August 2017: Nationalism and the market

I’m a patriot, you’re a nationalist and he’s a xenophobic racist Nazi pig.  We’ve all been conjugating the irregular verbs of narrow mindedness in August.

Having recently read Jodi Picoult’s Small Great Things, I found the Charlottesville incident fascinating.  I was interested afterwards by the political/business angle. Business and the Republican party have just had a wedge driven between them.  It’ll be interesting to see how long and wide the Democrats can make the wedge.  I’m not confident that Bernie Sanders’ party can capitalise on the opportunity, but let’s watch and learn.

Over on this side of the pond the Brexit process is getting stuck in quicksand. Nick Clegg puts it well in the FT:

“Conservative Brexiters and the rightwing press have started to do what they always do when things don’t go their way: whining about how intransigent and slow the EU is (what do they expect? It is a convoy of 27 governments) while throwing insults”

I’ve caught up with two friends who voted for Brexit in the last few weeks.  Trying as I might to be open-minded to their perspective, I find myself reflecting how an underlying dynamic of many Brexit supporters is an inability to consider the world from other countries’ point of view.  This failing is at work whenever you hear Brexit types say they want to be in the single market but retain full sovereignty. This argument doesn’t address the fact that if all the other 27 EU countries had the same objective you’d have 28 countries all railing against the protectionism of each other and with no shared institution for resolving the disagreements.

The link between civilised Brexiteers like Daniel Hannan and the appalling thugs at Charlottesville may not be obvious.  But to my mind the white supremacists’ inability to consider how the world might end up if everybody thought as they did feels worrying similar to the attitudes of many of the Brexiteers – certainly anybody who aspires to ‘take back control’ but remain in the single market (which includes quite a large portion of the 52%).

You can call it patriotism.  You can call it exceptionalism.  But it feels like blinkered supremacist thinking to me.

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July 2017: Congratulations, Mr Bezos

July saw a hotchpotch of news of all shapes and sizes.

Poor baby Charlie Gard caught the world’s attention.  I feel terrible for the parents, and also somewhat indignant about the hysterical coverage of the doctors and judges involved.  But from this blog’s point of view none of this is relevant so I will move on.

In the UK, pay was high on the agenda.  First of all with the post-election focus on the 1% public sector pay cap, now well below inflation.  Later in the month the BBC disclosed its highest paid staff, with a predictable fuss ensuing about an apparent gender pay gap. Meanwhile, across the pond Mr Bezos briefly became the world’s richest man, a rather less impressive fact when you consider how much more his gazillionaire rivals Buffett and Gates have supported charity and some of the astounding results the Bill & Melinda Gates is achieving (in part thanks to Buffett’s donated billions).

From a market point of view, what’s been going on?  The below-inflation pay cap bodes well for corporate earnings but badly for wider society.  And Bezos’s 15 minutes of fame stemmed from continued boom for USA tech stocks, as well as the wider markets. I only have a couple of the FAANGs in my portfolio but I’m not complaining.  USA equities were up over 1%, with UK and Oz markets rising a bit too.

In the currency markets, the pound and the US dollar both fell.  The Euro and the Aussie dollar both gained over 3% against the pound and dollar. Accordingly, European equities fell around 2% – this is a similar effect I think to what happens with the globally-exposed FTSE-100 when the pound gyrates. The more domestically-focused Australian equity market managed to rise despite a strengthening Australian dollar.

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June ’17/Q2 progress: Coalition of chaos

It’s the end of the second quarter.  That means it’s time for my usual monthly portfolio performance along with a quarterly review of how 2017 is progressing.

June’s news was dominated by the UK’s general election.  To my mind the electorate called it about right.  Under the UK’s first-past-the-post constituency system no voters have a say on the overall leadership, but nonetheless the overall outcome often reflects the wider mood of the nation with uncanny fidelity.  That’s what seemed to happen here: the Tories were badly led down by their leader, and Corbyn’s Labour offered a genuine and, to many, welcome alternative.  Yet at the end of the day the Tories remain in power, with an extremely short leash and an exploding collar.

The other news in June, which if you blinked you might have missed it, was the central banks publicly stuttering about the next policy move.  This unsettled UK and USA markets noticably, but it seems to have lasted less than a week.  From the point of view of my process however this was material; the pound gained about 3% culminating in it reaching $1.32 at exactly the end of the month (see graph).  Even as I write this, a few days later, the pound has reverted – but as I took my portfolio snapshot on 30 June my quarter-end numbers were pretty different.

Even a week before the end of June I was having a positive month.  But thanks to the pound blipping upwards at the last minute, and most of my portfolio being overseas at this point, I recorded a negative month. If the pound remains at the level it’s already returned to, then I am highly likely to post a positive July.

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