Author: rogerwlawson

Breaches of the Peace and Stockmarket Trends

The demonstrations in London and other cities against Israel are clearly “breaches of the peace” and should have been prevented. They were not simply peaceful demonstrations calling for a ceasefire in Gaza. The police are being way too feeble in enforcing the law and should call in the army if they feel that they do not have sufficient resources to enforce calm.

A ceasefire by Israel is not going to happen unless Hamas releases the hostages they hold and stop firing rockets into Israel – that also requires Iran to stop funding the attacks on Israel by Hamas and Hezbollah.

The demonstrators against Israel are being completely unrealistic in their demands. Palestinians may have some grounds for complaints about their treatment in Gaza but they are not helping to resolve their problems by the recent terrorist attacks on ordinary civilians.

Stockmarket Trends

Have we reached the late stage of bear market capitulation as Paul Scott suggested last week? I certainly get that feeling so far as small cap stocks go. Good news has little impact while bad news causes abrupt share price falls.

Last week the main good news was that I had sold shares in Fireangel (FA.) and Strix (KETL) some time ago thus avoiding big losses, For example Fireangel has received a bid at 7.4p when I sold for a small loss in 2016 (originally bought at less than 300p in 2014). Reason for sale? Total lack of confidence in the management. Strix I held onto for too long resulting in a 36% loss. The company went into “diworsification” with some unwise purchases and the CFO has quit. Moral: it’s never too late to sell.

Safestyle (SFE) has been suspended and is “game over” with a likely nil return which I held briefly in 2016. Incompetent management seemed to be the problem.

CAB Payments (CABP), a payments business that only recently listed lost three quarters of its value after a profit warning last week. Moral: don’t buy new listings – wait until the business model is proven. I did not hold it. Similar problems at Argentex (AGFX) after the CEO left abruptly.

Difficult to justify buying small cap stocks even at current prices when big oil and mining companies are paying such high dividends and interest on cash deposits can be as high as 5%.

Rishi Sunak may have stabilised the UK economy after the Truss debacle but fears of a prospective Labour Government are undermining confidence in the stock market, particularly by foreign investors. With UK taxes too high there are clearly many people sitting on their hands waiting to see which way the economy trends.   

Roger Lawson (Twitter https://twitter.com/RogerWLawson  )

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Demonstrations and Breaches of the Peace

The police have suggested that they cannot act against people who organise demonstrations against Israel or Hamas and which might include “chanting” of slogans.

This is surely nonsense because you can be arrested for “behaviour likely to cause a breach of the peace”. See https://en.wikipedia.org/wiki/Breach_of_the_peace

The police undoubtedly have powers to halt demonstrations that may turn violent or which incentivise people to disturb the peace. So why are they reluctant to use them?

This is yet another example of the police being feeble and reluctant to take action when confronted by people willing to cause disruption for the sake of publicity.

Roger Lawson (Twitter https://twitter.com/RogerWLawson  )

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IBP Special Administration and Thames Ventures VCT 1

I have a very small holding in Thames Ventures VCT 1 (TV1). This is the remnant of holdings in other VCTs originally invested from 1997 onwards and which have generated a total return of minus 58% to date according to Sharescope although I doubt that is accurate due to multiple consolidations and name changes. I would have sold the holding long ago if it was not for the roll-back of capital gains roll-over relief that would have been incurred.

Now we learn that TV1 held some of its listed shareholdings with IBP Markets Ltd which has been put into Special Administration by the FCA “due to concerns whether there were appropriate systems and controls in place to ensure adequate protection for client monies and client assets at IBP”. About 20% of VCT1’s assets are held by IBP.

More information here: https://www.investegate.co.uk/announcement/gnw/thames-ventures-vct-1–tv1/special-administration-of-the-company-s-custo-/7824992

and here: https://www.fca.org.uk/news/news-stories/restrictions-placed-ibp-markets-limited-and-firm-enters-special-administration

Needless to say this is all bad news. Are the assets still there, and what will the administration of IBP cost and will it be charged against the assets? Those are key questions. Also how long will it take to complete the administration and have the assets released – too long is no doubt the answer.

The whole future of TV1 is also brought into doubt by these announcements. The investment management was transferred recently to Foresight Group who have experience of taking on dead ducks but with net assets of £91.9 million according to the last annual report and the reputational damage from these events some vigorous decisions are clearly required.

Roger Lawson (Twitter https://twitter.com/RogerWLawson  )

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Hotel Chocolat and Luxury Products

I am writing this while awaiting a phone call from the local hospital to see if they have a bed for me – needed to support a non-critical procedure. They have already cancelled two appointments previously due to lack of a bed which rather shows how the NHS is falling apart and simply does not have enough hospital beds.

To fill in the time I listened to Paul Scott’s latest podcast. He put the boot into Hotel Chocolat (HOTC) and I have to agree with him on it. I avoid all luxury food producers – chocolate, ice cream, wine etc. The words cause investors to salivate and to act irrationally. The word “gold” has a similar impact on some investors. These are “trigger” words that cause a pavlovian response – a subconscious desire to get involved and a sure way to lose money.

I have no opinion on the merits of what Hotel Chocolat sells although Paul said he did not like the taste. But any examination of the past record of the company should be enough to put anyone off investing in it.

Roger Lawson (Twitter https://twitter.com/RogerWLawson  )

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Banks and Following Other Traders

The travails of Metro Bank and its need to raise more finance have reinforced my conviction not to invest in bank shares. In theory there is a gap in the market for a bank that can provide a good local service through a branch network when the major UK banks are closing branches as fast as they can (there is not a single bank left in Chislehurst where I live when there used to be several only a few years ago). My sole brief contact with Metro Bank did not convince me they were a good alternative.

Esther Rantzen had an article published in the Daily Telegraph headlined “I’m furious with Barclays – I’m leaving after 70 years” which spells out the common gripes. It included the comment: “Barclays, for example, is paying a rate of just 1.6pc on its “Everyday Saver account”, while charging mortgage customers rates ranging from 5pc to more than 7pc. Certainly Barclays and other major UK retail banks seem not to care less about retaining long-standing customers by offering competitive savings rates. If you have a “no-notice” savings account there are now much better alternatives.

It’s surely a mistake in marketing terms to close bank branches. A customer visiting a branch is a great opportunity to sell them something new and to build a personal relationship. Post offices and pharmacies know the benefit of a steady stream of old and new customers walking through their doors every day so why have banks not developed services to do the same?

Following other traders

There was an interesting article in the FT today headlined “Copy trading: a road to riches or risk?”. Apparently some share trading platforms now enable you to follow other popular traders and replicate their trades. This is a service for those who don’t want to think about their own trades but just want to follow some guru. Or likely just follow the herd.

When I first started investing in the stock market I thought following others was a sure recipe for success. But as the article points out you are just as likely to be following others mistakes and prejudices. To make money you have to be somewhat contrarian.

I suggest such services need regulation because they encourage herd behaviour which can suck the inexperienced into trading manias rather than investing based on fundamentals.

Roger Lawson (Twitter https://twitter.com/RogerWLawson  )

Telegraph article: https://www.telegraph.co.uk/money/banking/savings-accounts/esther-rantzen-barclays-bank-loyalty-savings-interest-rates/

FT article: https://www.ft.com/content/beac06bd-61d2-4326-89f7-59a1689132a0?

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News from Israel and Paul Scott Podcasts

I missed most of the Northern VCT (NVT) webinar today as I was watching the BBC TV news at 1.00 pm and they did not send out a reminder. It was mostly bad news from Israel of course although trouble in the Middle East has resulted in a rise in the price of oil which has had a positive impact on my oil/gas company holdings. But the rest of my portfolio has fallen today at the time of writing which has been a consistent story of late.

I cannot understand the tactics of Hamas. The chance of them achieving a military victory over Israel I would view as negligible and politically by killing civilians they just encourage the hardliners in Israel to stick to their views. Retaliation from Israel will follow. Hamas will also destroy any support they have from the rest of the world. It’s certainly not a recipe for peace but for more war. What do they hope to achieve? It’s simply stupidity.

Monday is usually a positive day for stocks but not lately. Paul Scott suggests that one reason for recent falls in equities is fund managers of open-end funds having to sell to meet realisations by investors. Folks are ditching equities and piling into cash and fixed income bonds and he is probably right. This can only be a short-term solution though. I am keeping my powder dry until I see good market opportunities. Companies that generate real profits and cash are what I prefer to hold.

I did listen to the latest Paul Scott podcast this morning (readily available on the internet) and he had the usual wise words about markets and events. He writes for Stockopedia. His favourite phrase now seems to be “I dunno” even though he mostly gets his comments on companies right. Humility is always a good thing when commenting on markets.

There is a Mello webinar this evening starting at 5.00 pm. With its focus on small cap stocks this is a useful event to get the feel of the market and learn about smaller UK listed companies.

Roger Lawson (Twitter https://twitter.com/RogerWLawson  )

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Diversity and Inclusion Consultation

Both the FCA and PRA have issued a public consultation, to which you can respond, on the subject of introducing a regulatory framework for reporting of diversity and inclusion in firms (CP23/20). The FCA suggests that “greater levels of diversity and inclusion can improve outcomes for markets and consumers. In particular by helping reduce groupthink, supporting healthy work cultures, improving understanding of and provision for diverse consumer needs and unlocking diverse talent, supporting the competitiveness of the UK’s financial services sector”. But they provide no significant evidence of that.

What they are proposing is an obligation on larger organisations to provide masses of data on the sexual orientation, ethnic status, even religious adherence of employees.

Proposals set out for firms include requirements to:

  • Develop a diversity and inclusion strategy setting out how the firm will meet their objectives and goals.
  • Collect, report and disclose data against certain characteristics.
  • Set targets to address under-representation.

Will there be targets set in due course for the number of bisexual employees? What utter nonsense.

Basically it means a whole mass of new bureaucracy which I personally consider a complete waste of time. The FCA and PRA have more important matters to deal with. Even responding to these consultations I consider a waste of time so I will not do so. But if you have an urge to do so please go here: https://www.fca.org.uk/news/press-releases/fca-and-pra-propose-measures-boost-diversity-and-inclusion-financial-services

Roger Lawson (Twitter https://twitter.com/RogerWLawson  )

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Company Webinars, RIP David McCallum and Lord Harris Donation

I attended the Mello Trust and Funds webinar yesterday where a number of such organisations presented. That included Impax Environmental Markets, Ocean Dial and the India Capital Growth Fund, Polar Capital Global Financials Trust and JP Morgan UK smaller companies (JMI). I can’t say any of them excited me. When the market is trending down there is a tendency to switch holdings but usually to no advantage. The JMI holdings might have been interesting but their holding in Aston Martin Lagonda, a consistently loss making business, is enough to put me off.

I also attended a ShareSoc webinar on CQS Natural Resources Growth and Income (CYN). This company provides diversified natural resources exposure through smaller companies. It’s a closed end fund. Manager Robert Crayfourd said there were further legs to energy while ESG policies were constraining supply. These have blocked the capitalist response function.

But he confirmed the energy transition was happening and they have been focussing on battery materials. They are also keen on precious metals due to central bank demand.

With 36% invested in oil/gas and 7% in uranium which they are bullish on as demand is exceeding supply I asked why we should bother investing in smaller companies when large oil/gas companies are on high yields at present. Not sure I got a clear answer to that.

The historic financial record looks fairly boring with dividends flat-lining but it was mentioned they will have surplus cash in their investment account so the directors may decide to increase the dividend. In summary I was positively impressed by the presentation and it may therefore be worth further research.

Actor David McCallum, star of the Man from UNCLE, NCIS and other popular TV series, has died. I once landed at New York’s Kennedy airport after a transatlantic flight to find a long queue for a taxi. Confusion reigned as numbered tickets for your place in the queue had been cycled around so there were two people holding the same number. Then David McCallum rolled up and he was clearly in a hurry because he attempted to bribe the queue organiser – to no effect. A memorable occasion! 

Another blast from the past was the news report today that Lord Harris of Peckham, one of my former bosses, has donated £5,000 to Rachel Reeves, Labour shadow chancellor. He has previously been a big donor to the Conservative Party and an active supporter. He is quoted as saying: “Tories don’t deserve to win the next election” and there is a big profile of him in the Telegraph here:  https://www.telegraph.co.uk/business/2023/09/26/thatcher-donor-lord-harris-tories-dont-deserve-power/

He has made many charitable donations to schools and hospitals from the fortunes he made at Harris Queensway and Carpetright but I doubt this donation will win him many friends.

Roger Lawson (Twitter https://twitter.com/RogerWLawson  )

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Net Zero and Rishi Sunak

In Rishi Sunak’s speech yesterday he is clearly still committed to “net zero” by 2050 to tackle climate change, even though the UK cutting carbon emissions is unlikely to have any significant impact on the worldwide figures. It’s a pointless gesture which will mean we incur enormous costs which the public has not been informed about and to which they have certainly not consented.

But reality has been creeping in after people have discovered that their gas boiler plus their radiators will need replacing by inefficient electric heat pumps. Likewise new sales of oil/petrol powered vehicles were to be banned from 2030, ahead of most other countries, when electric vehicles are still more expensive, don’t hold their resale values and are inflexible in use.

Rishi’s speech is seen as a vote winner but it’s in essence a more pragmatic approach to reducing carbon emissions and relieving the burden on certain households.

It’s certainly worth reading his speech in full (link below) which was only reported in simplistic sound bites in the national media. He concludes by saying: “We are going to change the way our politics works. We are going to make different decisions. We won’t take the easy way out. There will be resistance, and we will meet it”. That surely means he is going to face down the idealists who don’t live in the real world.

But will Rishi manage to take the Conservative Party and Civil Service with him? That is the key question the answer to which we will see in due course. That’s assuming the Labour Party don’t win the next election and reverse the direction of travel.

My view is that this speech is well argued and veers well from extremes. But he will have difficulty convincing the environmental fanatics who have not been listening to reason for some time.

Rishi Sunak speech in full: https://www.gov.uk/government/speeches/pm-speech-on-net-zero-20-september-2023

Roger Lawson (Twitter https://twitter.com/RogerWLawson  )

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Three Webinars Today – Eleco etc

I attended three webinars today. The first was a presentation by Eleco (ELCO) on their interim results on the Investor Meet Company platform. They reported “revenues slightly ahead of expectations”. They seem to be successfully transitioning to an SAAS model from one-off software licence sales.

Annualised recurring revenue was up 18% and the company seems to be making the right decisions but I wish the CEO would sound more enthusiastic about future prospects. My view is that the financial profile is OK but not good enough to excite anyone at present.

Small cap software companies except in high growth sectors are not popular at present.

The second webinar was with Leicester University to discuss how they can improve their fund raising for IGAN research to which I have been contributing. They have ambitions to raise many more £millions. See https://le.ac.uk/igan for more background. I suffer from this kidney disease and have done so for over 25 years. The research is certainly worth supporting.

The last webinar was on interim results from MyHealth Checked (MHC) who sell a range of home testing kits (for Covid-19 and other diseases). Revenue was down as expected but Covid is now spreading again and panic is rising also. Too early to say whether this business is going to be successful or not. The CEO seemed a bit defensive about the prospects.

You can watch a recording of the webinar on the Investor Meet Company platform.

Roger Lawson (Twitter https://twitter.com/RogerWLawson  )

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