Small Cap Value Report (Mon 8 Oct 2018) - ramblings, FCCN, AMO, QUIZ, SPE, ANG

I have resisted the temptation to comment on this thread.
Personally I am an unashamed capitalist that would make the likes of the Tory right shudder (maybe not JRM).

My biggest concern with labour is there open threat of ignoring property rights (whether that is Marx or social democracy or communism will leave up to others).
Economics relies on assumptions and I think one of the founding assumptions of economic thought (I hope there is a distinction between this and economics) is the assumption that people want to improve their current position and that they have rights (a legal system) to retain said improvement (in effect property rights).
I would suggest this is why a basket case like UK (balance sheet - no assets loads of debt) commands a better yield than countries where the rule of law is opaque or at least less prevalent.
The day UK threatens property rights, I dare say it will result in a frontier market yield without the natural resources.

Not sure how to deal with the problem, but I will investigate offshoring some of my property. Personally I thank whatever it is people believe in that I am fortunate enough to think and act, by moving some assets and potentially start again, substantially better off than most of the world's population.

Some comments on this thread in my humble opinion are vitriolic and I am not sure how much that achieves, regardless of your politics. That said some are absolutely fantastic (even if I don't agree) which is why resisting the temptation to enter the debate has been tough!

As an immigrant into this country (came with the luggage) I can assure you tolerance and civility are values that genuinely differentiate the UK and why my family still in India hold UK with reverence (maybe colonial brainwashing).

Regardless of Corbyn, Brexit, climate change and any others we can think of, I sincerely hope that tolerance and civility remain core to British values.

"Since no Communist Party is standing for a general election, or likely to, this seems an unlikely outcome, and certainly not one I'll be wasting time worrying about!"

I remember when I was at university in the early 1970s, the Marxis Socialist Workers Party knew that they had no chance of ever being elected, so they openly talked about infiltrating and taking over the Labour Party and gaining power by underhand means that way. Their Marxist successors, in the form of Momentum, have now succeeded in taking over the leadership of the Labour Party and are busy converting it from a respectable social democratic party to a Communist one in all but name, with likely disastrous consequences for this country should Labour ever win a general election.

To all the Labour apologists on this thread, John McDonnell lists his recreation in Who's Who as "fermenting the overthrow of capitalism". He's to stupid to distinguish between the meaning of "fermenting" (of which I broadly approve) and "fomenting". Lenin, whose biography I recently read, would have you accurately as "useful idiots".

Peterg

The Labour Party is now run by avowed Marxists. The former communist party of GB did not contest the last election because they saw no need, the current Labour Party ticking all the right boxes. The current Conservative party is now Blairite labour. They have done little to encourage small business and nothing to undo the high taxation imposedby Brown. They are now proposing to increase taxes further. McDonnell envisages whole scale nationalisation at a price to be determined by the government, a run on the pound, swinging taxes on property, increased corporation tax to 26%, a further confiscationof property through the workers dividend (most of which will go to the government) and unfettered trade unions. If you can't see this as communist then you're blinkered beyond belief.

To return to some practical solution to a Communist election victory,

Since no Communist Party is standing for a general election, or likely to, this seems an unlikely outcome, and certainly not one I'll be wasting time worrying about! The only two parties with any current chance of winning an election are a right of centre, and somewhat mixed up, "Conservative" party which can't quite decide if it's a moderate right of centre party or an unfettered free market party and the Labour party which is proposing policies that were regarded as Social Democratic in the 70s and before. If you think the Labour party is in anyway "Communist" you either have a limited political education or you are attempting to slur it.

Anyone who sees a Corbyn government through rose-tinted spectacles is deluding themselves. It would be a catastrophe. 

Any number of people keep telling me that Brexit will be fine/OK,/marvellous etc! We'll have to see - I doubt they are right. I'm not going to argue that I don't have issues with some of Labour's policies, many are poorly thought out, and we have to hope would be polished considerably should they ever win an election. However, the current alternative does not inspire the slightest confidence, and I have no doubt whatsoever that a no deal Brexit of the type favoured by fantacists and fools is a far far bigger threat to the economy and our standard of living than a Labour govt.

Peter

Yes, for example the British people should have been offered a say before the pro-EU (i.e. Anti-British) politicians signed us up to several major treaties e.g. Maastricht 1992, Lisbon 2007, Nice 2001,Amsterdam 1997.

Finally, after more than 40 years of being pushed further into a federal Europe without any democratic mandate the British people were offered a say. We voted to leave.

Re:Brexit

Coming from a profession where 'informed consent' is paramount then to me there seems to be no other ethical choice than to say to the UK population ...

"This is the deal we've been offered and these are the likely outcomes. Are you ready to sign on the dotted line?"

Blimey you even get a cooling off period when you buy a car and at least you've got some idea what you are buying.

To return to some practical solution to a Communist election victory, rather than selling up if it was looking likely, wouldn't it be better to convert all your holdings into very large caps trading globally (Shell, BLT, HSBC etc.)? John McDonnell is right when he says the new government would prepare for a run on the pound: Sterling would tank, along with UK based equities. Capital would exit the country like water from a sieve. But if the pound fell, then large companies trading in London (and elsewhere) would need to rise to prevent arbitrage. After a week you'd need to decide whether to sell up and bury it all as gold bullion in the back garden, but at least you'd get through the initial shock.

Anyone who sees a Corbyn government through rose-tinted spectacles is deluding themselves. It would be a catastrophe.

"So if, after experiencing a democratically elected Corbyn government, all the available evidence suggested that maybe it wasn't such a great idea after all, would you want people to have a chance to vote again (i.e. change their minds)"

That'd obviously come at the end of the parliamentary term, and due General Election no?
Unless the Govt fell in the interim

Fact is this was a decision for a generation , a decision that had been denied LEAVERS for 41 years.

Don't recall you being vocal about "the right to change ones mind" for all those years where you were getting your way!!!!

Google and Facebook are so special — more quangos with tax raising powers than market economy players — that it seems inappropriate to use them to draw general conclusions about productivity.

How long would a Jermy Corbyn government even be allowed to last? Coup d'etat and all that.

"There is no evidential basis for the opinion that Labour governments are bad for share prices."

That may be true, but we've never had a Labour government previously that's under the control of Marxists. If they get into power, that can't possibly be good for share prices.

Bandying about words like Marxist (which isn't incidentally in any way new) isn't really very helpful, as what do you mean by it, and what does everyone else think you mean. What is far more useful is to consider the sort of policies that have been proposed (which as anyone who has paid attention in recent years will know is a long way from being enacted by an party once elected). If you do that you'll see that while the recent policies announced by the Labour party are to the left of the Blair government, they don't look exceptional in comparison to pre Thatcher Labour governments. A Corbyn govt would not be the end of capitalism or the end of the world as we know it, but it might mean some rebalancing of the mixed economy that the UK has already  had for decades. That is probably overdue.

We could have an "unlikely happening" face off... in the left corner the Magic Money Tree vs. in the right corner the Trickle Down Fairy. Which will prove less unlikely??

There is no evidential basis for the opinion that Labour governments are bad for share prices. A detailed study of the post WWII period concludes "In terms of share price movements across the period of a government's office, however, there is no statistically significant evidence (at commonly accepted confidence levels) to suggest that the stock market has performed better in either nominal or real terms under Tory government " - see https://www.tandfonline.com/doi/abs/10.1080/096031098332925?src=recsys&

If you don't want the comment section to fill up with politics, please refrain from such talk as calling the Laffer curve an economic theory. It's patent baloney with a political slant and has no respectable evidential support.

Paul, I missed y/day but worth pointing out Sopheon figures/forecasts in dollars, so $0.483, not 48.3p, and $0.552, not 55.2p. FYI, it will obviously alter the PE a bit.

The whole Brexit saga and the ongoing leave vs remoaner debate are a bit of a side-show, it seems to me. I do think Brexit will eventually turn out OK for the UK, although not as OK in the medium-term as it might have done if Mrs May had been more prepared to embrace Brexit (once the decision was taken) and taken a bolder approach in negotiations with Brussels.

But this is by-the-by. I think the main and most worrying thing that Brexit has not created but has significantly revealed is the depth and the breadth of the underlying schism in British society. Whether they manifest themselves as hatred or just as utter disdain, the differences between leavers and remainers are going to take a long timeto resolve.

I've lived outside the UK - in Africa - for the last ten or more years. I can probably fashion the opportunity to make this permanent. More and more, I feel like this would be the right thing to do.

Hi Paul

You knew I'd have to respond to your Brexit comments didn't you ;-) You know my view that Brexit will be highly damaging to the UK; short-term disruption followed by long-term relative decline (like it was before we joined in the early 70's) but I would challenge your premise that a Corbyn/McDonnell government would be more damaging than Brexit. I agree a Corbyn/McDonnell government would be damaging but at least we get the chance to vote them out in 5 years time; Brexit will last a lifetime (for me anyway).

Secondly I would argue that Brexit, and the chaos it has caused within the Conservative party, has made a Corby/McDonnell government far more likely. So even on your analysis Brexit is highly damaging.

But for me the key issue regarding the deal, if we get one, is democratic legitimacy. Very few Leave voters would have expected us to be in our current position having been told "they need us more than we need them", that a deal would be "the easiest in history", that there would be "no downsides to Brexit only upsides". 'No deal' as an option wasn't even mentioned during the referendum campaign but now looks like a serious possibility. Whatever the deal is, if it is driven through Parliament (and it will have to be driven as there is no obvious majority for any of the proposed forms of Brexit) without the explicit agreement of the electorate it will have no democratic legitimacy. Whichever way you voted that would be a very bad outcome. A final say on the deal would give any deal legitimacy, or clearly show it's not what the people wanted; either way it is the only route I can see to give democratic legitimacy to such a huge decision with such profound impacts on our constitution.

From an investment point of view I have been moving increasingly into cash as I am nowhere near as sanguine as you on the impacts of leaving the EU, particularly if we are out of both the single market and the customs union, as it appears we would be with either no deal or a variation on Chequers.

Paul, thanks for your comments. I agree with much of what you say regarding Brexit or more, the threat of a Labour government. That is very disappointing because I feel all the good that previous Labour administrations did to make it a more electable party for the masses seems to have been undone. I seem to remember someone, Neil Kinnock was it or Tony Blair?, that to carry out their policies a party had to be in power rather than in constant opposition. The vocal minority of the left wing extremists seem to have learnt nothing. Enough of politics.

I think the greater risk to the general market at present is not Brexit but rather the actions of the Italian popularist government. It is basically sticking 2 fingers up at the ECB/EU regarding its' huge proposed increase in spending and debt and "putting Italy and the Italians first". This is potentially far more serious than the Greek debt crisis of some years ago and is already having some negtive effect on the stock market. We must all decide for ourselves what action to take depending on our own individual circumstances but is why I am now mostly in cash. My circumstances have changed very recently and my risk appetite has had to change accordingly.

https://www.cnbc.com/018/10/05/italy-government-announces-brave-and-responsible-budget-2019plan.html

Regards and good luck to all

CM

Paul: Pretty much agree with your comments on Brexit and Corbyn. Incidentally I had a letter published in the Financial Times today on the subject of Brexit, which was very kind of them as I effectively criticised their editorial policies. It was headlined “Please – no more letters from moaning Remainers” and was in response to two previous letters from clearly biased correspondents. You can find it on the FT web site.
As regards Corbyn and his bolshevist tendencies it could definitely be grounds to depart to another country, or another world, if he got into power. Just read a book on post-revolutionary Russia as I have just done and you will understand the menace.

I share Paul's concerns, although I think the uncertainties of Brexit will be negative.

A mitigation strategy I am considering is putting some money in overseas markets. A bit off topic but has anyone found a good way to invest in Australia/New Zealand/Canada without being gouged on fees, charges etc? Any suggestions on brokers in these domiciles who accept UK investors?

I think,Paul, you are a bit optimistic on Brexit. The complexities are such that I doubt anyone can truly master them or judge the consequences of any particular course of action.Ireland gets in the way of many attempted solutions.

Well done Paul for having the courage to write so openly about both Brexit and the current Labour leadership. On the former, I believe there will be a Brexit deal but it'll be such a political fudge that it may take many years for us to recognise whether it's a good or a bad deal for the UK. Whether one is a fan or not of Teresa May, we do have to give her credit for resilience and guts and I believe she'll get such a deal through the House of Commons.  But it's hard to escape the conclusion that even a 'favourable' deal will do damage to the UK economy in the short and medium term.  On the prospects of a future Corbyn / Macdonald led Labour government, as a survivor of the 1970's I share the view that this would be an utter economic disaster; all the sacrifices of the past decade of 'austerity' undone almost overnight and then some. 'Momentum' is just 'Militant' in a new suit - and it was the Kinnock leadership that called them out - i.e. from within the party.  Another election defeat for Labour could see the back of the Corbinistas and perhaps the return of sanity with a new Leader (Uma/Benn ?) cleaning out the Augean stables again. So it is possible to  envisage some positive scenarios.

Off topic WARNING for those without anti-virus the JS/Miner.bq Trojan will result from the link (or it seems any other links on that site and there's no contact email so they can't be easily informed: https://www.hussmanfunds.com/comment/mc181002/

Paul, I don't see why its ridiculous to suggest that the EU will impede trade. From the EU point of view, keeping the single market intact is more important than losing out on trade with the UK. They may also take the view that the UK is likely to be poorer after Brexit, and therefore less able to afford imported goods. If the UK does too well, it may encourage separatists elsewhere!

Paul, I'm trying to understand why you think French Connection (LON:FCCN) should be worth £1 or more per share. You mention profits of £3-5m in 3 years following the expiration of the onerous leases. But even with £5m profits that would require a pe of 19.2 for a market cap of £96m (with 96m shares), so surely you must expect that profits could be higher than £5 to justify the price? Also, that profit level would only be after 3 years so you have to knock off something because of that.

Your views on Brexit simply reflect the Consensus - that it's all a big fuss about nothing and UK economy will be just fine and dandy. Let's hope you are right. Personally I think we are moving towards an economy with zero-growth or in mild recession. You don't need to look very hard at the UK economy - the poor export performance, widening trade gap, slowing GDP growth and falling investment - to see how much damage has already been done and is being done.
Hopefully Parliament will accept semi-permanent membership of the Customs Union, which will be good for markets.
Over the next couple of years I think it's likely that public opinion will turn turn quite sharply against the Brexit hardliners and the Conservatives generally. And that has to make a Labour government much more likely.

I think Brexit and Corbyn are linked risks. A good Brexit for Theresa May is one that avoids alienating her right wing and causing a big UKIP type protest vote, avoids an immediate hard landing and can be forced through parliament. Afterwards everyone wants to move on, Corbyn can't force an election and Ms May has a few years to get ready for the next general election.

However there are risks around Brexit. It is highly complex and as things come down to the wire there is a lot of potential for negotiations to fail or for a negotiated deal to turn out badly in some respects. Both sides have a tricky bunch of stakeholders and vested interests to satisfy, all pulling in different directions. The core of most recessions is in a relatively small part of the economy - if tariffs had a serious impact on chemicals and cars for example that could be enough to create a recession. One unforeseen bi-election. the tories lose their majority, vote of no confidence, and suddenly you have a general election in the middle of a recession, tories arguing amongst themselves over whose fault it all is. Then Corbyn maybe has a chance.

Hi All,

Really interesting discussion this morning, chiming with some of the issues I am also mulling over.

I am currently 60% in cash which might mean I miss out on some gains but means I can sleep easy at night and if things do deteriorate then I should be reasonably well placed.

One of the regular posters (apologies that I don't recall which one) previously provided a link to the newsletter from Hussman Funds in the US. Their current view/newsletter, which is an interesting read (albeit a pretty bearish one), can be found here: https://www.hussmanfunds.com/comment/mc181002/

Who knows who will be right, and each to their own way of positioning their investments according to their own view of the future and risk aversion. I am just reminded, when looking at my worst position, that a 50% fall needs a 100% gain to recover and so, although I have a long term investment horizon, I am currently leaning more towards protecting the downside, until we have a little more clarity on the events ahead.

As one poster above mentioned, on this very high quality forum, I do hope that everyone feels able to add their own views without fear of being scorned or chastised. It is the free exchange of views, especially ones that may challenge our own, that have the potential to broaden our own minds.

Richard

On Brexit...

For a mature and decently functioning broad economy any economic projections with a distribution of outcomes that are all negative are dodgy. Crap in, crap out.

Why has this happened with Brexit forecasts from many respectable sources?

Forecasters including economists and policy sorts can only see positive growth as function of continuation of what already exists in some form. However, when economists look back and analyse why we had growth they see that it comes from lots of unexpected events that they could not model a priori.

So, the problem with Brexit is that negative consequences are very visible (and undeniably there). However, the change that arises from Brexit has positive impact too (new investment, new supply chains created, mundane work done to adapt. etc). As long as we assume that capital is suddenly not suddenly unavailable to UK at large inc companies then the period around Brexit should cause much higher activity in some regards than normal.

There is a false narrative around growth whereby it is viewed to be innovation or large lumps of foreign investment. The reality is that most growth is mundane and dull stuff. Brexit will bring a boom in mundane and dull stuff....

But the voice that can most be clearly heard at the moment is the voice of those who can clearly articulate what they will lose.

I'm not saying that Brexit is necessarily brilliant but I do think the discussion and analysis has become rather hyperbolic and done by "professionals" who don't really understand that much.

Paul, I believe you may have opened a (political) can-of-worms ! lol - But I'll add my thoughts - serious, and not so serious - you just have to work out which are which :o)

I'm not sure how a 2nd referendum would work, bearing in mind I know some people before Brexit v1, saying they'd vote remain so we could still compete in Eurovision song-contest, Football Euro's etc. ! Would we have a UK/EU agreed deal, then the public vote on that - What percentage of the voters would understand it all? How many voters would say they'd read the entire deal-document? Would we still have propaganda from both sides?
At first, I had visions of a multi-page voting form, asking :
1) How much of the £350m/week EU saving do you want to go to the NHS ? - None / Some / A Lot / All
2) How many foreigners should we let in ? - None / Some / Lots / No-limit
3) What do you believe the fiscal limitations of the Dept. for Brexit should be, and how do you envisage this being monitored and reported on, to the general public - please supply your answer in less than 1,000 words

Re: a Labour/SNP coalition - would this only be achieved if Scotland were given a 2nd leave/remain vote, or possibly just an outright no-vote leave option?
I've often suggested the next Scotland leave/remain vote should only be open to English voters :o) - And possibly to include Wales too !

The Naked Trader's sell-all idea, may be an option for many/some, but what about things like SIPPs - Can't access the cash, but can (possibly) limit losses by selling up. Would a Labour govt. come after Pensions > £x in value ?

As for looking for companies that may benefit from a Labour govt. - wouldn't these be taken into govt. ownership if they started to grow/thrive ? I think it's easier to work out which companies would/could be those to sell - utilities, Royal Mail etc.

I also think, as/if things get more heated/volatile, the extremes become more powerful - Far-right, communist-left etc., and history should have taught us the downside of this. This is possibly happening in the UK, but more so, according to the gutter-press, in other European countries (and possibly Brazil very recently).

On quiz...reminds me of FOOT. Another similar bull mkt dross. Collapsed and then halved again although recovering a bit from the 25p levels. So be careful imo on diving in too quick. Could easily do what foot did. Then again I am not sure this is a great time to be buying anything. Labour look very electable and if the NI party decide they want an election they can easily force one. When you have a Tory government and you see such chaos ....where are the police is a title on a TV program tonight. Plus millions of hard working families on lower incomes are due to lose 200 per month on average as tax credits are phased out replaced by a disaster of a new system called universal credit. Housing is in a bad place and so on. These are the issues that matter to the younger and mostly broke families not Brexit!

Does anyone know why Focusrite (LON:TUNE) has taken such a hit today? Down 8% with no news seems out of the ordinary.

Also interested in bvxp and xpp

Hi

With regard to the comments made (above) about US market, rates and equities. I found this tweet to be thought provoking.

When it comes to picking the direction of the market I agree it is very tricky. The common view is that when America sneezes the world catches a cold, but the truth is that the American market has been the strongest in the world for some time and the others have not caught up. I find it helpful to watch the Ciovacco Capital Youtube broadcast every week (though they do get repetitive). The crux is that at the moment, there is no reason to think that we are at the start of a bear market. Of course, every bear market starts with something that could be mistaken for normal market volatility, but if you want to distinguish between the signal and the noise, the technical indicators are not suggesting a market top in the US.
Of course, many other stock markets look worse, as they mirror the US when it sneezes but not when it rises. But on the other hand, they are cheap, especially compared to the US. Whatever else Brexit does, it is unlikely to lead to a surge in inflation that needs to be tempered by interest rate rises, so the 3-4% yield from the UK stock market looks attractive, provided it is sustainable.
Remember, more money is lost anticipating downturns than in the downturns themselves. What is different this time compared to February? But one of these corrections will turn into a full-bore bear market. Trying to navigate between those two conflicting positions is the challenge. I think you have to aim to hold the stocks that will be most resilient in a downturn and be willing to sell at a point (say 10-15% off peaks) when your entire being is telling you that you are selling at the bottom. It's not easy: perhaps it is the biggest challenge in investing.

So Cloudcall (LON:CALL) say Miton Group have completely sold out but there has been no RNS with who has swallowed up their 9% of shares. Given the volumes traded presumably there will be another RNS('s) to come.

Hi Paul

I have to briefly comment on your views on Brexit and Labour.

Taking labour first - you are right they are very scary, especially the leadership. That and Brexit are making me want to leave the country but at the moment I can not carry my wife with me on the argument and she is more important to me.

That said I suspect it would take a lot for the Labour Party to win an overall majority at the next election and that even if they did I would be surprised if they could carry the majority of the PLP with them for some of their more nutty policies. And remember that dear old Boris said #### (as an aside interesting developements in FCUK this morning I have a small holding) business so I am pretty certain that Reagan’s aphorism “The nine most terrifying words in the English language are "I'm from the government, and I'm here to help." apply regardless of party colour, but would entirely accept that labour, regardless of leader, is always more terrifying.

On Brexit, as you may recall from a previous interchange, I disagree. I will pretty much leave it at that but would just add that for most remainers (and possibly leavers) it is not just about economics/trade indeed for the remainers I know far more important are the “social” (for lack of a better word) aspects of the EU. I say that as someone who lives half his life in France, has many British friends who live in France and run businesses in France on the back of EU membership, a French brother in law, a polish sister in law and enjoys being part of the community of the EU.

The above may get many thumbs down as having no place on an investment column but one cannot be reductionist and reduce the costs and benefits of being in/out of the EU down to just trade.

Best wishes
Michael

QUIZ (LON:QUIZ) down another 30% this morning!!!!! So glad I sold (at a loss) on Friday... and having been clothes shopping yesterday I wouldn't go near the shares with a barge pole at the mo - the current in-store line looks absolutely dire and generally drab, and out of all the clothes shops I popped into or passed this one was the most bereft of customers.

On the other hand, I popped into Bonmarche Holdings (LON:BON) as well, which is unusual for me, as I'm not THAT old... and perhaps that's the point I'm going to make, because I was interested to see that the general offering while not being exactly hip and trendy is certainly a bit more middle-aged than it used to be. I actually bought a nice T-shirt and a couple of items of nightwear, which were nicer than any I'd seen in M&S or Next. They had some lovely coats there too, including one which is very similar in look and design to one I saw abroad costing three times as much. They also do a loyalty card system which is nice.

Your thoughts on Amino Technologies (AMO) would be appreciated. Thanks.

"Again, forget the politics, I'm talking about the economics. …………...Remember that McDonnell and Corbyn are admirers of the Cultural Revolution in China, where millions were killed..... "

another request for Bioventix (LON:BVXP) please

On Brexit, I am not sure I follow Paul's economic argument. The EU is protecting the Union so economic arguments are going to take a secondary position. We are not the only threat to the Union. Italy's confrontation and the democratic challenges in Poland and Hungary are possibly of a higher order of threat. In view of these has the EU not got to stand firm all round ? (I know 'standing firm' is not really a phrase that would immediately spring to mind in the same sentence as EU)

In any case, what we get in trading terms is going to be worse than what we currently have so a lot of businesses here because we were in the EU (Japanese & American esp.) are surely going elsewhere over time. Eastern Europe was not available when they originally set up.

In short, my take is a long drawn out severance from EU, recession and a country the will not forgive the Conservative party for a generation (assuming it survives in the medium term). I think we know where that takes us.

Great comments Paul both on Brexit and Labour Government.

There are many investments where both are not that relevant IF investors have a worldwide portfolio. So I would only consider selling everything if investing mainly in the UK.

A far bigger worry for investors like me who invest ;all over the world via shares with International business or Investment Trusts  is the US. There were clear signs last week of their bubble about to burst, with rising bond yields, and fears of faster than expected interest rate rises hitting US share prices. Now if the US were to go badly wrong... that would be worrying!

Even then though it often works out best to be selective in our selling rather than sell nearly everything. Yes, raise a lot of cash/have far more in cash than we normally do so as to be able to take full advantage if/when there are many bargain buys. But the risk of selling nearly everything is because the big falls might not happen.

I've lost count the number of times I've thought that THIS TIME big and widespread market falls are for real and bought index puts for insurance... only for the gains to continue.

Even in the worst of bear markets (though for a while the 2008 extreme bear market was an exception) there are usually some sectors that do not fall much or even go up;. e.g look at how well "value" shares( that had lagged during the big late 1990s bull market) did during the severe bear market that started in 2000.

Finally there are claims (e.g Ian Cowie in Sunday Times last week) that UK markets are the most undervalued compared with other major markets than they have been for 30 years. Problem with that is if it just means UK markets fall less fast if and when big market falls are for real.

Bioventix (LON:BVXP) slight miss on revenue when discounting the back dated royalty income. Siemens troponin project has yet to kick into gear. Can see next year sales going to be relatively low growth. The books closed in June and three months later presumably no pick up in Troponin sales otherwise they would (?) have mentioned it.

However its always been my understanding that they do not get royalties until many months down the line. BVXP tend to under-promise and dividend cannot be ignored either. Sold my shareholding this morning and perhaps will revisit this share again in Q2 2018 in hope that the share price has gone nowhere!

PCF (LON:PCF) Acquires Azule (Specialist finance for broadcast and media industries) for £5.6m Azule revenues were £3.1m and Pre-tax profit of £0.8m (25% margin) PCF says immediately enhance Group earnings. PCF will provide lower cost of money, and immediate boost to profitability. Would have been nice if they had issued a TU but will have to wait a while longer for that.

Following up from last Friday and the QUIZ profits warning. I'm getting tempted at these levels and indeed Paul indicated that below 70p it would start to look interesting. The profits warning is not good but hardly end of the world stuff.

The economy works on confidence, it can be talked up or down. For example, my holding in Tesco share has lost massive value but nothing has really changed at Tesco that I'm aware of. The constant doom and gloom about brexit is damaging. Change means opportunity.

I am with Julianh and the three companies mentioned in his posting Bioventix (LON:BVXP), XP Power (LON:XPP) and Sopheon (LON:SPE) get my vote.

Look forward to your thoughts Paul

All the best

Jonno

A few interesting small cap companies reporting today. Your thoughts would be much appreciated on:
* Bioventix (LON:BVXP) annual results - results significantly beating expectations but some caution on future growth. Troponin testing has not taken off yet - is this a bad sign or an opportunity for higher growth to come?
* XP Power (LON:XPP) trading update - good order intake and an inline forecast
* Sopheon (LON:SPE) trading update - results exceed expectations (again)
Your views on the recent sell off would be interesting. The start of a downward trend or a much needed correction?
And on the politics you are (sadly) completely right. Most people believe what they want to believe and protect their previous convictions with ad hominem attacks, name calling and strident assertions. In political debate there is not enough willingness to learn or to change our own opinions in the light of new information. If scientists worked like this we would still be riding around in horse driven carriages or banging the rocks together.
All the best to all of us on this bright and cold Monday morning

Amino Technologies (LON:AMO)

Looks to have issued a quite severe profit warning after assuring at H1 that it was confident with the heavy H2 weighting.

Reach (LON:RCH)

In line. Interested in any comments - plan is to cost cut and this seems to be going to target but is this enough with falling revenues.

Phil

Well timed intro. It is on my list for this morning to try to work out probabilities of various events over the next 12 months. All of which will affect share prices. As I see it... good brexit deal is likely to strengthen pound and therefore make our exports more expensive. Ftse100 would fall. Terrible brexit deal or no deal, pound will plummet, exports cheaper and Ftse100 will do well. Complications are... US employment is at all time high and economy is being stimulated like mad by Trump. Therefore they risk significant wage driven inflation. So their interest rates are almost certainly going to rise. If US rates rise then there is a tendency for all worldwide rates to rise. Rising rates are likely to hit stock prices. 2 scenarios lead to a downturn. So on balance it seems likely there is a slightly higher probability of markets falling from where we are. But looking at historic levels the Ftse100 is hardly expensive at current levels. So I imagine the damage might be short lived. I hit 10 years old in 1976 and I remember being worried about the general state of the economy and country. Strikes, power cuts, and general discord. A return to that is not something I would like to see.

My morning smallcap tweet: finnCap whacks Ackers.

French Connection (LON:FCCN), CAP XX (LON:CPX), Hydrodec (LON:HYR), Akers Biosciences Inc (LON:AKR), Sopheon (LON:SPE), Amino Technologies (LON:AMO)

French Connection (FCCN) confirms it is up for sale. I hold.
CAP-XX (CPX) Giant component co TDK will licence a family of CAP-XX's patents for supercapacitors. Joins Murata and AVX.
HydroDec Group (HYR) £10m placing and £2.8m open offer at >=75p post 100:1 consol. A 42% discount. Cash needed for working capital, R&D...
Akers Biosciences (AKR) finnCap gives the wobbly biomedical co 3 months notice and cracks the whip. finnCap will resign immediately unless whole Board of Directors attends an 'AIM Rules briefing' hosted by finnCap. Never seen that before. CEO resigns, replaced by non-board consultant. Agrees to pay $930,000 to US co Pulse Health to settle lawsuit. Will focus business on Particle Immuno-Filtration Assay.
Sopheon (SPE) expects FY to exceed market expectations from finnCap and Progressive.
Amino Technologies (AMO) warns FY adj pretax only $11.5m = £8.8m (£11.2m). Blames disappointing orders and and higher than expected component prices.

'Again, forget the politics, I'm talking about the economics.' [then goes on to talk about the politics, because of course they are inseperable from the economics, possibly turning the board into a sh*tshow for the rest of the day].

If we are going to talk sensibly about the possible economic effects of a Labour govt we should talk about what industries might benefit, too - which consumer industries, from rising wages and a more educated workforce? Constuction, given more council housing will be built, and Green industries? What buying opportunities might there be after an initial shock, when we realise that they are not actually Maoists and that, like Brexit and 2008, the sky isn't actually falling on our heads?

Paul nothing wrong with giving your views, if people don't like it, put up a balanced counter argument, or read it dismiss it and move on. However right now there is a trend to suppress peoples views and ability to express opinions freely, regardless of political leaning, debate is being driven away, I find this most alarming as it is eroding democracy, let's not do that here.

Morning Paul.

Interesting topic for discussion which will probably hijack any news the small cap world throws at us today so probably worthy of its own thread. I agree with the overall hypothesis that Brexit will probably be disruptive to share prices in the near term but one way or another will muddle through via an eventual compromise to be less of a cataclysm/panacea than its critics/advocates fear/hope.  Perversely, the potential it has to further split the Conservative party into an unelectable mess and lead to a majority Labour majority /SNP coalition is perhaps one of the most far reaching consequences from the Brexit process. Whether a Labour government would be as bad for business is some fear, in my view, would depend on the extent of their ability to legislate as they wish. The party itself seems to be being sanitised into a Corbyn aligned entity via the much discussed de-selection of “moderate” MPs although even with a large majority in the Commons (unlikely in my view) they’d still have to get their plans through a more reticent Lords.

One observation. Corbyn is largely a creation of the TU votes/active party membership that won him the leadership contest. Recent stats show the TU membership is now about 6.3m and less than 24% of the working population (and even less of the overall voting population).

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/712543/TU_membership_bulletin.pdf

One of the fears of business is presumably a radical resurgence in TU influence on government policy - yet their membership is a small minority of the overall population, and if you dig into the demographics predominantly older U.K. born I.e. exactly the profile that voted overwhelmingly for Brexit in the referendum (which Corbyn may now be trying to reverse). Gordian knots spring to mind ....

Back on business, French Connection (LON:FCCN) press release re. Press speculation.

https://www.investegate.co.uk/french-connection--fccn-/rns/response-to-press-speculation/201810080700052038D/

Gus.

A very readable article, Paul. Thanks. Speaking for myself, I'm not too worried about the impact of Brexit on our investments. Share prices shot up after the Brexit vote albeit after a short lived dip. Europe has a lot more to lose from a 'trade war' with the UK than we do as we're net importers.

A radical left wing government is a more serious concern to industry. I'm not sure I agree with the Naked Trader with regard to selling up everything. My action plan is to shift 80% of my investments in UK companies to the US (which is where I already keep 50% of my portfolio) because over the last 10 years the US indices have risen twice as fast as the FTSE 100, and I expect that differential to continue, but more importantly, a future left wing government in the UK will have no impact on the US economy.

Dear oh dear! Let's hope we have some better comments in the morning :-)

'I've come round to the view that most people (including me) believe what they want to believe. Therefore it's completely pointless discussing these issues'.

Unacceptable and sad you tarnish your work in this way sometimes: Remember that McDonnell and Corbyn are admirers of the Cultural Revolution in China, where millions were killed - including landlords being murdered, so that property could be given to the people