Good morning, it's Paul here with Wednesday's SCVR.

Estimated timings - should be finished by 2pm.

US markets sold off late, last night, so we can expect a poor open today. I'm feeling decidedly nervous at the moment. The news re Covid-19 seems negative - there's talk of a new virus strain which is appearing in children apparently, which sounds ominous. Also, I feel that the bubble in tech & healthcare shares seems inappropriate in its extent, with valuations looking very stretched.

Most UK shares I look at seem very expensive, given the appalling economic situation, and lack of visibility on earnings. This feels like the calm before the storm to me. I wouldn't be at all surprised to see markets lurch down again, and have re-opened my index shorts, to hedge my long portfolio.

Trade Credit Insurance

Yet another massive bazooka looks to have been wheeled out (do bazookas have wheels? I thought they were shoulder-borne?) this morning - the Government is guaranteeing trade credit insurance;

... the Government will temporarily guarantee business-to-business transactions currently supported by Trade Credit Insurance, ensuring the majority of insurance coverage will be maintained across the market despite the challenges posed by Covid-19.

The guarantee will be delivered through a temporary reinsurance agreement to be agreed with insurers currently operating in the market. The scheme will cover trading by domestic firms and exporting firms and the intent is for agreements to be in place with insurers by end of this month.

For anyone not aware, trade credit insurance is where company A sells goods or services to company B, and raises an invoice requesting payment, which is usually paid about 30-60 days later. The trade credit insurance company guarantees that the invoice will be paid. If company B goes bust with the invoice unpaid, then the insurance company coughs up the money instead. It obviously charges a fee to company B for this insurance arrangement.

Unless company A is dealing with blue chips, then it can make sense to insure invoices, providing the fees are reasonable.

It is often the case that, when company Bs go bust, it can be because the trade credit insurer has withdrawn cover, knowing that company B is in financial trouble. Company As then refuse to deliver goods or services, because they cannot get insurance that their invoice will definitely be paid, and…

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