Sunday Supplement 20/12/2020

Dec 20, 2020

One to go until the end of 2020……and the roadmap has changed over the last few days. With that in mind I’m going to go a different direction in today’s supplement.

The first thing to say is that emotion needs to be removed from this situation. Easy to say, difficult to do. Like everyone I’ve got people close to me significantly suffering from the effects of everything that is going on. This year has been one of the greatest tests I’ve ever faced so far. If not the greatest. One of the hardest things is that it isn’t over.

This isn’t going to be a doomsday piece. Whatever happens, we will survive and thrive in 2021 and beyond. But it is going to be hard-hitting and realistic.

The direction I want to take is not to be a pub doctor or virologist/epidemiologist. It is to consider that the action that the government government taking IS the action, not whether it is right or wrong. How have they reacted and how will they continue to react?

1) providing unprecedented levels of economic support. There are people and businesses slipping through the cracks in the hundreds of thousands if not millions. That is regrettable of course. This support will continue and even grow I’d imagine.
2) continuing with lockdowns. A lockdown after boxing day or in January looks extremely likely. Shops heaving with last minute Christmas shoppers will have led to spread and transmission. The numbers in the next 2 weeks will look bad.
3) presentation of numbers out of context. This will continue and will confuse and frustrate us all.
4) no policy is for certain, u turns are now so common they are not even called u turns anymore.
5) resolve and fight will not subside. Protests will continue. WHEN we get an all-clear the resultant economic uptick will be significant.
6) I wrote in April of a second event that may upset the apple cart “properly”. At the moment this simply isn’t the economic bloodbath that the doomsayers predicted. Thats mostly because of government intervention at a level never seen before. This event isn’t there with yesterday’s news but it is rearing its head again. My definition of the second event here would be if the vaccine is much less effective or redundant against this one particular mutation that is getting all the headlines. That would send markets into a downwards spiral similar to March I believe.
7) confidence. Morale is at a massive low right now because of timing and there will be some scrabbling around to sell. The market has effectively closed for Christmas so the timing is either fortunate or unfortunate from that point of view – you decide!
8) the stamp duty holiday won’t be extended. They say. But the furlough extension until end April a couple of days ago gives an indication of where the treasury thinks things are going and henceforth there are no certainties on that front
9) housing starts. One factor not widely discussed yet is planning “clog”. These figures need some airtime and further investigation but I’ve spoken with a few who are avoiding planning at the moment thanks to delays in the system and it is making some projects economically unviable. This will affect supply for 2021 and 2022 potentially.
10) confusion. I have said a few times my one prediction for next year’s market is volatility. Yesterday’s announcement just makes me want to repeat and reiterate that argument.

It will be hard. It will be tricky. But there will be tons of opportunity and the basics still need to be followed:

Sensible leverage
Not overpaying
Not taking on multi-stage deals unless the prices are incredible
Straightforward strategies that have worked for many years and will work for many years to come
Strong fundamental analysis and reasons to do every deal.

Will prices crash because of yesterday? No. I thought it was very emotional of the one SAGE member to say this was the worst moment of the Covid scenario thus far. There’s tons of reasons why it isn’t. It is just recent bad news at a crap time of year to receive bad news.

Do what you can to fight loneliness
Help others and be kind
Get some exercise every day
Be safe and sensible

Failing that…..hibernate – seems a sensible thing that some animals do that we could learn from!!!
See you next week for the roundup. What a year.