Chip papers

My younger clients won’t remember collecting our fish and chips wrapped in only newspaper. I’m not old but I do feel it sometimes, such has been the increasing pace of food hygiene legislation. I even remember my mushy peas and my gravy soaking right through the paper before I reached home. I hasten to add, I never had gravy on a fish; I’m not a barbarian. Initially a single sheet of greaseproof paper and more recently cellophane got added to hold back the surplus chip fat and later still did the mushy peas and gravy come in separate containers. Plastic forks replaced wooden chip forks, now we need huge landfill sites to dispose of all the food packaging that comes out of the vast array of takeaway meals. But I digress.

recession and brexit

A client has suggested I give my thoughts to a couple of questions he has.

  • Are we all headed into recession and will that cause our investments to reduce further?
  • What’s happening with Brexit? It’s all gone very quiet.

I thought I would tackle the dreaded R-word today because I have been told off on many occasions for expressing my views on Europe. Brexit is an old scab which absolutely everyone wants to refrain from picking. Suffice to say one of our current stumbling blocks seems to be that the Europeans feel they are entitled to our fish. That really does dovetail quite nicely with my opening paragraph on my forever favourite meals.

Are we heading for recession?


we have broken down.

My first car was a 1977 Ford Escort. I think I have mentioned to you before that I ran out of petrol in it twice. I was young, foolish and skint. I’d also swapped the single clock instrument panel for a dual dial panel, giving me a rev counter. Included in the instrument cluster was a new fuel gauge, which didn’t work really. Perhaps because the donor car had a larger petrol tank? Anyway, both times I broke down I was within walking and pushing distance of a petrol station. Remember, they used to be everywhere. £6 later, full to the brim I was on my way, embarrassed but relived.

I bought another Escort in June 1986. A second hand 1983 white XR3i, advertised privately in Northwest Autotrader. I say white, but it wasn’t the same shade of white all over. That should have been the clue that I should have walked away from this one. Within a few weeks the timing belt had broken, all the valve stems had hit the pistons and bent. It required a new cylinder head. The car was towed away from the middle of Manchester and I caught the bus home. I retrieved it from Thomas Motors, the ford dealer a week later after repair.

I was never really thrilled with the car after that, but had no money to change it. Just before Xmas 1986 it broke down again. This time I was on the M1 when out of the blue the battery and ignition lights came on. I was travelling fast enough to coast into the services. The engine was dead and oil was dripping out below. I won’t bore you with the details, but that breakdown resulted in hitching a lift back to Bolton in a lorry, 3 weeks off the road, a reconditioned engine, a £400 loan from my Mum and shortly after a change in career because I knew I could never afford to repay the £400 back. Incidentally I joined Abbey Life in February 1987 and commenced my (so far) 33 years in the financial services industry. But I digress.

and the point is

The three/four breakdowns described above are all parallels to the economy. A recession is where the economy slows relative to where it was before.

The breakdown on the M1 was very much akin to the “Great Financial Crisis”. In 2008 the banking system was completely bankrupt. Lehman’s Bros was allowed to collapse. Lloyd’s was effectively nationalised. Barclays did some shady deals in the Middle East which are still being investigated today. In early 2009 I attended a meeting in Belgravia where I heard that the FTSE would take 15 years to recover, such was the severity of the crisis. Mr Fuller, since deceased unfortunately, was absolutely correct. A structural breakdown of the economy is a complete “engine out job”.

A new cylinder head again entails a period off the road. There will be short term costs to bear and a period of “running in” once the repair is complete, but in a relatively short time most things should be back to normal. A new cylinder head and valves could even renew the power of the old tired engine. The parallel here is the Hard Brexit we are headed for in December. (Sorry to break that to you and I did say I wouldn’t mention Brexit). Germany and the rest of the wealthy North have shown no compassion to a struggling Italy. The UK must expect even less respect as we have chosen to leave the protection of the trading block. Christine Lagarde, Mario Draghi’s successor at the ECB has been as in-effective and perhaps downright deadly to European unity as drinking a bottle of Domestos would be to cure Covid -19.

In economics, a country’s GDP is the total value of goods and services produced within a country in a year, not including its income from investments in other countries. GDP is an abbreviation for gross domestic product. A recession is two negative quarters in succession.

So yes, we will enter a recession. As will the rest of the world. But if we can get businesses open again and consumers consuming again we will exit recession in the very short term. We entered coronavirus with the consumer in a strong position and as close to full employment as we have ever seen. There will be some losers, the global travel industry and tourism will take the longest to recover. But there will be equally short term winners. There has been a paradigm shift. 80 & 90 year olds are now ordering food online, holding Skype and FaceTime calls with loved ones. This lockdown has seen a huge acceleration forward for Technology based businesses.

the next breaking bad news story

Now 100 year old Tom is a Colonel, the media can get back looking for bad news again tomorrow. A single day of good news can be countenanced.

  • Mystery Chinese Deadly Virus.
  • Millions will die globally.
  • Not enough Critical Care Beds.
  • Not enough Ventilators.
  • Lockdown.
  • Negative oil prices
  • Recession. (coming very soon)
  • The returning influenza and Covid season in the northern hemisphere.
  • The November US Presidential election banana skin.
  • Brexit bad news ( commencing as soon as October and running until December would be my guess)

There needs to be an ever increasing stream of bad news because we all become less sensitive to the shock over time. I remember when the UK death rate was 200 per day, I was fearing the worst. Then it was 500, it became horrifying. It looked as though it was heading for 1000 a day then 1000’s per day, but it steadied and fell. Now 500 in a day doesn’t seem too bad. Now the numbers are falling there is the – yes but we know they are undercounting. The media needs to be moving on now as the shock value is falling. After losing our lives, what we fear the most is losing our livelihoods and savings. That will be the raw nerve fully exploited next as front pages move on to the economy being in tatters.

We have moved on from critical care beds that are filling too fast, to petrol tanks that don’t require filling up at all currently. A world full of oil and currently empty Nightingales.

we don’t invest in gdp

The markets are forward looking. There is no such thing as a GDP tracker because it purely measures the past. Markets quickly priced in a full “breakdown and engine out” event, with levels falling to just 4800 points on the FTSE. Currently we have recovered to merely a “new short engine” at today’s 6000 FTSE 100 level. I’m sure that over time, investors will come back to accepting that this was a major interruption to the economy of several months, more akin to running out of fuel and having to take time out to fill up the tank before we can continue forward again. Normal constantly interrupted service will be resumed.

would you like scraps with your fish?

They used to say” today’s bad news will just be tomorrows chip papers”. In these higher food hygiene times, I’m sure many of the youth of today would have no idea what that means, but I hope you do.

My thanks to Peter for his suggestions. Do you have any suggestions?

Newest Most Voted
Inline Feedbacks
View all comments
Judith Frater
Judith Frater
1 month ago

I remember fish and chips on the sea front at Bridlington, wrapped in newspaper. Never better. Thanks for the update Howard.

Phil Dustin
Phil Dustin
1 month ago

Hi With every country in the world pumping incredible amounts of money into their businesses, where is all this money coming from?. or is it just newly printed, or numbers on a keyboard. The old idea of people buying your counties bonds surely cannot supply this much. Or in a few years will it all get wiped clean. Does this matter to us, dealing in specific companies. Good reidance to austerity.

Peter Keeling
Peter Keeling
1 month ago

Us baby boomers are the ones with plenty of money to spend but we’re not being allowed or encouraged to spend. We are the ones that could help the recovery but ,due to distancing restrictions, we will be the last to be allowed out to spend. We go shopping all week not just the weekend, we spend most on luxury goods, luxury holidays, luxury cars, technology and house improvements. We like eating out, going to shows and visiting cultural venues. We’re the silent economic recovery solution. We’re sitting on cash and pensions we can’t spend and it’s building up monthly… Read more »

Steven Crowther
Steven Crowther
1 month ago

Good read Howard, and nice to see you tugging on the nostalgic heart strings with shaggy dog stories of ‘not so long ago’ bygone days! In future updates, I for one would welcome you sharing some of your inner thoughts through the weekly blog about some of your current and upcoming picks, the ones to watch with a rationale as to ‘why’ they stand out from the crowd. I like picking out shares from the portfolio to follow that I feel more connected to…don’t know if others feel the same? Anyway, looking forward to the regular updates, written in your… Read more »

30 days ago

Whatever your (or my) view on Brexit is I just wish it was another couple of years away. Companies stretched to breaking will emerge from Corona into yet more challenging conditions. To give another analogy it’ll be like stabbing your foot on an upturned rake only to have it swing up and smack you in the face.