Brexit Hangover, You’re Not Laughing Now

The markets falling, England lost to Iceland in a football match, and there is gloom and despondency everywhere. Much of the country seems to be in a post-party hangover. It therefore seems a good time to review the situation and try to give some explanations for what has been happening.

Firstly, you have probably guessed, as did my local M.P. without me telling him, that I voted for Brexit. Je ne regrette rien, as one of our partners that we intend to divorce might say. There were clearly some risks to the economy, and to particular sectors, but I judged them to be longer term rather than short term. The key for me was that I wish to live in a democracy, not a bureaucracy. But it is likely to be two years or more before we are out of the EU, and that’s even assuming there is no further renegotiation to keep us in or some other fudge devised by those in Parliament who oppose it. Even George Osborne has decided he does not now need an emergency budget after all – the threat was surely part of the “project fear” campaign. So the rapid decline in sterling and some shares was somewhat surprising.

And just to make it clear to Ms Sturgeon in Scotland, and Mr Khan in London, Parliament has the ultimate authority to take us out of the EU based on the Referendum result, if they choose to do so – or not as the case may be. Also Ms Sturgeon cannot invoke another Scottish independence referendum or block an EU exit without the consent of the UK Parliament.

What seems to have been happening in the last few days is that overseas investors (who may know little about the detail of what might happen) have been dumping UK stocks wholesale. Bear in mind that such holders now have the largest proportion of the UK market. So they have particularly been selling FTSE-250 stock and those exposed to the local economy. Whereas those companies that have more international business and dollar revenues, and who benefit from the falling pound, have been more favoured.

As the pound falls, so the perceived prices of UK stocks viewed from overseas falls, so it has encouraged a stampede to exit. But then UK businesses start to look cheap so we might see some takeover activity in the long term but the earnings also look cheaper of course. Those that have exports and hence income in other currencies might be particularly favoured. However, these effects take time to work through when at present we are in an irrational and short term state of panic.

Both commercial property and house-builders have been particularly badly hit. The former by the threat to London office demand as folks allege that the financial sector might move thousands of jobs out of London (to Frankfurt, Dublin or elsewhere). This seems to be based partly on the possible threat to “EU Passporting” capabilities for financial services (although the FT reported that might not be at risk after all) and by the EU attacking the dominance of London in that market. Whatever transpires, it does not seem likely to me that this will happen overnight. Moving such business is not a simple task and most commercial property companies have longer leases so the tenants have to keep on paying regardless. In addition the proportion of City/West End space let to Banks and Insurance Companies is less than you might think and has been coming down (even British Land whose share price fell by 25% only has 38% of its lettings to banks and financial services companies). In extremis, offices can be converted to other uses. In addition many UK listed property companies have substantial holdings in Europe and TR Property Investment Trust, one of the most popular general property holdings for private investors, has 50% of its holdings in European properties and companies.

Banks were also badly hit allegedly on the threat of a downgrade to their credit ratings, and in sympathy with the Standard & Poors downgrading UK sovereign debt. But the exact impact on banks of Brexit is not at all clear.

Actually it may not be a bad thing for the UK economy to lose some of its financial sector work. The UK economy is way too over-dependent on the financial services sector which is why the financial crisis of 2008 hit the UK very hard in comparison with other countries. Indeed it became Government policy to develop a wider spectrum economic base.

House-builders have fallen because of the possible “lack of confidence” engendered in house buyers and reports from London that the market is slow and prices falling. But London is not the country and it has been recognised for some time that the market for high-end properties has over-heated. But the fall in the pound actually makes UK property cheaper for overseas buyers, where a lot of them come from for such properties. For houses in general it’s worth noting that Rightmove reported recently that house price sales in May were at a record low in terms of duration, i.e. houses are selling faster than ever. If it’s slow now then that’s probably just the traditional slump in the summer months. It’s also worth noting that HSBC has been offering a record low interest rate of 0.99% (two year fixed rate) and the demand for new houses is driven by the structural deficit in the house sector and the availability of low costs mortgage. Neither factor is likely to change in the short term. A growing population needs more housing and with not enough production that will not change for years.

Will the lack of immigrants reduce the demand? No because not only is the demand still there, but in the next two years the number of immigrants may actually rise as they try to pre-empt any restriction. In any case past immigrants are mainly young and fertile leading to a rapid “organic” growth in the population as they procreate.

So in this writer’s view the worries about the commercial property and house-building sectors are grossly overdone.

Other companies badly affected have been banks, retailers, and others focused on the UK economy. So companies such as Whitbread and Restaurant Group have fallen back. Will we drink fewer coffees, consume fewer leisure meals, or rent fewer cheap hotel rooms? I doubt it – at least not in the short term. Any impact on these companies surely depends on a wide general recession in the UK but one can understand why overseas holders might be selling in panic mode. Retailers such as Dunelm and Topps Tiles have fallen substantially. Will UK buyers buy less homeware or stop refurbishing their houses? That seems unlikely, but those companies might be affected by the large amount of goods they import which may be at higher prices.

What’s the impact on companies such as Whitbread who you might think employ a lot of low cost immigrants? Firstly the supply may not change much as pointed out above. And secondly they are not as high a proportion of UK shop, hotel and restaurant workers as you might think which is only 8%. As usual the view of Londoners where most of the scribblers reside may be distorted in relation to the whole country.

There is the general impact of the falling pound to consider of course. Many companies will benefit. Indeed many countries of late have been in a “race to the bottom” to reduce their interest rates, reduce their currency value and hence boost their export economies. So oil companies such as Shell and BP and major exporters such as Rolls-Royce and Diageo have actually seen their share prices rise. Companies such as National Grid have also benefited from their “defensive” nature and the fact they have major overseas businesses. But smaller companies have been the victim of the “sell everything” stance of foreign investors.

Those companies that are very UK focussed and which are unlikely to be affected by short term economic trends have been particularly badly affected – for example EMIS who primarily sell to the NHS and which has fallen 20%. Will the Government be reducing health service expenditure? That seems highly unlikely even if there is a general recession.

So my conclusion is that if you are a UK based investor, then some of the recent price falls have made for buying opportunities. Certainly I have been purchasing stocks as have many other private investors it is reported by trading platforms. But the key is to pick out the irrationally priced companies from those that might be affected in the longer term.

One final comment. It is interesting to speculate what might happen to UKIP, a party with a single policy which they have now achieved. At least they might soon do so. Will they wind-up as many wish who hate the “popular” style of Nigel Farage or transmogrify into a more broader based policy platform? Mr Farage repeated his quip which I had heard before to the European Parliament yesterday when he said that when he first joined the Parliament many years ago and said he wanted the UK to leave “You all laughed at me. Well, you’re not laughing now”. This is of course a paraphrase of Bob Monkhouse’s classic joke “When I said I wanted to be a comedian, everyone laughed at me. But you are not laughing now”. That resonated well with UK audiences but fell flat on Euro MEPs.

We could certainly do with a few more laughs in the current state of political affairs.

Note that the writer of this note holds some of the stocks mentioned therein.

Roger Lawson

Bargains You Could Not Pick Up

As I predicted might happen in an earlier blog this morning, there was a panic when the market opened as the pound was already down substantially. But if you tried to pick up some bargains, it was damn difficult. Retail service providers who provide electronic quotes to brokers seemed to stop providing them, and just logging into some retail platforms proved very difficult. Even if you managed to log in, the service was so slow that it was impossible to do much. Could you phone them instead? No because their lines were all clogged up. This affected The Share Centre, AJ Bell YouInvest and Hargreaves Lansdown and probably others. Only Charles Stanley Direct seemed to be operating near normally if somewhat slowly.

Surely this is simply not good enough in the modern age, and it is not the first time this has happened. IT systems should be built to cope with exceptional volumes and adequate stress testing should be done on a regular basis. Perhaps we should complain to the FCA who regulate such organisations because this shows either lack of investment or plain incompetence?

One key question I don’t immediately have the answer to: are private shareholders being prejudiced as against institutional investors? The latter may use different trading systems.

Anyway, there was an indiscriminate sell-off of shares early in the morning, although it has recovered somewhat at the time of writing. Property companies and housebuilders were badly affected which seems somewhat of an over-reaction to me. Even those companies with large international businesses were hit although Rolls-Royce was one of the few risers – the fall of the pound will have a positive impact there and presumably sales volumes are expected not to be. But for the reasons given above, it has been difficult to take advantage of the really great opportunities today in this writers experience.

Roger Lawson

Brexit Result Impact and Tesco AGM

The result is in, and the people have spoken. We will now leave the EU, unless of course there is some more re-negotiation or other fudge which would probably require some U-turns by politicians. They are of course adept at finessing such manoeuvres so don’t be surprised if the outcome is not quite as simple as it might first appear.

The pound has already fallen substantially (I am writing this just before the stock market opened). Is that a disaster? Not quite because it will actually be beneficial for major exporters and for those large FTSE-100 companies that are global businesses and earn much of their profit overseas. That’s at least so in the short term although there is a risk to long term trade if we cannot negotiate good trade deals.

Those companies (such as Whitbread whose AGM I attended a couple of days ago) who are mainly focussed on UK customers may be little affected unless the UK goes into recession and household income is reduced or taxes rise. The threat by the Chancellor to bring in an emergency budget would be seriously damaging to the economy, but probably also to his and Dave’s chances of staying in power.

The key surely is for the Government not to rush into invoking Article 50 which triggers the 2 year countdown to exit.

It is of course possible that stock market traders may simply panic, particularly the international holders of UK stocks which are now the majority, as they may not understand the finer points of what might happen. In that case there should be some bargains to pick up. In these kinds of circumstances it’s a good idea to be flexible in temper and see what arises.

Interesting to read the press reports of the Tesco AGM yesterday. It seems that shareholders were not impressed by moving it to Excel in East London. The travel disruption in London because of the storms was a major problem which I suffered from also. I was heading to a meeting at the London Stock Exchange to discuss AIM, but we arrived an hour late having to divert via the DL:R, taxi and walking. The way back to Chislehurst was no better with trains cancelled or delayed. But it’s certainly true that Excel is not the ideal location for AGMs (I only recall attending one there before which was Barclays). ShareSoc recommends that AGMs be held in convenient locations in central London (the City or West End) as that maximises attendance and assists those shareholders who wish to attend.

Roger Lawson

Whitbread AGM Report – More Fun Than Lloyds?

The Whitbread Annual General Meeting took place at Church House Conference Centre in Westminster on the 21st June. This was one of the few FTSE-100 AGMs I have attended where the Chairman seemed to pay good attention to the views of private shareholders rather than considering it a tedious 2 hours that had to be suffered.

In addition shareholders (and I am a new one) could learn a great deal about the strategy of the company and its affairs from the meeting. In short, an example to be followed.

This is a very brief report on the meeting – a summary of a much fuller report available to ShareSoc Members. ShareSoc now publishes many such reports which can be very informative for investors who cannot attend in person, or do not currently hold the stock.

Some background first: Whitbread now has three main business strands: Premier Inn budget hotels, restaurants (Beefeater, Brewers Fayre, etc), and the Costa coffee shops. The former two tend to be lumped together in reporting as “Hotels and Restaurants” with little discussion on the latter probably because hotels are growing more rapidly and that is where money is being invested.

Whitbread has grown strongly in the last few years due to the roll out of new Premier Inns and Costa and the share price grew to match. It reached a peak of about 5,400p in March 2015 but then declined down to a low of about 3,700p in March this year. This was probably due to the perception of analysts that growth in future might not be as rapid but a view also that the coffee shop market might be becoming saturated. In addition the departure of the well respected CEO Andy Harrison during the year and replacement by the inexperienced (at least in this business) Alison Brittain may not have helped. However the share price has perked up more recently, and the trading statement issued on the morning of the AGM helped further (up another 1.6%). As the Chairman indicated in the meeting, Whitbread is one of the few FTSE-100 companies where profits have been growing in recent years.

What follows is a report of what was said at the meeting, summarised and paraphrased for brevity.

The Chairman, Richard Baker, commenced by saying sales grew by 12% last year with underlying earnings per share up by 11.7%. Positive cash flow funded development of their brands and also enabled a 10% increase in dividends.

They have made a positive start to the new year – see the announcement made on the morning of the meeting. He introduced the new CEO and said she had already reviewed the strategy. He said she has brought some fresh thinking to the company and “as great businesses grow they must also improve”.

The CEO then gave a presentation. She said she had reviewed the business and would share a few conclusions. She summarised the results for last year – it was a combination of like-for-like growth and expansion of the business. Return on capital was a healthy 15.3% and the leverage was a comfortable 3.1 times. The first quarter results were sales growth of 8%. Costa has done well and Premier grew in a competitive environment. Restaurants were up 0.2%.

They have a clear strategy for profitable growth with opportunities for organic growth. Some 86% of customers at Premier Inn book directly via their web site which is a great competitive advantage. Their growth targets are:

– Premier Inns to reach 85,000 rooms by 2020 (implies market share to rise from 9% to 11%).

– Costa to achieve £2.5 billion in sales.

They are focussed on delivering growth in eps while maintaining a good return on capital (comment: something I always like to see). But the external environment is evolving. Competitor dynamics are changing – for example AirBnB, the rise of artisan coffee chains. Costs are under pressure and there is increased competition for skills and people. They also need new capabilities in IT and digital.

In the UK there continue to be growth opportunities in Costa. But expectations of customers are rising – for faster service, fresher food, digital loyalty schemes, etc. They will also continue to innovate in Premier Inns – new pricing schemes and “Hub” hotels so as to gain access to new customers, segments and markets. They have a pipeline of 12 Hub hotels (City centre formats). There are lots of exciting opportunities and the international business is only at an early stage of development. The company has grown rapidly in the last four years and they need to invest in people, skills, IT systems and digital.

We then moved onto questions from shareholders, of which I’ll just cover a few.

One shareholder questioned the rise in debt. The Chairman responded that the company can borrow at much less than the current return on capital so they are taking advantage of that to grow. The CEO mentioned international opportunities, particularly Germany and said they need to speed up exploitation. In response to another question it is was mentioned that this year will see increased investment in IT systems, through to 2020.

Another shareholder welcomed Ms Brittain and said it must be a shed-load more fun than working for Lloyds Bank.

I asked the following questions, after thanking the CEO for an informative presentation and the Chairman for handling questions intelligently:

  1. I commented on the lack of segmental analysis – e.g. revenue, profits and assets by business line and geography which is normally in Note 1 to the accounts, but here is patchy and spread throughout the report. Answer: they will look at this.
  2. I complained about the backgrounds of the non-execs which seemed mainly irrelevant. Could we have some with a “hospitality” background next time they recruit one. Banking showed how important it was to have non-execs who understood the business. Answer: some directors have relevant experience but comments noted.
  3. As remuneration policy is currently being reviewed (for 2017), could they please simplify it – for example the Investment Association have raised this point. I also suggested bonuses of up to 367% of base salary were excessive. Answer: they are taking on board comments. Note: I spoke to Mr Williams (head of Rem Comm) after the meeting and asked him to look at the recently published ShareSoc pay guidelines which he will do. I also suggested maximum bonuses should be more like 50%. He said the existing LTIP had resulted in very high payouts because of the unexpected growth in profits and hence share price – latter up 5 times in a few years. Comment: so perhaps one reason the former CEO could afford to leave was the enormous payouts?

There was a question re increasing dividend and share buy-backs. The CFO responded: We don’t do buybacks because we can get a good return by investing the cash. Comment: a good response and one I always like to hear.

We then moved to a poll using electronic voting devices. This was efficient and quick, and enabled us to see the results immediately although I still prefer a show of hand votes. But if companies are going to use a poll, this is the only sensible way. There were only 4.6% of votes against the Remuneration Report, 7 to 8% against share allotment resolutions which is unusually high, 8% against the change to 14 days notice of general meetings, and surprisingly 28% against the re-election of Sir Ian Cheshire. It was reported in the media the next day that this was because he had missed three board meetings last year (one was “unscheduled” and he had prior commitments for the other two). He has not missed any so far this year. This seems somewhat of an over-reaction to a minor issue but no doubt it brought it to his attention.

In summary, a useful AGM for shareholders. I wish more were like this but it demonstrates that it is not difficult to revive the format if directors have the commitment.

Roger Lawson

Cash or Shares. Which is Better?

An interesting article in Saturday’s FTMoney (18/6/2016) by Paul Lewis suggested that you might be surprised to learn that if you had invested £10,000 in a cash account in 1998, you would have done better than investing in a FTSE-100 index tracker. It’s surely odd for the Financial Times to persuade their own readers that cash is better than equities because a choice of cash might mean they no longer needed to read the FT – they could just use a comparison service such as Moneysupermarket.com once a year to pick the best deposit account. But nothing about the editorial policy of the FT surprises me of late after their persistent promotion of the Brexit “Remain” platform. Has the purchase of the FT by Nikkei started to affect its editorial policies one begins to wonder?

But back to the arguments put forward by Paul Lewis because if he is right then ShareSoc (which promotes individual stock market investment) might as well wind up. So it’s worth looking at the facts with some care.

His detail analysis is based on comparing an HSBC FTSE-100 index tracker with the best buy deposit account that was available each year since 1995. The HSBC index tracker is low cost (0.18% in charges p.a. he says) and is one of the few that goes back that far. So that is fair enough, although selecting a specific time period when the stock market is widely variable in level over the years might have been prejudicial. Picking the “best buy” cash deposit also somewhat slants the picture because the deposit accounts offering the best interest rate are likely to be smaller and less known ones which few people might select – for example they might be more risky. Now Mr Lewis identifies that Charter Savings Bank is paying 1.66% for one-year fixed rate bond, and Moneysupermarket suggest OakNorth Bank at 1.61% and Habib Bank Zurich at 1.51% – not exactly household names. The better known Sainsbury Bank only offers 1.30% and that only for deposits of up to £200,000 at the time of writing. As any investor knows, a small difference in interest rates, compounded over many years, will make a big difference to the outcome. But Mr Lewis claims cash beat shares in 57% of the five year periods beginning each month in 1995.

This kind of analysis is not new to me because the author of the book “Monkey with a Pin” (which is on our recommended reading list) came to similar conclusions a few years back. It is difficult for private investors to beat cash returns because their equity investments via funds are eroded by charges, many of which are hidden.

One big defect in this argument is of course that only a fool would have been solely invested in the FTSE-100 in recent years. This is an index dominated by mature companies in sectors that have been strategically challenged – oil/gas, minerals, pharmaceuticals, or which have simply hit an exceptional economic and regulatory crisis such as banks which might be one of those “black swan” events that only happen once in a hundred years.

Mr Lewis does point out that the Barclays Equity Gilt Study, which is published annually, shows equities outperforming Treasury bills or cash over long periods of time (their data goes back to 1899), but he argues that is because the charges on equity funds are not included, and cash does not reflect the real rates obtainable.

Of course there are many more equities that could be invested in than solely the FTSE-100; for example foreign stocks/markets, FTSE-250 and small cap stocks, even AIM stocks. One just has to look at the long term performance of some of the large investment trusts to see that they have consistently beaten inflation, which cash has not. Indeed cash and government bonds have been particularly poor during periods of high inflation while owning part of a business via an equity stake actually inflation proofs your portfolio to a large extent.

Even the editor of Investors Chronicle when commenting on our campaign to improve AIM pointed out that in “pure performance terms, the AIM market has actually outperformed the FTSE-100 over the past year” (Editorial in 10 June edition). Before you get too excited though one of our correspondents pointed out that the AIM index is grossly distorted because it does not take account of companies leaving the index – a lot of which may subsequently have fallen on hard times. So as ShareSoc keeps warning people, you have to be selective about AIM stocks and it is not a market for the inexperienced or unsophisticated investor at present.

But in conclusion, I regret to say I am not convinced by Paul Lewis’s article mainly because I know that I have done a lot better than cash over the years myself. I can only go back in my records (which are very detailed) to 1997 but my average total return (dividends plus capital) have exceeded 20% per year. There are other well known investors such as John Lee who writes for the FT who have achieved similar figures, and Warren Buffett has done even better. Indeed I suspect other ShareSoc directors and members have done as well or better without knowing their exact performance figures. This suggests that you simply have to take a more intelligent approach when investing in equities than simply selecting a FTSE-100 tracker.

Roger Lawson

Where Bonds are Concerned, Trust No-One

The news that the holders of Lloyds bonds (ECNs) have lost their legal battle in the Supreme Court reinforces the message that when it comes to investing in bonds, you should trust nobody – not the issuer of the bonds, your friendly stockbrokers and wealth managers who advise you, or the FCA to protect your interests.

The bondholders won their case initially in the lower courts, that Lloyds should not be able to force redemption of these bonds at par. But after appeals the Supreme Court voted 3 to 2 in favour of Lloyds Banking Group. Mark Taber, who has been campaigning on behalf of the bond holders, alleges that the prospectus for the bonds did not disclose all the information that investors needed to make an informed decision. He also says the FCA are refusing to disclose what they knew about the likely changes to capital requirements when the ECNs were issued, which subsequently caused the “capital disqualification” event to arise enabling Lloyds to redeem the bonds at par.

Unfortunately many private investors buy bonds on the basis that they are safe and secure investments for their retirement, and they are advised so by brokers and other financial advisors. But one needs to look very carefully at the terms of bonds, i.e. read and understand all the small print in detail which private investors would have difficulty in doing even if they had the inclination. In other words you need to look at the prospectus and the trust deed that is issued.

It also reinforces the point that banks and financial institutions in general are still not to be trusted to act in an ethical manner. They and the courts will stick to the technical wording even though only the issuer really understands the risks. This happened of course to PIBs holders such as those at the West Bromwich Building Society, even though the Society did lose a recent case on appeal brought by landlords against a rise in tracker mortgage rates. A classic example of being sold one thing which the Society retrospectively tried to change when it realised it would be losing money on the contracts because of very low interest rates. But perhaps that will be appealed to the Supreme Court also.

Can you rely on your financial advisor to give you the facts and advise on the real risks in bonds? From experience no. They rarely know more than the educated amateur.

Can you rely on the Financial Conduct Authority (FCA) to protect the interests of the private investor against large financial institutions? In essence no because they seem to side with the latter in most cases. The FCA does spend a lot of time introducing regulations to protect private investors against their own foolishness (which ultimately is an impossible task). But when it comes to complex issues that require urgent decisions, they fail completely to protect the interests of individual investors.

So the message is clear when it comes to bonds – trust no-one because you are your own.

Roger Lawson

Berkeley Results, Pay, Brexit and AIM

We are now definitely in the usual summer doldrums in the market, compounded by the uncertainty over Brexit. It is obvious that private investors have been taking their money off the table for some time and this is clear from the results of Charles Stanley, a stockbroker and “platform” operator that were issued this morning. Both transactions and funds under management down over the year and other brokers are seeing the same. That does of course not bode well for the future figures from problematic Alliance Trust subsidiary ATS.

Private investors tend to buy when the market is rising, and even looking expensive, and sell when it is falling, or looking cheap. This is a recipe for long term poor investment performance as against a simple index tracking or “buy-and-hold” strategy. Or keep an eye on when the market is looking cheap which if it continues to fall it might soon be.

But life goes on so here are some comments on some recent news.

Berkeley Results

Housebuilders have been bouncing around for some months, and the results from Berkeley Group were published yesterday. At first sight they were positive – adjusted profit before tax up by 5.6% and forward sales now £3.25 billion. But the undercertainty over the referendum and the tax changes on buy-to-let properties is clearly having a significant impact on sales.  Sales in numbers were down 4% on the year and the London market is clearly slowing down at the top price level. However price inflation remains for properties of less than £1.25 million the announcement suggests. This surely reflects the underlying and continuing shortage of housing in London and the South-East for a growing population.

Berkeley, like Persimmon (and I hold both these companies), somewhat anticipated the cyclical impact on property sales caused by the long-term nature of building construction and recognised they might be getting near the top of the cycle. They both have plans to return substantial cash to shareholders via dividends over the next few years. In Berkeley’s case this means returns of £16.34 through to 2021 while the current share price is about £30. Effectively they are taking a conservative strategy and not gearing up in response to the housing boom of the last few years.

Remuneration

Tony Pidgley who founded and runs Berkeley, does of course get rather well paid for his long term experience and wisdom. His “single figure remuneration” figure for the year to April 2015 was £23.3 million generated from the aggressive bonus/LTIP schemes. Last years figures are not yet available but this might be another company where there is a substantial revolt.

But it’s worth noting that last year when the show of hands vote came at the AGM, I did not spot anyone voting against other than myself. And on the proxy counts only 14.5% voted AGAINST. This just shows how difficult it is to get investors to vote against resolutions when they are happy with the company’s performance and its share price. ShareSoc will probably be issuing more comments before the AGM on the 6th September.

Brexit

Tony Pidgley is in the Remain camp so far as Brexit is concerned and it is clear from his comments in the Preliminary Results yesterday and at last year’s AGM as to why. The financial interests of Berkeley are linked to not just a growing population in London, but on skilled labour coming in when there is a shortage in the UK.

Was very amused to talk to my local M.P. recently at the Chislehurst Summer Fair. He had apparently already predicted how I was going to vote despite the fact that I had only recently made up my mind while not advertising the decision, and he mentioned he was supporting the Remain side which did not surprise me either. This despite the fact that I applauded his role in the democratic structure of the UK which is being undermined by the EU in a recent editorial for the ShareSoc Newsletter which you can download from here: http://www.sharesoc.com/brexit.htm . As I said in a recent blog comment, I just wish all those commentators who forecast financial disaster, or the opposite, would run my portfolio because they clearly have more data, or are closer to the Delphic oracle, than me. And that’s the last I will say on this topic I think.

AIM Market

As you probably know ShareSoc recently launched a campaign to improve AIM – see http://www.sharesoc.org/aim-campaign.html . There were a couple of relevant stories on the front page of the AIM Journal (sponsored by Northland) this month.

The first one mentioned that it was the 21st birthday of AIM and mentioned that of the first ten companies listed on AIM only one is still quoted, and even that has moved to the main market – this is Athelney Trust. The rest have been taken over, delisted or simply faded away into history and such is the track record of many AIM stocks. The second article was on new AIM listing Directa Plus (DCTA). This is an Italian company that produces graphene. Graphene is a wonderful new product with many potential new applications, but most of the producers of it currently lose money. It is therefore a rather typical “concept” stock where it could have a wonderful future if you believe the hype and future growth forecasts. The current market cap is £72 million, but it made substantial losses in the last financial year and previously. Revenue last year was only £1.7 million. So this looks like yet another grossly overvalued stock being promoted to investors as with lots of other AIM stocks. Not all new AIM listings are such speculations, but unfortunately many are. This is one aspect of AIM which we suggested could be tackled.

Roger Lawson