WEEKLY FAYRE – Monday, 9th November 2020

November 9, 2020

With proud thanksgiving, a mother for her children,
England mourns for her dead across the sea.
Flesh of her flesh they were, spirit of her spirit,
Fallen in the cause of the free.

Solemn the drums thrill: Death august and royal
Sings sorrow up into immortal spheres.
There is music in the midst of desolation
And a glory that shines upon our tears.

They went with songs to the battle, they were young,
Straight of limb, true of eye, steady and aglow.
They were staunch to the end against odds uncounted,
They fell with their faces to the foe.

They shall grow not old, as we that are left grow old:
Age shall not weary them, nor the years condemn.
At the going down of the sun and in the morning
We will remember them.

They mingle not with their laughing comrades again;
They sit no more at familiar tables of home;
They have no lot in our labour of the day-time;
They sleep beyond England's foam.

But where our desires are and our hopes profound,
Felt as a well-spring that is hidden from sight,
To the innermost heart of their own land they are known
As the stars are known to the Night;

As the stars that shall be bright when we are dust,
Moving in marches upon the heavenly plain,
As the stars that are starry in the time of our darkness,
To the end, to the end, they remain.”

Laurence Binyon – poet – 1869-1943




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By the time this missive attempts to join the cornflakes on your kitchen table, it seems unlikely that President Trump will have gracefully bowed out and offered his congratulations to President-Elect Joe Biden. Nonetheless the dust has settled, and Joe Biden has been duly elected to become the 46th President of the USA, regardless of recounts or litigious interventions. The leaves the USA as a deeply divided nation, with such political hatred threatening to cause pockets of civil unrest. Covid19 is still rampant. There will clearly be a change of emphasis in the US Government’s approach to dealing with it, whilst as the same time, the US economy will need humungous help to massage its recovery. The tiresome but hugely effective Speaker Nancy Pelosi will hopefully be more constructive in orchestrating an accord for a $2 trillion stimulus package, though probably not before early January. Speaker Pelosi and her Democrat cohorts will no doubt tinker significantly with the package in favour of the underprivileged rather than the wheels of business and commerce.

Last week investors witness a massive rally in global equities. Why? In many respects it was quite hard to fathom. In the US there was always a feeling that Joe Biden would inherit the keys to the big ‘White House’ on Pennsylvania Avenue, even though it had been ‘nip and tuck’, all the way. Clarity has always been a pre-requisite for investors. Clouds of uncertainty have never been appreciated by markets. Then there was the possibility of mass vaccination early in the New Year. Also, despite horrific Covid19 infection and casualties, employment data was starting to show signs of improvement. Friday’s Non-Farm payrolls indicated that the unemployment rate came in lower than the 7.8% estimate at 6.9% with 638,000 jobs being created in October against expectations of 530,000. However, with a view of providing some balance Thursday’s Initial Jobless Claims posted first-time claims for unemployment insurance totalling 751,000 last week, a slight decline from the previous period. This number needs to improve.

Notwithstanding all this ‘election brouhaha’, equity acolytes held their nerves and ‘took hold of the bit’, as they sensed there might not be a Democrat majority in the Senate, which would prevent the Biden administration from rescinding all Trump’s tax cuts or allowing it to introduce draconian anti-business legislation, especially laws focused of the massive technological revolution. Hopefully, when it came to introducing counter-productive economic legislation, a Biden administration might prove to be a ‘toothless tiger!’ There may well have to be a rethink on this perception. It is now possible that the Democrats will have a majority in the Senate.

Concern has been expressed by many equity geeks, that this ‘second coming’; the other, in terms of a global equity rally having started on 23rd March 2020, may not have the ‘legs’ for a sustained rally, unless Covid19 says ‘Good Night, Vienna and dies!’ Without a global vaccination, that is an unlikely outcome.

What of the UK’s relationship with the UK? Many believe that President-Elect Joe Biden would prefer a closer relationship with the EU than he would with the UK. Blondemoney’s Helen Thomas, who has provided wonderful commentary and data on this US election, has picked out this nugget for digestion. “Joe Biden, as President will be a “fresh start” for the Special Relationship with Britain and the Western alliance will be “closer and stronger” than ever after Trump chaos, says top Biden ally Senator Coons.” That remains to be seen. Certainly, Trade Secretary Liz Truss says that the legal framework to agree a deal with the US is in place. I do not think the US has agreed a meaningful trade deal with anyone since ‘the Old King died!’ We shall see. On his list of ‘things to do’ I suspect the UK is a long way down the list of priorities, with Covid19, the US economy, its dangerously pitiful  relationship with China and Russia, and soon to be nurtured ‘love-in’ with the EU likely to take favour.

It was no ‘run of the mill’ meeting of the MPC and the Bank of England’s Inflation Report at 7.00am last Thursday. As expected, the MPC kept rates unchanged at 0.1% with a 9-0 unanimous vote. Few observers doubt there will be any meaningful increase in official rates for probably three years. What was slightly disturbing was that the quantitative easing facility was increased by £150 billion and not the expected £100 billion, to £895 billion. What was even more unnerving was the downgraded adjustments the Bank of England made for growth targets for 2020 and 2021. Governor Andrew Bailey said the BOE forecasted that GDP for 2020 may come in at -11% down from -9% and GDP forecast for 2021 was lowered from +9% to +7.25%. 

Against that rather downbeat forecast it was not surprising that Chancellor Rishi Sunak has agreed to extend the furlough scheme at the rate of 80% of salary, until the end of March. It was felt that without this much needed help the service and hospitality sector would be irrevocably damaged, with many operations never recovering, resulting in mass unemployment. The opposition criticism to the second lockdown was widespread across the political spectrum. However, the job retention scheme was unreasonably criticised by the opposition. This scheme has provided more than £200 billion of help plus close to £500 billion of borrowing for public sector requirements by the end of the year. Where many feel they are legitimately aggrieved towards the government, is the discrimination shown towards 3 million from the ranks of the self-employed. The banking sector is also bracing itself for a new wave of topping up bounce-back loans, on top of the £38 billion lending spree.

The ‘pop’ in global equities last week was surprisingly robust. The ‘sell-off’ in the tech sector ten days ago was probably overdone, especially as there seems no immediate solution to Covid-19, with more ‘lockdowns’ being implemented in Europe and with the US probably suffering more than most. So, a rally of the ‘heavy brigade’ – Amazon, Microsoft, Facebook, Zoom, Apple etc, was logical. If investors believe a vaccine can come into play in the next three months, there are so many trashed sectors that would attract investors – energy, travel, insurance, airlines, and banks – hence last week’s rally.

Also, it won’t have escaped observers and investors notice that ‘takeover’ activity has raised its game in the UK in recent weeks with the likes of Wm Hill, RSA, G4S, Sportech, Urban & Civic, all subject to bids. Panmure Gordon’s Simon French was quoted in the Daily Mail, suggesting that ‘British companies are valued at around 20% less than their European counterparts as international investors fret about Brexit. ‘This makes them attractive for investors prepared to look through the near-term political disturbances that have generated this discount.’  There is likely to be further frenzied activity in the months to come. It will be interesting to note whether RSA falls into the hands of Intact of Canada or Tryg of Denmark or a combination of both. Shares in RSA rallied 46% on Thursday but eased back

As the pandemic continues to take a vice-like grip on the UK’S economy, the dole queue lengthens. 3500 jobs will go at J Sainsbury, 700 redundancies at Caterpillar in Larne, Co Antrim, 1070 jobs to be lost at Lloyds Banking Group, despite a £1 billion profit posted last week plus a further 1400 jobs out of the proposed 9000 redundancies at Rolls Royce will be eliminated. Then, with Christmas looming on the horizon, John Lewis will say ‘sayonara’ to 1300 members of staff and 145 at Waitrose.

Amongst the compendium of international news nuggets that manifested themselves this past week was the fact that Amazon’s Jeff Bezos sold another $3 billion of stock in his company on top of the $10 billion he sold a few months ago. Dominic Chappell, who erroneously bought BHS from Sir Philip Green for £1 in 2016, was sentenced to 6 years in jail for avoiding and failing to pay tax due, more than £500,000. The All-Blacks Rugby Team have lost about £44 million during the pandemic and are seeking a ‘buyer.’  This brilliant brand is surely deserving of support. CVC Partners has been mentioned as a possible suitor. When you consider European Football is thought to be valued at £28 billion, what the All-Backs require looks like modest fayre. On the airline front BA has ‘temporarily suspended’ its Gatwick service – hardly surprising with little in the way of flights in and out. Ryanair’s Michael O’Leary lambasted the Government over its testing policy, which has resulted in the airline posting a 78% drop in revenues between April and September in comparison with its performance a year ago. Ryanair also experienced an 80% fall in the number of customers in those six months.

Two of the UK’S high street moguls posted dispiriting numbers last week. As expected, M&S posted a loss of £17 million for the first time in 94 years. Food profits were up 19% and like for like sales by 2.7%. However, clothes and merchandising had a nightmare in the past 6 months. Sales in Q1 were down 61.5% and down 21.5in Q2. J Sainsbury dipped into the red with a £137millon loss before tax on the back of £438million cost of 460 Argos closures. Like-for-like sales were up by 6.9% - food increased by 8.2% percent while general merchandise was up 7.4%.

Jack Ma’s ANT GROUP, due to go public in a $34 billion IPO, which was oversubscribed to the tune of $3 trillion, has been pulled by the Chinese authorities. Whether it returns is in the hands of the Chinese government.


UK companies posting interim results this week – Tuesday – Meggitt, Persimmon, and securities, Electrocomponents, Wednesday – Flutter Entertainment, JD Wetherspoon, Taylor Wimpey, Wm Hill, Great Portland Estates, Thursday – Vesuvius, WH Smith, National Grid, Qinetiq

US Companies posting interim results this week – Monday – Zimmer, CVS Health, Hershey, Coty, Revlon, Viacom, Tuesday – Eastman Kodak, DR Horton, Thursday – Applied Materials, Beazer Homes, Cisco Systems, Walt Disney, Dillard’s, Dolby Labs, Friday – JC Penney

Economic data to be posted this coming week – Monday – ECB’S Lagarde Speech, BoE Haldane’s Speech, UK Consumer inflation, Tuesday – UK unemployment rate (EST: Sept 4.9%), Wednesday – US MBA Mortgage Applications, Thursday - 3rd quarter GDP (EST: Y/O/Y -9.7%) (EST: Q/O/Q +15.5%), UK Construction, Industrial Production, Manufacturing Output, UK 3rdquarter GDP (EST: Sept Y/O/Y -8.2% & M/O/M +0.9%), US Inflation (EST: 1.5%), US Initial Jobless Claims, Friday – EU 3rd Quarter GDP (EST: Y/O/Y -4.2% Q/O/Q +12.7%), US PPI, US Univ of Michigan Consumer Confidence