Posted on Leave a comment

STOCK market does still defuddle at times.

I recall trying my best to read the FT as an A Level student. I thought someone studying A Level Economics ought to and the tutor was always scanning it so…. I used to have to make a 1.5 hour journey each way to college, so I gave it a good go. I could not make sense of it. Just not experienced enough at 17/18years old and….fathoming out how markets and funds worked was beyond me.

 

Now some 32years later the financial press, the markets and share prices still have the capacity to befuddle me. Look at this crop from the day after solstice 2020.

 

By the Way…I did learn this though…..

 

#Rule 72. If you invest in the market, you can beat bank ROI [not hard] and generate a 4.4% yield from UK based equity in dividends. Apply a compound effect and after 16years, your investment will have doubled. Better than 0.001% roi !!!

 

[1] How Can this Be ?

Wirecard, the troubled FINTECH German payments group, has been unable to account for said €1.9 billion of cash and ADMITTED it probably does not exist. PARDON ? WHAT ? Money is supposed to be held in accounts looked after by a trustee on its behalf

 

Just how can this be ?

 

The CEO has been arrested and bailed. The value of shares fell 85%? Huh? Not 100% how bad can it be to stop investing ? The concern in the UK is that our FINTECH sector catches a cold. And, for a sector that currently bedazzles [recall dot com bubble] that is not a welcome outcome.

 

The company said: “Wirecard continues to be in constructive discussions with its lending banks with regard to the continuation of credit lines and the further business relationship, including the continuation of the current drawing coming due at the end of June.”

 

 

[2] Tax Cut Health Warning

 

My A Level economics textbook clearly had the following lesson: to increase spending and therefore economic health cut tax. So, the Chancellor plans a VAT cut from 20% to probably 15%. But it would seem unlikely that it will work as theory anticipated.

I’m not sure people’s reluctance to spend is because things are 5% too expensive. Must be a question over how effective a VAT cut of 5% would be? 2008-2009, 2.5% VAT cut for 1 year raised spending by 1% when shops and hospitality were operating normally.

Also this measure may increase the spread of COVID-19 as has been seen in Germany at Primark alone saw 27% in cash transactions and contagion possibilities. SO the measure to release the economy make conversely close it down.

Each % point reduction in VAT costs £6.85billion over a year. I know we are used to big numbers flying around that the moment but a 5% cut would be very expensive indeed. With household finances stretched, the disposable income of the middle classes firmly lockdown down, who is going to do all the spending ?

[3] Pop, Fizz

 

Great news for a product one would not have even imaged existing 20years ago. Certainly not when I was that A Level student

British Sparkling Wine is likely to have doubled its market by 2030 to 20Million bottles. Not allowed to call their product Champagne as it is well not from Champagne…. This premium product had a bumper year in 2019-20 and it look set for year on year growth. Try @ChapelDown I sure have.

 

 

 

Leave a Reply

Your email address will not be published. Required fields are marked *