Good morning!

The market continues to suffer the blues, i.e. it's in the red with the FTSE down by more than 100 points this morning.

The Dow Jones lost 800 points yesterday (about 3%) and while it remains at an elevated level, those sorts of daily movements aren't good for an investor's nerves.

The two major issues in the US are

  1. their entire market is overvalued vs. historical norms, and
  2. the Fed wants interest rates to get back to a more normal range (but the President does not).

The situation in the UK is very different - in fact, it's pretty much the exact opposite. We don't have that problem of wild overvaluation, even though the Bank of England has shown no real ambition to get interest rates back to normal.

In other words, relative to interest rates, UK equities are amazingly cheap at the moment. The obvious explanation for this is Brexit uncertainty.

I've seen some of this first-hand, among friends. International investors are getting scared out of UK property and UK savings accounts by the doomsday predictions of a disorderly Brexit.

But for an economic contrarian who specialises in UK equities, it's a great time. I can buy into a market (the FTSE) that is hated by international investors at a level that has made no progress at all in 18 years.

Admittedly, its valuation was over-cooked in 2000, and that was true again in 2007. But it's much less likely to be overvalued on the third attempt, nearly twenty years later!

Don't get me wrong - I do expect turbulence around Brexit. The vote in Parliament next Tuesday could, in the words of a fellow investor, be "the point of maximum pessimism". It feels like the strange and unusual politics around Brexit have been building up to some kind of a crescendo - perhaps the final movement is about to begin.


With my customary macro intro out of the way, let take a look at some shares.


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