Small Cap Value Report (Tues 7 April 2020) - placeholder
Good morning, it's Paul here, with the placeholder to start off with at 7am. It's anybody's guess what happens next, in this bizarre new world we live in.
Probably like most people, I'm trying to figure out what the hell happens next? When not sure, I just try to do a base case, then an upside & a downside scenario.
In my head, it goes something like this;
- Base case - short term economic shutdown, the like of which has never been seen before. Unknown outcome, but recovery at some point (unknown timing).
- Downside scenario - CV19 might recur, or linger, or worsen, leading to unknown economic disaster
- Upside scenario - CV19 peaks, then recedes, and economic activity resumes in the next few weeks.
We need to know which of the above it will be, in order to value shares.
Therefore, it's just guesswork right now.
Personally, I remember thinking to myself in Torremolinos in early Feb 2020, that this looked really bad, and hedging, only to be almost wiped out by a whippy movement in the indices. Since then, it gives me no pleasure whatsoever to say that my hedges protected me very well, and have provided lots of fresh cash to buy beaten down small and mid caps. It feels sick to talk like this. We lost John's mum yesterday, when the hospital turned off her life support, as this evil virus took over her body. We must have been one of the first households in London to be taken over by CV19. We battled it for 3 weeks, and sadly we lost Madeleine yesterday. I am just numb with it all. But we have to carry on.
What to look at next?
Housebuilders - generally really good balance sheets. Worried that I missed the +12% rise yesterday?
REITS - I could be wrong, but have gone big in Newriver Reit (LON:NRR) and small in Hammerson (LON:HMSO) - I think both should survive covenants, but we'll see
Retailers - could be a disaster, but I couldn't resist MKS at 100p. Says it has lots of liquidity.
That's probably it for now. I'm so tempted with Wetherspoons, Greggs, and others. Have bought Dunelm. I see this as an opportunity to move up to some better quality shares.
Fundraisings
Well done to WH Smith, getting a placing away.
Many, even most, businesses need to raise money. Do it NOW!
He who hesitates, is lost.
Disclaimer
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78 comments
I am just about out of mental bandwidth for the day. ( I am a very small and very remote part of the battle against Covid following a 'project' I picked up recently) - as a back office Jonny I don't expect any plaudits but aside from my efforts to ensure that I can support the clinicians rather than be a burden - I just find myself exhausted when I consider the extra mile(s) some of 'my' clinicians are putting in to this effort.
I didn't though want the to let the day go without adding my voice to the commiserations offered to Paul and John at this time,
I'm not sure if Paul always reads the later comments on these posts, but I did just want to offer something that might raise a smile in these troubled times,
I am particularly moved Paul by your loss given that I have 'known' you (digitally) for probably close to two decades. We used to regularly get each other chastised on the old Motley Fool bulletin boards by one TMFGrow for our "late night exchanges". (Wouldn't it be good to know what George is doing these days?)
I think we probably met at Mello (when there was still a restaurant called Mello) about 15 years ago, although that evening was particularly hazy!!
I have particularly though enjoyed our most recent meet ups and out new ritual; which goes something like this :
I am mourning the lost opportunity to meet up again in May - but perhaps when the restrictions are lifted we should choose the other end of the day and meet up for breakfast!
Anyway, sorry to be so irreverent at this time, but I just wanted to reflect how well you are loved and perhaps give you a little chuckle in these trying times.
Best,
Tony
(AKAGromley)
Paul - sorry for your loss.
So sorry to hear about your loss, my thoughts go out to you both, sadly i feel that so many of us will be affected by this terrible virus.
Paul, sorry for your, John's and John's family's loss.
Hi Paul. I concur with comment below. So sorry for your loss. If only humans could hibernate! ?Take care. Simon
Take the rest of the week off, only do a report if, and only if, it is of benefit to you, forget about us and think of yourself for a while until you feel you want to do something.
Tracsis (LON:TRCS)
I am a holder of this stock. It has a number of interests in transport based systems, and has been hit by the drop in train traffic, and event cancellations (it provides man power and metrics to manage event traffic).
However, for those interested it does have as one of its investments an interest in Vivacity Labs, which provides traffic data info to local authorities, to enable them to measure policies against data outputs.
My thanks to the Tracsis board on London South East (one of the few areas of that website to find a vaguely sane conversation) where I saw some of the links below. Interestingly Vivacity adapted some of their pedestrian metrics to judge social distancing (based on anonymous data).
Obviously, this is not to say this makes it a great investment, but it does touch on appropriate data capture relevance, and could be something of interest for the future.
https://www.linkedin.com/pulse/social-distancing-data-from-oxford-peter-mildon/
https://vivacitylabs.com/
Hey Paul, I haven't read the comments but I am sure all will be sympathetic, I just want to say 'hey mate, take some time off, you shouldn't be writing today, take some time out'.
Look after yourself.
Per CityAM:
Investor demand for UK government bonds was its highest for three years today as Britain sold £3.25bn worth of debt to help fund its unprecedented coronavirus support programmes.
Buyers bid 3.05 times the £3.25bn available of the 0.125 per cent return three-year Gilt (UK government bond). It sold at an average yield of 0.204 per cent, the UK’s Debt Management Office said today.
Would you lend money for 3 years at 0.204% ?
Given that the BoE is buying up the secondary market (again) the life companies and pension funds etc. don't have much choice.
And of course the environment has reverted to return "of" capital rather than return "on".
Is 3 years a very short time to have to refinance that debt ? I would have thought that Govt debt would be sold at much longer dates to allow the possibility of inflation (greater now than BV) to make the refinancing cheaper. ok will cost more now but not that much & surely worth it. Perhaps its a mix point ?
"Would you lend money for 3 years at 0.204% ?"
Yes I would do and a small part of my portfolio is doing exactly that. Your question sounds as though you think the idea is ridiculous. Why? What other asset class is so obviously a better choice that it negates any need to own short dated gilts?
It can't be cash because that 0.204% is the market's best guess for the profile of cash interest rates over the next 3 years plus a term premium. Bear in mind that interest rates can be negative and the chance of that happening over the next 3 years is non-zero. Does negative interest on your cash make 0.204% sound more appealing?
Interest rates had gone negative in several countries before any issues associated with coronavirus. Now they are even more likely, and even more likely to be passed on by the banks to their depositors (don't shoot me I'm only the messenger).
Deepest condolences Paul to you, John, his family and the household. Stay safe everyone.
In terms of the big picture, a lot of comment about the state of the market seems to take little account so far of the time lag in when different countries will exit the pandemic and how long it will take their economy to recover thereafter. e.g. while China is exiting the pandemic now, presumably the proportion of their economy that depends on exports to the West will not recover until the economies of the West recover.
So, I’m pondering that it may be good to avoid export dominated economies for now even if the pandemic is not hitting them hard in terms of deaths. e.g. Germany
Looking more at specific stocks I’m struck by the contrast between internet retailers who are nimble enough to keep going, e.g. Gear4Music, and those that have shut their internet operations e.g. Next. It is very hard to know in advance which are going to be the nimble companies (nimble may be the wrong term, perhaps companies that can “find a way to work” would be better) but when evidence appears to show they are in RNSs etc. then those may be the best opportunities rather than being too influenced by what sector the company is in.
Hi Paul
I am sorry to hear of your loss. My thoughts are with you. Amazed how you keep things together and still "put pen to paper". Thank you.
This, in a completely different and less significant way, has been an emotional roller coaster for me, not ever having been through it before.
My anxiety and stress got the better of me at 5 in the morning on 19th March and I sold a large proportion of my holdings to go to 67% cash.
So who says you can't pick bottoms? I did perfectly: trouble is I sold at the current bottom!
This has "cost" me a chunk of money. It was a cost (at the moment) but it was IMO worth it for my mental well being and I have certainly learnt from it for the next time, assuming there is a next time before I give up investing for what ever reason.
So now I am struggling to contain my urge to make another beginner mistake and invest at the top of a dead cat bounce.
Valuations are still absurd for a world where to me a severe recession is all but inevitable.
I am currently working on a plan to put a a bit of money back in (perhaps 10%/15% of my cash) to dampen the FOMO emotions. I will apply tight but manual stop losses.
I did retain (increase since I sold the other stocks)
Anglo Asian Mining (LON:AAZ) +26%
Avon Rubber (LON:AVON) +20.3%
Bioventix (LON:BVXP) +42.2%
Ergomed (LON:ERGO) +25.7
Rockrose Energy (LON:RRE) +47.8%
Sylvania Platinum (LON:SLP) +31.3%
£PHAU +11.4%
So not all has been "lost".
I would be interested to hear what others are doing in a broad sense rather than a specific stocks sense.
Thank you.
For what it's worth, and coming from a position of currently being 100% cash, I'm trying very, VERY hard to sit on my hands and resist temptation. I've got a list of 18 stocks I want to buy (mostly income stocks as I figure this is a rare chance to buy cheep) and am working really hard to do nothing. I have almost cracked several times. The key things I'm using as cues to sit tight are:
1) looking at the live business feeds of several news websites seems incredible - 'huge' gains on days when we get nothing but bad news. Seems bonkers to me
2) FTSE hasn't broken through resistance at about 5800, although it is testing it is again today. If it does, I might reconsider.
3) Exponential moving averages are still very much in bear mode.
4) There is still huge volatility, which (I'm told) tends to indicate a bear market)
5) If I do 'miss it', I won't miss ALL of it. Plus it would signal things getting back to the sort of environment where my usual tried and tested rules for buying and selling are applicable - so why would I be worried about that?
On the flip side, I'm wondering if 25/3/20 represented what William O'Neal called a follow through day marking the start of the upswing.
Overall, huge fear of missing out going on. What's that old saying? "The markets can stay irrational longer than you can remain solvent". Maybe in this case it is "the markets can stay irrational longer than you can hold your nerve"
I'm in the same boat.
90% in cash and spend about an hour each day watching my portfolio-to-be add yet more % points. However, I suspect that despite being a relative novice at this I'm doing the right thing when I see:
IATA lobbies gov't with announcement that airlines cannot afford to give out refunds, and Jet2 cancels all holidays well into June.
£DTG rises by 9%.
I don't understand, and if you don't see the play then there isn't one (for you). Will sit on the sidelines for a bit longer.
Sylvania platinum will 60p plus soon
Cash rich and platinum on the up
is 60p unrealistic?
what are your thoughts on sylvania platinum
I think there a good thing?
Adding my condolences to Paul and his friend. Personally I find focusing on shares is a useful distraction at the moment, but we shouldn't lose sight of the bigger picture.
On a rare stock related topic Codemasters Group (LON:CDM) reported a trading update this morning:
https://www.stockopedia.com/sh...
The COVID-19 pandemic has affected the sales mix, particularly in the last few weeks of the financial year. The shift to digital delivery has accelerated greatly, which has contributed to higher margins, with traditional retail and box sales impacted, exacerbated by the closure of the majority of game retailers.
There's no way of knowing if the shift is permanent but I'd guess some of it will stick, which is another blow for traditional retail. I think you have to be very brave to invest there at the moment, but I guess if you get it right you will make an awful lot of money.
For obvious reasons online gaming is a bright spot at present. Well, actually everything is a bright spot at the moment but it's hard to see how markets can defy gravity for too long - at some point we'll start to see some proper recalibration of winners and losers. In the meantime a lot of companies were very oversold - the issue now is whether excessive exuberance pushes them too high, given we have lots of bad news to come.
timarr
timarr-
I am struggling with your statement that "a lot of companies were very oversold". Compared to what? what is the reference point? Is it the value before the market collapse on or about 18 Feb?
Let's take £NXT as an example. This share was always considered a top quality share, with excellent management and great metrics. In just over a month, on 23 Mar, the sp dropped 50%!
Intuitively, people might say this is very oversold. But is it? If you think about the new world it will be facing and the impact of COVID-19 that is still unfolding, I can think of several scenarios that tells me it might not be oversold.
I think some were oversold and that's why they have bounced back strongly in the last 2 weeks. Spirent Communications (LON:SPT) fell from 250p to 150p and now is back up to 250p again. Avon Rubber (LON:AVON) is similar. Even a company such as EMIS (LON:EMIS) which could benefit was sold off, Creightons (LON:CRL) also, Kape Technologies (LON:KAPE) is another.
But not everything floats when the time rises.
I am struggling with your statement that "a lot of companies were very oversold". Compared to what? what is the reference point? Is it the value before the market collapse on or about 18 Feb?
Hi Ramridge
In absolute terms, not relative, I'm fairly confident that some of the prices we've seen will turn out to be valuing future earnings at exceedingly low levels. However, no statements, judgements or predictions about the future can be ever treated as 100% certain - they are always probabalistic statements, not guarantees.
Phlip Tetlock's book Superforecasters is particularly sharp on this in the context of all sorts of forecasters including financial ones as most turn out to have no skill at forecasting at all, but the popular ones are very good at communicating their confidence in themselves.
So, in rough probabalistic terms I think it more likely that the new world we'll be facing will look a lot like the old and, even if it isn't, markets will recover through their normal processes of creative destructionism. However, I'm not 100% confident about that - which is why I'll retain a slug of gold and some cash in my accounts for some time to come.
In some areas - and retail is one - I have very little confidence that the future will look like the past. Next (LON:NXT) is a good company and will probably (that word again) survive in some form - but what they will look like and how you put a price on it I don't know.
But in other areas I am significantly more confident that some of the lows weren't rationally priced. Housebuilders, for instance - people will still need homes to live in post-Covid-19. Berkeley Group (LON:BKG) has a billion pounds on its balance sheet, is guaranteed to pay dividends and could survive for years on a lockdown. On balance, I think £31 a share will turn out to be very oversold. I think buying Berkeley Group (LON:BKG) at anything around that price would have been a good decision - even if, in retrospect, it turns out to be a wrong one.
Even in areas where companies have been patently unaffected - spreadbetting for instance. Cmc Markets (LON:CMCX), now at over £2 a share could have been purchased at under £1.4 less than a month ago even though we absolutely know that spreadbetting companies thrive on volatility.
When a selldown is indiscriminate then it indicates extreme risk aversion and means that the genuinely risky get marked down with the not so risky. In hindsight I suspect (nearly) everything that survives will turn out to have been oversold, but I'm not so brave as to throw my money at that suspicion.
But as for thinking about the new world beyond Covid-19 - yes, I do that a lot.
timarr
Hi timarr -
You have made a lot of thought-provoking comments that had/ has my head buzzing.
Just a few random thoughts in no particular order of importance.
Following the first downturn in February, I took the view that it is futile to look ahead more than a few days or weeks. After liquidating all my holdings into cash, I started looking for potential low hanging fruits. As it turned out, I got interested in researching healthcare companies making equipment that would directly assist in combating C-virus. Got lucky, bought shares early in Novacyt Sa (LON:NCYT) and Byotrol (LON:BYOT) and made enough profit to wipe out all my portfolio losses year to date.
Looking ahead, I am now focusing on the earnings quality of shares. My base reference point is their earnings quality pre C-virus and then I ask myself the following questions
1. in the medium term, will this share's earnings quality be better or at the very least the same as before?
2. or has it been permanently damaged?
3. or is the positive impact just a flash in the pan and the earnings power will steadily decline?
The stock market is at the moment a complex adaptive system (CAS) on steroids. The funnel of doubt is very wide.
best.
Paul, I am so sorry for your loss, I can't believe you're still writing the SCVR! Thinking of you. Take it easy.
As for the markets, it seems (so far) John Rosier called it right (so far) as outlined in the piworld webinar last week.
This week, piworld have another webinar, to help investors navigate these difficult markets. We'll be speaking to Stephen English, pre register for Thursday 9th April at 1pm, through the piworld events page. Webinar: A plague on all our Houses - How to repair some of the damage. At the end of the webinar there will be a chance to ask your questions.
Stephen is Fund Manager of the Blankstone Sington AIM portfolio. He's given various presentations at Mello and an interview with piworld last year. He's a great speaker.
Cheers Tamzin. I listened to Johns webinar today and found it really useful. Looking forward to the next one.
For the bears out there, head of global equity strategy at J.P. Morgan, worth a read, not least the global economy has large pockets of lockdown, so for global companies it's not just your local consumer.
https://www.marketwatch.com/story/investors-should-prepare-for-a-coronavirus-induced-vicious-spiral-more-than-twice-as-bad-as-the-financial-crisis-says-jp-morgan-2020-04-06?mod=MW_section_top_stories
And of course, the next article is '26th was the low, buy' article - takes two to make a market of course.
One sector I am interested in is the gambling sector. People like to gamble and always have since the beginning. I do....mainly on shares. It is just a business after all and significant online...the Plus results today highlights that people stuck at home need an outlet. I started buying William Hill (WMH) in the 30's....it seems an age ago but in reality only a couple of weeks....currently at 93p as I write so a huge winner. A takeover offer by the "betfred" Done brothers seems likely to me. My largest holding is in GAN and this has recovered very strongly from the lows.....just ahead of minnow WEB which has not. I think when the lockdown ends, we will see a huge explosion as people pour into racecourses, football, casinos and so on .....and with sports betting inevitable in all of the USA , this is an area well worth exploring with the potential for huge profits. Funnily enough, I would never ever buy shares in a cigarette manufacturer ...but I am relaxed about gambling stocks. I suppose we all have our "not going there" lines!
I suspect one of the tentative ways out of this lockdown will be sports events being televised and played behind closed doors for contractual and entertainment reasons. This would likely make gambling companies some of the early rebounders.
John,
I am very sorry indeed to hear of the loss of Madeline ..and give you my very best wishes , alongside John of course.
I hope you all at some point can find the peace you deserve and require to see this through
Alpha FX announced a placing for £20m at 680p
https://www.stockomendation.com/rns/27644211
Speaking as an expert in throwing away money, I can confirm that it does generate feelings, but never for me a feeling of abundance.
Like everything in life it has some context. I include neither to support nor condemn : just to contextualise. The whole point of the discussions here is that they are informed
Markets are complex ecosystems with a variety of species with differing specialisations in the food chain. There is no right or wrong , no axiomatic way to be despite the misconception that investors are somehow more evolved than traders. Better to celebrate the differences and opportunities than to continually view the world as one who only has a hammer. Possessing only knowledge of how to use a hammer does becomes frustrating when conditions present mainly screws.
Having spent years on bulletin boards prior to joining Stocko in 2013, I found the atmosphere and quality of discussion on Stocko a real breath of fresh air. That has deteriorated of late , maybe owing to market conditions.
Trouble is, personal attacks and fractious outbursts do tend to redefine the overall atmosphere so in that spirit, I'll hang up my keyboard for now
hi dscollard -
couldn't agree more. I was sitting in my back garden thinking "what is better use of my time, answering a poster who vents his spleen and accuses minervini of being a d*ckhead who spews claptrap, or watching Feymnan's amazing lecture on the laws of gravity?"
only one winner, really.
couldn't agree more. I was sitting in my back garden thinking "what is better use of my time, answering a poster who vents his spleen and accuses minervini of being a d*ckhead who spews claptrap, or watching Feymnan's amazing lecture on the laws of gravity?"
I think maybe your time would be better spent reading some behavioural science books. I'd start with Richard Thaler's excellent "Misbehaving". Your short post had so many biases in it it was probably enough for a PhD thesis - Fear Of Missing Out, confirmation bias etc. And why do you feel the need to follow anyone? You've been around since way back in TMF days and the fact you've still not found your own investment approach and follow some Guru is a little bit worrying and sad to be honest.
Si
Paul, I would just like to echo the sentiments already given on here and say sorry for your loss. I have appreciated your honest and clear writing about the wider economy in recent weeks and admire your ability to keep going through the illness and sadness you have been experiencing recently. My best wishes to you and to John.
I'm in the camp of markets have lost the plot, S&P up 7% yesterday and futures up 2.7% now & all with Jamie Dimon saying buckle down! CNN has a good premarket view here for those interested:
https://money.cnn.com/data/premarket/
Company states no C19 impact, ignoring a recession impact - Big bounce
Company states big impact, no revenue for ages and we are going to take on a lot of debt, ignoring a recession impact - a bounce non the less.
Company states our market is toast & in discussions for massive debt & we might survive - gererously priced for recovery.
A fairly unique situation where lots companies are trading 20% below their all time peak, at about the same price as dec 2019 (only 5 months ago!!!) , when they have practically zero revenue, taking on huge debt, no guarantee of the outcome & about to go into a recession. maybe this time it is different, but when did the market look ahead to this extend and discount all this bad news to be just 20%.
Maybe 3,4,5 trillion will make it all ok, who knows.
Sincere commiserations to you both. Take solace in the good done, and left here.
Deepest sympathy to you and John.
In bear markets with bottoming process and wild rallies- one thinking is to go for index funds rather than individual stocks as a risk management strategy.
My query for the experienced folks here is-
Do I buy directly from the fund manager ( I am thinking of Vanguard US) or via IG/Interactive investor platform? One downside is that there is added charge by the platform but is it mitigated by being able to manage everything at one site.
Thank you.
I tend to buy index trackers/multi-asset funds through Interactive investor (I have some Vanguard lifestrategy for example). I find it easier to manage in one place but you always have to be mindful of FSCS limits in the event of broker issues (I know the assets are supposed to be ringfenced etc etc but who knows).
Thank you for your insight.
Really sorry to hear of your & John's loss Paul :(
Good on you for turning up to write this report today!
Really sorry to hear your friend's mum passed away Paul.
Whats the old truth? You cannot time the market! Lets keep reminding ourselves of that.
Some will always get a big gain or loss from an individual situation. As Paul implies, these can go either way.
I tend to spread my 'bets' over time, but am always willing to look at something which screams value at some opportune time, in that general context. That will include mixing in some funds investment as well as individual stocks.
I have the occasional impulse. For example I bought some BP.
I have no idea really what will work in the current situation, but I will trickling in my ISA allowance over the next month or so.
Paul. Sorry to hear about your close friend's Mum. This is an awful time for many people.
I'm so very sorry for the loss of John's Mum. R.I.P.
Hi Paul,
Please don't feel you have to write anything else today for our benefit, and just do what you need to do (which may be this, of course).
You've been remarkable throughout this crisis with your constant honesty, transparency and total lack of ego or pretence that you know what's coming next, all the while dealing with a huge amount personally.
Look after yourself and John.
Chris
Very well put, Chris. I think most of us agree wholeheartedly.
Jon
For Minervini followers, he is still of the view that this is a technical rally and we have not tested the bottom yet. Here is his tweet of yesterday
" Mark Minervini@markminervini·10h It's good to hear the talking heads disbelieve this rally and call for a test of the lows. While history suggests a 70% probability of a retest, with so many people pointing it out, it lessens the probability and will likely fuel a a continued rally before a significant pullback. "
Surely if people follow this bloke they'll already watch his Twitter feed? Meanwhile, why do the rest of us need to read this overconfident clap-trap? Paul has got it spot on. There is absolutely no way of knowing where we go from here, so anyone speaking with such confidence must be treated with extreme suspicion.
All the best, Si
How ghastly was throwing money out of the car. Utterly repugnant. So awful.
How ghastly was throwing money out of the car. Utterly repugnant. So awful.
Paul,
Firstly, can I pass on my condolences for your friend's Mum passing away.
Secondly, as you were responding to my post, I don't follow your comment? I'd like it to be known I have never thrown money out of a car.
All the best, Si
Minervini told people to throw $100 out of the car.
Minervini told people to throw $100 out of the car.
Oh. Dare I ask why? Not that it matters I guess as I'd already applied my "Duck Law" to establish the type of person he may be i.e. if it talks like a d***head and acts like a d***head - It's a d***head!
All the best, Si
To "declare your life of abundance" and change your thinking.
http://www.minervini.com/blog/index.php/blog/mark_minervinis_100_challenge_throw_100_out_the_windowdo_it_now_and_transfo
Si please stop, in recognition of todays sad news, lets try and keep at least todays thread respectful
Si please stop, in recognition of todays sad news, lets try and keep at least todays thread respectful
Stop what? I've made my thoughts known on an individual that does not post here, that is all. Of course, it is sad news and I passed on my condolences to Paul. However, Paul chose to put a blog up for us to exchange opinions even though under the circumstances no-one would have minded if he hadn't. BTW Other people were still posting long after I stopped yesterday.
Please don't try to censor me. I may not suffer from the false consensus effect in the same way as others, and just ignore thumbs etc. but please don't make me out to be some kind of troll.
Si
For Minervini followers, he is still of the view that this is a technical rally and we have not tested the bottom yet. Here is his tweet of yesterday
" Mark Minervini@markminervini·10h It's good to hear the talking heads disbelieve this rally and call for a test of the lows. While history suggests a 70% probability of a retest, with so many people pointing it out, it lessens the probability and will likely fuel a a continued rally before a significant pullback. "I bought selective shares yesterday and the day before, with the view to selling them at the first sign of a pullback. The market is presenting good trading opportunities. IMO, right now a long term view of the stock market extends to tomorrow. Beyond that is a world for gamblers, not investors.
Perhaps in the great scheme of things £0.5 billion isn't that much, but I wonder if the current crisis might just prompt the powers that be to finally find a way to release the funds from this mysterious charity that has been fascinating nerdy trust fundraisers like me for years.
It was originally set up in 1928 with the idea that it would accumulate enough funds to pay of the national debt following the First World War. Perhaps after this whole thing has settled down, the funds could be used to pay off some of the national debt caused by the Covid-19 crisis.
https://en.wikipedia.org/wiki/The_National_Fund
https://www.civilsociety.co.uk/voices/david-ainsworth-the-strange-story-of-the-national-fund.html
Sorry for your loss Paul, and many thanks for your resilience during these trying times. Your insights are always worth reading.
You are doing remarkably under your circumstances and you continuing on is greatly appreciated.
You sometimes get the impression from the way the news is presented that normally, no one dies and that suddenly we have this pandemic and suddenly people are dying in large numbers.
It is interesting to look at this website which tries to put the numbers in context. This shows the number of deaths with COVID compared with total deaths this year and last and deaths from flu and other causes of pneumonia.
http://inproportion2.talkigy.com/
This is a website put together by one individual and the numbers have not been verified or peer reviewed but the general picture is thought provoking.
That is interesting, and I also think that the government may have over reacted. However, the other side of the argument is that although the number of deaths from cover-19 is currently small it is growing exponentially and without the lockdown would continue to do so. For example, if it doubles every week 3,443 deaths becomes 27,544 deaths in 3 weeks time--overtaking the number from seasonal flu. And 3 weeks after that it becomes 220,352. Of course, when sufficiently many people have had it, it would stop growing exponentially.
Also what about other patients who can't get treated and have operations now? Are those flu deaths just the ones in hospital, because the CV-19 ones are? Hospitals are getting overwhelmed, reports are they have never been so busy. Flu has had a head start as well, unless the number fall in the next month CV-19 will overtake flu/pneumonia deaths. It is already over 5,300 and that is 5th April's figures, by now it is probably over 6,000, if you add on the ones who die at home or in care homes the figures will be worse. I see they added pneumonia in as well, the average deaths from flu is around 17,000 per year in the UK. Last winter I believe it was much lower than that. From February 2019 "In total, 2,182 people in the UK have had to be admitted to an intensive care unit (ICU) or high-dependency unit (HDU) because of flu since the start of October. " Currently there are over 1,500 in ICU from CV-19, I don't have any figures
for HDU. So 2,182 in a period of over 4 months and that was much higher than the previous year which only had "That is more than the 2,045 who needed such care in the same period last year", 2018/2019 was the highest year for flu hospital admissions since 2009.
Hi Bouvier,
Very interesting website http://inproportion2.talkigy.com/
And the below official weekly death rate figures make for interesting reading & makes the point that usual death rates are less. The data does lag but this is key to watch to see if we have an in proportion response.
https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/deaths/bulletins/deathsregisteredweeklyinenglandandwalesprovisional/weekending20march2020#overall-deaths-and-the-coronavirus-covid-19
I am still neutral on what is right and wrong. I am just glad that I do not have to make some of the difficult decisions. And hearing of a death in the household in which Paul stays reminds us how awful this thing can be.
However, it is important that information is put out there to help those of us who are interested to understand how death rates and hospital omissions compare with more normal times. The media tends to completely misuse statistics to create sensationalised headlines.
And just as an aside, in the last day I have seen a TV advert from Save the Children asking for donations of just a few pounds to pay for antibiotics that would save a child's life in the third world .
There was an article on the BBC a while ago that said Covid-19 cases that reach intensive care have 50% mortality rate. This was relevant because they were discussing whether resources should be directed away from individuals where the disease had reached this level of severity. Obviously Boris Johnson will have the very best care, and will be in the ICU as a precaution, but this is a very serious situation.
My base case scenario is as follows: Lockdowns work and are slowly eased over months. Possible second wave of outbreaks over the northern hemisphere winter. My personal view is that the disease is here to stay. There are 4 coronaviruses and we do not have a vaccine for any of them. Massive hit to hospitality, retail, and travel leading to unemployment and government stimulation of the economy. Severe recession that lasts for 1-2 years.
Downside scenario: Each time restrictions are lifted the virus comes back leading to a situation where lockdowns are in place on some level until herd immunity is achieved. Unemployment hits as much as 10%-20%, slowdown in spending leads to deflation, followed by inflation as governments print money to stimulate industry. Possible currency wars as countries try to discourage imports. Result is somewhere between GFC and GD.
Upside scenario: Testing and technology combine for us to effectively manage the disease. Inevitable job losses in affected sectors and a redistribution of jobs into manufacturing as the government stimulates jobs, and tries to move away from global supply chains. Government conducts a successful deleveraging of the economy leading to a more balanced distribution of wealth, and investment in new sectors.
Sorry for being such a pessimist, I feel I have annoyed all my friends and family with my doomsaying but I've had some success with my predictions so far. In all my scenarios I feel that the market is overvalued based on the level of disruption that companies will experience before we have established a new normal. I agree with GUKT that the markets being up nearly 3% on a day the prime minister is moved into an ICU is nuts in itself.
Would love your views on Medica's results, Paul. Medica (LON:MGP)
It seems to me that there are two possible end games to the lock down.
1. Carry on with stringent lock down until few cases and then move to a regime of identify and isolate the cases. This is more or less what South Korea is doing as I understand it.
2. Slowly release the lock down but do it keeping an eye on the NHS ability to cope. In other words, keep the curve flat but don't try to bring it down to zero.
The advantage of 1 is less deaths. The disadvantage is that there could be a serious resurgence and the lock down would have to be reapplied. We would also have to do what South Korea is doing which is to put all visitors to the country into isolation for 14 days.
The advantage of 2 is that herd immunity will build up and we can return sooner to normality. One disadvantages is that there is a 14 day lag or so between changes in the lock down rules and seeing what the effect is. Hence we might have to row back on some changes.
It is hard to decide between the strategies when we don't know where we are now - hence the need for testing.
We do not yet know if herd immunity will work with this virus.
Hopefully it will, it is by no means certain however - having chickenpox protects against future infections, having a cold/flu does not.
dmjram I am not sure that is true that having cold/flu does not give immunity, isn't it that every year the cold/flu tends to be a slightly different strain as it mutates, but we have some immunity from the same strain.
Yes, it changes slightly so the existing anti bodies aren't effective.
And we don't know if this new virus will behave in the same manner yet - will it mutate and re-infect?
Also we don't know how long the antibodies effective against covid19 will remain effective for the exact same virus should an individual be exposed again - hence Hancock said he was still practicing social distancing for this very reason.
I think your option 2 has the political problem for the government of the flack it will get if there is any increase in case later, which is almost inevitable. They will be accused by the media of having released the lock down too soon, and put lives at risk etc.
However it seems to me that the only long term solution is either a vacine (many months away) or herd immunity. Therefore I don't see an alternative to your option 2, unless we are to remain in lock down for a very long time, and completely trash the economy with all the consequences that go with that, including a lack of funds for the NHS and everything else in the long term.
FTSE Futures up 1.9% - Prime Minister in intensive care
Markets have lost the plot. Even if infection rates are stabilising the economy will not snap back to normal.
I am considering shorting the market
Everyone is different, but in my view when you come down with CV19, you have to give in to it, and completely take to your bed. It's no good trying to continue as normal.
My morning smallcap tweet:
SRT Marine Systems (LON:SRT) Elecosoft (LON:ELCO) Audioboom (LON:BOOM) 4imprint (LON:FOUR) Treatt (LON:TET) Intercede (LON:IGP) Scholium (LON:SCHO) Gooch & Housego (LON:GHH) Avation (LON:AVAP) Holders Technology (LON:HDT) Mirada (LON:MIRA) Cello Health (LON:CLL) Medica (LON:MGP)
SRT Marine Systems (SRT) [last night] £1.5m placing at 25p, a 9% discount. Also open offer via Primary Bid. Has taken Govt backed covid help. Can survive a delay on all business by up to 12 months. I hold.
Elecosoft (ELCO) traded well in Q1 but now likely to experience disruption to operations. 19% of rev involves face-to-face services. Passes div. No guidance.
Audioboom (BOOM) Q1 rev up 40%, ahead of mgmt expectations. Cash $0.8m down $1.2m in Q. $4m secured loan undrawn. "Early indications are that we will see more caution from advertisers during Q2" Has "sufficient headroom to fund the Company and its growth strategy through to forecast sustainable cash positive generation on a monthly basis."
4imprint (FOUR) recent daily order counts down 80%. $50m cash at hand. Passes div. No guidance.
Treatt (TET) trading in line. Covid - no adverse effect. UK factory relocation may not take place until 2021.
Intercede (IGP) guides FY(March) rev up 3%, lower than market expectations. Profits substantially higher than market expectations due to cost control. Covid: working from home, business as usual.
Scholium (SCHO) currently trading at a small monthly loss, maintaining a reduced level of trading online and by telephone. Only £270k cash at hand.
Gooch & Housego (GHH) guides H1 rev down. 4 of the 6 US factories are open and all UK ones. ITL has increased demand for medical kits and a ventilator part. Co "good levels of available cash." Expects better H2.
Avation (AVAP) liquidity position is 'satisfactory': $129m cash, unencumbered assets $53.9m and trade receivables of $11.1m. Some airlines have entered into short-term financial relief agreements with Avation. Co "can successfully operate for an extended period greater than a year on this basis as ongoing cash income will be sufficient to cover expected financial obligations."
Holders Technology (HDT) rev to end March down 10%, mostly due to weak lighting and control orders. Cash position 'satisfactory', no debt. "Order books for the second quarter appear reasonable given the current business climate. However, we have limited visibility on the second half of the financial year."
Mirada (MIRA) minimal impact from COVID. Substantial increase in use of broadband and audio-visual services but too soon to say if it will benefit co.
Cello Health (CLL) Q1 in line. Cash at hand £11.7m and £17m undrawn credit. Cello Health has seen deferral of certain types of work where live meetings are essential. Passes div. No guidance.
Medica Group (MGP) FY19 rev up 19%. "Strong start to 2020, with trading and radiologist recruitment in line with Board expectations, however, COVID-19 is having a significant impact on short-term revenue...significant reduction in both NightHawk and Routine cases being outsourced by our NHS clients."
Plus500 A light at the end of a long dark tunnel, lets hope the regulators don't ruin it, we all need some good fortune in these dark times.
Any thoughts on OPG the numbers on Stoko appear ok why do they languish so.
Come on Boris we need you back and it was all shaping up to be a great share ownership year.
Absolutely stunning results from Plus500 (LON:PLUS) today. Assuming volatility remains at relatively elevated levels for most of the year, it would be a surprise if they didn't get close to $1 billion in revenue for 2020. A truly underrated business in my opinion.