Sell in May – STAY AWAY PAST St Leger’s Day

We’ve all heard the phrase “Sell in May, Go Away, Come Back on St Leger’s Day”.  Did it work in 2020?  Oh Yes!  But we don’t recommend the returning bit.

FTSE100 chart showing the wisdom of selling in May

The chart shows the steady drift downward of the FTSE 100 since it’s peak of 6484 on 5 June.  This morning the index opened at 5907 and is looking rather soft.

Ah but, the rest of the phrase says we should come back on St Leger’s Day, which was last Saturday?  DON’T DO IT! 

Galileo Chrome winning the St Legers (on the right). Pic from

The St Leger’s race at Doncaster was won by Galileo Chrome, but you should take the last minute banning of visitors to the meeting as your omen for the rest of 2020.

At the very best, we see the benchmark back at 6000 next spring, but there is a volume of blood to be spilt in the meantime.  Remember that the FTSE 100 companies tend to be multinationals, exposed to the global economy.  So we should examine what could go wrong and what could go right over the next few months.

Alert readers will recall that our views on Fama’s Efficient Market Hypothesis can be discerned from the article “The Efficient Market Hypothesis is Bunk”  However, it does have a useful shorthand idea that to determine market direction, one has to look for events that surprise or shock the market.  Overlaid on this, readers should remember that the market can be rather short-sighted.  So we all know that there will be a US Presidential election this winter, and further pandemic spikes.  Yet you can bet your bottom dollar that the market will take fright when they happen.  What else could go wrong? All sorts of diplomatic failures, natural disasters – and man-made ones too.  What could go right? Well, er, some people still believe in a Christmas vaccine – perhaps these folks think Santa will magic it out of thin air?  We cannot see an effective vaccine making much difference in the next two years.  Medical knowledge is growing of course, and fatalities will reduce over time, but a big breakthrough just has too many hurdles. (Unlike the St Leger, which doesn’t have any)

So more room for negatives than positives – the market is likely to trip rather than jump.  Our forecast for 6 months today, 20 March 2021, is that Footsie will be at 5800 – but we see opportunities to buy below 5000 between now and Christmas.

Disclaimer: We are just observers of complex and dynamic markets.  Do not take our views seriously!  You must always consult your specialist advisors before making any investments or sales.

PS. We took the advice ourselves and went away in May. This is our first column since St Leger’s Day. Yes thank you, we had a splendid summer!

Buy Real Estate – Death of The Office Greatly Exaggerated!

Are you reading this from home? Ensconced in your favourite armchair, still wearing pyjamas, and yet on full pay and feeling like you are working? What could be better?

It is easy to see why journalists with column inches to fill are making mileage about the joys of working from home as a new phenomenon. But they need to lift their noses from their screens and think beyond their own profession. Writing things is one of the most solitary occupations out there. Journalistic contacts need to be built, nurtured and developed but, crucially, it is external relationships that matter. A writer is judged on their output; it is clear, and in black and white (literally).

However, most organisations thrive on the informal networks which grow from shared space, shared experiences and camaraderie. It is those water-cooler chats which build company morale. Taking the opportunity to lobby the big boss with your breakthrough idea can make or break a career. This will not happen at home.

Similarly, many many people are enjoying the absence of a long commute, and seeing more of their spouse and children instead. In time, this will pale. Most relationships benefit from some separation. Being holed up en-famille is not one long holiday.

Then there are the meet ups in coffee shops which drive the financial world, the quick beers after work which support networks and friendships. Quietly, and probably not in front of their other-half, many people yearn for the space and freedom brought by escape to the office.

But Coronavirus?

Many observers speculate that it will be many many months before a credible vaccine can be produced against Covid-19. After all, would you take a rushed-through vaccine with unknown side-effects or long-term implications, against an infection which most of us have had and is unlikely to be fatal anyway? On the bright side, humans are innovative. If necessity is the mother of invention, then surely making money is the father. Ways will be devised to allow work to happen.

We can see that large open-plan offices may have some consumer resistance, and lift operations need to be thought through. But these issues are not show-stoppers. Partitions are easy. Air-conditioning can be reconfigured to only bring in fresh air, warmed in a heat exchanger.

We do not fully understand the transmission of Covid-19. Latest research shows that it is less air-borne droplets and more likely direct touch. So we’ll stop shaking hands, and maybe we will wear masks in the lift to give comfort to others. We will not stop congregating, and we will not stop wanting to work together.

The office is not dead. By this time next year, our modes of work and way of life will be very close to previous style. Note that this applies to offices. It is curtains for shops. They’ve had it

This opens up opportunities to buy property companies at a large discount. Try to choose one with large office investments such as Helical and British Land.

Steer clear of shopping centre owners such as Intu and Hammerson. Oh, and watch out for the local authorities who invested in commercial real estate on borrowed money going bust. There could be drops in valuations over the next 6 months, for both offices and retail. It won’t take long for their investments to fall into negative equity. I’m thinking of you Spellthorne – see our earlier article here, and our even earlier article here. But there are many others.

This is not a pivotal moment in time, despite what the media would have you think. The world will very quickly revert to past patterns, with only a few masks and gloves to remind us of the great coronavirus scare of 2020.

Buy Helical at 307 and British Land at 355.

IMPORTANT: Please see our disclaimer. We are only commentators. Readers must review any potential share purchases or sales ideas with their special advisors before going ahead.

Buy Shell Next – For the Dividend Cuts

Both Shell and Next have seen share-price falls this week following announcements that they were slashing dividends, or ceasing them altogether.

Dividends are not the most important thing when buying a share. They are known as a distribution – and that is just what they are, giving their own money back to the shareholders. So the business owners now have more money in their pockets, but a less valuable company in their investment portfolio. It is no different from a shop owner taking some cash from their till: more cash in their wallet but less in the business. In both cases, the owners are flat, they still have the same total value.

In normal times, we believe in dividends. We like the discipline it installs into managers that the company needs to be making money. More than anything, we love the way that a dividend requires cold hard cash. Cash is hard to acquire or to fake (unless you are De La Rue perhaps?). Therefore we believe in cash much more than stated profits. Clever accountants – and that isn’t an oxymoron – can move profits up or down, backwards or forwards. Paying a dividend each year needs actual money. Again, it forces company boards to ensure that there is plenty of income.

But these are not normal times, are they? The damage already caused to the economy will not be undone instantly, and nor will battered confidence rebuild quickly. The habits of the population will have changed to more frugal and less consumptive patterns. When nobody knows how the second half of the year will develop (not even us), conserving cash makes huge sense, What is the alternative? Make a big pay-out now, but then have to return to the market in crisis later in the year, and possibly sell extra shares at what would be a lower price? That would only dilute shareholders. Better to keep hold of the funds ready for the rainy days likely to be endured. This is why we support Shell and Next after their cuts. Keep hold of our money and be ready for stormy times – or opportunities to expand. In a recession, cash is king!

Buy Shell

RDSB price over 12 months – from London Stock Exchange

Shell’s share-price has had a tough 12 months. We’d call it a rollercoaster, but that implies fun to be had. The market reaction to the dividend cut has moved Shell down into attractive buying territory.

Shell has been battered by the collapse in oil prices over the last two months. A collapse in demand and surge in supply could only end one way.

However, we believe in Adam Smith. The market will adjust. At this price, existing supplies will be reduced. New investment will not happen. These two factors will reduce supply over the coming months. On the demand side, things can only get better – and a low low oil price will be a real initiator of the recovery we foresee in the global economy. Oil price shocks have been drivers of two out of the last three recessions (excluding the current one). Whilst the global economy is not as sensitive to oil price rises as in the past, lower transport and supply chain costs will stimulate demand. Falling supply and rising demand can only lead to a reverse of the crash we have just seen. When marginal oil producers have costs around $45 per barrel, the market will end up there, and most likely overshoot.

Peak-oilers are predicting that this recession will encourage moves to a fossil-fuel-free future. We do not see that. A lower oil price and general lack of spending power is more likely to see the use of oil-products rise instead of promoting transfer to more expensive and untried alternatives.

When oil prices rise – and it is when rather than if – Shell will be well-positioned to benefit. The company understands the longer-term move away from oil, and is positioning itself accordingly in to gas and renewables. The world is not going to return to the dark ages with no energy use, and when things pick up, Shell will be there to provide the energy required. At 1200.00, we rate Shell B shares a strong buy.

IMPORTANT: Please see our disclaimer. We are only commentators. Readers must review any potential share purchases or sales ideas with their special advisors before going ahead.

Aston Martin – Buy the Cars and the Shares

This is quite a U-turn for us – a full hand-brake, opposite-lock wheels-spinning 180-degree about face. Ever since the shares were launched at £19.00 each, we have been fearful that Aston Martin (ticker AML) has been trying to do too much, with too few resources. Now that the shares are almost in penny territory we say BUY! Fill your boots – or at least fill that curvaceous trunk at the rear of your gorgeous Aston Martin.

Our previous articles, Great New Aston Martin Models in Geneva – but What About The Shares?, No U-Turn on Aston Martin (AML) – Yet!, and Aston Martin Still Has a Mountain to Climb* may have given the impression that we felt AML was on the downhill road to bankruptcy.

So what has changed?

Lawrence S Stroll

Since our last report, Canadian billionaire Lawrence Stroll has bought a quarter of the company and installed himself as Chairman. More importantly, he has assessed the company as a businessman rather than as a car enthusiast. So he can see that everything hangs on getting the new DBX model (a long overdue SUV) into series production. So the peripheral distractions – such as re-introducing the Lagonda brand as as an EV – need to be abandoned to focus on what counts.

Do we think Aston Martin has a long-term future as an independent car maker? In a word, Nope, Not A Chance! Okay, so that was four words – what do you want, a financial analyst that can count??

We still see AML being bought by Daimler Benz or Geely (see our earlier article about their ambition). The difference now is that Aston Martin will be bought from the shareholders, not the receiver.

Aston have announced that they intend to restart production in the new factory at St Athan. There may not be a huge launch event for the DBX, but you can be sure there will be plenty of column inches to cover it.

The night is always darkest before the dawn. Right now, things look a bit iffy for AML, with closed factories, a high-interest loan to service and all the challenges of building a new car in a new factory – and then launching it into a market new to the company. However, if you wait to see how the company performs launching and building the DBX model this summer, the opportunity will be gone. They closed last night at 59p, having been as low as 49p this week. By Chrismas, the shares will be back at £5.00 each, as the financial world recognises the turn-around of this magnificent company.

Buy now. These shares are due to motor upwards! (Sorry, I so nearly managed to resist motoring puns throughout this article.) Then go and order a DBX.

IMPORTANT: Please see our disclaimer. We are only commentators. Readers must review any potential share purchases or sales ideas with their special advisors before going ahead.

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!

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.

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.


The UK stockmarket, is at rather low multiples of income, given the interest rate environment. This morning, 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.

FTSE 100 Forecast Flat Until March 2020

It is that time for us to kid ourselves that we have some insight of where FTSE is heading over the next six months. “Hurrah,” I hear you cry, “we’ve been waiting for a laugh.”

FTSE over 6 months

But first let’s have some humiliation by looking at what we foresaw back in March 2019. Back on 18 March, we confidently thought that Brexit would be resolved on 29 March. Oh how naïve we were. We thought that either a deal would be done, or no deal would be all sorted by September. Either way, we thought that resolution of Brexit would be supportive for FTSE, and so, with FTSE at 7228, we forecast 8150. The article was entitled “UK Equities About to Soar.” Wow, how confident we were. Sadly, our central assumption over Brexit was wrong, and so the out-turn of 7345 on 16 September was much lower. As we noted before, forecasting is particularly difficult when it involves the future (Ed; and as I remarked at the time, what other kind of forecasting is there? Now get on with it).

Market Screen

Looking forward to Monday 16 March 2020, what do we see? As noted last month, we see some risk of a global slow-down. And we have said this before, but surely by March, Brexit will be settled? The potential outcomes are;-

a) Deal on 31 October

b) No deal on 31 October

c) Extension to January, then Deal or No Deal

d) Revoke Article 50

Thus we feel that Brexit may well be off the scene. To some extent it will be hedged anyway, as a bad Brexit might lead to a lower GBP, which tends to support FTSE through the foreign earnings route.

Though we could have a Marxist/SNP/whatever coalition government too!

However Brexit is solved, we see it too soon to have a kick-start effect on the UK economy by March, and globally, we still see the risks on the downside. Therefore, we think the on-going global slowdown is bad for equities, but some kind of resolution of Brexit should help the UK market (dear God, any kind of closure, please, we implore you).

Thus for 16 March 2020, we forecast FTSE 100 at 7200. Yes, I know that is the same level we have forecast for December 2019, January 2020, and February 2020. At least we are consistent!

FTSE Weak Until Christmas – Then Rebounds in the New Year

It’s that time of the month when we take out our crystal ball and forecast where FTSE 100 will be in 6 months time, February 2020.

Stock Prices green for up, but we think down

Before giving away too many of our thoughts, gut-feels and sheer guesses, let’s look at where we are now. Six months ago, in February this year, we thought FTSE would continue the upward trajectory sine the start of 2019, Brexit would have been and gone, and FTSE would be just over 8000. What’s actually happened is that Brexit was postponed and so the UK economy has been left dithering over the summer. Last night it closed at 7148. So we got the direction right. At the end of last month, when it was at 7700, we could have forgiven ourselves a little smugness.

FTSE 100 with date of forecast shown

For the last three months, as the implications of the Brexit delay became apparent, we have been forecasting FTSE up to 7500 in July, and then a retreat to 7200 by November. Well, we got to 7500 in July, but back down to 7200 a little early. Our suggestion last month that the market was riding high but vulnerable to bad news was brought to life by President Trump’s step up of the tariff war with China.

So where to now?

As we noted last month, the global economy looks weak, and the UK could be in a technical recession by Christmas. (See our article last week, A Bleak Midwinter Brexit Recession By Christmas) Our central forecast for Brexit is that it will be a soft No-Deal, in that another Withdrawal Agreement will not be reached, but enough accommodations will be made to keep things ticking over. This outcome will scare the market further.  However, FTSE tends to look 6 months ahead, and by February, it should become clear that the UK economy will be okay, and the world economy could be over its wobble.

So we think the worries of a No Deal will send FTSE down to 6800 by November, but that in the 6 month time horizon of our forecast, we think it will be back to 7200 by Friday 14 Feb 2020

A Bleak-Midwinter Brexit Recession By Christmas

Oo-er, suddenly the UK economy ain’t looking so good!

The news media are full of speculation about Brexit, and not many of the stories are looking forward to how wonderful the country will be once/if Brexit happens. We can expect more of the same for the next twelve weeks until Halloween.

Are we heading for No-Deal?

At the moment, both sides are digging in, trying to create a tough stance for the benefit of their populations (I hesitate to use the word electors when we are discussing the EU, but you know what I mean). Behind the scenes, it can be assumed that the diplomats and civil servants will see themselves as the grown-ups in the room, and thus be at least looking for common ground.

However, it seems unlikely that a comprehensive new Withdrawal Agreement will be crafted by October. But we can expect enough co-operation to keep the world turning.

So what’s the problem?

The problem is that investment is collapsing. The worst thing for businesses in uncertainty. Life has enough risks when it comes to business investment, without an unseeable future being only 12 weeks away. Similarly, house-buying and car buying are likely to miss out on their usual autumn surges this year.

And after Brexit day, will there suddenly be clarity and light? Nope. There will be hysteria in the media for a few weeks as every little shortage and business malady is blamed on you-know-what. And the effect of this – more hand-sitting and less spending.

What else is happening?

Leader of the Free World

The US is starting to suffer from Mr Trump’s tariffs, to the extent that Jerome Powell has cut interest rates despite full employment. Meanwhile, China is suffering a marked slowdown from the trade war. This has now spread to Europe, which is also teetering on the edge of recession.


The UK is heading for recession – and it is difficult to see when it could end. Domestically, we’ll probably pull out next spring…. but that depends on what the rest of the global economy does. If things keep softening elsewhere, it could be a big one!

PS. The slowdown in Q2 announced today was no surprise, given the stockpiling in Q1 for the original Brexit day, and the factory shutdowns brought forward to April in case of Brexit delays.

Theresa the Timid

PPS. The coming recession will be a direct result of Mrs May’s and Parliament’s timidity over Brexit. If they had gone ahead on 29 March, we’d be pulling out of it by now. The delay to October has just increased the uncertainty and halted the economy for 7 months, tipping us into a recession we need never have had.