Sunday Supplement – 26/09/2021

Sep 26, 2021


Welcome to the supplement as Sunday is once more upon us. I’ve thrown out the rule book and my allocated topics for this week, because there are situations developing relatively quickly around us, and I wanted to make room to provide some (hopefully) sensible and thought-provoking commentary about them, and, more importantly, possible consequences!

On Friday night I was returning home late through deepest Solihull at around 11pm. I passed a petrol station (there is only one in the town centre – and it is appropriately overpriced compared to the many other alternatives there are in a surrounding radius of a few miles). I never go there, even when I do need diesel (I have an electric car, so it is only if I am driving my wife’s, these days). It’s a mug’s game or one for people who are not geeks like me who think about where they will get petrol/diesel from, not so much to save a few pence a litre but to minimise time in my life spent on menial tasks such as filling up the car – for those who do a lot of miles, Waze is a great app not just for traffic but also for planning fuel stops – superb.

Anyway, I think you know why I will have bought this up. They were queueing off the forecourt still at 11pm. So there’s a few things going on here……firstly, the actual problem. Supply chain shortages. Gas has hit the headlines in a big way in the past 10 days, and there are a few points of order. Strategically, I’ve been convinced that the Government have for years wanted to use the climate change argument to move away from gas anyway – there is certainly no economic argument to speak of. For those who know a bit about EPCs – there’s also no climate argument either (and what will happen – they will have to change the scoring, to manufacture one, IF they are serious about getting rid of gas as a fuel supply for a house). The strategic side is they just really don’t like where the gas comes from, and that isn’t improving as the years go by. Then you throw in the pandemic, when the fragility of all supply chains has been not only identified but also magnified, and it just increases this argument. The name of Gazprom has been mentioned and the amount of influence the UK government contains there is minimal.

And, how lucky are we that temperatures have remained in or around the 20s in much of the country! So gas demand currently is tiny compared to 30-60 days time…….

So onto fuel – a summary of the problems. The Government say there is enough fuel (in this instance, I’m inclined to believe them). Fuel supply is not the issue – logistics is the issue. This is no new news in general – for example, there is enough food in the world to feed everyone more than adequately. The problem is logistics (and, behind that, investment in the logistics to solve the problem). This is often about money and motivation. We have a potential perfect storm – Brexit, Covid, years of poor conditions, lack of recognition through a pandemic that has taken a toll on everyone, a tough lifestyle especially when comparing it to a knowledge worker, working from home (or a relatively low-skilled worker, like a call centre operative). Apportioning the blame is of no interest and quickly gets political – we are where we are.

The decision of the Government was to issue the statement. “Don’t panic”. This is a bit like the old “Don’t think of an elephant” ruse. What did you just do? There’s an overwhelming likelihood that you just thought of an elephant. We are at the dawn of the toilet roll rush (and I didn’t know whether to believe it, but people were calling into LBC that I was listening to on my journey last night and saying that toilet rolls were running short – arguably I’m not helping even talking about it here, and that is part of the dilemma!). What should the Government have done? Say nothing? That was the only other choice. Maybe they should. Don’t panic is simply an invitation to panic. No-one ever says it in a situation unless they know that at least some people will be panicking, and the next move will be for them to panic some more. Then, people not panicking will start to panic, and people who never panic (I try to be this person, whether I succeed or not is a bit too subjective I guess) will understand that these panickers mean I NEED to change my behaviour, because they are panicking. The epitome of the vicious circle.

The restrictions are in place already although not across the board. Max refuel £20/£30 – this has been better managed than the toilet roll situation. The traffic is backing up outside the forecourts. This has negative consequences – journey times, higher probabilities of accidents. Worse for emissions. Worse for fuel consumption – the vicious circle again. But at least the restrictions have gone on within 24 hours – last year you will remember it took weeks and weeks for them to be implemented.

One panic leads to another as well. IF the toilet rolls reports are true, remember what else went last time? Pasta, and then random local shortages I believe. No logic to it, but it starts. A more “structured” approach here would be to finish the Christmas shopping by the end of this month, as there may well be choices between presents and food if this situation goes towards a worst case scenario. If the army do have to get involved to drive tankers, this will cause further panic. (I think they only have 1000 drivers who can help anyway – not nothing, but people are talking about shortages 20-100 times that size in the sector currently).

Can and would this filter through to the property market? Possibly. Many start to batten down the hatches towards Christmas anyway. More reasons to leave the UK if you can afford and are in position to have a long winter break – these problems are not confined to the UK but Brexit has definitely had an increasing impact, as people on either side expected it would (if we stay position-neutral). A quieter market than normal? People panicking about other things leading to more motivated sellers? Possibly.

The stock market often speaks of October crashes. 1987 lingers in the memory but there have been other haircuts. The US market has wobbled more than any other time this year in the past 10 days – but that’s been as “unwobbly” as any market I can remember for a while. Is there a crash coming? I don’t think so. But it is the hint of the crash that opens the door of opportunity. If 10% of vendors believe it……….it is as good as it being true in those 10% of situations.

I’ve spoken a couple of times this year about this being the portion of the year where there would be “no good news”. There’s more to come here. Separate the real problems from the theoretical problems – see how people react – because that is what it is all about. Keep your head whilst all around you are losing theirs. Keep calm and carry on but don’t forget about the numbers.

This is what will serve you well over the next 6 months…….Until next week, when I will return to numbers, areas, and a healthy portion of macro (and yes, inflation……)