The old Yorkshire phrase “there’s ‘nowt as queer as folk” has never been so apposite as some of the goings on this week.
Michael Eisner, former boss of Disney who’s done it all, seen it all, taken over huge companies like ABC, CBS, XYZee whatever, goes and buys our local football club Portsmouth FC. From “Finding Nemo” to tweeting “Good luck the Pompey” against Newport County on a wet March afternoon at Fratton Park. I mean, why would you do that?
However, it’s probably not as strange as the case this week of head of Ligurian principality Seborga, his “tremendousness” Marcello I, who’s being challenged for the post by “his awesomeness” West Sussex born Italian Marco Dezzani, taking European self-determination to a new level, having previously declared independence from Rome.
And finally the Donald. Ah yes, the Donald. A new low/high from POTUS this week when asked to compare how he viewed Angele versus Vlad, the line “Let’s keep an open mind” was probably not quite what diplomats of Europe’s largest and most powerful country and bulwark against Soviet communism for half a century were thinking, prompting the skulking six foot eight figure of Fed Bureau chief James Comey to come out against DT’s Kremlin cronies in a withering attack at a House committee hearing last week.
And investors more generally are starting to question the DT sunny uplands with Nancy Pelosi and her ilk finally getting their act together on Capitol Hill against the administration’s attempts to ram through Obamacare reform and repeal of Dodd Frank.
On this side of the pond we’re into the hard Brexit versus soft Brexit, clean versus unclean debate, blah, blah, blah…Theresa ‘s back from the Liberty fresh from showering the Welsh with goodies, a quick turn on the cover of Vogue magazine and followed up by the triggering of article 50 to get us on our way.
In financial markets Fed Chair Janet Yellen raised Fed funds as predicted to 1% but the yield curve ‘s flattened to 150 bps short to long reinforcing our view of a 1.5% GDP growth rate- in line with the last 20 years and hardly grounds for DT driven euphoria especially with CAPE in the States already a heady 21x.
There are other grounds for scepticism over the strength of the recovery.
- German two year yields schatz bonds, are trading at -100bps and a total of $8 trillion of investment grade debt is trading below zero.
- While GDP estimates and global inflation forecasts are rising, generalised commodities as measured by the CRB are flat so far in 2017.
- Emerging markets are the best performers year to date yet the biggest one, the Chinese A share market, is flat.
- Fourth and finally, cyclicals are underperforming again and defensive stocks like utilities, gold and high yield blue chip corporates are outperforming.
PAM managed funds are closing out a solid first quarter. Our cash+ strategy has put on 1% while the average Dynamic multi asset fund has put on +5% in the quarter and the gold fund +20%.
Our core strategy remains centred on a diversified approach with a reasonable spread of corporate debt and loans targeting 4% to 6% yields and enhancing this via a satellite of punchy names in particular in resources, industrials and energy where we see the most value and upside potential for a rerating.
Our top ten fund holdings are below.
- Aberdeen Asian Income Trust
- Blackstone GSO Loan Fund
- Galloway Emerging Market Debt Fund
- Invesco Perpetual Asian Income Trust
- IShare European Utility
- IShare European Property
- IShare US Preferred
- IShare European Oil and Gas
- NB Floating Rate Income Fund
- Polar Convertible Fund
We continue selectively to favour commodities, for example, taking advantage of supply driven shocks in cobalt (AUSTRALIAN MINING) but we focus this week on ilmenite. With supply tightening in paint worldwide as takeovers dominate the chain (PPG’s bid for AKZO following hard on the heels of SHERWIN WILLIAMS’s merger with VALSPAR) we’ve bought holdings in two ilmenite suppliers:
One is MINERAL DEPOSITS, an Aussie listed mineral sands dredger, the largest in the world and which is a first class asset in Senegal, West Africa and ships the product to its owned smelter in Norway. Shares are potentially extremely undervalued in our view with assets in the balance sheet of AUD200m and mcap of AUD90m with ilmenite prices underpinned, this could look very cheap.
The other one which is earlier stage is in Greenland and is absolutely flying, fellow paints ingredients supplier BLUEJAY (*wikipedia- bold noisy north American bird!) that’s pulled a fast one and changed its name from the less catchy FINNAUST and seen its shares soar 50% already this year.