“We Don’t Do Hindsight”

Does it have to take a former Chairman of the US Federal Reserve, Ben Bernanke, to tell us that the Governor and his colleagues have been unable to properly predict the ensuing economic shocks after Russia invaded Ukraine?

He called the BoE’s main economic model as being no longer fit for purpose. 

Andrew John Bailey, aged 65, has been the Governor of the Bank of England since 16 March 2020, he is employed on at least £11,500 a week plus perks. 

Refusing to apologise for the lack of more accurate economic analyses, Bailey’s response was effectively, like others in public offices – lessons have been learned etc – by him stating, what some would say was somewhat arrogantly, that “we don’t do hindsight.” 

From where I view the situation, the BoE certainly don’t seem able to do foresight either. 

Bailey has another four years to go – what is going to happen to the UK in that time and can he and his ‘team’ cope with the ‘challenges ahead’ – that is the question? 

As Daily Mail City Editor Alex Brummer noted, Bailey is gaffe prone, has a tendency to drop off during meetings, has been nicknamed ‘the sexy turtle’ by a former Governor and has earned the soubriquet from The Economist of ‘Rock-a bye Bailey.’  

Britain Is Not A Nation Of Shopkeepers 

It has taken a piece of analysis from the Labour Party to inform us that the UK’s retail sector is undergoing a severe reduction in size. 

Greengrocers, newsagents, butchers and the like have been closing shop at quite a significant rate over the last couple of years. 

In fact, it is noted that retail insolvencies have risen by some 20%, due largely to higher interest costs added to the lower rate of business activity. 

Names like Farfetch, Wilko, The Body Shop, Planet Organic, Wiggle, Ted Baker, Matchesfashion, Kettle Interiors, Tile Giant, M&Co, Snowdrop, Paperchase and Vashi spring immediately to mind. 

According to the Centre of Retail Research, some 61 companies fell last year, hitting 971 outlets and 20,646 staff. 

This year so far, some 12 companies have gone out of business, closing another 308 stores, with 11,466 employees affected. 

Certain onlookers refer to the massive increase in the rate of shoplifting, caused by the pressures of the cost-of-living crisis, while being totally unhindered by police forces across the country refusing to react accordingly. 

Admittedly Covid must have been of a major impact to retail turnovers, whilst so many towns and cities have been witnessing boarded-up premises as a by-product of the abysmal ‘work from home’ edict. 

That the Government does not have the courage to insist that its civil servants should return to their office desks, has not helped the situation. 

Also, the ongoing rise in business rates provided another nail in the coffins of not only the retailers but also those operating in the pub, bars and restaurant trades. 

Oil Prices Ready To Trade Higher 

There are now strong fears that a much tighter supply over the next few months will inevitably push oil prices a lot higher. 

The price of Brent Crude, which is one of the world’s international benchmarks, hit $92.10 a barrel on Friday. 

Thoughts are that oil consumption will remain high, especially if China’s economy picks up its expected momentum. 

Just in late March Opec, dominated by both Saudi Arabia and Russia, lowered their output in order to strengthen prices and thereby increase their revenue intake. 

Saudi Arabia is playing a tricky game in screwing with supplies, but there again it is one of its true natural resources, so why should it not try to get the best price. 

Now it looks ready to break the $100 level again. 

Iran Attacking Israel – Watch Gold And Oil 

Just imagine the market frenzy that could be created if, as predicted by many Middle East observers, we could be seeing a lot more than 300 drones and missiles trying to penetrate the Israeli shield. 

The recent strength in the price of Gold has given us some indication of what could ensue. 

Then too could we see Brent Crude shooting away in price. 

And what could such a frenzy do to our UK economy as the Government continues to try to convince us all that the rate of inflation is now back ‘under control’ – that is still a nonsense as far as I consider – especially as the ROI compilers do not appear to take account any form of shrinkflation when comparing pricing. 

The FTSE100 Breaks Into New High Territory 

On Friday the UK market took a very positive turn of mind and that was exaggerated by the FTSE100 Index charging up to 8,044 at one stage, before closing at 7,995.58, up 71.78 on the day. 

It had a good week, starting at 7,928, before dipping to 7,903 on Thursday and then climbing strongly on Friday to a twelve-month High. 

Observers suggested that the market strength was as a reaction to the UK emerging from recession. 

Some commentators are now looking to Sunak and Hunt putting together a quick package of tax cuts and other economic boosters just before the May elections and then again prior to the General Election, whenever that may occur. 

Is The UK Market Shrinking? 

Although the number of new IPO’s has dwindled over the last couple of years, while several companies have actually left the market, I do not consider that the market is knackered. 

Admittedly professional adviser fees now make a very much higher cost of new entry, while the ongoing costs of staying on the market are apparently only going one way – upwards. 

But so what? 

Some of the companies that have left or are leaving the market, of their own volition, are generally continual ‘loss-makers’ driven by very well-paid executives, so they have little real attractions for new investors. 

One AIM company boss was last week quoted as saying that he was switching his company over to the US NASDAQ market, that was because he had struggled to raise further capital for his drug development company from UK institutions. 

He is quoted as saying that “the board was extremely disappointed by the lack of institutional UK interest in our innovative, technology-driven value proposition…This trend has been a consistent theme over the last four years.” 

The market has over the years, even the decades, seen ‘new issue’ activity coming and going in waves, where just about any company that was considering a float was then easily persuaded by ‘advisers’ to do so. 

Like anything in life – the market is full of ups and downs. 

Fees could well start to reduce as advisers attempt to encourage newcomers onto the market. 

However, I still consider that the UK Market is thriving and so too are its constituents. 

But What About The Electric Vehicle Market? 

I noted that my favourite luxury car maker has stated very clearly that it believes there will always be a demand for sports cars with petrol engines. 

The group delayed by a year, its planned February 2024 launch of its first battery-powered electric vehicle. 

I wonder whether the ban on new petrol or diesel cars in Britain from 2035 onwards will actually come into play. 

The infrastructure around the country for new EV power pods is meagre, to say kindly. 

There is now a very evident drop in major name EV vehicle sales, like VW who in the first quarter of this year has seen its EV sales fall by a massive 24%. 

The Society of Motor Manufacturers and Traders reported lower EV sales in March than a year ago. 

The SMMT have petitioned the Government to halve VAT on EV purchases, to amend its excise duty on EV’s and even to cut VAT on public EV charging. 

Against that backdrop we now have an absolute flood of cheaper EV’s coming in from China, which inevitably will drive overall prices lower, with BYD being the biggest player pushing aggressively.