New article from Tatton Investment Management: Sudden, but not entirely unexpected

1 December 2017

It has been a week full of surprises and sudden turns of events, with the main unchanged parameter continuing to be the consistent and synchronised progress in global economic growth.

For the UK public and economy, the most import development was the apparent breakthrough in the Brexit negotiation on the subject of the divorce bill. While many will be staggered and perhaps appalled by the many 10s of billions of £-Sterling being thrown around, it is important to note that this move does not constitute a caving-in by the UK’s government to the EU27’s demands. Instead, by agreeing that liabilities arising in the future from joint decisions of the past, will be honoured, both sides have accepted that it is sheer impossible to know now what they may be. On the other hand, it is abundantly clear to both sides that an unamicable Brexit would cost both sides 100s and not just 10s of billions of £-Sterling and €-Euros in lost GDP.

That then leaves the Irish issue to be resolved, but where there is a will, there should be a way.

We have dedicated the next article to a more detailed discussion of the Brexit divorce bill approach, with a particular focus on the potentially positive impact on the near-term development of the UK economy should most of the Brexit trade uncertainties dissipate.

The next surprise from a current affairs point of view was North Korea’s firing of another ballistic missile, with the potential to cross continents. Capital market action, however, judged it as another non-event and robbed “little rocket-man” Kim Jong-Un of the pleasure of causing any wider disruption.

Instead, stock market investors took note of a rare episode of one major US stock market declining while the other two continued to rise. This one day unsynchronised fall of the tech and growth stock heavy NASDAQ, versus the Dow and S&P could be seen as an indication that investors finally begin to believe in a broader economic growth dynamic. This would decrease the attraction of those technology and growth stocks which investors have pushed up relentlessly over the past years in the belief that they will be able to grow healthily, regardless of anaemic general economic growth. If this episode heralds indeed a rotation from growth to value stocks, then this could provide stock markets with further upside potential, given value stocks like banks and many industrials have been unloved and are thus not yet displaying stretched valuation metrics. Please read our third article for more.

On the side of truly remarkable market events has been the disruption in the meteoric rise in the aggregate value of the cryptocurrency Bitcoin. We have written here before about these internet based value exchange mechanisms which lack most features of effective currencies, but are loved by the ‘net’ and regularly become object of speculative frenzy. Last time we reported at length, the Bitcoin had suffered a massive bout of hyper-deflation, which saw its value in US$ terms rapidly rise 100 fold from $10 to $1,000 only to subsequently decline back to $200. This time it has ‘only’ risen 11-fold since the beginning of 2017 – from $1,000 to $11,000 last week. Since then Bitcoin speculators appear to have lost their nerve and at times the cryptocurrency lost as much as 25% of its value within hours, before recovering almost back to where it was.

Does it matter if internet geeks create and subsequently destroy intangible or even imaginary value positions? Well, to a point, or as an old friend of us noted last week “when your Uber driver tells you he is getting a second mortgage in order to ‘invest’ in Bitcoins, then you know that a bursting of the bubble will cause collateral damage in the real world”. This would be the reason why there have been so many warning voices in the media about the Bitcoin mania recently. Together with last week’s volatility nobody should be able to say they didn’t realise that the value of Bitcoins is just as uncertain as winning persistently at the races. We will be watching the next stages of this mania unfold with interest but at a collective value sum of now over $100 billion it will matter how much of this was just theoretical book gains of historic Bitcoin holders and how much real cash has flown to push up the (crypto) value.

Back in the tangible world, stock markets took a breather after hitting new highs last week, despite the global economic dataflow evidencing once again a very healthy level of increasing business activity around the world. We point out in the last article this week, that this may well have to do with a slowly changing level of financial liquidity available in markets as central banks begin to tighten monetary liquidity conditions and businesses find more productive uses for their idle cash piles than general capital market investments. This would be good news for further growth prospects in the real economy, while capital market investors will have to get used to the thought that further returns may require a bit more investigative analysis of presented investment opportunities, rather than being able to simply rely on the general surplus of financial liquidity to lift all ‘boats’ more or less equally.

News Archive

3 December 2018

New article from Tatton Investment Management: Predicaments


15 November 2018

Interim Results for the six months ended 30 September 2018


15 October 2018

New article from Tatton Investment Management: Autopsy of a stock market sell-off


1 October 2018

New article from Tatton Investment Management: Poor politics containing bond market risks?


27 September 2018

New article from Tatton Investment Management: Brexit clamour vs. real market new


7 September 2018

New article from Tatton Investment Management: Interesting times ahead


31 August 2018

New article from Tatton Investment Management: “Not the end of the world”


24 August 2018

New article from Tatton Investment Management: Steady markets vs. noisy politics


17 August 2018

New article from Tatton Investment Management: Political strongman tactics come home to roost


10 August 2018

New article from Tatton Investment Management: Summer heat wave makes way for return of political he


3 August 2018

New article from Tatton Investment Management: A gentle deceleration?


27 July 2018

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20 July 2018

New article from Tatton Investment Management:Earnings are growing, why worry?


13 July 2018

New article from Tatton Investment Management: Hard Brexit demonstration potential?


6 July 2018

Notice of Annual General Meeting


6 July 2018

New article from Tatton Investment Management: It is getting hot


29 June 2018

New article from Tatton Investment Management: Digesting or consolidating?


27 June 2018

Preliminary Results for the year ended 31 March 2018


22 June 2018

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15 June 2018

New article from Tatton Investment Management: No surprises


8 June 2018

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1 June 2018

New article from Tatton Investment Management: Ignore politics at your peril


25 May 2018

New article from Tatton Investment Management: GDPR? No - far more interesting news!


18 May 2018

New article from Tatton Investment Management: What's the economic reality of this week's news?


11 May 2018

New article from Tatton Investment Management: Batten-down-the-hatches?


4 May 2018

New article from Tatton Investment Management: Past the peak?


27 April 2018

New article from Tatton Investment Management: Confusing signals?


20 April 2018

New article from Tatton Investment Management: A mixture of messages


6 April 2018

New article from Tatton Investment Management: Could do better


6 April 2018

New article from Tatton Investment Management: Peaking, plateauing or dimming – and how about that


29 March 2018

New article from Tatton Investment Management: End of a stormy quarter


23 March 2018

New article from Tatton Investment Management: Now we know it's risky!


16 March 2018

New article from Tatton Investment Management: Back to Normal?


9 March 2018

New article from Tatton Investment Management: Tariffs to growth


2 March 2018

New article from Tatton Investment Management: Time to take some profits


23 February 2018

New article from Tatton Investment Management: Change of direction or gradual normalisation?


16 February 2018

New article from Tatton Investment Management: Breathing easier for the moment


9 February 2018

New article from Tatton Investment Management: Meteoric stock markets crash bac


6 February 2018

Tatton Investment Management's Stock Market Correction Assessment


2 February 2018

New article from Tatton Investment Management: Good news turns bad news - again!


26 January 2018

New article from Tatton Investment Management: Surprises


19 January 2018

New article from Tatton Investment Management: US$ weakness versus Bitcoin and Carillion


12 January 2018

New article from Tatton Investment Management: Bullish sentiment rings alarm bells


5 January 2018

New article from Tatton Investment Management: Encouraging kick-off


15 December 2017

New article from Tatton Investment Management: 2017 - taking stock


8 December 2017

New article from Tatton Investment Management: Progress versus Bitcoin


5 December 2017

Interim results for the six months ended 30 September 2017


1 December 2017

New article from Tatton Investment Management: Sudden, but not entirely unexpected


24 November 2017

New article from Tatton Investment Management: Invincible markets?


17 November 2017

New article from Tatton Investment Management: Yield-curve flattening: a bad omen?


10 November 2017

New article from Tatton Investment Management: Nervous investors herald more volatile markets


3 November 2017

New article from Tatton Investment Management: UK rate rise: ‘one and done’ or beginning of rate


27 October 2017

New article from Tatton Investment Management: Trick or treat season


13 October 2017

New article from Tatton Investment Management: All-time highs and Q3 results outlook: Reasons to be


6 October 2017

New article from Tatton Investment Management: Bad news – good news


29 September 2017

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22 September 2017

New article from Tatton Investment Management: QT to reverse QE and 2-year transition period to soft


15 September 2017

New article from Tatton Investment Management: BoE guides for year-end rate hike - Bluff or real?


8 September 2017

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1 September 2017

New article from Tatton Investment Management: Bad news, Good news


25 August 2017

New article from Tatton Investment Management: Summer low or summer lull?


18 August 2017

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11 August 2017

New article from Tatton Investment Management: Stocks take note of North Korea crisis - or do they?


4 August 2017

New article from Tatton Investment Management: Consolidated base but momentum dwindling


28 July 2017

New article from Tatton Investment Management: Summer thoughts about the ‘longer term’


21 July 2017

New article from Tatton Investment Management: Summer lull - delayed


14 July 2017

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7 July 2017

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23 June 2017

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