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The Shipping Forecast.

The Shipping Forecast.
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Traditum News

We are often questioned at Traditum about the forecast for the economy. It affects valuations for our private equity deals and the scrutiny placed by our investment committee on our deal team to ensure and drive the best deal for clients. It affects the regulated financial advice we may provide in our family office, or the unregulated advice which families generally seek to coordinate their affairs across multiple advisors. So which barometer should, or do we consider? 

The press must be taken with more than a pinch of salt. Social media ignored. Comments from economists balanced. Public bodies MPC, OBR and the Bank of England can provide at times wrong, and homogenous the same mantra as they seek to defend years of QE. We have been in a long period of low growth, low inflation followed by high inflation, and interest rates, and many point the finger at them. Their message is thus on the defensive.

The consensus of the social democratic economic playbook, with the objective of keeping in check the budget deficit rather than shrinking it by reducing the size of the state, runs across all political parties and what many call the blob. This leads to very few diverse opinions and predictions on the economy, so it is hard to judge independently. Teflon from the establishment and neither the potential incoming or incumbent Chancellor will change macroeconomic policy and thus, reporting will remain the same and will do so for the foreseeable future.

The result is consensus, a lack of diversity and the feeling you are reading a large pile of ironing staring at you in the corner. Dull and dreary. Monotone. Like the shipping forecast.

There are exceptions of course. Alistar Heath is brilliant, Martin Vander Weyer insightful, and funny. It is the latter who nails it for me at present. Find a barometer which is without agenda, it will inform the reader in more ways than one.

Le Creuset profits are down. What could that tell us? Sales are down 20 pc last year. This is a post covid dip as more people made a stew when locked at home, and now do not need to buy another one? They are meant to last 100 years; I still have my grandma’s so that would make sense. Higher interest rates may be to blame, as middle England is squeezed. I do not think it is a crystal ball however of consumer spending, but investing into a middle range luxury good at present is questionable.

The shipping forecast however does not have to be boring and can tell you a lot. Maersk has downgraded its global container forecast by 4 pc. Western companies are holing less stock and China is in a slowdown. Container rates from Shanghai to Rotterdam are now down 80% from the post pandemic spike. Many companies are reporting nearly 10% drop in traffic through their ports.

What could this mean?

I have been a long, and sometimes lonely critic of running an economy on cheap Chinese product, printed money, and cheap labour. You get inflation, bloated values in the wrong asset class, low growth, low wages, and all manner of social issues. So, for me, less China and a different type of global supply chain and trade can be a good thing.

For the economy however, the shipping forecast indicates macro demand is falling, and thus a company’s place within that economy should be reviewed. Globalisation is changing and is not the favoured path as it once was, even with Cameron back on the front bench. Business plans need to reflect this, and growth industries carefully selected. Valuations across all share class’, private and public need to be watched. This can present opportunities.

David

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