of the first six months is a “V” or perhaps a two-fingered salute to all the financial commentators who claim knowledge of the future. Bond yields again did almost nothing.   I have written elsewhere about the prevailing mood that seems to try to put a pessimistic spin on everything. As a result I would imagine that most people would be amazed to know that shares were so strong in Q2. How could they be in the turmoil of the imminent collapse of international trade, courtesy of the hardball tactics of Mr Trump and M Barnier, l’homme who loves to say “non”? The sole purpose of trade rules is to prevent trade from taking place and that these two gentlemen are both happy to use that threat as what I suppose we must call a negotiating tactic, if we could only tell what it is that they are trying to negotiate. Never mind that. The stock market doesn’t seem very concerned about it. Last quarter I listed thirteen everyday UK shares with markedly high dividend yields. Unsurprisingly, in view of the market performance, you would have done quite nicely if you had bought them. Not a single one of them went bust between April and June, I am pleased to say and the shares of none of them declined. It is better to look at valuations and to ask what they are telling us than to listen to what commentators are actually telling us. How about the yields on government bonds? I have said that there was little change in Q2 (despite innumerable predictions of falling prices) but are there trends and what do the absolute levels tell us? Germany is the benchmark bond for the EU. The ECB will continue its asset buying programme until the end of this year. It is still boosting asset prices by its own version of QE, implying that the crisis that started in 2008 continues. A year ago, 10 year Bunds yielded 0.5%. Now they yield 0.3%. Not many signs of imminent recovery there. Bond yields...

Populism explained!!

Populism explained!!

21 Dec 2017

The causes of the financial crisis have not been properly addressed. In particular, the perpetrators are widely and correctly seen as having got away with it. This, in my view, lies behind the populist behaviour that keeps giving us “anti-establishment” election results like Brexit, Trump and Corbyn. That’s the conclusion of this essay. Here are my arguments, looking at what happened in the US, the EU and the UK and the common failures of leadership in all three territories. WALL STREET AND THE FINANCIAL CRISIS I think we all know that the financial crisis involved junk debts being packaged by rogues as AAA and sold to idiots. Faults on both sides, no doubt. US officials are relatively good at hammering those considered dispensable. (Bernie Madoff was sentenced to 150 years at the age of 71. That showed him). But the biggest banks were considered “too big to fail”. They operated with an implicit guarantee that, no matter what, they would be bailed out by the state. This was extended to the claim that they were “too big to jail”. It has been said that it would be destabilizing to the financial system if the senior management of a major institution were taken on the “perp walk”, handcuffed in front of a global TV audience. At the same time, the alumni of US investment banks seem to penetrate government at the highest levels. The original bailout was presided over by the Treasury secretary Hank Paulson, once of Goldman Sachs. Also from a Goldman career is the current Treasury secretary, Steve Mnuchin (there are limits to President Trump’s populism). You can read plenty about Goldman Sachs here. US politicians who complain about the big banks tend to stand out because they are unusual. Bernie Saunders and Elizabeth Warren are portrayed as “progressive liberals” (that’s an insult in establishment parlance) and possibly anti-capitalist or un-American. It is estimated that the US banking lobby spends more than $100 million a year fighting attempts to regulate it.    In 2011 the Occupy Wall Street movement claimed to represent “the 99%” against income inequality and corporate influence. President Obama said perceptively that: “I think it expresses the frustrations the American...