Ash Wednesday tomorrow and I don’t feel like giving up anything and I cannot possibly give up chocolate given it’s standard fare in this office. Maybe merlot and macadamia nuts but not chocolate…
Back from spending the w/e with a load of Italian rugby supporters (they do exist!) at HQ watching Newcastle Falcons winger Giovanbattista Venditti score a bizarre try on the stroke of half time, we were looking into the bottom of our glasses of Barolo doing the Italian equivalent of a double take as the Azzurri took a half time lead befoe England pulled them back to register an 18th straight win.
Meanwhile north of the river another Italian, Antonio Conti, is doing at Chelsea what Eddie’s been doing at Twickenham. With the same group of players as Mourinho managed last season they’ve moved 10 points clear in the title race. Spare a thought for fellow countryman Claudio Ranieri though who less than a year after leading the foxes to a first title has been ignominiously tinned at Leicester.
Italy features large in markets too as together with France they both threaten to do to the euro what so far Brexit and Trump haven’t managed with Le Pen and Forza Italia swinging their wrecking balls towards it. Jean Monnet must be spinning in his grave as the 60th anniversary of the Treaty of Rome looms on 25 March. Books like “Fatherland” “The Last Great Frenchman” and “1984” are flying off the shelves.
Management of Credito Valtellinese we know well and on their visit to our offices last week they threw a spotlight on their eye popping 23% of NPL, a staggering €4.5bn out of €25bn. NIM may be improving courtesy of the “Donald’s” almost single handed effort to right the global yield curve but to say the balance sheet’s stretched would be the understatement of the year. UNICREDIT’s €18bn rights issue limped over the line and aggregate Italian bank NPL remains at €330bn or a staggering 20% of GDP.
Unsurprisingly gold’s on a tear given the chaos in Washington and the eurozone and signs yesterday that US voters are starting to see their confidence in Trump eroded embed the case for gold. (and for hard assets more widely) Fortunately we’ve got the best performing gold fund in the country. In fact Amanda’s caught up with Ian W’s Charteris equivalent with a return of 92% and is just about first in the country over 12 months in all categories out of 2,800 funds in the IMA.
South River Asset Management funds more widely too have started 2017 nicely.
Over 12 months we’re performing well in all four categories- Cautious, Diversified, Growth and specialist (gold). Our Growth multi asset fund has returned 30% over 12 months versus the key competitors in our space Marlborough and Miton whose equivalent funds are up 16% and 7% respectively.
We’ve got a 4* FE Trustnet rating for our Cash+ fund and our Diversified fund has been upgraded to a 3* rating following a 1200 bps outperformance last 12 months.
Short term however we are tactically cautious. The Dow is up twelve days in a row and 10% since Trump’s election on 8 November yet beyond a huge amount of grandstanding, mud- slinging and hype, achievement there has been none.
The new President goes into tonight’s crucial speech to Congress to present his fiscal proposals with US markets in what appears to be an almost delusional state of euphoria that Trump cannot surely over deliver on. And with a trailing p/e of 19 there is a risk of disappointment.
As a result we’ve hiked cash further to 15%, have further increased gold to 10% and upped weightings in commodities, defence stocks, (good results from MEGGITT today) industrials and infrastructure.
We’ve been busy bees on the research front covering a ton of ground and seeing approximately 100 companies YTD already.
The team’s back from SA claiming exhaustion (though Amanda and Richard L protest too much, sounds far too enjoyable a time to me!) But 50+ companies later I grudgingly accept is a pretty decent effort.
As for us, back at the coal face we’ve been nose to the grindstone trying to disentangle European bank debt, the state of US preference shares and European utilities and the efforts to squeeze extra juice from high yield.
We met the team at JPMORGAN corporate debt fund last week while in mineral sands there’s a great issue out there. It’s the $300m debt issue of the French government backed ERAMET/MINERAL DEPOSITS TiZir JV. With two coupons coming and it rolling in September, trading at 95 cents in the $ that’s a potential 16% total return in six months.
Have an abstemious Ash Wednesday