Small Cap Value Report (20 Jun 2016) - NXR, FTC, PTSG

20th Jun '16 by Paul Scott

111 comments 37351 reads

Good morning!

This is now the last week of the Brexit campaign, thank goodness. I expect many people are, like myself, heartily sick of the whole thing. Especially when tragedy struck last week, in the senseless murder of that lovely lady MP. That shouldn't affect the vote, but I think it will - as a reminder that there is an extremist minority element within the Brexit camp which is beyond unsavoury.

Personally, I'm wavering, and am now in the unsure camp. What has really worried me, is talking to people who work in financial services, including our own commenter "Maddox" here. They're saying that the removal of EU passporting for financial services will definitely lead to (possibly serious) job losses from the City to places in Europe.

My heart says leave, and get back our democracy. My head says that doing so would cause so much disruption, and consequences that nobody really knows, so perhaps it's better to play it safe for now? Also, as investors, we do have to think about the portfolios we've carefully nurtured. An out vote would undoubtedly knock them hard, possibly for quite a while - nobody really knows.

The betting odds have moved towards the Remain side in recent days. I follow the IG binary Brexit market, and it has recently moved from a mid price of 61.5 to 77.0 today - i.e. there is now only a 23% chance of a Brexit vote succeeding. That's probably why we're seeing such a big market rally today the FTSE 100 is up 211 points at the time of writing - a remarkable one day rise.

There are not many results/TUs today, which is handy as I'm heading into the City again shortly, to meet management of one of my favourite small caps, in which I hold a long position, Best Of The Best (LON:BOTB) . This is the weekly spot the ball, supercar competition, where 70% of its business is now online (the balance in large UK airports). I'll report back if there's anything interesting from the meeting.

Then I'm heading back home to Hove for a few quiet days, as all the frenetic activity of recent weeks in London has done me in a bit. So some R & R is definitely needed!

Norcros (LON:NXR) update

(At the time of writing, I hold a…

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ed_miller

21st Jun '16

I agree that we should take a compassionate and charitable approach to dealing with a refugee crisis, especially so because our government played an active role in bringing about its root causes.

To my mind, another statement of the bleeding obvious is that a sovereign nation should be in control of its economic-migration policy, even if having that control doesn't much reduce the net rapid rise in our population, and consequent strain on English housing and infrastructure, we should still be in a position to make such a policy work well for our needs (and not lazily use economic migration as an excuse not to bother equipping our populace with useful skills and employment opportunities). The EU giving its ~440 million non-UK population an inalienable right to work in the UK was self-defeating and invidious when there is such disparity in wages, living standards and job opportunities among EU states.

Nor do I agree that welcoming in former Soviet states has contributed overall to our stability and neutralised Russian influence over them. Though I think it has been a boon for the countries concerned, and paved the way to more democratic accountability, and perhaps economic prosperity, than some might otherwise have achieved without a path to EU membership, Putin has certainly viewed it as provocative and threatening. Russia uses its oil wealth and military power to project increasing influence and dominance over its satellite states. The EU hasn't the will or the means to stop him but continues further integration that he views as antagonistic. It doesn't make me feel safer.

Plus they're pretty keen to retain our second-largest net contribution to membership fees!

almain

Migration has only a small part to play in the demand for housing. By far the largest demand from housing comes from the changes to our own social structure. In 1970 there were approx 55M people in the country, and 16M houses. Now there are 65M people and 25M houses.

So most of that demand comes from the fact that as a nation are living in smaller groups (getting married later, divorce, living longer). So even if there was no net migration, we'd still have a housing crisis.

You'll be disappointed if you think that controlling a border will solve the problem.

timarr

OK, so let's consider EU economic migration. Roughly we can divide this between skilled workers and unskilled workers.

Skilled workers, by and large, I suppose we probably welcome. Personally I think importing doctors, nurses and teachers because we haven't trained enough of our own is both morally dubious and economically stupid. But that's nothing to do with the EU, it's all about systematic failures in government policy towards training those people. Even if we start now it'll take four or five years to fix the issue.

Unskilled EU workers are most likely coming to the UK because they can earn more money here than at home. They're competing for jobs at the low end of the market, pushing rates down, potentially below the level that even unskilled British workers can afford, or are willing, to work for. Leaving aside whether that's economically good or bad for the country, this group of immigrants are more likely to be in receipt of working tax credits than their equivalent UK cohort and less likely to be receiving unemployment benefit: so they work, but they don't earn enough and the government subsidises them.

Now I completely accept that that's bizarre - but again it's an issue of UK government policy, rather than a direct EU issue. Our benefits system is not fit for purpose, the government has no business subsidising businesses to pay a living wage. But this is one of the reforms Cameron managed to negotiate, so if it is a contributory factor to this type of migration we should see an impact as those opt-outs kick in.

Also note that the UK's employment rate is not far above the effective rate of full employment which suggests that we’re not being economically disadvantaged by migration at the national level. However, the impact of migration is not spread evenly, so some areas have been badly impacted while others have benefited.

There isn’t ever going to be a straightforward answer to whether migration is a net good or a net ill. But the argument is currently being conducted between the Leave campaigners, who’ve made it the central plank of their argument, and the rump of the Tory party, who’ve been complaining about the issue for years and can’t now reverse course without appearing an even bigger bunch of hypocrites than normal. So there’s no proper debate about this at all.

A more nuanced view is that most of the perceived problems with EU migration can be dealt with by changes to UK government policy if it had the resolve to address them.

timarr

herbie47

I think the problem is the 3Q profit, announced end of February was up 90%, now its only up 15%. Also they advised profit would be in excess of £40, which it is but only just, so I can why some are disappointed with these results.

Davidcox

DaveRave

If you want to see what the EU has done for us so far, look around you! If i'm ill I have to wait at least three weeks to see my doctor. My wife had an accident the other day. We were in A&E for nearly seven hours before being seen. I've been waiting now for about eight months for a small operation on my eyelid. When I was a kid I could ring the doctor and see him the same day and sometimes he would come to the house if I was bad enough. When I was ready to buy a house of my own I could afford the deposit and had plenty of houses to choose from. Now my daughter can't afford the deposit even though she would love to buy. If I go down the town shopping It is full of people of foreign origin. I wonder how they can be able to survive without working and where they live. I hear they are letting even more people into the country and there is nothing we can do about it, so I think it can only get worse. I drive back home and see traffic jams, in even what used to be the quiet times, and know that at some time everything is going to grind to a halt. My grandsons class at school is populated with immigrant children where more and more extra places have to be found to accommodate them and leaving the teachers struggling with different languages and customs. Soon we have to give up our quick boiling kettles and have weaker vacuum cleaners because of laws made by undemocratic bureaucrats in Brussels,which our elected leaders can't change even if they wanted to. I've watched our quality of life go down over the years and wondered what our soldiers fought and died for in the two great wars only to see the democracy that people secured with toil, tears, sweat and sometimes death over many years just been given away for a few extra jobs maybe or keeping some rich elite happy. In my opinion it's time to say enough. Time to say charity starts at home. Time to think of our own people in Australia, New Zealand, Canada and the Commonwealth because if we don't!!! I shudder to think. Vote Out.

hayashi22

I think your role David Cox is to work hard all your life and pay taxes. These taxes go to pay for the lavish lifestyle of Lord kinnock and his ghastly wife so they now own assets worth millions. Still they are amateurs compared to Blair who has used public office to enrich himself to a degree few could imagine.

I agree with most of what you say in your post, timarr, and welcome your efforts for a reasoned and considered debate. My main point on economic migration is that it ought to be for sovereign nations to decide and control, and you would counter that that it has little practical difference and is a price worth paying for the many benefits of EU membership - either view can be perfectly rational and ultimately is a value judgement.

(And I am not arguing against economic migration, though I am mindful that I benefit from it without suffering its negative consequences, such as might be felt by working class people and tradesmen in cities like Peterborough. I've recently voiced similar unease on the morality of plundering the developing world of its trained medical staff, though Herbie's link to a BBC News article on doctors and nurses stated that many were trained privately, surplus to Singapore's requirements and their medical skills allowed them to secure good jobs in our own NHS, or other western health services, and then repatriate surplus funds back to their families in Singapore; so where such conditions arise, perhaps such migration produce a 'win, win.')

Ed

Plus both sides of the campaign are using scare tactics and whatever they think most likely to win them the referendum - that does not mean a positive case couldn't be made either way, it means they are politicians and they're mostly lacking a bit of personal integrity!

Andrew L

timarr, I just can't believe that 330,000 net migration last year (a record) has no meaningful impact on the UK housing market versus other factors. At this rate we are adding 1m a year to the population through net migration. This compares to a UK population of around 64m. So at the present rate in about 19 years net migration will have increased the UK population by 10%.

Of course there are other factors and I accept that. But net migration has a big impact and is something we can control if we are outside the EU. We can't control divorce, people living alone or living longer etc. We can impact home building to some extent but many people in the UK do value the Greenbelt.

In your summary you say that "most of the problems with EU migration can be dealt with by changes to UK government policy if it had the resolve to address them." Of course we could abolish the free NHS, get rid of the living wage, get rid of the minimum wage, reduce the quality of the public schools. Even then being a low crime country with relatively high wages we would still attract high migration from countries like Romania/Bulgaria. The monthly wage in Bulgaria is about £290 according to EU salary figures. That would take about 35 hours to earn at the UK Living wage of £8.25 an hour.

The simple reality is that the EU is not academic to people. We can't hope to solve the housing crisis while we have such high net migration. Your argument that we should change UK public policy to make it less of a pull factor to migrants would make little or no difference i.e. like Cameron's deal with the EU.

I appreciate that everyone has different views and perspectives. But these seem to me to just be facts. My cleaner is from Romania and tells me the monthly wage there is around £200 a month. I pay her about £20 for two hours. So it is obvious there is a powerful pull factor. In 20 hours work in the UK she could earn what she would get in Romania in a month.

fleecednflogged

Zzzzzzzzzzzzzzzzzz ..........................................

-3

purpleski

22nd Jun '16

Dear Jane

I only live in two European countries and only speak two European languages and my son is only 10 so currently at a UK prep school in the summer and a French school in the winter.

We obviously see the EU from completely different perspectives (and looking at the number thumbs up you have received I see it differently to many people here) and we will have to agree to disagree but I could never vote for something that is pushed by the likes

Johnston
Gove
Rees - Mogg
Farage
Lawson
The Sun
The Daily Mail

regardless of the arguments. But self interest (my business) aside, which I completely admit influences me, I genuinely believe that we should remain and the economic arguments of the leave campaign are a cobweb of lies and there views on immigration are vile and offensive.

Best wishes

Michael Broom Smith

janebolacha

Michael,

It would be very easy for me to give a similar list of people and newspapers and to make similar comments to those you make but about the "remain" campaign and their arguments and approach to this referendum.

However, the time for arguing is probably past for that, for all of us.

I'd simply say for clarity and for the record that the views I hold and expressed obviously do relate to the immediate event of the UK referendum but actually go quite some way beyond that, relating as they do to how I see the whole European Project, that I once held very dear and believed in, as having been irremedially and irretrievably corrupted by the kind of organisation the EU has been turned into. Increasing numbers of people in Continental Europe seem to have come to the same conclusion. That I am likely to be living in Continental Europe for the rest of my life perhaps explains my wider approach to the question.

Should the vote be to remain in the UK, then I should remain convinced that people in UK would very soon be regretting their decision.

However, that is democracy, something to be valued and cherished, even within the EU.

Best wishes,
Jane.

Bonitabeach

The argument between Remain and Leave reminds me very much of the argument over should the UK join the Euro:

“The euro (EU) has proved to be exactly the job-destroying, recession-creating, undemocratic monster the doubters always warned it would be. People who liked the euro (EU) were civilised, supported the arts, went to Tuscany or the Dordogne for their holidays. People who didn't like the euro (EU) drove white vans decorated with the flag of St George.
Today, it is hard to find even the most fervent euro enthusiasts in the Liberal Democrat party arguing for UK membership of the single currency. Disillusionment with what was once called "the Project" is almost total in the face of grinding austerity, a double-dip recession that has already lasted 18 months and a jobless rate of 12.2% and rising.
Imagine for a moment that Nick Clegg, Ken Clarke and Tony Blair had triumphed back in 2003.”

Not from the Sun or The Daily Mail; the mouths of Gove, Johnston (who he?) Farage, Lawson: from: The Guardian Do not adjust your spectacles.

Dear Jane

Fortunately the time for arguing and discussing is as you say over. The only point I would add is that if the people of the U.K. do vote to remain and "regret.. their decision" then we can still leave at some later date. Whereas if tomorrow we vote to leave there is no way back if the people "regret.. their decision".

The fact that the vote looks as though it will be very evenly split indicates to me that which way to jump is not clear and that to stick with what we have is less likely to lead to regret.

Out of interest Jane if the EU is such a dreadful political, economic and democratic place to live why do you continue to live here and keep houses in two of its member states?

If the UK does vote leave tomorrow I for one will certainly look to see if there is a country that I can leave a country that will no longer be proud to be a citerzen of.

Kind regards

Michael Broom Smith

Kind regards

Michael

Hi Bonitabeach

It is a good and well written article but I don't understand your point in relation to the Brexit vote?

Kind regards

Michael Broom Smith

23rd Jun '16

Michael,

"Out of interest Jane if the EU is such a dreadful political, economic and democratic place to live why do you continue to live here and keep houses in two of its member states?"

That is a matter personal to me and none of your business.

Jane.

Sniggolb

A great deal of rancour in the in out debate and quite unnecessary. There are sound arguments on both sides of the case.

Vote out is also supported by sensible people such as Charles Moore, Max Hastings. Lord Howard (Michael) . Lord Lamont. lord Lawson and Peter Lilley. Then we have the support of the likes of The Sunday times, the Telegraph, the Sunday Telegraph, the Spectator and many other thoughtful people who think rightly that we should run our own country.

No one should read anything into the fact that Jo Cox was murdered by a nutter

I can guarantee one thing

Whatever you vote today you will grow to regret it!

Tom Benyon

Vote out is also supported by sensible people such as Charles Moore, Max Hastings. Lord Howard (Michael) . Lord Lamont. lord Lawson and Peter Lilley.

If I were old, rich, white, male and politically on the right wing of the Tory party I would probably want to the leave the EU too because it stands for all the things I hate. But none of those people will suffer at all if our economy falls apart because a) they're already rich and b) many of them will be dead in a few years.

These people aren't sensible, they're 20th century ideologues who hate the EU on principlenot on the basis of the evidence. But we've run out of gunboats (literally, we have run out of gunboats, we can't even police the Channel), our ex-colonies are doing very nicely without us and the sun has long since set on the British empire.

21st century Britain is a thriving, multi-cultural, European country in which our young people are increasingly blind to gender, race, creed, religion and sexuality, We cannot turn the clock back,By all means vote to leave, but for God's sake don't take your cue from this bunch of throwbacks.

Gosh that is sharp. My sincere apologies for asking. I did not mean to give offence.

Best wishes

Michael

Small Cap Value Report (20 Jun 2016) - NXR, FTC, PTSG

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