It’s a quiet public holiday today but I have a few things to talk about.
The financial media seem to be dominated at the present time by commentators who are forecasting doom for the UK economy. Bailouts by the IMF are forecast, rampant inflation and higher taxes because the Government is spending more than we can afford, or are raising in taxes.
That may be so although I never try to forecast national economics. Certainly higher taxes are eroding confidence in UK companies although fortunately many are more reliant on overseas businesses.
There were some interesting comments by John Baron in the Investors Chronicle this week. He has been reducing his exposure to equities in his “Growth Portfolio” and had this to say: “Apart from higher inflation, ever higher government borrowing across the western world is a factor [which has encouraged diversification into other asset classes]. Politicians need to face reality by cutting spending, which is growing faster than their economies can fund – in part due to ageing populations. For example, estimates suggest UK GDP would need to rise by 3 per cent every year in the coming decades to compensate. This will not happen. And taxes cannot keep rising. High government spending crowds out the private sector and, together with high taxes, stifles enterprise and economic growth…”
That’s a good summary of the current UK economy in my view.
But I am still looking to spend money personally – namely on a new laptop to replace my very old Windows 10 Lenovo one (purchased in 2021). Apart from it not being capable of running Windows 11, the battery now has a short life. The latest Lenovo Carbon X1 looks a good replacement and gets good reviews. I have been very happy with my old Carbon X1 so prefer to stick with the same supplier if possible.
I also have a Win 11 Desktop PC and a Samsung tablet I use for web browsing and book reading while in bed, so a new Lenovo laptop should keep me in IT kit for a few years.
If any readers have any comments on the above, please let me know.
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The UK Government has published its Industrial Strategy – see https://www.gov.uk/government/collections/the-uks-modern-industrial-strategy-2025 . It claims the Industrial Strategy is a 10-year plan to increase business investment and grow the industries of the future in the UK. It says the Strategy will make it quicker and easier for business to invest and will provide the certainty and stability needed for long-term investment decisions, but this is mainly hogwash.
With politics in such chaos at present (it is uncertain who might win the next General Election) betting on stability in government would be rash. But it might be worthwhile to skim the executive summary. The document is short on specifics although it does point to certain things that the government intends to tackle – such as the burden of regulation, the speed of planning, the high cost of industrial electricity and the reduction in regulatory burdens to speed innovation – previous governments have had such objectives but have conspicuously failed to achieve them. Why? Because the political leadership has been weak and the civil service has been adept at resisting change. In addition we are a nation of “nimbys” – full of people who oppose revolution in any form.
Even when some change is supported, implementation tends to be abysmal, as has been highlighted by the recent debacle at HS2. Originally planned to run from London to Birmingham, Leeds and Manchester the last two arms have axed but the cost will still be more than £100 billion – a quite fantastic figure.
This is a management problem in essence but the Government thinks that throwing money at the problems will resolve the difficulties – such as a new £500 million “Local Innovation Partnership Fund”. Socialist governments are always adept at spending money but not on how to manage where it is spent.
In summary I have no hope that the latest “Industrial Strategy” will improve the UK economy.
Postscript: This is what the AIC had to say on the Government’s proposals, which I agree with: Richard Stone, Chief Executive of the Association of Investment Companies (AIC), said: “It’s encouraging to see the government recognise VCTs’ important role in the venture ecosystem. VCTs could do even more to support the government’s growth ambitions if they had greater freedom to invest in scale-ups. We’d like the government to increase the investment limits and abolish the age limits for VCT investments. This would allow VCTs to effectively mobilise capital to invest in more British companies with great growth potential.”
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Dropped into my local petrol station this morning for a refill and as I often do at the same time, bought a Bounty Bar (coconut flakes in a chocolate coating made by Mars).
But it has definitely shrunk in size very considerably since two years ago. I haven’t checked the price changes (I don’t even look at the price of petrol), but I do object to them reducing the “sugar rush” I get from eating them. This is surely a big marketing mistake which should be reversed.
Maybe they’ll hope I’ll buy two instead of one? Or turn it into a bogof at a higher price?
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Whenever a socialist government gets elected, they think they can improve the economy by interfering in the decisions of capitalists. The current thinking seems to be that pension funds will be the next target with defined benefit pension schemes being encouraged to invest in big infrastructure projects covering transport, housing and energy.
This might be extended to target ISAs and SIPPs. ISAs hold as much as £750 billion but a lot of it is in Cash ISAs which don’t contribute much to the economy in terms of financing businesses. In total UK pension schemes, including SIPP pensions, hold a vast amount of assets, totalling over £3 trillion. This is a very attractive target for any Chancellor.
ISAs have been very successful in attracting savers because of their tax-free status and simple administration. SIPPs have also proved attractive in pension savers who want more control over their pension funds. It would be a shame if there was interference in these successful models. But the government apparently thinks that more of the money should be directed to financing UK companies. At present there are few explicit limits on what ISAs and SIPPs can invest in. And it is difficult to see how such limits can be imposed when investment trusts and funds which are listed or registered in the UK can pick from any listed companies worldwide.
The big issue for individual investors is whether the government should be interfering in the investment decisions of savers. The assets held in ISAs and SIPPs should not be diverted at the whim of civil servants or politicians who have proved to be incompetent investors if you look at history – British Leyland is a great example.
If investors wish to invest in the US economy instead of the UK’s – why should they not? This has proved a very successful investment strategy in the last few years mainly because US companies are better managed and operate in bigger markets.
Any wise investor does diversify investments geographically even if by doing so they expose themselves to currency exchange rate variance. Pensions in particular are long-term investments. The world economy might look very different in 30 or 50 years’ time so backing UK businesses may be perverse when Chinese companies might be dominant.
SIPPs are a particular issue because most SIPPs are written in trust. They are not owned by the investor in them but whoever is named as the beneficiaries. Government interference in where the money is invested breaches the fiduciary duties of the manager, whoever that is.
The key question is: “would diverting pension funds into infrastructure projects actually provide a good return?”. That is a very difficult question to answer and the answer might change over time. But if such projects do provide a good return then there are plenty of funds willing to invest in them and take any risks associated with doing so. They do not need the government to start interfering.
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With the Reform Party winning the by-election in Runcorn, its first two mayoral positions, and taking control of a number of local councils in England, it is clearly on a roll. Is this the end of two-party politics as Nigel Farage has suggested? Perhaps I would say but if it’s a victory for democracy it’s also surely more down to having two weak leaders in the Labour and Conservative parties while Nigel Farage represents the views of many on the big issue of immigration.
But it also demonstrates that Reform have built a local party machine with active supporters who can win elections, and have the funding to do so. They are not going to go away. Even more to the point, it suggests that we really do need a system of proportional representation to stop the “winner takes all” and divisive politics of the older parties. The socially divisive Labour and Conservative parties need to change their politics and public images so that they can represent everyone.
VE-Day Reminiscence
VE-Day which celebrates the end of the war in Europe is on the 8th May. It’s a good moment to recall what my father wrote in his diary on that day in 1945.
My father worked for Boots in a reserved occupation maintaining their power station. Although he did briefly join the Home Guard he generally avoided military service. This is what he wrote in the days before and after the celebration day:
Sunday, May 6. Yesterday afternoon I did three hours hard work fixing a 1 kw heater in the upstairs water tank. I scrounged it from Bob some years ago and it will probably come in handy next winter, when coal supplies look like being even less than last. It was raining hard all day but milder.
Today was bright and sunny but there was a cool wind. Out before dinner with Grandpa and the lad and again after dinner to the University Park [in Nottingham] and took two snaps [one below is of my mother Nell and brother Adrian].
There was nasty news last night of the Russians dealing with the so called Democratic Poles, whom they now admit, after much delay and prevarication, to have arrested on vague charges of “sabotage” etc! A shocking business, which hasn’t made a good impression either here or in the USA. The Russians are a bit too keen on setting up their own governments in the liberated countries and I fancy we are not going to stand for it very much longer.
Wednesday, May 9. Well at long last, the announcement came of the end of the war in Europe. Rumours were circulating at 3 o’clock on Monday but I didn’t take much notice until CHJ told me and Fred Sutcliffe that it was semi-official and that the news would “break” at 9 pm. We argued for an hour about what to do; but in the absence of definite news, we decided we’d wait and see. At 8:30 pm the announcement was made that Churchill would speak at 3 pm on Tuesday. I rang CHJ and he was in a fog and told me he would get Bull. He did and told me that Bull also couldn’t make up his mind just whether it meant 2 days or only 1 day’s holiday. But at the 9 pm news it was made quite clear, so I went down there and got the arrangements made.
Yesterday I went to work, just to make sure but found the boys all shut down and away (by 8:40 am!). Jack Spenser rolled up also by 10:30 am and we adjourned to the Chequers, where a crowd was congregated waiting for opening time at 11:30 am. We got a pint each and by 11.50, the beer was all sold and we had to content ourselves with a Guinness each in a pint mug. I paid for that in a headache, which lasted the rest of the day. After tea, Nell and I went to the pictures but after three quarters of an hour, I couldn’t stand any more, so we left. Where such drivel comes from I don’t know. I forgot that after dinner, being fine and sunny after rain, we went into the University Park, where I got two snaps. The evening was quiet except for a few fireworks in the garden 2 doors away. Bed by 11 o’clock, very thankful that the job is finished.
VE Day Today was a grand day of sun, though with a fairly high wind. We took Adrian out before dinner and after, I went with Nell to play tennis but we only got 20 mins play when Adrian began to howl, so we were forced to abandon the game. We were home by 3:30 pm and after taking my last snap, we have just packed him off.
Well, I wonder what will happen now. All the shouting is still to do but on the whole, I fancy we may see a steady rise in our standard of living for the next 10 years; after that I’m not so sure. But there is much reconstruction to be done and I think Germany will be no great competitor for many years. Russia and the USA will take some holding though and whether the Commonwealth will hold together much longer is an open question. Sentiment alone counts for little now.
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My father clearly foretold the threats from Russia and the USA which we are still living through. But the UK economy was in a dire state in 1945 and the difficulties are made clear in the book by Ed Conway which I reviewed here: https://roliscon.blog/2025/02/24/book-reviews-j-d-rockefeller-and-ed-conway/ . It covers the Bretton Woods conference which set the structure of international finance since 1945.
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Easter gives one time to review your share portfolios. In last week’s Investors Chronicle John Rosier reviewed his portfolio and the impact of Trump tariffs. He has been “purging” US exposure from his funds portfolio. He has sold Polar Capital Technology (PCT) and JPMorgan Global Growth and Income (JGGI), both of which I hold, and several others. The exposure of Fundsmith Equity to US Stocks also proved unhelpful to his overall performance and mine.
With the S&P 500 down 10% in the last six months, is it time to refocus on other markets and dump US holdings? I am not so sure.
It has certainly been the case that buying the US markets has been a simplistic trading strategy in the last couple of years. You couldn’t go far wrong by investing in US companies or US index trackers. Tariffs will certainly have a negative impact on the US economy and several other countries. China should be particularly badly hit.
But has the world really changed? Famous investor Warren Buffett has said in the past “never bet against America” and he has proved right so far. The size and vibrancy of the US economy is not easy to beat and trade tariffs may only have a temporary impact. The US economy is so attractive to the best and brightest immigrants that it is like a lamp to a moth. That accounts for much of the success of the US technology sector in recent years.
It’s exceedingly difficult to predict what will happen to the world economy and changing portfolios based on short-term economic forecasts is surely a mistake.
There may be some opportunities to pick up as panicking investors dump holdings of US stocks or funds because they are scared of what Trump might do next, but this is surely a time for holding one’s nerve, not for responding to emotions. The dominance of index tracking funds is making the waves of emotions that sweep stock markets more pronounced than ever but now is not the time to ride those waves.
With signs that progress on peace in Ukraine and Gaza is looking more likely, it is time to be optimistic rather than pessimistic about the state of the world and the major economies.
The UK economy is a different story though. Higher taxes are going to have a negative impact while Trump is aiming to reduce US taxes by cutting Government expenditure. He surely has the better strategy.
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I missed watching Rachel Reeves giving her Spring Statement live because it clashed with a presentation from M.P.Evans Group (MPE) I wished to watch – see below. But there were numerous reports I could read later. There were no great surprises. The Chancellor is aiming to save £3.4 billions on welfare payments and £3.6 billions on “other departmental” costs. But there is increased expenditure on the Justice Department to offset that.
A discussion on tv channels afterwards suggested that some benefit recipients, presumably those receiving Universal Credit payments, will lose over £4,000 per year. There is going to be some squealing as a result no doubt. But when you have to cut your budgets to stay solvent, then there is little option.
M.P. Evans Webinar
M.P. Evans Group is a producer of palm oil and associated products in Indonesia (mainly Sumatra). I recently purchased a few shares and the presentation of their final results was most informative – and kept me awake that is more than I can say for some webinars.
There was a useful slide showing the breakdown of the vegetable oil market. That includes rapeseed oil which I recently commented upon and am now avoiding. Palm Oil is now taking up a larger share of a growing market which now includes usage in biodiesel. Production by MP Evans was much the same as in the previous year despite challenges from dry weather but prices of palm oil increased so revenues and profits increased last year. They could therefore afford a17% increase in the dividend.
On a prospective p/e of 8.8 and a dividend yield of 4.8 according to Stockopedia the shares do not look expensive but there may be substantial risks from investing in a country with its main operations in Indonesia even if the company is registered in the UK and has a long track record. It will clearly be sensitive to commodity prices.
It was interesting to note that the war in Ukraine had an impact on the company as their costs are affected by the price of fertilizer.
I will do some more research on the company and track it for the moment.
The MP Evans webinar was on the Investor Meet Company platform and will no doubt soon be available as a recording there.
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The BBC broadcast a documentary this week commemorating the five-year anniversary of the start of the Covid-19 epidemic. It is entitled “Love and Loss – The Pandemic: Five Years On”.
I watched it because I thought it might be of interest but it mainly consisted of individual sob stories. It didn’t attempt to trace the cause of the epidemic or the Government’s reaction to it. You can find the programme on BBC’s I-Player.
If you wish to trace the track of the epidemic and the prevention measures taken in the UK you might do better to read the diary I started in 2020 which was later published on Amazon under the title “A Journal of the Coronavirus Year”. See https://www.roliscon.com/journal-of-coronavirus-year for more details.
I started it because I thought I had little chance of surviving as I have a suppressed immune system but I never got the infection. That may be because I had numerous vaccinations for the disease and was careful to avoid crowds and public transport.
Some members of my family did seem to get infected but with relatively mild symptoms.
It is still unclear exactly where the disease originated from but it now seems likely that it escaped from a laboratory in China that were experimenting on viruses. The latest death toll from the disease is reported to be over 7 million worldwide.
The cost of the epidemic had a major impact on the UK Government’s finances and we will learn the latest bad news on that later today when the Chancellor gives her spring statement.
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We woke up this morning to the news that President Trump is getting tough on trade tariffs to reduce US imports. With up to 25% on imports from China, Mexico and Canada this could be seriously damaging to their economies and raise the cost of living in the USA. Although it is not clear what the impact will be on the UK or the rest of Europe we cannot expect to get off completely free.
Trump is aiming to reinvigorate US industry by ensuring it can compete with economies where labour costs are lower. That is not an unreasonable proposition but the method chosen is a very blunt instrument. It has already had an impact on worldwide stock markets (my own stock market portfolio is down 1.6% today at the time of writing and it was down also on Friday).
Some of the damage done is from the aggressive rhetoric that Trump has chosen which may fade over time as countries affected retaliate but clearly some sectors of the economy could be badly affected.
The world is now a very complex economy with industries and countries very dependent on each other. A recently published book that explains some of this is the book “Material World”.
Book Review: Material World by Ed Conway (subtitled: A Substantial Story of Our Past and Future).
This is an educational tome which explains what the sources and uses of common products such as sand are – in that case in the semiconductor industry in the form of silicon.
It’s certainly a very good analysis of some industries but at 501 pages it is yet another book that is too long for my liking. However it helps to explain why countries are so interdependent. Although interfering in the free economies can often be worked around at pace (as happened in World War II when Germany had to invent substitutes for some products as it lost access to oil and rubber) it is economically damaging in the short-term.
Free trade is important to maintain if you want a vibrant economy.
The UK has just decided to damage its own economy by a decision in a Scottish court that permits for oil and gas exploration should take into account end-user emissions. This is judges taking decisions that should be reserved for politicians and the electorate. This could be very damaging for companies such as Shell who planned to develop the Jackdaw gas field. Let us hope that this decision is overturned but with Ed Millibrain as Secretary of State for Energy and Climate Change I am not hopeful that the UK Government will see sense.
Meanwhile China and the USA are expanding energy production (hundreds of more coal mines in China for example) while the UK simply reduces its own energy sources and becomes more reliant on foreign imports. We cannot replace electricity production by wind and solar farms alone and expanding the electricity grid is not a short-term fix.
Politicians need to read the Conway book for enlightenment.
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The ONS has forecast that the UK population will rise by 5 million people to 73 million by 2032. This is being driven by immigration which in my opinion is way too high. The only positive aspect is that it will increase the working population which might help to cut the need to raise taxes. But it will place a heavy burden on social services, doctors, schools, etc, which are already over-stretched.
The transport network is a major problem with insufficient capacity to cope with the number of houses being built to house the increased population. I live in the London suburbs and traffic congestion has already increased substantially in the last few years and it is obviously going to get a lot worse as there are no plans to improve the road network. Don’t expect Sadiq Khan to do anything about it.
Where are the additional 5 million people going to be housed? We need another few cities the size of Birmingham so where are they going to go? England’s green and pleasant land will soon disappear.
There is also a looming problem with the capacity of the electricity network which faces increased demand from electrification to meet irrational net-zero carbon emissions.
But the current Government seems to have no clear plan to curb population growth. They may be attacking “illegal migration” but most of the inward migration is people on work visas or family relatives. There are also many “asylum” seekers who are really economic migrants. There are no clear targets or plans for how to stop the population growth which we desperately need. I have said this before and the scenario does not change.
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