Market Commentary

“In April, May announces election in June”- tweet from Ivan the K 18/4/17. It is debatable whether the population of Britain really wants this, but we are heading for an Election (the third in two years); With almost perfect comic timing, the IMF announced an upgrade to the UK growth forecast on the same day! The immediate response was a fall in Sterling to $1.2515 followed by a sharp reversal to c.$1.29. Sterling has risen, as opinion polls suggest a Conservative majority of at least 90 seats (and possibly as much as 200). This is what happens when record levels of shorts meet news…

Just as with Carlsberg, we don’t do predictions at EBI, but if we did they would probably be the best in the World… I am sure you have already had your fill of predictions for 2017, but just in case you haven’t here are some more, but with a slight twist – these are the opposite of the consensus view, taken precisely because of that fact. Call it a control experiment – how right can one be simply by saying the opposite of the pundits? We shall check back in approximately 350 days… 2016 was a normal year in most senses – pundits got it wrong, as usual, but this time the magnitude of failure was spectacularly large: not just the puditocracy though. As the screenshot below shows the Bookies got it badly wrong too, and it cost them real money.

“We have long felt that the only value of (stock) forecasters is to make fortune-tellers look good.” Warren Buffett. There are lots of predictions out there already for 2017. In order to have a fighting chance of being right, I will focus on 2016 and look at the events that shaped what turned out to be an “interesting” (in the “Chinese” sense of the word) year. In no particular chronological order, the “main events” appeared to wrong foot all and sundry – It was not a good year to be a pundit.

[The events of Tuesday/Wednesday has necessitated a substantial re-write of this blog – once again, markets have been wrong-footed by a massive underestimation of public mood. If it reads as if I am gloating a bit, it is because I most definitely am]. Where’s my boy @JebBush at? Clinton’s and Bush’s finally kicked out of politics. Phillip Taylor tweet 08.48 am. 09/11/16.”They would not listen, they did not know howPerhaps they’ll listen now.”Don McLean – Vincent Before the result on Tuesday, I found the following screenshot – notice anything similar? …

“Most people would sooner die than think; in fact, they do so.” ― Bertrand Russell (UK writer, historian).Steve Forbes (of Forbes magazine fame) once said (apparently) that you make more selling advice than following it. “It’s one of the things we count on in our business, along with the short memory of our readers”. An article I recently read (in Forbes, ironically), suggests that this continues to be the case. It once again takes the line that there are alternatives to Indexing, and that Dividend investing is the answer. Let’s look under the bonnet to see how it arrives at its conclusion.

“Historically, the claim of consensus has been the first refuge of scoundrels; it is a way to avoid debate by claiming that the matter is already settled” – Michael Crichton Without much fanfare, last month the IMF announced that it would be including the Chinese Renminbi in its SDR (Special Drawing Rights) currency basket for the first time, in doing so adding a fifth currency to the mix. It is the confirmation of the rise to global status of the Chinese economy (and by extension, the rise of Chinese political power), and has been hailed by them as them arriving on the world stage.As shown below, the SDR has been falling versus the US Dollar over the last 2-3 years, prior to the Renminbi’s inclusion.