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

10th Oct '18 by Paul Scott

117 comments 19259 reads

Good morning, it's Paul here!

The first couple of sections were posted last night. Today's news follows below.

Brexit

I've tried to avoid commenting on this, as it's polarised, and political.

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, now that most people have formed fixed positions, largely based on defending how they voted in the Referendum (not in my case though). We'll just have to see what happens, and most people are talking rubbish, in my view.

Looking through the politics, and engaging our common sense, what is most likely to happen? The bottom line for me, is that the UK is a large net importer of physical goods from the EU. Therefore it is ridiculous to suggest that the EU will try to impede trade. One way or another, trade will continue very much as before, possibly with some short term disruption.

As regards services - companies in the EU don't use London for their financial services out of the goodness of their hearts. They use London because it's competitive for their needs. The feared exodus of jobs from London, in preparation for Brexit, simply hasn't happened, or only in tiny numbers.

Last week, I had drinks with some European bankers, who told me that German & Dutch clients are terrified about losing easy access to the UK. Some are setting up UK subsidiaries as a cautionary measure. That's the mirror image of scare stories going the other way - of UK companies setting up a nameplate subsidiary in Dublin, or Frankfurt, just to be on the safe side.

Bottom line - it's all going to be fine. All these issues will get ironed out, probably quite soon, as it's in everybody's interests to reach agreement. Therefore, I am coming round to the view that Brexit is probably far less of an issue that I previously thought. It could even be an opportunity to pick up some bargains maybe?

As usual, this is just my personal opinion, and please feel free to agree or disagree. I think we'd all prefer that the comments section does not fill up with a load of strident, partisan, political comments - that's best done on Twitter!

Corbyn Government risk to share prices

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Fangorn

9th Oct '18

"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). "

Oh dear oh dear

What makes you think you'd have a vote in 5 years after they were in power in the first instance tone? They'd end elections,and voting...as they did in Venezuela!

"short-term disruption followed by long-term relative decline(like it was before we joined in the early 70's)"

Short term decline that was stopped by Thatcher supply side reforms you'll find.
Eu hasn't helped a jot.

Not surprised you're a defeatist who has no faith in Britain, or the British people.

Thank god there are less of you and more optimist hard working people who want to re-engage with the ROTW. EU is in decline, it is eating itself from within..and will implode.

How you can sanction a foreign power telling us how to live our lives beggars belief.

Oh you're sporting a #FBPE shitetag

" Terry #FBPE @dinocras51
Manage my own retirement portfolios for fun"

You're okay, just as Bob "Up Yours" Geldof is...
(Disclosure - so am I- I retired at 35 after a career in City. I'm not as ancient as you however!)

"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."

Agree only because certain TORY MPS didn't do as they've been bloody told.
Eg Greivance , Sourpuss, Cruella de vil(All Remoaners note) and May's inner cabinet!

We voted LEAVE but certain sections of Conservative Govt(and Civil service) have done their best to undermine and subvert our vote.

"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"

There's the typical pretentious LEAVE voters didnt know what we voted for!
Did Remainers realise that Status quo wasnt on the ballot??? No suspect not!

"'No deal' as an option wasn't even mentioned during the referendum campaign but now looks like a serious possibility."

No such thing as no deal.
Now you're being dishonest as most LEAVERS fully aware that LEAVE meant
1) Leave the Single Mkt
2) Leave the Customs Union
And that WTO or Canada derivation were likely outcomes.
WTO isnt a no deal scenario either fyi.

I've been waiting since Maastricht shambles to have a say on our membership of EU and there was no way Project Fear,or some bus sign was going to change how I was going to vote. You know, that democracy you're all for that denied us a say for 41 years on the most important development in our nations history.

" A final say on the deal would give any deal legitimacy, or clearly show it's not what the people wanted"

Ah dishonestly pushing the second referendum angle I see Terry

FYI I Agree we should have a second referendum on the deal terms

We should have a say on:
a) Leaving with a deal(The one May gets us)
b) Leaving with NO Deal on WTO

And no, REMAIN shouldn't be a third option, as we've already decided that!!!

Would that fulfil your

"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"

Pretty sure it doesn't as you don't care about democracy , you're just pissed you didn't get your way!!!

p.s If we follow Chequers we're essentially in the Customs Union fyi(#Common Rule Book) and given May's other concessions, we'd likely be in the Single Market too....without any vote.

So you'd be incorrect on both accounts.

Missed you on twitter. You disappeared for a while. NigelPm and I were worried.

-4

@Davistovest

"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 time to resolve.

Insolvable if people are unable to accept a democratic vote result as Remoaners clearly aren't. They've been subverting the outcome since June 2016. Project Fear is 24/7 for last 28 months.
Terry whinge alot has been doing similar on twitter for last 2 years plus. @Dinocras51
Go check out his twitter feed - says it all.

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.

I've only been back in UK for 10yrs after a similar stretch in Asia. What a gloriously energetic and refreshing place- full of can do people, the hustle n bustle.No defeatists, no whiners, no feckless layabouts.

I did however grow up in Africa so intrigued....

RSA? Kenya?

Suspect if Corbyns commies get in you'd be best staying put!

Absoluely concur.

I'm all about "respecting the vote result"

If we vote that way so be it

Can't stand losers who wont accept such.

If we don't, democracy falls.And who knows where that leads

-1

pka

"Much Marxist analysis is insightful and it seems highly unlikely that society couldn't be better organised than it is today, to the advantage of both rich and poor. Have you actually read any Marx?"

I haven't read any Marx, but my parents suffered terribly for 10 years under the practice of Marxism in Communist Hungary before they managed to escape during the Hungarian Revolution of 1956. Marxist analysis might be insightful, but it does not take account of human nature and it has never worked in practice and has led to great poverty and totalitarian dictatorships in countries that have been subjected to Marxist governments.

AnonymousUser252054

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

cig

10th Oct '18

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.

JollyBiologist

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)? Or should the result be allowed to stand in perpetuity because it was, as Timarr says, the will of the people...?

"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!!!!

mojomogoz

The common fallacy of Marxists through to progressives is that they think they can both see and manage the future. It is a huge intellectual conceit that reality proves wrong repeatedly (yes, I have read Marx).

Socialism is dead as socialism has won. We have new problems and they cannot be fixed by Corbyn's version of romantic populism with an undertone of we will punish the rich. Perversely, they will not help the real poor, those in poverty conditions. Class warriors New Old Labour are are a chimera...they are there for the professional middle classes and public sector workers. They wont really do much for the struggling of Castlemilk (blighted Glasgow estate) etc

I say this as someone who considers themselves left of centre and is a member of the Labour Party. But I'm more a fan of Adam Smith than the super clever Marx (said without irony...but the Karl Popper take down of him in The Open Society and its Enemies is even cleverer!). Smith is rather misrepresented in modern economic discussions. He is much more in tune with the biting reality that most people face and which is how I define my left of centre....

The modern proletarian capitalist democracy is the best solution the world has seen to governance. Not by design but by iteration, with lots of mistakes and crises along the way but it survives and adapts rather than collapses in on its self. Darn that's impressive in a historic sense. This collective genius is never planned out like Marxists/Socialists believe it can be...and if they are given a chance to do it they will throw the 'natural' system out of balance and remove its ability to rebalance itself. However, the key problem is that most people will 'economically fail' in this sort of society so our central problem is to organise ourselves in a way that means people do not feel this relative failure painful and degrading...

This is where we are wrong today. But mugging the rich (in language as well as assets) to give to the many is bitterness and self-harm. I'm not against some tax rises at all but it is a romantic fallacy based in a different time to believe that redistribution is the answer. The answers lie more with Adam Smith and a modern day version of 'the commons' than ideologues like Marx.

Broad based asset wealth through housing has allowed lots of average people to feel like economic winners for the last 30+ years. That illusion is over and our problems will continue to become more acutely visible as a result. The threat comes from outwith...its China the end of the Western Enlightenment based vision of the world. Things could get very bad for us if we don't play this right but that's another discussion...

All IMO of course!

(Great thread altogether by the way)

PS excuse the self-promo...but I wrote links below and its sort of related to this thread...if you have sympathy with what I say above maybe this will be of interest...

On dangers of normative progressive thinking:
https://medium.com/@mojomogoz/the-revolution-will-not-be-linearly-extrapolated-810b44722759

On the trap of house prices and how leftist/progressives are not honest on it:

https://medium.com/@mojomogoz/...

I write a column for a new economics mag (heterodox rather than orthodox) that I then post up on Medium and this is one from last year. My objective is to make people think and question their biases and assumptions.

Ciao

Glorenfeld

Interesting post and not a single all-caps word within it!

So you agree that democracy is a process, not an all or nothing irrevocable one-off decision? Given the implications of leaving the EU for, let's say, 41 years, wouldn't it be appropriate just to double-check that the electorate still felt it was a good idea? Wouldn't that be truly democratic? Or are you suggesting that the people will somehow betray the people? If it's clearly the right thing to do, what are you worried about?

snodgrasse

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.

PhilH

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.

Blissgull

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.

peterg

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

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.

This comment is under review

"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.

Vsihv

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.

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

Brexit

Corbyn Government risk to share prices

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Paul Scott

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