A December to Remember

As we focus on the issues that have still to be resolved by the end of this year, it’s easy to forget what has already happened so far. It has been a stand-out year for all the wrong reasons. Currently we are focussed on;

• Tiers for Fears. Even the mighty metropolis of “that there London” is now experiencing the kind of lock-in that most of us have been forced to live with for the majority of the year. How long will lock-down London last and what effect will it have on some of the recovery shares we own? Covid numbers are rising in some places and falling in others, perhaps due to the type of test and the number of tests performed? Funnily enough that has been going on all year up and down the country, but it’s now seen as more important as London and its media centre can no longer go “down the pub”. East-Enders will be without an “Old Vic” Christmas Day family punch up, as the punters are not allowed out. With Scotch egg or no Scotch egg.
• Remember Donald Trump? There’s still some fight left in him but he shouldn’t be US President for much longer. More importantly now are a couple of run-off contests which will decide the potency of the future Democratic President Biden.
• And Brexit. Yawn. There will be a deal, right at the last minute, it won’t be the one anyone wants, but the globe won’t stop turning at midnight along the Greenwich Meridian. Hopefully the French won’t throw their veto into the hat, but I wouldn’t put it past Emperor Macron following the example set by General De Gaulle.

Why is it best to think of 2020 like a panto? Because eventually, it’s behind you.

The Bad News First

As always the media focus on the bad news. There is rarely a good news story that makes it onto the first dozen pages of a newspaper or a news website. I believe that if a bright star suddenly appeared over Bethlehem right now, it would be re-cast as an asteroid hurtling towards us with the goal of wiping out life on the planet. The arrival of mankind’s saviour and the whole Christmas story, not likely? We are doomed and overdue some divine retribution.

But here is an interesting thing. What would it take now to seriously shock us? We have become anaesthetised to bad news. We have come to expect it. And yet many believe that the bad news just around the corner is going to decimate investments held around the world. Nothing could be further than reality – the bad news, possibly the worst news – is already baked into global stock markets. It will be the good news that shocks us, because many don’t expect it.

Nothing is fixed yet. The US Election, the free trade agreement and positive results following the early vaccinations. However nothing needs to be fixed today, we only need the expectation of where we are heading in the next 18 months.

The Good News

Interest rates are set to be close to zero for decades. If I was 20 years younger I would borrow millions. 30 years ago when I went out on a limb and borrowed big time to move home, interest rates were fixed at 10% for 5 years. They peaked at 14.5%. We will never see interest rates like that again. Rates have been low already for 12 years and are set to continue for maybe double that period. Low interest rates are not only good for the housing market, but are good for indebted companies. Debt on the balance sheet shouldn’t be the issue it was when it actually cost money to borrow money.

Covid-19 will lose it’s current shock status over time. I believe we already have a fair amount of Covid-19 fatigue globally. When this traumatic period is taught to school children in years to come, I believe it will be the global reaction that will be studied, not the virus itself. It will be seen that hospitals were generally large enough to cope with just another seasonal virus. Albeit only just, but any larger would be a huge waste of resources for most average years. Importantly it will be taught that billions was spent trying to slow the tide which was inevitably and repeatedly going to ebb and flow, much of it’s own making. It was in fact sheer arrogance exhibited by most politicians believing they had the power to make any difference.

The research that was synchronised globally in those dark days searching for a cure to a naturally occurring virus (impossible), finally came up with a valuable protection for the vulnerable, but more importantly brought many, many breakthroughs in other areas of medical science. No virus wants to kill its host. The valuable medical lessons learned from trying to prevent a person’s immune system from over-reacting and thus killing themselves, will undoubtedly lead to a better quality of life for millions of inflammatory disease sufferers throughout the world in the future.

The kids will continue doing what they have always done and act as a vector for the transmission of coughs, sneezes and diseases. Gradually there will be less human raw material for the virus to safely call home. In my childhood I was sent to parties and playgroups in the hope that I would catch viruses early on and build my immunity for later years. However viruses will adapt, call it mutate if you want, and another human/virus battle will become commonplace, just like the annual flu season. Why has flu disappeared this year?

The travel and hospitality industries will gradually catch up as more individuals regain the confidence to go out for entertainment and to travel. We will be ready to invest in some of those hardest hit companies once we get through the Northern Hemisphere virus season. Let’s call the current vaccines for what they are, “Dumbo’s magic feather”, because shortly many individuals will believe they can fly.

The governments of the world will not entertain financial repression right now. Instead they will continue to borrow and invest in capital intensive infrastructure projects to create future growth and promote employment. This will be synchronised, with every country that can control its own currency, printing ever more of the stuff. Maybe in January I will blog about why it doesn’t matter who pays for this as the answer will be nobody will need to.

There is still tons of cash on the sidelines globally looking for a home and once this cash starts to be deployed and spent all economies will pick up in unison. Much like the start of 2017, when the many reasons not just to invest anymore were removed all at once.

Globally UK shares are seen as cheap and ripe for a near term re-rating upwards! No investors embrace uncertainty, hence whatever the outcome for free trade with Europe going forward, good UK companies will be back on investors menus.

Merry Christmas

Interestingly I have nine draft blogs penned over the last nine months that I didn’t have the courage to publish at the time. This is a testament to how polarised we are as both a nation and a close knit client group on the issues that matter. I didn’t dare to touch any raw nerves.

This could possibly be the last blog of the year, but there is so much left to finalise over the next couple of weeks, I could be sat at the keyboard again. It is however, definitely the last blog before Christmas and I hope that I have given you many reasons to be cheerful and full of hope for the future. This is typically the part of the year where we make most of our growth so let’s keep our fingers crossed.

I would like to say thank you to every investor who had confidence and realised early on that the short-term is always unpredictable, but we are investors for life. It is the long-term incremental growth that pays the bills and allows us to do the things we didn’t think of as possible.

And Finally

The top ten Christmas Covid-19 jokes, courtesy of the Guardian readers.

The top 10 cracker jokes

1. What is Dominic Cummings’ favourite Christmas song? Driving Home for Christmas.

2. Did you hear that production was down at Santa’s workshop? Many of his workers have had to Elf isolate!

3. Why didn’t Mary and Joseph make it to Bethlehem? All Virgin flights were cancelled.

4. Why are Santa’s reindeer allowed to travel on Christmas Eve? They have herd immunity.

5. Why did the pirates have to go into lockdown? Because the “Arrrr!” rate had risen.

6. Why is it best to think of 2020 like a panto? Because eventually, it’s behind you.

7. Why couldn’t Mary and Joseph join their work conference call? Because there was no Zoom at the inn.

8. Why can’t Boris Johnson make his Christmas cake until the last minute? He doesn’t know how many tiers it should have.

9. What do the Trumps do for Christmas dinner? They put on a super spread.

10. Which Christmas film was 30 years ahead of its time? Home Alone.