Market Commentary

“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.

“People who think they know everything are a great annoyance to those of us who do”. Isaac Asimov We return to the subject of Oil. The recently agreed OPEC deal to freeze output has finally stopped the rot, pushing prices back up above the $50 per barrel level, to much relief all round (the Saudi’s, Russia and US Shale producers all stand to benefit handsomely from this development – it may even allow Venezuela to survive another year!). The chart below shows the extent of the gains since the low point of January/February 2016. The question is now about its duration – can the deal stick, or will the cartel resume its policy of benign neglect, leading once again to over-production and falling prices.

“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.

In the early hours of Friday morning, Sterling fell from $1.26 to $1.18 in five minutes. It had already fallen from $1.295 at the start of the week, as “Investors” (1) took fright at Theresa May’s weekend comments about a “Hard Brexit”, suggesting that we might actually leave the EU (Shock,horror). The post- mortem has already begun, but it likely that we will never find out the real reasons behind the fall; so conspiracy theories will no doubt fill the void, especially as, unlike the Swiss Franc crash on January 2015, there doesn’t appear to be any “news” associated with last night’s carnage.

“When Cash is outlawed, only Outlaws will have cash” Bill Bonner (Bonner and Partners)