UK Solutions, Autonomies Fund 10-year anniversary, Investing in Ukraine, China tech relative strength
Email of the day – on the UK long-only equity portfolio:
Very helpful. Good to know there are a few ‘gems’ in this apparently moribund country.
When will the portfolio be updated/discussed again? Every quarter?
My view – Thank you for this note. I envisage providing an update on open positions monthly. Each of the positions has a stop so, I will also update whenever one of those is triggered. I regard these as investment positions, so I expect to hold for the lengthy medium-term, subject to events.
The “moribund” perspective of the UK today is the polar opposite of the Cool Britannia days of the late 1990s and early 2000s. So, what went wrong and how can it be remedied?
In short most of the UK’s problems could be fixed by creating the correct incentives for work and rewards. No one is under any illusion that will be easy.
The UK has faced four significant crises in the last twenty years. The problems include:
Energy deficits
It went from being an energy exporter to importer. Politicians ignored what that meant for national income and still seem to be floundering. That single event reduced the ability of the economy to bounce back from future challenges.
What’s the solution? Make energy independence, at a reasonable cost, a national priority. Do whatever is necessary to achieve that goal. Make every alternative proposal subject to the proviso that it furthers the aim of cost effectiveness and independence.
The Gutting Of the City
The Global Financial Crisis shook the City of London to its core. It also led to the growth of the nanny state. Compliance costs have been heaped upon the financial sector with the result that only the largest most well-capitalised firms survive. The number of business lines open to financial firms has declined so the size of the industry shrank. Nothing has replaced the role of the City in national income.
The reform of the financial sector is underway. The stock market is responding forcibly. This is a long process but at least this trend is showing signs of change.
Political Instability
The failure to bounce back from both these challenges led to revolutionary political movements. They sought to break the status quo, most particularly by leaving the EU. That was achieved but the subsequent appetite for aggressive measures to boost productivity were not delivered.
Fiscal Laxity
The pandemic and response to it led to a further intensification of the nanny state. This has also resulted in record high tax burdens as well as high minded statism that is not delivering on rapid infrastructure improvements.
Solution: The UK has constant need for infrastructure renewal and development. That’s not news. The Thames Water debacle highlights how important standards of governance are when setting up outside investment.
At the same time, the UK badly needs more housing. Property is a very leveraged investment. High prices sap the available capital of the population to invest in more productive assets.
There was a lot of talk about standing up to local planning authorities and facing down NIMBYism after the last election. So far, there has been precious little progress.
It always seems darkest before the dawn. The UK market has been under loved by investors for decades and is only now beginning to emerge from its long range.
The time is now to lobby politicians to think more about national independence and the welfare of the economy. We are entering a much more competitive global environment where transactional diplomacy appears to be the basis for negotiation.
Email of the day on the UK portfolio, fund management and investing in Ukraine.
Thanks very much for the list of UK companies that you prefer. I am looking forward for the US and EU list too. Are you going to create a fund that we can invest in or are these just information that you are sharing with your subscribers. On a different matter, I would like to invest in Ukraine if/when the war is over. Would you have any suggestions for investing in Ukraine. Please advise. Thanks, in advance.
My view – Thank you for these questions which may be of interest. I do not have plans to launch a fund management company right now. Following feedback from subscribers, the general tone was most do not want me to have a conflict of interest.
However, I do spend time on several investment committees for asset management firms. For example, I supply the investment recommendations for The EF WM Global Corporate Autonomies open-ended fund. It is coming up on its 10th birthday next week and has returned an annualised 11.18%.
It has 100 equal-weighted holdings, is reweighted quarterly and the investment universe is the list of Autonomies I created for Crowd Money.
I also sit on the board and chair the investment committee of the Nevada Trust Company. That set up allows me to provide separate accounts that are managed on a discretionary basis for the firm’s clients. The firm’s custodian is Northern Trust.
The portfolios I supply in this service are designed for you to follow along at your own discretion and to keep a scorecard for how well my recommendations perform.
As for investing in Ukraine: