Coronavirus Moves to Stage 2 – Excuse for Missed Profits

The human cost of the coronavirus cannot be underestimated. Now that the authorities are taking steps to limit further spread, one has to hope that the disease will be restricted from any more major growth. We may well not have hit the peak yet, but hopefully it is in sight. Then there will be a long tail of infections stretching into the spring and summer of 2020.

What will be the long term impacts?

It seems clear that the secrecy and delay of the Chinese government has created a mood-change among the population. What was an acceptance and even pleasure at the Chinese way seems to have turned to resentment and anger. We’ll look at this another day.

But what of the financial impact?

6 month FTSE 100 chart from LSE

From the chart, it is clear that the Boris Bounce post-election has been brought to a halt. However, FTSE 100 remains higher than after the election, and the fall seems to have halted. The market seems to be looking through the inevitable short-term disruption to a resumption of normal service in just a few weeks time.

Coronavirus – a God-send to Failing Managers

Clearly the coronavirus is going to be a blessing to hard-pressed CFO’s wondering how to make excuses for poor financial performance. In the past, the go-to justifications to explain bad management were currency fluctuations or interest rate moves. Bizarrely, these flimsy reasons were accepted by the financial community. Nobody ever seemed to ask why the same CFOs hadn’t managed those risks in the same way that they managed the other risks of the business. Why didn’t they hedge the markets properly?

Then came Brexit, the perfect catch-all reason for management to cover up why they had failed.

And now here is coronavirus, a wonderful reason to show failure was an Act of God, and not incompetence. Has your pie-shop in Hartlepool seen falling sales – blame coronavirus. What if your newsagents in Warrington didn’t sell as many magazines as last year – it’s coronavirus. Do you run a major international oil-company that missed profit targets – coronavirus? Next it will be airlines and iron-ore supply companies saying that reduced demand from China drove then to a loss.

The minimal falls on FTSE 100 says that the market doesn’t believe there will be a long term effect of coronavirus. You shouldn’t believe all those excuses either!

Dino Days by Phill Brigstock – A Special Book

We interrupt normal programming to bring you a special treat…. a review of Dino Days by Phil Brigstock.

Dino Days – A Special AUTO-biography

This is a whole new genre of car book – an anecdote-filled AUTO-biography. It is centred on Phill’s twice ownership of a Ferrari Dino, but covers so much more of his family’s life-long involvement in classic cars. It avoids the usual technical-fact design-detail of many single model books, and the tedious detail of I-restored-it-this-way of classic car personal accounts.

Instead Mr Brigstock takes us on a very personal driving CV. He started with a humble Ford (so many of us can relate to that), but quickly moved up to a Triumph Spitfire (related again). However, Phill just kept going. We particularly loved the stories of Lotus Esprits and the Lamborghini Miura – owned by the Brigstock brothers when most of us were still standing in WHSmiths reading Thoroughbred and Classic Cars with a longing in our hearts. The atmospheric, slightly colour-faded 1970’s photos emphasise the nostalgia for a long-gone time.

What is particularly noticeable in the book is an absence of any reference to spannering or modifications. The family were not tinkerers, and certainly it is refreshing to read that any profits were purely accidental, and certainly not the usual Wheeler Dealers type of mythical look-how-much we made on this.

Wheeler Dealer Mike Brewer

Talking of Wheeler Dealers, Mike Brewer has penned the foreword to the book. All of the profits from each book are going to the Sporting Bears charity, which we strongly endorse. Sporting Bears members provide paid-for joy-rides for members of the public, with all proceeds going to benefit disabled children. Everybody wins from that. It enables regular people to experience everything from an Austin 7 to a brand new Aston Martin, boosting the image of classic car hobby. Having raised well over £2 million, this is a most commendable organisation.

You must go and buy this book! It is available on Amazon, and at good bookshops. It is a great read….. and it supports disabled children. Just how much incentive do you need? Buy it today!

 

Go to Amazon……

Scottish Architecture: V&A Dundee is Good, Scottish Parliament is Bad and Ugly

What a wonderful, uplifting building has been built by the V&A in Dundee!

V&A Dundee – uplifting on a grey day

It is modern, but references the past life of its location on the River Tay and in the lovely city of Dundee. What is most impressive is how it is so accessible – and I don’t just mean the ramp to the door and lift inside. Everyone can see it and understand what it represents: truly a case of bringing art to the masses in an inspiring and interesting way!

Dundee has a long history of shipbuilding, especially (whisper it) for the whaling industry. Hence it was Dundee that supplied super-strong ships for Antarctic explorers. This building is the cornerstone (!) of reinvigorating the riverside area. It is a welcoming sight as one leaves the train station. Oh, and if visiting Dundee from the south, do try to arrive by train. The journeys across the Forth bridge and Tay bridge are worth the rail fare in themselves.

Magnificent Forth Bridge

Impressive Tay Bridge

The building was designed by Kengo Kuma. For us, even more impressive is the structural engineering of the building. With few internal walls to tie it together, the design of a bowl-shaped building must have been rather interesting! So kudos to Ove Arup for their work there.

 

Contrast to Scottish Parliament

Scottish Parliament – Bad and Ugly

Regular readers will know of our disdain for the Scottish Parliament building – and yet it is feted among the architectural and planning community. We can see that it is innovative, and that the layout of the buildings references traditional Scottish democracy. Yet here is the BUT… and it is a big but (the worst sort eh).

BUT

  1. A weird concrete monstrosity is wildly out of place on the Royal Mile.

  2. The references it makes can only be understood from the air.

  3. It is elitist. It works for people “in the know”, who claim aesthetic training and superior artistic feel. Everyone else just feels excluded.

To us, the Scottish Parliament emphasises the gap between architects, planners, and all of the people for whom they are meant to be working. It has brought the professions into disrepute.

What a contrast to the V&A Dundee. This building is in context, striking but easy to understand. It is uplifting for everyone who sees it. What an inspiration!

Pic from Ove Arup

Iran = World War 3 – NOT! Or At Least, NOT YET!

We all know that the Middle East is a Tinderbox – though I wonder just how many people today would recognise such a thing if it hit them on the forehead?

Tinderbox, from oldandinteresting.com

So once you come round, now you can identify with what you have just been bludgeoned!

How will last night’s reprisals work out? Well it is fair to say that Tehran had to be seen to be doing something, to show the domestic audience and local acolytes that the leaders aren’t cowed by the US gorilla (yep, I mean you-know-who). But their target selection was fairly low level, and the results not even a pin-prick.

Will Trump reply, or just laugh at them? A big man would stand and smile benignly at the small child who is having a paddy. But this is Trump we are talking about. Oh dear!!

Our feel is that he will wait to see if the Iranians try again. If they do something of real economic consequence, then one can expect a hard strike at Tehran. I hope the ayatollahs have a good bunker.

There is some risk to global oil supplies, and successful attacks on Saudi refineries or shipping would provoke a very sharp response from the US. It would be a short erasing of any Iranian production capacity. However, we do not feel that it would lead to a sustained rise in oil prices. Pipelines can be repaired, and US Shalegas drilling is is very elastic to price rises.

Meanwhile, the markets are calm, down by less than 0.5%. We think that is right. The worst thing for Trump right now would be to appear weak to his electorate, or to blink. Our feel is that Tehran is drinking in the last chance saloon, and just ordered another round…….. There is clearly a point at which Trump will be keen to demonstrate to the world that the US economy and US lives are sacrosanct. If the bullets (or missiles) start to fly, then the markets will fall by less than 20% – because everyone, us included, will see very limited global economic consequences, and any falls representing a buying opportunity.

Why did we say “NOT YET”? Where is the real risk here then? If the Russians or the Chinese see an angle for stepping in to control the Middle East, then suddenly it becomes a geo-political play, and then we really are worried!

Have a nice day now!

Boris’ Historic Election – Thank You EU

Congratulations to Boris! Now perhaps we can go back to having too much food, too much drink and too much indulgence over the Christmas break, without having politics upsetting us all?

Johnson this morning – photo from BBC

This huge victory will set the direction of politics for the next 10 years. Yes, we predict another term for BoJo starting in 2024. I am indebted to my older contact who has already pointed out that by December 2024, Labour will have only had one election-winning leader in 50 years. FIFTY YEARS!!! Step forward Tony Blair. You achieved the success that eluded Jim Callaghan, Michael Foot, Neil Kinnock, Gordon Brown, Ed Milliband and now Jeremy Corbyn. Oh, and John Smith too…… Did I miss any?

Jim Callaghan – never won

Michael Foot – never won

John Smith – never won (though to be fair he never tried)

Neil Kinnock – never won

Gordon Brown – never won

Ed Milliband – never won

Mr Corbyn – he didn’t win either (twice)

Tony Blair – the only one to win in 50 years – and yet they hate him!

And to what can we allocate this massive swing in the vote for the Tory Party? Why, the EU!! What a change for the European project to be assisting the blues! It was the disdainful response of Frau Merkel to David Cameron’s pleas for moderating change that set the ball rolling towards a leave vote. This was compounded by the EU inaction during the referendum campaign. Where were Messrs Junckers and Tusk during the lead up to the vote? They were not in UK sharing the vision and love were they? Their next mistake was to play hardball too much with Mrs May, forcing her on to the defensive at home. One has to surmise that they thought a Remainer-Parliament was their best hope of keeping the UK on board. But they overplayed their hand, sending Theresa back with too much of a surrender bill. This off-hand treatment was compounded by the humiliation and shunning that Mrs May received from the other EU leaders at Salzburg. So the scene was set for Parliament to respond to the lack of co-operation… which led to Boris becoming leader…. which led to the election. One has to hope that they will work with Boris as an equal!

Boris to Win 43 Seat Majority Says Meta-Poll

You’ve heard of meta-analyses, where academics who can’t be bothered to do their own research just nick everyone else’s hard work, crunch the numbers a bit, and come out with a super-accurate result? Well here is our META-POLL. After much reading of the papers, surfing the net, and even talking to people, we have concluded that the Tory party will win. (Bet you saw that coming eh?)

Why do we think that?

  1. Farage folded, as predicted here recently, avoided splitting the leave vote, and crowned the Tories as winners

  2. The Labour manifesto was written to appeal to hard-line left wingers – who would have voted for Jeremy anyway. Only the naïve or those too young to remember the 1970s could think that nationalisation is the answer. (See our earlier report on rail user numbers pre- and post – nationalisation). The “free” broadband idea went down well, but the practicalities are horrible. By the time it is built, at five times the original cost, technology will have made it obsolete. And the big beneficiaries will be the farmers and isolated rural communities – who will not be voting Labour under any circumstances. Meanwhile, their fence-sitting on Brexit feels a bit like “Follow Me….. I don’t know where we are going, but Follow Me!”

  3. The Liberal Democrats have shown themselves to be neither liberal nor democratic. Their reverse Article 50 campaign can only appeal to the most die-hard europhiles. Meanwhile, Jo Swinson has not done well. Her claims to be PM in waiting invite the retort that she’ll be waiting a very long time.

  4. The Tories have avoided a May-style manifesto-suicide-note. Divisive figures such as Rees-Mogg have been kept out of the limelight. Boris himself has picked his battles carefully, with more to lose than win.

So what happens now?

There are still considerable risks for Mr Johnson. Will the left-leaning students be too busy recovering from their end-of-term parties to vote?

Students preparing to oversleep and miss voting

Just how many people were too embarrassed to tell pollsters that they would vote Tory (but will anyway)? Will tactical voting have any impact? Will Mr Trump try to intervene? He is not great at keeping his thoughts to himself is he? That could hurt Boris. In this last week, we expect the Tories to try to refocus on Brexit as the major issue – and Labour to try to talk about virtually anything else!

What does it all mean for Asset Prices?

The market had a lost year in 2019, with too much uncertainty. A Tory win is about 70% baked into the market, so we expect a moderate bounce on 13 December. This will be most pronounced for the likes of BT and other nationalisation victims. Despite longer term trading arrangements still being in the air, we feel that 2020 will turn into a log bull run for equities and commercial property, as investors get back to the serious business of making money.

Farage Must Fold

Gosh, there are so many pics out there of Mr Farage with a pint!

Much as we admire Nigel Farage’s consistency in supporting his cause, his present political positioning is just madness.

Clearly, he could never have thought that Boris would tear up his deal just because it is not No Deal – which seems to be Farage’s target, So what does Nigel want? Most Brexiteers can live with Boris’ deal – and many remainers can live with the withdrawal, as it least it isn’t a crash, and it moves the topic on. The Brexit Party have no chance of power, and in many close marginals, they risk drawing just enough voters away from the Tories to gift the seat to Labour or the Liberals.

Just as in Peterborough and Brecon by-elections, they could well split the leave vote, and let one of the other parties to win, with many fewer than half of the votes cast. Does Nigel really want to be the man who let Jeremy Corbyn into Number 10? We think not. So the only conclusion is that he thinks there may be a peerage in it for him if he backs down. There can be no other logical motivation for Mr Farage to take such an extreme position.

Our Forecast

The Brexit Party will withdraw from all seats except those where the Tories have no chance anyway – ie Northern Labour-held seats. Nigel will magnanimously agree to back Boris’s deal as being better than any of the plausible alternatives. In due time, Mr Farage will enter the House of Lords.

Lord Farage of England! You heard it here first.

FTSE Forecast; Brexit Supports, World Economy Undermines

It is that time of the month when we ritually kick ourselves for making what turned out to be a stupid forecast six months ago – and then, without learning from our mistakes – we go on to make a crazy forecast for where FTSE will be in another half year.

Will go up, will go down, but not necessarily in that order

BUT this time, we weren’t so far wrong. Back on 15 April, we had failed to leave the EU on the second deadline, and a new exit-date of 31 October had been decreed. Wisely, or perhaps by luck, we guessed that on 15 October, Brexit might not be established, or the future might be rather worrying. Quote “So we will work on the basis that Brexit is still on-going by October.

Our forecast for 15 October was 7600, quite a reduction from the 8150 we had been predicting for September. Thus, we got the direction right, and a close of 7212 is pretty accurate by our standards.

The Next Six Months

Now for the next six months. British politics are somewhat unpredictable. We think that Boris might just pull it off and squeeze Brexit through tomorrow. The country (or at least 52%) will rejoice….. so there is no way the opposition will allow an election if Brexit goes ahead. Thus our central forecast is that Brexit happens, but then the minority government struggles on for several months until the demand for an election is overwhelming. This could easily be around our forecast date of 15 April 2020. However, a Brexit Deal will create an optimism and gentle release of pent up demand to support the UK economy over the next six months.  Lack of Government interference with new laws will also help!

However, no country is an island. Okay, well some countries are islands. Malta comes to mind. But economically, the future of UK based businesses, with our new, outward looking trade policy, cannot be but affected by the world economy. We foresaw the potential of a recession by year end, and the data published since then has done nothing to change that view. The global economy, from US to China to EU (in that order) is definitely looking soft.

Where does that leave us?

The UK domestic economy should have a surge, this will be countered by weak global growth.

Re-rating

The UK stockmarket, is at rather low multiples of income, given the interest rate environment. This morning, www.dividenddata.co.uk quotes the FTSE100 yield at 4.53%. If / When Brexit is settled, we see scope for yield compression – and hence price rises – justified by the reduced uncertainty and risk.

In summary, we think UK growth will be supportive, global economics will undermine, but an extra boost will be given by removal of the Brexit factor. From a close yesterday of 7182, we see FTSE100 at 7600 on 15 April. This is an increase from the 7200 we expected for Jan – Mar next year.

What is Boris’s Plan for Brexit?

We are three weeks away from Brexit Day, and yet there is no clarity. This is starting to look eerily familiar!

Boris; buffoon or battler?

We have a PM who is trapped in office, but with no majority he is completely powerless. Meanwhile, the opposition is scared of an election, and is rather enjoying the discomfort of Boris.

It seems that the key date will be 19 October, a week on Saturday, the day when Boris is legally ordered by Parliament to write the letter asking for an extension.

Leo Varadker, Irish Taoiseach

Will he do it? We think not. Since the Benn Act (aka the Surrender Act) was rushed through, Boris has been at pains not to retreat from his ‘do or die’ message about 31 October. We can see why he would do that as background to his negotiations. If EU actually thought he could push through No Deal, then they would be much more keen to negotiate. This has to be true of Leo Varadker, Irish Taoiseach, who has most to lose from a No Deal. Clearly, they have not bought into that idea though.

 

How can these facts co-exist;-

  1. Boris claims we will leave on 31 October, deal or no deal,

  2. The Benn Act says he must ask for an extension in the event of no deal

  3. The Conservatives have stated that they will not break the law

  4. A deal looks extremely unlikely

  5. The EU will agree to any extension request

  6. Parliament will not let BoJo call a quick election?

It seems Boris must believe that there is a mechanism to spring free from the trap. Here is what we think could happen (yep, “could” implies our low level of confidence in our prediction).

The Queen’s Speech next week will essentially be the Conservative manifesto for an autumn election. It will get voted down, but still the opposition will not allow an election.

The big day will be 19 October, in the special Saturday Parliamentary session called by the Government. We see the following votes;-

  1. A vote to lift the Benn Act and allow a No Deal to happen. This will be designed and phrased in terms of progressing or overturning the referendum result, to try to make the opposition look like it is ignoring the plebiscite. Narrowly, we think this will be voted down.

  2. A vote to call a General Election. This will be designed to make the opposition look like it is scared of facing the electorate, especially given that they have earlier voted to “ignore the referendum”.

  3. This is when Boris Johnson resigns as Prime Minister, and where he states that he will not do the usual caretaking role until a new one is appointed. We feel that BoJo has too much political capital tied up to write that letter. It would be interesting if Parliament voted to make him personally write a letter in which he does not  believe. If he does not resign, I see him taking a jail sentence as less politically damaging than writing a letter.

  4. If we have no Prime Minister – and hence no Government – then there will inevitably be a court case as to who can write the letter.

  5. Then there is 14 days for a new Government to be formed. We do not think Mr Corbyn could attract enough support, as the LibDems will see little advantage of positioning themselves as Labour’s poodle.

  6. A government of “National Unity”, which even the media have Christened “National Remainers” also seems unlikely, given how the various factions of the remainers struggle to agree on anything.

  7. Another Conservative would be the natural choice, as they have the largest party…. could that be dragged out for the remaining 12 days?

  8. So we drift towards 31 October……. no Prime Minister, no Government, political chaos.

  9. Away from Westminster, the negative respect for the political classes plumbs new depths.

When the referendum result was declared, the best outcome would have been a clear, firm date three years (or even five years) ahead, for which everyone could plan and prepare, leading to the most seamless transition possible. Instead of which the political classes in London, Brussels and Dublin have screwed it up right royally. By their constant bickering and game-playing, we are now in the worst possible situation. It is no wonder that the general public is coming to despise politicians.

 

Oh, and as for the details of Boris’s Plan, we don’t know.  We’re not even sure that he knows……

Scottish Parliament is Rubbish

For once we don’t mean the politicians in Scotland – though as an aside, why is Scottish Nationalism tied up with left-wing policies, when nationalists in other countries are more to the extreme right: eg National Front in France, or EDL in England?

However, this time we are reviewing the building completed in 2004 to house the  Scottish Parliament.

The Parliamentary buildings were ten times over budget. Not ten percent, but a multiple of ten! That is the outcome of public management of projects, spending Government money. To all those thinking that Mr Corbyn has it right in letting the Government run anything to do with construction or businesses, there can be no finer example of why it is such a bad idea.

The build budget was £30mio – £40mio. The final outcome £414million. That is just a mind-boggling variance. Could part of the reason behind the vast overspend be that the builders were Scottish, but they knew it would be the English tax-payers picking up the bill? There may be one or two people in Scotland to whom that would appeal.

Ugly Frontage to the Royal Mile

And so to the design. This must be one of the best locations in Edinburgh, on the Royal Mile, opposite Holyroodhouse Palace, and backing on to the rugged mountainous Arthur’s Seat. Like most architectural observers, we do not advocate a pastiche of earlier designs. A modern design is more honest. But we do believe in respecting materials and blocking forms.

Google Earth of Scottish Parliament

The exhibition inside explained that the buildings in the complex were designed to represent the human body, or groups of people standing around in a form of government discussion. Who bought into these ideas? Even seen from a helicopter (okay, let’s be truthful, even seen from Google Earth), it is hard to make any simile from the mish-mash of weird shapes. Observed from the Royal Mile, the concrete wall with convex and concave horizontal curves – pictured above -just looks a mess, and totally out of place. What an eyesore on the most important street in Scotland. Instead of render or attractive stone, we see bare concrete, enlivened by rusty steel poles.

Unnecessarily complex and expensive details

The Scottish Parliament Building could have been attractive, eye-catching and uplifting. Instead it is jarring and rude. Shame.