DREAMERS

What would Trump’s high tariff isolationist world look like? What would the mirror image be in Xi’s China? Not now, not next week, but rolling into the next decade.

And whatever portfolio theory says, and whatever the optimistic investor believes, 80% of my own portfolio is flotsam, drifting up and down on Pacific tides. Stocks I both like and which have compounded over decades are remarkably few. Oh, and a brief word on African housing.

GOING IT ALONE

But first, to give it the grand name, autarchy, or self-sufficiency. A bit of a joke - the Soviet Union tried it, Iran tries it, China famously only revived after ditching it.

But it is back in fashion, and not just in strange places. The EU industrial and agricultural policy is starting to look like a version; beyond their four walls they need carbon and chemicals, but within them they don’t, nor will they allow imports of them (or products including them). Quite fantastic.

Trump is on his 60% tariffs line. Xi clearly wants to cut off foreign capital, as it arrives infected with democracy and transparency, and the associated foreign reporting or verification.

So, could they? Yes, the US could - it is big enough, can do most things, and largely trades internally. While at least in Trump’s imagination the commercial borders are sealed, and so enforceable.

What goes wrong? Well at some, quite distant, point people stop expecting to trade with the US. So, at its most extreme, if China can’t sell to the US, it won’t buy from them either. But that is decades away, most Chinese production can probably take a 300% tariff, and still sell at a profit.

The flip side of the tariff is the huge salary for a barista, or a trucker. The latter is not so far away. Prices of domestic US production must rise, to allow the blue-collar Mid-West to rejuvenate. US consumers of course (including that barista) will pay vastly more for US goods, or will get hit with the import tariff; this of course is a tax on them.

Source: Statista

What about Xi? Well again it is possible - that’s how China ran for much of his life, with a lot of new infrastructure, industrialization, since installed. He can do it all again. There, unlike in the US, the issue is capital. As a big net exporter, an area that will itself be under pressure, money will be harder to find; it already is.

 

THE NIGHTMARE

Countries that go through this closing cycle typically also do default (as the Soviets did, as US (and UK) railways did,). Folly, but it can be done.

The US has been going down this route since Obama, Trump talked a lot about it, but Biden too sees the resulting wage inflation as a good thing. So, it is the next US President’s policy either way.

Obama was keen on hitting capital markets (FATCA was and remains both a non-tariff barrier (I am being polite here) and a tariff on external capital) and I suspect a Biden administration must do the same, to balance the books.

While Xi never really left protectionism, WTO and GATT were mainly honoured in the breach.

And Europe? There is quite a strong strategic need to expand to the East, although as that goes through (and we are talking the mid 2030’s here) Ukrainian farmers, like Polish farmers today, will buckle under the rules; it barely matters about the Donbas, the EU will shut those heavy industries down too.

So, I think autarchy can work for all three, it will support a large uncompetitive labour force, and consumer choice will vanish. In many cases there will be lower quality and high prices. All three will attack (or in some cases keep attacking) capital flows.

And in the end, the entrepots will survive, those not in any such block, like the UAE or Singapore today, Amsterdam in the 17th Century, Yemen under the Romans and Victorian Britain.

The winners will be flexible, a tad amoral, assertive, in fluid alliances, but reliant on gold not steel to survive. And they will suck in entrepreneurial talent too. At a strategic level, that feels the place to be looking. Although buying uncompetitive heavy industries before their brief period of tariff induced profitability, has a short-term allure.

 

DOGS OR GREYHOUNDS ?

The ludicrous halving of CGT allowances, based on some fantasy “yield” number from the equally ludicrous HMRC, via the OBR, means once again the tiresome process of harvesting losses is upon us. No longer can they sit unloved at the back, snoozing; out they must come.

And what a tale of dross they reveal, and scattered amongst them so many once “good ideas” and busted yield stocks. Well, it sticks in the throat, but perhaps sticking it in a US wonder stock for six months is better?

Of course, if I knew when I acquired them that the FTSE was moribund for two decades, I would never have bothered. Seems it is time to simplify.

 

COLLATERAL

And lastly African housing. It was one of Gordon Brown’s (and the PRA’s) great achievements to get UK banks out of overseas assets, far too volatile, currency? foreigners?- Who needs them? Bring it all home and inflate the UK housing market with safe, cheap, mortgages.

So, Citizens went, Barclays were hounded out of South Africa, and so on – although their post-sale performance has really not been great either. Africa now just does not have proper mortgage financing for the vast bulk of the population. This is at a level I had failed to fully comprehend.

You think that despite everything, Africa must have got better. But no housing, so less health, less stability, no financial security. Safe recycling of profits in the continent is still hard. Aid can’t create institutional reform, but that’s the need.

If you look for the breakout into developed status, it starts there.

 

 

 

 


this is a photograph of a desert road, with the words written above : never reaching the end?

Seeking an end to the turmoil

This market turmoil feels interminable, as asset markets stumble to find a firm footing and churn relentlessly. Instinct says that’s a time to buy. But there is so much happening, as this multi-year trauma unwinds, it is quite hard to know what.

Although we try to segment it, the key problem is the terrible dishonesty of politicians, who have bullied their citizens into an unthinking reliance on institutionalised theft on a grand scale and a belief that nothing really matters, as long as you have a press release to deflect it.

IT IS ALL STILL COVID

So, working through piles of annual accounts, as a pleasant distraction, (I have always enjoyed history), the one repeated theme, is of shrinkage, under investment, caution. This, in a way, is natural because COVID reset two years of global production, and indeed destroyed large areas of output and services. Which also makes it terribly hard to understand what “normal” is now.

Not helped by the piteous vagaries of those craving spurious accuracy. Big banks and resource companies seem overall just to want to carry on shrinking, which is odd as their results seem very good. But they are not. All that has happened is they took big write offs and reserves in 2020 (which were not needed) and that then reversed in 2021. However, the underlying business volumes fell, the trend to more disposals than acquisitions was unremitting; these are shrinking businesses.

To the populists who believe higher taxation lowers inflation (are they mad?) and indeed, to market commentators, this looks good, but it is really not, productive employment is shrinking too, workforce participation is not roaring back.

Extracted from the UK Office of National Statistics (ONS) June update.

And with inflation we will again see plenty of “top line beats” or rising revenue, but that too is an illusion. And indeed, raised dividends. For example, Shell now proudly offers a 4% dividend rise, as if that is generous; last decade it was, but not now.

That is now a real dividend cut. 

Data taken from the June update of the Office of National Statistics UK.

As we struggle with a badly damaged global economy, government policy is unremittingly wrong-headed: you wonder what we could do worse than the vast debt fuelled bubble after COVID?

But then we stumble on the idea of doubling or trebling domestic fuel prices. We do this to punish big energy exporters like Saudi Arabia and Russia. Only a simple clown could believe that will help us, and only a child-like vandal, that it will halt Russian armies. We take our own possessions out and smash them on the street, like voodoo dolls, because we are hurting and want others to hurt too. Nuts - it is tearing our own clothes in blind anger, but we ourselves are not the enemy. 

Meanwhile, underneath all this noise, is the game up?

Is the expansion we have seen for two decades based on cheap Asian product imports, and low interest rates fuelling inflation in non-traded goods now done? The non-traded category is everything that can’t be shipped in. Land, services and the like that must be consumed, where they are provided. Although with that went quite a lot of imported labour consumption too, of course.

I keep wanting to write positively on China, but I simply don’t know. Is their COVID winter politically sustainable? Is it a massive pivot back to a closed state? Was the aberration their great expansion, and they are now reverting to being a hermit kingdom? Instinct again says no, who would reverse the greatest success story of our time? But evidence the other way just slowly piles up. Another giant nation seems slowly to be sliding towards belligerent stagnation.

And so much went crazy with the toxic mix of low interest rates, and excess liquidity. We may at last have learnt that if you have a blocked pipe, spraying it with gold is not a remedy. The pipe stays blocked, but everyone gets flecks of gold on them. Better (and cheaper) to hire a plumber.

WHAT WILL BE THE THIRD POLICY ERROR?

We certainly don’t see the recent bubble implosion reversing, for all the bluster, crypto, and concept stocks, feel to us like a long term drag on the indices, remorsesly lower.

The turn feels to be more likely in bonds. The fight is between a shrinking set of outputs, but rising prices and apparently rising consumption. As long as policy blunders persist, and they show no sign of ending; then the upward pressure on rates will also persist.

But we doubt that any conceivable interest rate rise can solve this inflation. In short, the fire must burn itself out or at least no longer be stoked up.

In which case posturing about a long run 2% 3%, or 5% rate is really guesswork. But that’s the big question. If it is 3%, we are already there, but there is no great market conviction on that. At least the belated but long inevitable addition of the Europeans to rate rises, should take some heat off exchange rates.      

LETTERS I’VE WRITTEN

What about Boris? I was quite surprised at the swift and co-ordinated move to a no confidence vote. The Tory party is rubbish at a lot, but plotting it does do rather well. And also surprised at the vote itself. The rebels can not win, without a candidate that both factions like, that is the real Tory party and this odd “Cameron light” lot in Downing Street. Of course, Boris himself is already largely that candidate, talks right, acts left. Which means all sides hate him, but neither can replace him, for fear of the ‘wrong type’ of fake instead. Just what you want to be, you will be in the end.

There was also a fair bit of bile, stirred up by the media, and rather infecting what are loosely called the “activists”, who are anything but, but do bend their MP’s ears. They just want to dislike Boris and his lack of scruples, but also like the gifts he brings them.

They don’t want local trouble, so enough of those MPs voted against him, to keep their local associations happy. If that “terrible man” stays in office, they can at least claim they did their bit, but ‘others’ then let the side down.     

Will Boris last up to the election?

Our core belief remains Boris stays in power long enough to hand over to Keir and Nicola. But perhaps we have rather less conviction than last week. We thought Keir was more likely to be in trouble, but perhaps the Tory plotters could be desperate enough to finally agree on a candidate? Either way this is now a lame duck UK government.

But then like markets, outside events may rescue it, it’s just we really can’t see how at present.

As for where to consider investing? Our MonograM momentum model loves the dollar, for sterling investors and for USD ones, increasingly just cash, and decreasingly the S&P, so long the global refuge.

But that is in no way a recommendation, just an observation; more detail on our performance page.


a map of russian oil pipelines with pictures of pipes super imposed on it - in house collage - illustration for an article by charles gillams - he who pays the piper

He who pays the piper

A very strange quarter: the FTSE100 was up, in sterling terms the S&P 500 was up, and the Russian Rouble ended where it was just before the Russian invasion. Short term dollar interest rates are nicely positive at last.

So where is the problem?

UK policy changes – could we finally be leading in economic policy?

Well, at long last the UK Chancellor has finally realised that just throwing money at inflation has one clear outcome: more inflation. This is tough lesson learnt back in the 1970’s and seemingly since forgotten.

If true it is a turning point and we predicted that it must always come sooner for the UK, if it persists in staying out of the Euro, than for bulkier continental currencies. Sunak also seems miraculously to be finally tackling some long overdue, multi-parliament, structural taxation issues, a rare sign of political maturity.

Whether he can hold the line against an increasingly dimwitted set of MPs and a media who constantly bay for more fuel to be added to the inflationary fire is unclear, but at least he has had the courage to step out into the unknown night, not cower by his warming bonfire of magic myths.

Nor is it clear whether he has the clout to unpick the cosy mess created by Theresa May and her childlike energy price fixing, or the ensuing nonsense from Ofgen. This fine-tuned capacity to the point of absurdity, guaranteeing a massive breakdown in the generating buffers, which had been painstakingly installed under a series of Labour governments.

Inflation policy is being taken seriously

But Rishi is trying; to cool inflation you simply must have demand destruction, there is no choice. This type of deep-seated widespread inflation will be hard to quell in any other way. True, areas of it can be contained, but it is hard to hold it all.

He is lucky to be helped by a Bank of England that seems to be serious about its brief, not regard it like Lagarde and Powell, as some kind of political inconvenience, to be wished away in double talk and evasion.

But he’s unlucky in other ways; we noted a while back that China no longer seemed to care about headlong export led growth, or more broadly about access to hard currency. It feels it can invest with and gain from its own currency and avoid importing the monetary excesses of the West. That in turn means it cares less about the endless flows of cheap goods to Europe and the US, and conversely about soaking up those surpluses in luxury goods and services. None of this is good for our inflation.

Meanwhile by eliminating the oddly divergent starting points for the two income taxes, National Insurance and Income Tax, Sunak has opened the way to many benefits. It continues to drop taxpayers out of the system, despite desperate measures by HMRC to suck more in. A key step, and a sign of, for once, a more liberal, more efficient government. Many more steps are needed to unshackle wealth creation, but it is a start. It makes much of the Universal Credit complexity around thresholds also fall away. Most of all it is a step closer to combining the two income taxes.

Politically this is highly desirable, as it strips away the pretence of a low starting rate of taxes on income.

It perhaps even gives an excuse for the otherwise inexplicable step of introducing National Insurance on employees passed retirement age. Given so much of current inflation is due to the mass withdrawal of older workers, another step in that direction looks remarkably stupid, but perhaps it has a higher purpose. It is good to see that the “Amazon” tax as Business Rates should be called, as it gives Amazon such a massive earnings boost, is also clearly still under long term review.

Why has the rouble recovered?

Source : this page on tradingeconomics.

The recovery of the rouble is of course not a market step alone, doubling interest rates, exchange controls and the mass withdrawal of exports to Russia from the West, are part of the story too. But it also shows a turning point. At first the West was so shaken by Russian military attacks, it was prepared to follow its own scorched earth policy, regardless of the harm caused to our own people and employers.

But at some point, the realisation that Ukraine’s army would hold, that Putin’s army was not that good after all, especially up against modern weapons and we start to understand that the further blowing up of our own bridges just raised the ultimate bill. Here are the sanctions we've imposed.

So, it seems it is no longer true that any price is worth paying to help Ukraine or hinder Russia. Clearly, we don’t have to jettison all our principles in dealing with other tyrants, nor one hopes do we need to alienate every piece of remaining goodwill with the rest of the world, by panicked grandstanding.

The mob is still rampant, goaded by an American president for whom no European economic sacrifice is too great.

But maybe it is also time to tell Ukraine that no NATO also means no imminent EU: Brussels has its hands full with its own struggling ex-Soviet states.      

And what about Powell and his policy?

Well, we don’t expect him to hold inflation down with his trivial rate rises, nor politically can he do more than tinker. It seems too that Lagarde at the very least has to get Macron back in, before telling the bitter truth about rates.

So, we feel the bond market has rates where the market would like them to be, in the US, not where they will be set by the Fed anytime soon. And the Euro is now in a very odd place, still with monetary stimulus being applied and with an unstable gap to US interest rates.

So, we may look to be where we were late last year, but in most cases the cracks are now alarmingly wide.

Europe, quite urgently, but the US as well needs a sharp jolt upwards in rates to halt inflation.

Oddly only the UK looks to have spotted the danger, stopped the false COVID ‘economic expansion’, tightened fiscal policy, reformed taxes and raised base rates steadily, towards where they need to be. How unusual.

Long may PartyGate continue if this is the end result.

We will take a break for Easter now, and resume on the 23rd.

If the first quarter is a guide, by then everything will have changed again.


This is a collage of images illustrating the argument being made by Charles Gillams in his blog post 'every dog' that changes in the perception of Boris Johnson and Chinese policies should be noticed by professional investors

EVERY DOG

Boris seems slowly to be turning into the opposition to his own party, which I suppose is not new for him. Meanwhile China also seems to be hitting an identity crisis. Neither bodes well for investors.

We apparently have a real budget due soon, but this vain Prime Minister seems bent on upstaging his own team, so we had a pile of tax rises and changes to tax law bundled out in a haphazard fashion in response to the endless (and insatiable) demands of one ministry.

A likely collision course with natural Tories

That pretty well defines bad governance, and these ad hoc excursions into major spending plans are a hallmark of waste and short termism. So, to me the investor headline should be about planning ahead for the Tory government to either fail in front of an exhausted electorate, or less plausibly given the large majority, to implode. But have no doubt that No 10 and the mass of the Tory party are now set on a collision course.

The extraordinary extravagance of the blunt furlough scheme has always been the fiscal problem, and it is hard to believe, as many bosses are clamouring for new migration to solve multiple labour problems, largely in some measure of their own making, that the government has still parked up a fair chunk of two million workers, on pretty close to full pay.

I struggle to comprehend that number in a hot summer labour market, nor do I see why employers would cling onto staff until October at which point, presumably they take a decision? Are these ghost workers? Already happily in new jobs, but having done a deal with their bosses to split the loot, their fake pay for not being? Are these people HR have forgotten or are too scared to fire? Will they really try to pick up work they put down eighteen months back, in a largely different world and probably for a now quite alien organisation?

Who knows, but the whole thing cost £67 billion (so far) and that’s what Boris needs back. I challenge anyone to give a lucid explanation of how his latest proposal “fixes” social care for the elderly. Nor to explain how in parts of the country like this, with no state care home provision anyway, it can ever be called “fair”. So, to me, it is just bunce for the ever-gaping maw of the state, and the idea, with Boris in charge, that it will ever be temporary or even accounted for, is somewhat risible.

What would “fix” social care is transparent, autonomous, local provision, not bullied by a dozen state agencies, not run by money grubbing doctors, not harried by property developers and absurd land costs, nor daft HMRC grabs on stand-by staff pay, and it needs to be highly invested in simple technology, all IT integrated with the NHS; not this crippled, secretive, subscale mess.

It is not that there is no problem, but it is as much operational as financial. A recent Bank of England paper looking at wealth distribution highlights how in retirement property comes to both dominate assets and also shrinks far more slowly with age.

A chart showing average wealth by age group, to illustrate an argument in the article by Charles Gillams that we should look at who benefited from the furlough scheme.

(Sourced from this speech given at the London School of Economics, by Gertjan Vlieghe, member of the Bank of England’s Monetary Policy Committee.)

Of course, the crux here is seeing a family home as both an asset and an essential for life. That is the distortion, and this fiddling with care rules attacks the symptom, not the cause.

Can you trust a word he says?

So, now tax on income rises, a broken promise, employer tax rises, broken promise, the ‘triple lock’ on pensions is ditched, broken promise, and to top it off those working beyond normal retirement age (now 66) get a 25% tax penalty, via another broken promise. Oh, and if you are mug enough to save, then dividends will get hit too.

Again, there is a real problem but this is by no means a logical answer either: I guess the Treasury were applying heat on excess debt, and this is sand kicked back in their face, but it shows no sign of anyone solving anything. The UK has both high debt levels and no supportive currency block around it, sure France and Italy look bad, but they have Germany to help. The UK does not. Hence the anxiety.

So, Boris has had a fine Cameron-like bonfire of dozens of electoral promises; the worm turned on Cameron (and Clegg) when he couldn’t keep his word, and so it will turn on Boris. This time he won’t have Corbyn as the pantomime bete noir to bail him out. Indeed, Kier Starmer’s response linking this problem to inflated property prices is remarkably prescient, even if his typically confiscational solution is not.

These tax levels (as a % of GDP) have not been seen in fifty years, for an economy with a noticeably less effective grasp on government expenditure and a rather less globally competitive commercial base.

This is a clip from a published UK government source showing local tax increases anticipated in 2021-22

While tax rises are emerging everywhere (see below), and public service reform has become a simple money equation, need more service, spend more money, a dangerous one-way road.

Source: from this primary report

While notably, ‘buy to let’ is again left untouched. London house prices have doubled in this century, the FTSE 100 has moved from circa 6800 at its late 1999 peak to 7030 now and remains below pre-pandemic levels. So clearly this is not the time to hit the investors in jobs and business, who have had a 5% nominal gain (that is a 60% real loss) in twenty years and yet to leave the buy to let rentiers trading in second-hand hopes, with their 60% real gain in that time, untouched.

And don’t give us the dividends argument; the buy to let plutocrats get plenty of rent and all their sticky little service charges.  This measure simply hits the workers and investors in business and pampers the bureaucrats and the rentiers. It makes very little sense, unless you are a senior civil servant or a retired prime minister, like Blair, of course.

Chinese insularity - the new version

Meanwhile China I feel is now detaching itself from both the rule of international law (in so far as it ever bothered) and more interestingly the world financial system. It may indeed end up better off, but for now (and this is also a change from much of the last 50 years) it does not feel it needs to attract external capital.

So much of its trade and capital markets engagement has been predicated on securing capital; this is an odd and novel twist. Although perhaps a logical response to the West, who rather than conserving capital as a scare resource, are immersing the world in torrents of surplus cash and inflation.

Much of China’s policy about their own global investment (so outside China) also used to have the same theme, driven by the desire for returns, influence and to hold their own export-based currency down.

But no more, it seems, and their inherent desire for autarchy, the hermit kingdom trope, has only been emphasized by Trump, WHO and the madness of the internet. It apparently wants to be the new Germany, (no longer the new USA), so it will be insular and conservative: cautious, not driven mad by debt and the baubles it procures.

Well, if true it will be different, whether it can really be done, without a wave of disruptive defaults is unclear, but don’t doubt the length of vision, so unlike our own government. While a theme of this century has also been where China leads, the rest must reluctantly follow.

Even a dog has its day, but for investors both the UK and China now feel significantly more canine than at the start of the summer.


Some Big Calls

First posted on 7th February 2021

US Markets: The ‘no-Trump’ response

We may learn a little about markets from the curious absence of Trump.

We had been confidently told that without him the US stock markets would fold, and as US markets collapse, these days so do global ones. Indeed, not just relying on the US, has become the fund management challenge of the last decade.

Well, he went, admittedly in a two-stage collapse, but he and the Republicans are out of office, yet the apparent upset in Georgia passed with barely a market ripple. Markets just went on up, unconcerned. Now some of that is their appetite for short term debt fueled spending, which even if you know makes little sense, it is folly to stand in the way of.

But beyond it, higher taxes and lower growth must be the consequence, if you are buying stocks on a 6 times multiple of earning the next two years matter a lot, but when buying them on the current S&P 500 forecast of 25.35 times earnings, that implies those later high tax years must surely be in the equation too.

Has the market priced in the downside?

So, what seems to have happened, is the downside of future years has been calmly offset against the short-term gains of a stimulus package: is that logical? It seems unlikely, if nothing else a big corporate tax rise is due, to notionally pay for it all, plus a fair slice of traditional “stick it to the rich” revenge legislation.

The assumption seems to be that the winners in the higher consumption aisle will be neatly offset by those who suffer from the new regulations. We are less sure and do feel the ultimate impact will inevitably be lower US growth.

Of course, tech might solve all, but then it is very richly valued already. It might solve the growth problem, but could still be loss making for investors, at these levels.

That is not to say that Biden put on a poor show in his advocating a “go big” package, he did it lucidly and with passion, a good speech. 

For all that, when a new leader arrives and confidently asserts lots of economists (but notably not including The Economist this week) think he’s doing the right thing, it means trouble ahead. While his near certainty that the US would consequently be back to full employment by Christmas was touching, but absurd. The excess stimulus might get growth back to pre-pandemic levels, but that’s really not the same as employment.

The China issue remains big.

Another really big asset allocation call:

We are hearing ever more gruesome tales about East Turkmenistan, following on from decades of horrors from Tibet, both sovereign states seized by China in the political chaos after WWII.

If you see them like the other nations seized by Mao’s fellow imperialist Stalin, at much the same time, you will understand the repression. Although as ever with China, with a big dose of racism, against the 7% of their population who are not ethnically Han Chinese, plus of Communism, which still stands against any form of religion, be it Buddhist (Tibet) or Islam.

Will Biden care more or less than Trump about human rights? Well obviously, he will care more, as something is more than nothing. But will he be more effective than Trump, indeed do the Chinese find an unpredictable enemy with a penchant for sudden tariffs, harder to deal with, than a believer in the international order and gentle fireside chats?

Well here cynicism prevails: these are nations caught between empires, like Poland was for centuries; any tension in the international order will always see a land grab by their bigger neighbours.

I also believe Biden will find the proposed attacks on American consumption through both higher taxes and the removal of cheap energy and labour, can perhaps withstand also keeping Trump’s price rising tariffs in place.  As notably he has done just that, to date. Indeed, he seems to be out-Trumping Trump on Federal procurement and protectionism.

But I still don’t think cutting China out of global trade, however barbarous their actions have been, is a runner. I think the vile abuses of power can go on, just as the EU has already handed a free pass to China’s torture chambers to plough on, by agreeing a new trade deal with no human rights teeth. So, in time, realpolitik will triumph with Biden.

It was I suppose nice to see China (after a pause for thought) suggesting locking up elected politicians in Burma, after the Army grew tired of holding all the cards, but getting no thanks for it, was a poor move. But there was a long enough pause to just tell the junta they didn’t mean it and were really rather pleased. A little more discord, more repression of the ‘tribal’ areas along their shared border, more sanctions to exploit, a few less pesky journalists, all are very much in China’s interest.

So, I see a curious dichotomy, in the Han Chinese areas, Tesla car plants, Apple phone stores, Starbucks a plenty, for a sophisticated technologically advanced middle class, will all thrive. While the minority non-Han areas will be pillaged for resources and labour and if they are good, be re-settled and re-educated and polished up for tourists. A bit like California in the 19th Century. So perhaps Xi is right, only China can split China, but then history suggests, it will, one day.

But not any time soon; you can take a moral position on Chinese racism, or an economic one on Chinese dynamism, but I am fairly sure the market will easily favour the majority.

This of course does create another ESG contradiction, the US high flyers rely on selling to the Han Chinese but are keen to exploit minority Chinese labour forces and natural resources. We can look forward to a great deal of sophistication in somehow disconnecting the two.

Efficacy of the Astra Zeneca / Oxford vaccine

Finally, I should mention the battering the EU and even perhaps the Euro (at a nine month low) has taken from the principled resistance to fudging the data exhibited by German scientists. The scientists are right, the evidence base for efficacy in the over 55 age group is indeed absent. Excitable politicians, including the normally precise Macron, have said it means it is ineffective, which it does not, only that proof is lacking.

Now that is presumably in part to cover the arrogant and inflexible EU procurement process, so full of checks and balances it strangles itself.

Boris’s vaccination stance

While Boris (faced with the same data) decided to wing it, correctly seeing that to save the NHS and his own electoral chances in May, he would rather give a potentially useless but harmless jab to millions of elderly disease vectors, than talk about due process. For once his disdain for the experts paid off.

The opposition in the meantime pleaded for a longer deprivation of our liberty by a longer pointless lockdown. Thank you for that suggestion.

Call it luck, if you will, but Boris has spent a long time practicing that ex tempore talent.

Proof might have been lacking, but it looked a jolly good bet.   It sure was.

Charles Gillams

Monogram Capital Management Ltd