The rapid expulsion of Boris Johnson as Prime Minister needs to be looked at in an impassionate way. Clearly, he has his faults. Slap dash, economical with the truth but there is no doubt he has had more on his plate than any Prime Minister since Churchill in the war years. Unwinding a 40-year trading relationship after May’s flawed proposals, a once in a century pandemic and the first real war in Europe (excepting the Balkans) since 1945.
In these three ‘Big Picture’ areas, Boris did pretty well. Indeed, better than others who grappled with the same problems elsewhere. He will be remembered for that. He will also be remembered for his indiscretions over how he financed his flat improvements, collecting his birthday cake in the office and appointing a man with inappropriate behaviour.We now have the election of a successor by the Conservative Party, and I have to say that I am not overjoyed by the selection of candidates. Already bickering about their rivals,. The varying approaches to taxation are an interesting differentiator. War in Ukraine
The war in Ukraine, rumbles on with a huge loss of life on both sides and its side-effects may starve much of Africa, cause the undoing of the European economic powerhouse. Germany, and has sparked an inflationary spiral for all of us, and led to higher interest rates. Pretty serious stuff. There is no doubt that the West has been slow to assist the Ukrainians against Russian barbarism. Again, Johnson has a fine record here. Biden has been slow, Macron a non-entity and the Germans obstructive. The $7bn supplied to Ukraine is no more than the kit the US left behind for the Taliban in the withdrawal from Afghanistan. Too slow, for fear of provoking Russia has just meant more civilians killed in Ukraine and no more than a holding operation for defending forces.
I’ve been studying two little known (to me) important thinkers, a philosopher and a psychologist. First, Hannah Adente, regarded as probably one of the most important thinkers of the 20th century. Her work on Totalitarianism is scripted from personal experience and interesting to look up online.
Mattias Desmet, is an exponent of this. Desmet is a Professor at Ghent University and he discusses Mass Formation in modern times, arguing that the totalitarian drive comes from bureaucrats and supposed scientists. Desmet purports that the technical message is absorbed by the masses even if it is opposed to their own benefit, so that it becomes a religion. Logic and analysis go out the window and non-conformists who criticise the ideas are ostracised and even destroyed in some cases.
This is a modern process and helps to explain lots of movements, from ‘Stop the Oil,’ ‘Climate change,’ the cancelling of JK Rowling, and maybe the movement to oust Johnson. Understanding such ideas can be helpful in explaining market pressures. It probably explains why there are now more Environmental, Social and Governance (ESG) staff than fund managers these days. ESG funds have been underperforming as they have no defence or oil content in their funds. The more I see of science I think it is important to divide it into two, bearing in mind that 85% of scientific research findings cannot be repeated i.e., they are possibly false. The great inventions such as the jet engine, the microchip and the Internet, which push civilisation further should be marvelled at and celebrated. The forecasts of 20 years hence should be taken with a bucket full of salt. Remember the Imperial College forecasts from Neil Ferguson that forecast huge deaths and that fear led to the Government imposed lockdowns. Now data shows that countries with no lockdown, like Sweden, had no more excess deaths than lockdown countries. If one looked in detail at the past forecasting record of that team with BSE, Swine Flu, and Bird Flu it would have been clear that the estimates were always overly pessimistic (the Bird Flu forecast 150,000 deaths – actual 282). Models are flawed in so many cases, but they spread fear as with the mass formation concept.
A number of things have changed. Defence spending so often neglected is rising in the checklist of Government spending. Just look at the share price action at Bae and Babcock. It is certain that interest rates are on a strong rising trend and the Fed is leading the charge, with a 0.75% rise predicted. Consequently, the US Dollar is strong, the Pound mediocre and the Euro weak, with the spectre of gas supplies disappearing this winter. This means consumers will be faced with spending cutbacks. The rise in energy and food prices means a cut in living standards the world over. Share prices have fallen, but we still have some profit warnings to come and are probably not quite at the bottom. History teaches us that bear moves end and bull markets begin when things are darkest
Lastly, for the gardeners amongst us, this year I have been growing a very old variety of pea, Champion of England, which dates from the mid 1850’s and has recently become available again. It fell out of use because the peas are difficult to pick commercially. The variety grows 10 feet high and mine are 8 feet tall and still growing. The plants are very prolific and offer the chance to get 2 to 3 times the yield from the same small plot, as most modern varieties are only 3 or 4 feet tall. A good counter to food inflation.
If you would like to discuss your current investments or future plans, we would be happy to schedule a call
– Contact details for the CFM team are here and my contact details are:
T: 0203 6970564
Barrie Newton, July 2022
Please also see the Review of April to July 2022 from Paul Coffin, and UK Financial Outlook Hinges On Who Replaces Boris Johnson by Stephen Lovelock