11th December 2009

The Hunters' Tails

Irony in igloos ...
All shall be well. The apparently patent truth that 'climate-change' is (all) man-made has its apotheosis in Hopenhagen. All of Denmark's limos, and most of Sweden's, are involved. There are no jets left to charter, and there are so many watermelons - green on the outside, red on the inside - carbonising their way to Copenhagen that campaigning Cassandras have to fly to Malmo instead - and limo along to the industrial estate where they deliberate, before nights in melting igloos. Eschewing such vulgarity, Lord Mandelson has instead continued his social mountaineering. He has been shooting with a son of that tented oligarch and friend of Lockerbie bombers, Colonel Mu'ammar al-Qadafi, the longest-serving ruler of Libya since Ali Pasha al Karamanli, who presided from 1754 -1795 - while the 35,000 staff of the European Commission have just done their bit for the new frugality - by accepting a pay-rise of a mere 3.7%.

Back here, the garden gnome has decided that if you earn between £100,000 and £113,000, your marginal rate of tax will be 62% from April 2011. £15bn in sudden, obvious "efficiency savings" makes one wonder what even they think they've been playing at for so long. Anyway, in response to the obfuscation William Littlewood of [y]our Strategic Assets Fund has increased his short in sterling, taking it from 34% to 38%. "Even if the UK economy recovers much faster than we anticipate," he says, "it is unlikely that the PSBR will fall below 7%, a level which in 1976 forced Denis Healey to get a loan from the IMF." Perhaps Darling's eyebrows aren't bushy enough yet?
Happy birthday - to whom?

This month marks an important anniversary for investors. The FTSE 100 Index closed at 6,930 on 30 December 1999. Although it climbed close to that in June 2007 (6,732),it has had a poor decade overall and, as we write, seems range-bound above/below 5,250. That is some 20% off its 10-year peak and compares, unfavourably, with a return of 109% from residential property over the past decade, 37% from corporate bonds, 35% from gilts and 21% from cash.

But Footsie's relatively dismal showing masks, of course, some remarkable divergence in returns. Of the companies which have stayed in the index for the entire decade, Invensys is down by 90%, as is RBS. But Randgold Resources, for example, is up by 5,680% and Cairn Energy by 2,230%. So, talking our book, stock-picking matters. And in general, after a relatively 'lost decade', will the next one be equities' turn?
And so to s[t]ocks ...

A topical example of corporate Darwinism is WH Smith (which we hold widely), following the demise of Borders. Another favourite of Derek and Ruth in our UK Special Situations Fund, and another strong survivor, is pub group Mitchells & Butlers which is much in the news. "One of the best operators and heavily asset-backed," says Ruth. "Rebel shareholders are banging the drum. We hold 3.5%, and have yet to declare our allegiance." To what, and to whom? Ah, it's a boozy business, it seems.
In UK Growth Fund, Tim has returned fresh from Cambridge-in-foggy-fens with a steer on his holding in Abcam. He's worked out what "internet sales of antibodies" means. Growth. That will do. Defence procurer Cobham, up 11% in November, is a second stock to whose troth Tim plights. In Strategic Bond Fund, Alex and James have esoteric edges. A bond yielding 9% from Poland's CEDC, the world's largest producer of vodka, is now 0.9% of the fund; and they've added another Polish bond (1.1% of the fund), this one from TVN, Poland's leading broadcaster, on an 11% yield. Could James be going to Poland for Christmas? In Income Fund, both Adrians concur on Compass, which has come out with great results this week, and on IG Group, which is expanding overseas. "It seems," says Frostie, "a safe, ah, bet."

Speaker's corner ...
"I came to Dubai to find out if it's really all it's cracked up to be, and the answer ... is a resounding 'yes'. As for the credit crunch, everyone I have met here says that Dubai won't just survive. It will thrive."
Piers Morgan, ITV1, January 2009.

And finally ...
What percentage of the Obama cabinet has ever worked in the private sector? Of the 432 people concerned, the answer is 34, or 8%. (The next closest was JFK's Camelotians in the 1960s, at 28%.) We offer a festive magnum of champagne to whichever of you, our 34 readers, is first to email us by today week (which will be our last issue of 2009) with the answer to the question: what percentage of grim Gordon's cabinet has ever worked in the private sector? With suitably august ceremony, we will hand over this prize at the appropriate one of our Evenings with Artemis, early in the new year.

News of the Week
Gold, frankincense and myrrh ...
Short of ideas? The US Federal Emergency Management Agency (FEMA) has made some suggestions this week: a home disaster kit including food, water and medications for 72 hours, a first aid course, a foldable ladder, a smoke alarm. "Or what could be more generous than giving your loved ones a fire extinguisher?" asked FEMA administrator Craig Fugate. "Or you might get one of those emergency crank-up radios. And I'm a big fan of those little flashlights. You can never have enough flashlights when there's a power cut," Fugate said.

FEMA also advises that, in addition to reading The Night Before Christmas to the kids, you take the occasion of having the family together to "develop a family disaster plan." Fugate explained: "I'm not saying that Christmas should necessarily have disaster as its theme. What we are saying is that the holidays are the ideal time to talk about a family communication plan in the event of a disaster." The talk could always wait until Boxing Day, he added. "But if I were you, I wouldn't take the risk."