Tag Archive: Brexit

Weekly Thoughts 02 September 2016

Many clients and people have wondered and asked about the impact that Brexit will or might have to their investments and the global or regional economy in general. If the UK stock market ‘drops’, it means the average value of all the listed companies drops, not necessarily that every underlying company in the UK is suddenly not making profits anymore. The concern for one country’s stock market often overrides the fact that good companies earn money from many countries making up the global village, not just the country it is listed in. So about six weeks on now, how have some company faired since the event? I have some figures for five UK-listed companies:

• Vodafone: It generates 84% of its revenue outside of the UK, operates in 76 countries and is up 5% in pound terms since Brexit.
• British American Tobacco: 97% of revenue from outside the UK, operates in more than 180 countries, 13% up in pound terms.
• Reckitt Benckiser (They market a whole bunch of health related products and all of us reading this will have at least one of them in our house): 92% of revenue from outside the UK, 180+ countries, 7% up since Brexit.
• GlaxoSmithKline (also global healthcare): 95% of revenue from outside, 150+ countries, 18% up.
• Diageo (a global alcohol business): 95% of revenue from outside, 180+ countries, 18% up.

Many good companies have also been around for a very long time and weathered all sorts of economic and political events. For example, Nestlé has been in business for over 150 years and Johnson & Johnson and Coca-Cola both for around 130 years. Good consumer companies will last and will make profits.

Weekly Thoughts 15 July 2016

I recently cracked an invite for lunch on Tuesday this week with a small group of Independent Advisors who were invited to have lunch at a very decent hotel with the head of retail at Coronation Asset Management, a chap by the name of Pieter Koekemoer. He is a great guy and I really enjoy the small group thing as its more interactive than the presentation style.

The lunch went on for two hours and was very interesting. Not only does Pieter know the fund management side of the business, having regular and deep interaction with the fund managers, but he also comes with much experience and insight into issues affecting the broader industry. This because he chairs and sits on a couple of industry advisory boards, which includes interaction with Treasury and the FSB. So we get to chat around the regular fund information and then also raise many questions pertaining to the industry, legislation, the stumbling blocks being faced, political interference… and so on. Very worthwhile opportunity.

We did talk about Brexit, seeing as it is the latest topic. The short story is that they feel all will be OK in the end and that there might even be some long term advantages. There will be some employment and trade adjustments but people will continue to spend their money at Tesco’s and Harrods and buy products from General Electric. Personally can see the leaver’s point of view. I mean if I was paying more to something than I received back, I would also think about that. Whereas Greece receives far more financial aid than it pays in to the EU – although it couldn’t pay more anyway. Pieter believes that Greece will never be able to repay their debt. I think he’s right. It will need to be written off.

It’s a fairly reasonable view when you think about it – the UK leaving. Besides economic pro’s and con’s, they’re completely separated from the mainland by a piece of water (although you can drive through a tunnel) and they’ve always retained with their own currency. So the returning to own currency problem is not there for them. I do think it could bring about new issues politically around Scottish independence and the border with Ireland. If one looks back in history there are many examples of how nations were somehow put together and then determinedly wanted their independence back. You can see this from Iceland to the USSR to the times of the Roman Empire. Maybe in 500 years’ time this event will be recorded as the beginning of the breakup of the ‘United’ Kingdom and the European Union. Fascinating.

Anyway, together with US politics, there is plenty of entertainment on the news channels.