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Have Yourself a Quiet Little Christmas - (PHP)
4/12/2019 (119264)

Have Yourself a Quiet Little Christmas

On Tuesday, Trump seemed to suggest that a trade deal with China could wait until after the next US election in November. One day later he is reported as raising hopes of an early deal, saying talks are going very well. On Tuesday the US markets (trailed by the UK) slumped, while today they rallied.

Back in the real world in the UK, fund management giant M & G suspended dealings in a £2.5bn property fund after investors withdrew £992m from it in 12 months. Selling commercial properties to raise funds to repay investors has got too tough. While the fund has only lost 7.9% over the year, life is getting harder. Obviously there is a conflict of interest at this stage – the properties easiest to sell are the best ones, those managers would least like to sell. So the size of the fund shrinks, and the quality diminishes.

This is yet another straw in the wind for those of a cautious turn of mind. All but the very best of retailers are finding life more difficult, and investors must appreciate that a modest downturn on sales can have a disproportionate impact on profits – all of those fixed overhead to cover first. Properties? Who needs them?

And we are little more than a week from an election whose result is uncertain. The polls suggest a Tory majority, but will it be an absolute majority or another hung Parliament? The latter would not be good for markets.

The former? Well, it tosses us back into the immediate concern about Brexit and the detail of how it can be done and done quickly. And then the uncertainty while that detail – and there is pretty fundamental detail in the mix - is worked out over the next twelve months before the split, or whatever.

Maybe all of those companies holding fire, waiting to see a firm decision, will act if it is finally clear that we should be pulling out. Perhaps they will be forced to make decisions on moving plants, shifting people, across into the Continent of Europe. Upheaval all around, uncertain times for people to buy anything unless they have to.

A clear Tory win might mean some of those expansionist promises start to come good, boosting parts of the economy, but who knows? Will the feel-good factor prevail? Or will we be worrying about employment again?

That covers just a few of the broad questions facing the UK and our stock market, never mind what Trumpery is afoot, changing in the twitch of a tweet. For just a day there this week, it seemed quite plausible, the notion of Trump pushing expectations of a trade deal with China beyond the next US election. That left plenty of room for him to postpone it until mid-summer, closer to the election, when it would help advance his case for another four years of top-down chaos and corruption.

Why would he settle a deal now, settle it early, way before his election battle? Far better to prolong the talks – China seems to have infinite patience – and come to an agreement – any agreement – and proclaim trade war victory in time to benefit at the polls?

That, of course, supposes he is able to strategise that far ahead. Right now we are looking, perhaps, at some sort of deal ahead of December 15 when the US is scheduled to add 15% tariffs on an extra $165bn or so of imports from China on top of the $360bn tariffs already in place. So far, American consumers do not appear to have understood too widely that they are the ones paying those tariffs in the cost of imported goods, but that might change. Scratch a soya bean farmer and he knows things aren’t right, with special subsidies keeping him afloat while his business sinks.

All of the while Trump appears to be spreading more confusion, adding new tariffs to hit imports from other countries – steel and aluminium from Argentina and Brazil, and all of those goodies from France where tariffs are to be doubled. Higher costs help strangle world trade, which helps heap pressure on us all.

The sheer unpredictability of Trump’s progress has failed, so far, to knock the US stock market out of its stride for more than a fleeting moment. Yet who knows how long that can last? Trump watches it closely, and acts to keep it bubbling.

He cannot afford to let it tumble ahead of next November, yet many US commentators are sounding warning notes. It might not be the housing market which causes a collapse next time, but auto loans are looking toppy. Gone are the days of economy vehicles. The streets are crammed with ever bulkier SUVs and trucks guzzling gas. They get replaced every year or two, with the unexpired portion of the previous loan rolled into a new, bigger chunk of debt. So long as folk can meet the monthly payments for the moment, the spending does not seem to stop.

No wonder Trump rages against the Federal Reserve Bank and the notion of prudent money rates. The auto and housing markets are sustained by low interest rates, but where do they go next? Should the unending spending falter, where is the room to stimulate the economy by slashing money costs? There is precious little of that left, and debt is high.

And so on, and so forth. What happens in the US happens in the UK, sooner or a little later. And there are ample reasons to be cautious. That is a significant reason for the lack of buy recommendations from me – the fear a crash could be coming, and the knowledge that the redoubtable kenmitch and a whole gang more of posters on our bulletin board are doing a far better job at picking more general stocks right now than I can.

I remain very grateful to them, and in no way wish anyone to read this comment as challenging their choices. But, please, learn from my experience (and learn rather better than I have been able to in practice in some of my own trades), and keep a stop loss well in mind.

In the first two days of this week, it looked as if the pre-election uncertainty might combine with the US slide to send the market tumbling. Today it has regained its poise. But do take heed – the dangers are out there.

So in the unlikely event that you are not familiar with it, go to the stop loss section listed in the contents on the front page of the site. It does not always work. It can take you out of good growth stocks too soon. Others can collapse too quickly for it to cope. But having it constantly in mind is well worthwhile, a stock market safety belt. It ought to save you from calamity.

Be honest, too. Step back a moment and assess how much you have at risk, and whether you can handle a tumble. Several of the stocks I write about most frequently are speculative, and should command only a modest chunk of your portfolio, money you can afford to lose. I love them and believe in them or I would not be writing about or owning them myself, but they do not come with guarantees.

The two relatively safe stocks on my main list are Primary Health Properties (PHP) and Supermarket Income REIT (SUPR). Primary Health is hitting new highs, a broker has just raised the price target to 160p, and I love that rising income and the safety of state income support. Supermarket Income offers a higher and rising income at 5.24%, and is also pushing at a new peak. It is clearly preparing the way for more acquisitions, so capital growth is likely to be modest, constrained by issuing more shares. But it looks an excellent bet over the medium to long term, operating in a way which insulates it nicely from the more general retail unease.

It seems a shame to issue a warning report when the party is going so nicely, but step aside from the fun, and ponder what is going on. US debt mounting, an erratic emperor running the show, the unease of the UK election, and the absolute uncertainty of how Brexit will work out...

Oh well. Happy Christmas, all. Let’s just keep that cash safe while we wait, eh?

I have a holding in Primary Health Properties.

  More on (PHP)
Previous Stories
Mike on (PHP)
13/8/2020 Looking ahead at Primary Health Properties.
4/8/2020 More support for Primary Health.
29/7/2020 The inevitable solid PHP interims.
9/7/2020 More cash to keep PHP growing.
25/6/2020 A few thoughts on preserving your profits.
10/6/2020 What to do about the market.
1/6/2020 The market puzzle and a few answers.
14/5/2020 Down we go.
12/5/2020 PHP pulls in the rent.
6/4/2020 Two healthy players.
25/2/2020 Updated broker forecasts for Primary Health.
12/2/2020 First class Primary Health again.
6/12/2019 An old favourite excels.
4/12/2019 Take it easy towards Christmas.
25/9/2019 Primary Health growth plan.
18/4/2019 Yet more reports praise PHP.
28/3/2019 Safer returns in a sliding market.
26/3/2019 A flurry of praise for Primary Health Properties.
15/3/2019 Harry Hyman on a new high.
31/1/2019 Primary Health powers on.


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