"UK equity market descends into ‘uninvestable’ zone"

[spiderbill]

Well that's encouraging

https://www.ft.com/content/bd81b917-658a-3b99-a810-7f1b343ecb1e

Seems like the time to buy isn't now! - according to the experts.
(unless you're feeling brave)

cheers
Spiderbill

[flyer61]

Ironic I sold Some SHYU and bought LGEN and AV. today. Am I the only one who thinks now is the time to go long UK plc..?

[monabri]

Ironic I sold Some SHYU and bought LGEN and AV. today. Am I the only one who thinks now is the time to go long UK plc..?

No....you're not alone!

The UK will look increasingly attractive to the US and European investors based on yield and the current sterling weakness.

[richfool]

I couldn't access the FT article, but today I topped up LGEN and also MYI., - perhaps hedging my bets with the last one. Two weeks ago I topped up HSBA.

[spiderbill]

Odd, I followed the link there from Twitter initially and got straight in, but trying to go back to it just now it blocked me. Must be allowing 1 look per day or something similar.

Wish I'd waited till now to buy MYI, bought in a year ago and it's down 16% since then!

[mc2fool]

It's direct linking that the FT stops, but it allows links from search engines, so if you google the article and then go there from google you'll be able to get through.

https://www.google.co.uk/search?q=UK+equity+market+descends+into+uninvestable+zone

[andyalan10]

Two points:-

To paraphrase, UK stocks have become so cheap they are uninvestable, OK, each to their own.

Secondly, UK stocks at the mercy of short term political decisions. So nothing like the US, then.

Thirdly, asset managers saying they can't invest in the UK because they can't predict the future. Doesn't that match their inability to predict the future everywhere else?

Andy

[moorfield]

UK equity market descends into ‘uninvestable’ zone"

Surely, from a HYPsters perspective, the UK equity market descends into 'investable' zone ....?

[flyer61]

No one gives the UK the time of day at the moment. There are a zillion things to worry about, but so what, when weren’t there issues to get your knickers in a knot. I am heavily exposed to the USD and it has served me well. At this point in time Quite happy to buy UK focused Companies. Lloyd’s, Aviva, Legal and General spring to mind. Interested in others UK specific ideas.

Back to the Antiguan sunset...

[SalvorHardin]

When major media outlets are chucking around phrases like "uninvestable", I start to get interested in buying. To quote Nathan Rothschild, "Buy when there's blood on the streets, even if the blood is your own."

I suspect that the FT doesn't really mean "uninvestable", if only because this is defined as that cannot be invested. This is patently false since the London Stock Exchange is still open and all sorts of UK quoted (and based) businesses are listed there and you can buy shares in them. Rather it is a sensationalist / hysterical (take your pick) headline designed to appeal to its core audience (opinion formers with money who don't wish to leave the EU and are looking for a reason to not invest in Britain).

Like me, Moneyweek is taking the opposite view:

"Of course, when an asset class is detested, that’s when you should start getting interested in it. So when I’m reading in the FT that investors have pulled a full $1trn out of UK equity funds since the Brexit vote in June 2016, and that UK markets have lagged the rest of the world as a result, I have to say that my ears prick up."

https://moneyweek.com/498387/britain-is ... me-to-buy/

Another quote, this time from Warren Buffett: "Be fearful when others are greedy. Be greedy when others are fearful."

Investors don't make serious money by following the crowd; at best they get market returns minus costs (or more likely there's a big additional negative because of private investors' collective habit of buying at the top (or close to it) and panic selling at or close to the bottom).

Incidentally why haven't these managers who claim that Britain is "uninvestable" sold everything in the UK? This sounds a lot like those people who claim that Brexit will "destroy the UK economy" yet when challenged to justify their claim that GDP will fall to zero then say that they didn't mean it.

[Hariseldon58]

From the viewpoint of a Non Sterling investor, they see deep political uncertainty, the likelihood that the currecncy could fluctuate 10 -15%, either way and how companies will fare. It will feel unattractive.

From a UK based investor point of view, we are less worried about the currency factor. If things go well, sterling rises, our UK investments will probably go up and we see our overseas assets fall in value due to the currency movement. We have hedged our bets !

If it goes poorly, UK stocks might fall, the currency goes down but our overseas assets increase in value, again we have balanced an up and a down.

From an overseas investor point of view, the outcome is more polarised, they win or lose big time, as a rising share price and a stonger currency at the same time, give strong local returns to an overseas investor, if things go the other way they lose both bets at the same time.

[stevensfo]

When major media outlets are chucking around phrases like "uninvestable", I start to get interested in buying.

Quite agree! Also, over the years, I've become used to seeing figures for PE, ROE, PEG, P/B, Dividends etc to back up these sorts of claims. The last time I looked, the UK market looked pretty attractive. Despite some falls, the FTSE is still over 7000 and I haven't heard of any dividend cuts. Re. currencies, well, I arrived in Italy when the pound was worth 1.5 euros, and it's now 1.1. Currencies do fluctuate; that's why we have diversified portfolios.

Even if the Brits do leave the EU and embarrass themselves in the history books for thousands of years, I'm sure the stock markets will still continue.


Steve

[tea42]

Babcock? 6% divi. Lots of Govt contracts, sub £6 bargain methinks.

[LooseCannon101]

Why would anyone trust their money with these clowns? Surely, the lower the price, the greater the bargain.

These so-called analysts depend on 'models' which cannot cope with uncertainty - welcome to the real world!

[Gengulphus]

I suspect that the FT doesn't really mean "uninvestable", ...

I would be pretty certain that the FT really does mean what they wrote: "uninvestable" inside quotation marks. If you search the article for the word, you'll find it appears in two places:

“The UK equity market is close to uninvestable in the sense that the near term movement is likely to be dominated by political forces that are very hard to model,” said Inigo Fraser-Jenkins, a senior analyst at Bernstein.

The wording "close to uninvestable" actually implies not uninvestable!

And even if the words "close to" weren't there, the tying down of the sense to one about near term movements means that it's only necessarily of concern to those who focus on the near term: I can well imagine a fund manager whose job might well depend pretty heavily on the fund not underperforming badly in the next couple of quarters considering the UK market uninvestable because of the high chance that it will move a great deal one way or the other in those quarters and it's too hard to call which way. In those circumstances, investing in the UK market is basically a matter of the fund manager betting their job on a flip of a coin, when not investing in it leaves their job relatively safe...

An investor with a long term perspective might not care at all about whether the UK market is 'uninvestable' in that sense, and might well regard it as highly investable if enough investors with short-term perspectives take money out of it and so pull prices down. This is unlikely to be a common viewpoint, as having a long term perspective is pretty hard for an investor to achieve unless they're investing more of their own money than of anyone else's and so basically have the voting power to ensure that their job is safe in the face of short-term setbacks.

UBS hosted a meeting of large institutional investors earlier this month where Brexit was discussed. “The consensus among those investors is that the UK is uninvestable at this point because it is not amenable to rational economic analysis,” said Mark Haefele, global chief investment officer at UBS Wealth Management.

So the FT is reporting Mark Haefele reporting a "consensus" of the large institutional investors who attended a particular meeting. That separates the FT's use of the term from the people who actually used it by two levels of reporting and one of the simplifying and summarising required to decide what the consensus of a lot of views is. That gives ample opportunities for it to be affected by "Chinese whisper" type shifts of meaning - for instance, if Inigo Fraser-Jenkins had been at the meeting and said something like the first quote, would he have been counted as part of the "consensus" that the UK market is "uninvestable"?

There is also the possible issue of the meeting concerned being a self-selected sample, not necessarily at all consciously. For instance, if the meeting's themes (or its reputation if it happens to be a regular one) were generally ones that would mainly be more attractive to some particular style of investing, that would be likely to result in the "consensus" being influenced towards the general views of investors of that type...

To sum up, in that article the FT is not saying that their view is that the UK market is uninvestable, just that that's the word used by others about it. Their use of quotation remarks around it will be to avoid saying that that's their view, which if it indicates anything at all about the FT's view, indicates that it is not that the UK market is uninvestable. But my guess is that it doesn't indicate anything at all about the FT's view, and is instead basically just a policy of keeping a clear distinction between reports and opinion pieces.

Gengulphus

[simoan]

Babcock? 6% divi. Lots of Govt contracts, sub £6 bargain methinks.

Well, with Net Debt currently over 5x EBITDA I'd say it it deserves to be on a very low rating. If the economy deteriorates it's the kind of thing that could "do a Carillion". If all you're interested in is a 6% dividend there are far safer ways of achieving it IMHO. With regard to other fundamental valuation methods (PCF, EV/EBITDA) it does not look especially cheap.

EDIT: Tbh I'm not even sure where the 6% yield comes from? Consensus forecast for FY2019 is for dividend of 30.6p.

All the best, Si

[Avalaugh]

- Cheap now however maybe not if custom is lost after March 29th
- A no deal will mean valuations are very high right now,

Lgen etc, loss of passporting, will be a great short

[johnhemming]

Its really difficult to price in "no deal".

[toofast2live]

The crowd is sometimes right. Momentum investing has a history of working - what goes down usually continues to go down and what goes up continues to go up. Until it doesn't. Useful eh?

But hang on, if the uk market is yielding getting on for 4.5% and even if the lunatic "f**k business" brigade get their dystopian vision and plunge us into 20% earnings downgrade we're still on a pretty decent yield. The problem is that the US market is in insane valuation territory and when that hits the fan...

[johnhemming]

In the end the reality of the economy will impact the capital markets. Doesn't help today as it is very difficult to price in the risk of stupid political decisions.