So we are back to the future. As expected, the economy improved by 0.8% in the second quarter and is now as large as it was before the crash. And it will get better, the IMF believes, with the UK’s growth forecast for the year upgraded while the world as a whole is downgraded.
It is at times like these that it is best to be cautious. The IMF’s forecasts for the UK have in the past been over pessimistic so it is wrong to take them at face value now they are optimistic. The IMF, remember, was scathing about George Osborne’s austerity programme as being too severe when in fact it has been quite lax. Government spending continues to grow and so, alarmingly, does the Government deficit.
Until this or some other government grasps the nettle of making large-scale tax dodgers pay up, the rest of us will continue to be squeezed. Attempts so far have been more window-dressing than reality.
Any optimistic scenario can have a nasty shock waiting round the corner and Ukraine, Gaza and Syria/Iraq are bubbling away. From a British investor’s point of view, the stand-off with Russia is the most threatening. While Prime Minister David Cameron’s threats to confiscate assets sound dubious in a country where the rule of law prevails, Russian President Vladimir Putin has no such constraints in grabbing assets from UK companies such as BP (BP.).
That’s enough caution for one week. The overall picture is more sunshine than clouds. I am looking to invest the last tranche of my ISA allowance for this year. I urge readers to do likewise.
Tesco Boss Gets the Boot
You can’t do right for doing wrong, my mother-in-law used to say. Thus Tesco (TSCO) chief executive Philip Clark departs with the ringing endorsement of the Tesco board. His fellow directors consider he has done a tremendous job and “it is hard to see what more he could have done”.
Who makes up these ludicrous tributes when a top executive is sacked? Oh, of course. It’s not that he’s fallen short in any way. He just doesn’t happen to be the right man to take the company forward. You can bet your life he would have been the right man if he really had done everything the board felt was possible.
Thus Clark, a man who had no intention of leaving a month ago, is out and the board that was so reluctant to see him go has miraculously found an immediate replacement from outside the company. Is it just possible that they were plotting to oust Clark at the same time that they were allowing him to stand up in public and insist that he was staying? Surely not!
Tesco shares shot up on the announcement, presenting a fleeting selling opportunity before reality set in. Whisper it, but I actually do think that Clark did as much as he could and I’m not convinced that anyone else will do any better. Sainsbury (SBRY) in which I own shares is also under a new chief executive but it remains the best bet among quoted retailers.
Royal Mail Value is in its Property
I didn’t buy shares in Royal Mail (RMG) as I am a long term investor and if I had done so I would be looking to get out. Figures showing that parcel deliveries are slipping back are seriously bad news. At privatisation, rising parcel deliveries were going to more than compensate for the long term decline in letters.
Royal Mail is a slowly dying company. Anything we can send electronically goes through broadband. Rivals can cherry pick the best collection and delivery routes within and between cities.
The value of Royal Mail lies entirely within its property portfolio. These sites can be sold off only once. The parallels with UK Coal, which was ostensibly a coal mining company but came to rely on land sales, are stark. UK Coal died a long, lingering death.
