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The Hunters' Tails
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A bit like Basque...
'Double dip' or not? Mixed, and a bit of a muddle -- welcome to the 'new abnormal'. Racked between good corporate results (and prospects?) and bad (or less good) economic news, markets are hard to read; and so will stay, we reckon, through a slow and lightly traded August.
It's a bit like Basque. This ancient and iconoclastic language is so complex that a verb, for example, incorporates in its one word not only the pronoun but the complement too. "He gives to you" is one word. "She gave to us" is another. Meanwhile the Basques' national sport, pelota, of which squash is a country cousin, is the fastest of all ball games and every bit as polymorphic as stock and bond markets these days. For underlying their outlook of Janus, we all still face:
The disease of debt ...
In the US, nominal household debt has now fallen by 3% since its peak in Q2 2008. But it's still a staggering $13,500bn (£8,645bn). In the UK, total personal debt at the end of June stood at £1,457bn. Individuals owe more than these still sceptr'd isles in their entirety produce in a year. As for that emerald isle, the only thing booming is debt collection. "Businesses are owned body and soul by the banks," says John Fitzpatrick, a sheriff in Dublin who confiscates posh motors from those of net income and gross habits. The yield on Greece's 10-year bonds has dropped by around 220bps (vs their German equivalents) compared to when the night was very black. But Greece's ratio of debt to GDP is still likely to be 150% by 2013 -- and its economy is not growing. At all.
Or on the other hand?
As an export-led recovery gathers its lederhosen about it, German unemployment has just fallen for the thirteenth month in a row. It's easy to forget that a 9.5% rate of unemployment in Liberty's Land means that 9/10 Americans in the workforce still have a job.
Then, alongside the alarms, there are the comforts of history. Times of austerity are, always, also ones of great entrepreneurial energy. In particular, the American passion for inventing, which began with Eli Whitney's cotton gin in 1794, will not be denied. Even during the Civil War, some 3,500 patents were granted annually. But in the decade after General Lee's surrender in 1865, the rate was more than 12,000 each year. By 1885, the total number of patents granted had topped 300,000: 34,967 patent applications were filed that year alone. (Both Abraham Lincoln and Mark Twain, incidentally, were granted patents. Twain received three -- for a type of suspenders, a game and a "self-pasting scrapbook". Lincoln's, granted 10 years before he became President, was for "buoying boats over shoals". President Obama, please?)
In the depressed 1930s, new industries such as consumer electronics and plastics were born. In the turbulent mid-1970s, personal computers arose as the likes of Microsoft and Apple emerged from garages and lofts. A lot of bright people will have no choice but to set up their own businesses. Last year, 395,327 new businesses were registered in the UK, a figure topped only once in the last 25 years. In London, Metro Bank, the first new High Street bank in the UK since 1872, opened its doors (to dogs) yesterday.
And so to (Spanish) stocks ...
We go on buying on your behalves, confident over at least the medium term and beyond. This week alone, Intec Telecom (held by UK Smaller Companies and UK Special Situations) epitomises our point above. It may not bear fruit, but a possible bid for this innovative (telecom billing software) British business has seen the stock soar. Come dip or dance, there will be more such.
Of more substance, with a £375m buy-back Virgin Media (Income) has put its money where its mouth is. AstraZeneca (Income and Strategic Assets) has justified our Adrians' and William Littlewood's long-standing faith in the deplorable demographics of the weary west. The stock has rallied sharply after US approval of the company's blood-thinning Brilinta. It also reported Q2 earnings that exceeded estimates, raised its earnings forecast for the third time this year and doubled its share buy-back plan. [Y]our Income's and Strategic Assets' big positions in pharmas (that have lagged) will, we believe, leap.
As for bonds, the donnish James Foster is positive. "Yes, perhaps the 'stress tests' weren't stressful enough. But they've been an important watershed; and I now expect bonds to give investors more of what we used to expect of them: a gratifying ennui."
And so, after Basque, Spanish. It has two words for the verb 'to be'. One is estar, which means to be in a particular condition: for example, "I am on holiday with my mother-in-law." The other is ser, which means to be in an enduring state of being. Equities and bonds? Like our new Global Income Fund,serian.
And finally ...
This august organ will now take its ease in August. We will come back up, or should that be down, on 3 September. If you have been, thanks from all of us to all of you for reading our Tails -- and for your support through these volatile markets and, ah, interesting times.
News of the Week
A[s]sign in stone ...
Villagers in Dorset have taken action against souvenir hunters who kept stealing their sign. They have chipped in to buy a chunk of Purbeck stone and have had the name Shitterton carved on it. Ian Ventham, chairman of the parish council, said: "People kept nicking our sign because, clearly, Shitterton is amusing. I don't think it was malicious, but it was exasperating. We would get a nice, new, shiny sign from the council. Five minutes later, it would be gone."
Mr Ventham said it was his wife Diana's idea to carve a sign out of stone. "We thought, let's put in a ton and a half of stone and see them try and take that away in the back of a Ford Fiesta." Mr Ventham wrote to neighbours, asking them to give £20. Of 50 households, well over half obliged. Purbeck District Council donated £70. Mr Ventham said he felt the project was a good example of David Cameron's Big Society. "I am not sure if he was thinking expressly about signposts to Shitterton. But I think he is talking about people getting off their backsides and doing things."
Article last updated: Jul 30, 2010
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