The usual stock market gyrations are taking place in August and this year it seems to be the turn of big mining stocks. Rio Tinto (RIO) is down 20% since its recent peak in May and Anglo American (AAL) fell sharply after it recently went ex-dividend. BHP Group (BHP) is also down but not by as much as might be expected after it announced that it was intending to unify its corporate structure and this will mean it will no longer be a FTSE-100 stock so some tracker funds will have to sell it. The downward move was probably limited because this company is dual listed in the UK and Australia and there was a discount in the UK versus the A$ price which will be eliminated.
The reasons given in the media for declines in mining stocks are numerous – some profit taking after a long rise, worries about Covid infections rising, US stimulus measures being cut back, a slow-down in economic growth in China and several other reasons. All of this is probably just “noise” that can be discarded as financial news tends to be thin during the summer so media tend to invent stories.
As regards the BHP move, where I hold the stock, I do not oppose the simplification. It will still be listed in the UK but as a FTSE-250 stock. However the one-off costs of US$500 million to do the unification seems to be unreasonably high. I hope we see a good justification for the move when it comes to a vote. But it has been suggested that one motivation is a more relaxed corporate governance environment in Australia. As I have pointed out in previous blog posts, excessive regulation in the UK is providing an incentive to list elsewhere or not list at all.
Other market news is a recent spate of takeovers in my portfolio such as at Avast (AVST) and Ultra Electronics (ULE). The Avast proposal is not at a great premium but I have only held it for a short while so I will not oppose. It’s a good opportunity to simplify my portfolio which still has too many holdings in it.
As regards Ultra this is another short-term holding and the agreed offer price is at a very good premium so I will support. The Government has required the competition watchdog to assess ‘national security issues’ over the sale but the share price barely moved after that announcement so it seems the market expects this will not thwart the deal. With UK and US defence companies now so intertwined it would seem pointless to object.
On a more personal note, in March 2020 I started a diary because the coming year seemed likely to be a momentous one. With the Covid epidemic spiralling out of control and our departure from the EU (Brexit) having happened but no free trade agreement yet in place which was forecast to be a disaster by some people, it looked likely to be an interesting year economically and politically. And so it turned out to be.
My life in the period has been somewhat mundane as meetings have been cancelled and travel much restricted. But I thought it might of some interest to my offspring in due course. My father wrote a diary covering the years before, during and after the Second World War which proved to be fascinating reading when it came to light over 50 years later even though he was in a “reserved” occupation and the nearest he ever got to fighting was in the Home Guard.
I have now finished my diary as I consider the epidemic to be substantially over and Brexit has turned out to have minimal consequences on our daily lives. But some aspects of our lives have changed. My diary has been printed under the title “A Journal of the Coronavirus Year” and is comparable to “A Journal of the Plague Year” by Daniel Defoe published in 1722.
I have published other books in the past – the most recent one via Amazon which is relatively simple to do. But I only wanted a few hard copies for my family so I used a company called BookPrintingUK (https://www.bookprintinguk.com/ ). This I found to be a very good low-cost service which I can recommend it you have a similar need. It is easy to use and they can include colour photographs. Photograph of completed volume of 400 pages is above.
The current book contains both personal information and commentary on the financial world – the latter often taken from my blog. Is it worth turning it into a publication that the general public, or at least the investment community, might find of interest? Let me know if you think that would attract any demand. As a history of the epidemic and other events from March 2020 to June 2021 and how life has changed in that period it may be of some interest to historians.
Roger Lawson (Twitter: https://twitter.com/RogerWLawson )
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