27th May 2011

Artemis: The Hunters' Tails

Iphigeneia at Aulis ...

Since Euripides' original it's been a play by Racine, an opera by Gluck and a novel by Unsworth. But as, inter alia, sovereign debt keeps markets range-bound, the ancient Greek myth is an apt analogy.

Under Agamemnon and assembled at Aulis, the Greeks were all set to sail for Troy, Helen and revenge. Contrary winds, arranged it is said by the Troy-loving goddess Artemis, prevailed. The seer Colchas told Agamemnon he could only propitiate the gods if he sacrificed something he held most dear. Enter the high king's daughter Iphigeneia -- and the rest, as they say, is history. The victim's mother, Clytemnestra, was not amused.

Despite €256 billion in bail-outs to Greece, Ireland and Portugal, the great Euro-Mess is as messy as a year ago. Greece remains shut out of financial markets, and the cost of insuring its debt against default is at a record high. There has been no real sacrifice anywhere, let alone at Aulis. In our view, both there and everywhere in the developed world, there needs to be. Will it happen?

No. Recidivism rules. If markets are to go back on up, they will have to do so against and despite the fudge and fiddle. In the US, for example, millions of bank-owned homes have begun falling into disrepair. US lenders own twice as many foreclosed homes as they did when the financial crisis began in 2007. US debt is colossal, gargantuan -- and, largely and increasingly, just accepted as being there.
Back at the ranch, our coalition -- that detention centre for Liberal Democrats -- continues. Is, for example, reform of the Lords really that important in the midst of much? The UK now contains more people who are older than 65 than people who are under 16; and a sixth of us are expected to live to be 100. That's, ah, expensive. Though HMG is said to be considering radical measures, such as actually encouraging us all to smoke or to start again if we've quit, emollience and the mortgaging of the future will prevail.

Meanwhile our islands' credit rating has just been cut by China's Dagong rating agency. It cites the UK's crepuscular growth, which it says will be stuck in the 1.3%-1.5% range for at least two more years. The downgrade from AA- to A+ puts Britain on a par with Chile and heavily-indebted Belgium -- and, yes, with the US, which Dagong downgraded in November.

This all seems to us intractable; inscrutable; there being no Troy to burn. And so, sometimes bemused at best, we go on:

Sticking to our knitting ...
Which is stocks. For UK Special Situations, Derek and Ruth are much taken by Victrex. Britain may be down, but as Adam Smith said there is a great deal of ruin in a nation; and with the likes of Victrex about, our lights will be on for a while. A near-monopoly, the firm makes things out of polymers (or polyaryletherketones to the chemical cognoscenti.) If and when you get on board a Boeing 787, for example, you will find about one tonne of Victrex's polymer around you. (It replaces much that is metal.) Through its Invibio brand, Victrex is applying the same high tech to medical devices such as shoulder arthroscopy. The best of British -- from Blackpool.

Old (er) but in some ways no less new, Derek and Ruth are almost as pleased with their holding in Shanks, which came out yesterday with some pretty impressive results. It has minimal landfill operations (landfill tax is about to go from £56 a tonne to £80 a tonne), but significant operations in energy from waste and recycling. And that, of course, suits the tenor of these times as we recycle more and more -- especially debt.

For Artemis Income, this week Frostie has been in ruminant mood: "We estimate that the average proportion of profits being paid back to shareholders by UK companies is only about 40% -- the lowest for many years. So not only should dividends grow as profits grow, but also there is scope for companies actually to increase the percentage of profits paid out in dividends towards the long term average of 50%." That will do. Achilles was at Aulis. But he too came to learn about the tortoise and the hare.

Speakers' corner ...
“Work as if you live in the early days of a better nation."
- Alasdair Gray, novelist and painter, 1934 - .
“I didn't come to discuss the looting of Greek society with prime minister Papandreou. I came to tell him that he must not go ahead with this crime against the Greek people."
- Alexis Tsipras, leader of Greece's Left Coalition Party, on plans for privatisations.

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