Monday, 5 March 2018

Recession Watch Part 3

Well, well, well. Things have been getting interesting since the last Recession Watch post. In the weeks since then, Carillion have gone bust, big high street retailers are dropping like flies (Maplin, Mothercare, Toys R Us, etc. ), casual dining restaurants are closing their doors in droves (Prezzo, Byron Burgers, Jamies Kitchen, etc.) In fact a report shows that a third of all casual diners are losing money. There is more carnage to come I think.

Carillion's plan to become the defacto government for building and doing stuff backfired on them when they turned out to be more incompetent than an actual bureaucratic government department. Hopefully the little companies that they took over MacAlpine, Tarmac etc. can be recovered and put to good work again. And the various services that should be looked after by govt. can be put back in the right place.

And now the 'Beast from the East' arrived and has decimated the business environment for a whopping 5 days. pffff... no effect whatsoever you'd say, but papers are reporting today as much as several billion pounds - maybe up to 0.2% of GDP. Once you add that to everything else going on, there will be no growth to minus levels in the first quarter of the year in the UK.

Over the weekend news of Trump declaring a trade war. Tit for tat tariffs are now virtually guaranteed and everything will get a little more expensive. Inflation will tick up again and the Fed and the BOE will have little choice than to up interest rates. While that might not have much effect in the US, here in the UK everyone has borrowed too much at tiny rates for too long.

Lastly, on Friday a leading indicator for a recession (quoting myself "so RecCon 4 will probably be the failure of an online stock broker")stockbrokers taking their clients money nefariously and running away with it. Beaufort Securities may have been little more than a boiler room operation but they were regulated by the FCA and they still managed to run off with everyone's money.

So the Recession Watch is going to move the RecCon meter straight past level 3 and on to level 4. One to go and we're in the mire looking for the paddle.

In the meantime I've gone half to cash after selling up in the second week of Jan and the rest is in world trackers. I'm no perma bear but if Mr Buffett can't find things to buy and is stocking up on Apples then that sounds a pretty sensible plan.

Be careful out there kids.