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30 December 2015

Politics Provided the Light Relief in 2015



2015 has been a pretty miserable year for investors. No asset class really stood out as providing more than a mediocre return, and in fact the majority were flat to down. Stock markets? Mostly flat to down, although the US and the FTSE 250 (unlike its better-known sibling the 100-share index) put in stronger performances. Bonds? Marking time, on tenterhooks, waiting for the crash to hit. Cash? Forget it - we’re still in the low (or no) interest rate world. Commodities? A very sad story. Oil probably led the way, at least in the eyes of the general press and public, but the others weren’t far behind, with copper and nickel both showing how it wasn’t a good year to be a metals man. Prime location property across the globe did actually perform pretty well, but it would be a brave investor to be too heavily invested there - too much of a temptation for tax-hungry governments, I would suggest. 

Bookended by Atrocities

In a world where the year was near enough bookended by atrocities in Paris, where millions are displaced by wars - declared or not - and terrorism, where corrupt governments reward their cronies and watch their populations head for starvation, it may seem strange to say it, but the light relief this year has in many ways been provided by politics and politicians, and commentators and pollsters. Think of the UK general election back in May; what were the highlights, the bits we remember? Probably, a man trying to eat a bacon sandwich without grease running all down his chin. And then, a few days later, that same man, standing in front of a giant headstone, engraved with third-form debating society platitudes. Yet the pundits pretty much all told us this was the next Prime Minister. Laugh? It would have been rude not to.

The Left

Then, a little later in the year, that same political party had a leadership election. One of the candidates, on the ballot paper “just to promote debate”, was a lifelong marxist socialist. No chance, the experts told us, that he could be elected; the electorate wouldn’t have it. But it was a peculiarly selected electorate, and he won. Watching the pundits backtrack their way out of that one was a delight. On a more serious note about that, though, marxist socialism has never, ever, worked satisfactorily wherever in the world it has been tried. Why would it now, in the UK? The perennial problem is running out of other people’s money. Still, the man’s been good entertainment value so far.

The Right

And in case you may think I’m being partisan here, and picking on the political left, just look across the Atlantic to the USA. There, ahead of the approaching presidential election, one  of the leading candidates from the right is a man whose major policy decision appears to be to be to abuse everybody - still, I suppose at least that’s equality, of a sort. Oh, and to put an exclamation mark after his name on Twitter. Fine head of hair, though, and, again, watching makes good spectator sport. 

Now, I realise I shouldn’t really treat this as just light entertainment. After all, given that the pundits have been so wrong this year, maybe they will be again, which could mean two of the major western nations being led in the relatively near future by - in one case - a hangover 1970s student protester and - in the other - a man who has no policy apart from being rich. That possibility would make a Swiss residence permit one of the most valuable documents in the world, I should think. Except that those two would have fingers on the nuclear trigger, so it probably wouldn’t help.

Bottom of the Cycle?

Still, we haven’t reached that point yet and light relief from the steady, grinding decline in the prices of metals and oil has been welcome. Has the cycle reached the bottom yet? I suspect not, at least partly because the necessary re-adjustments have not yet fully taken place. In an era of low prices - and I don’t think anyone would question that that’s where we are going to be for some time - the most important issue for miners and drillers is to be on the bottom part of the price curve. That focus on cost is what is driving the business at the moment, and ultimately it will bring good news for investors. Unlike this year, I believe there will be interesting opportunities in the resource sector in the reasonably near future. Miners who can produce at the lowest cost will survive, and that’s where the investment potential lies. Look for the cheap production, and that’s where to put the money.

Optimism

So if the politicians have provided the cabaret to amuse us while business languished somewhat this year, I’m more optimistic that next year will bring better opportunities. Sadly, though, the politicians have the potential very easily to slip from farce to tragedy, so they could yet mess it all up.


I would just like to thank all readers of this site; the viewing numbers keep rising, which is pleasing to those of us who write on here. A Happy and Prosperous New Year to all.



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