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ISSUE 16 // OCTOBER 2016

The bubbles are ready to pop

7 buy tips US election losers Scotland cannot afford independence UK Investor Magazine — 1 — October 2016

From Intro The INSIDE


4 Scotland cannot afford independence Tom Winnifrith 5 Tesco is just like Brexit Chris Bailey 6 The next sectors to pop are... Tom Winnifrith 7 The biggest losers of the US election will be... Tom Winnifrith 8 Enquest shares look cheap Gary Newman 9 Five ideas for an ASOS-like gain Tom Winnifrith 11 Company Profile: LoopUp Steve Moore 12 Support Christmas at Woodlarks Tom Winnifrith 13 The House View

CONTACT US UK Investor Magazine 91 - 95 Clerkenwell Road London, EC1R 5BX E: W: EDITORIAL Steve Moore Editor

Following in the footsteps of an editor who always served up UK Investor Magazine several weeks after the intended publication date I am delighted to start my editorship where he left off: with an apology for our late publication. Did you know that I was in charge? Tom Winnifrith has—rather later in life than he had expected—become a father again and is trying very hard to work fewer hours and to spend more time with Joshua Patrick his new son. And so I shall be editing this title as well as the ShareProphets website until, at least, May. This is a slightly slimmer than normal edition but we will return to our fuller monthly in November. I hope that you will find something of interest inside, with articles from myself, Tom Winnifrith, Chris Bailey, Gary Newman and a couple more from Tom. There are shares to buy, shares to sell and much more besides. Of course, as the name of this magazine suggests, the main focus of our year is the UK Investor Show itself which in 2017 takes place on April 1 at the QE2 Centre in Westminster. Although that is still well over five months away, I am told that already 70 of the 120 stands have been booked with six more coming in last week alone (Reach4Entertainment, FairFX, Rare Earth Minerals, BMR, Tern and Forbidden Technologies). It is interesting to note that four of those six are tech/media businesses - some people have said that in prior years resource stocks dominated the show. That really is not going to be the case in 2017. All in all we are well ahead of schedule as we work towards that great day and we have another 25 investor class tickets to hand out this month if you want to come and meet 120 really interesting AIM Companies as well as hear real master investors such as Nigel Wray, Mark Slater and Vin Murria speaking on the main stage. To grab one of those seats on a first come first served basis go to and use the promotional code OCTUK17 when booking an investor class seat. I look forward to meeting you all in April and hope that you enjoy the magazine that follows.

Steve Moore Editor

UK Investor Magazine — 2 — October 2016

UK Investor Magazine — 3 — October 2016

Scotland cannot afford independence - it is insolvent Writes Tom Winnifrith


nce again Nicola Sturgeon, the leader of Scotland and the SNP, is insisting that if the evil right wing Tories take Britain out of the EU then she will do her utmost to get Scotland to leave the Union. Is her contempt for democracy more alarming than her delusional failure to grasp basic economics? It is hard to say.

who is going to want to take on Scotland.

The poisonous midget is clearly a great fan of referenda as long as the peasantry vote the right way. Sadly for her the Scots voted to stay in the Union and Britain then voted to leave the EU. She likes neither result so, as with all patronising lefties, she wants more taxpayers cash to be spunked on another vote so the oiks can vote “the right way”. Repeat and rinse. One day the peasantry might do as folks like Nicola know to be in their best interests. What is more amazing is that Nicola reckons that outside the UK, Scotland would be embraced as a new member of the EU. True, there are some EU officials so determined to snub and humiliate Britain that they might consider this wheeze for a second. But even they will look at the stark maths of such an idea and baulk. Across the continent folks are rising up against their leaders who have spent billions on idiotic schemes, and on themselves, leaving the ordinary people of Europe to foot the bill. In Holland, Italy, Germany and France those politicians who have supported such profligacy in the name of a project that serves only the elites, will be swept from power over the next twelve months. As such

The reality is that Scotland is an economic basket case. The budget deficit to GDP ratio in Scotland is 9.5%. In the UK as a whole it is 3.32%. That, by the way is among the highest in the EU - higher even than that of Greece. With UK debt to GDP now at 88% we as a nation should be pretty worried and that deficit number combined with a commitment from Phil Hammond not to deal with the deficit is one big reason the pound is slumping. For Britain, a good way to cut the deficit in a meaningful manner would be to get rid of Scotland and so personally I’d be delighted if the poisonous midget leads her folks off into the economic wilderness. But with an average Eurozone debt to GDP ratio of 92% but budget deficit to GDP ratio of just 1.86% why on earth does Ms Sturgeon think for a second that the EU would want to take on board the Greece of the North to add to the Greece of the South. At least the Southern Greeks have faced real austerity and are starting to get their budget deficit under control. The Greeks of the North are spending cash from the Money Tree like it’s going out of fashion. At some stage Nicola and her welfare addicted countrymen are going to realise that nobody else in Europe wants to pay for Scotland’s spendathon. The poisonous midget may hate her fellow Britons but she should thank her lucky stars that we are so stupid that we keep subsidising her folly and that of her countrymen.

This article first appeared on UK Investor Magazine — 4 — October 2016

Tesco is just like Brexit (or maybe a hedge fund) By Chris Bailey of Financial Orbit


o Tesco (TSCO) shares flew after the latest (upbeat) financials were released earlier this month. Well that’s great news as a shareholder. The move is justified as Dave Lewis (‘Tesco Dave’) is doing a solid job with his difficult aircraft carrier sized hand. Improving positive momentum in UK like-for-like sales, more engaged customers and an internal satisfaction survey that Tesco staff are feeling the love again. That’s a couple of boxes ticked on the ‘to do’ list. Other parts of the business like the global operations and the Tesco Personal Finance crunch along in a workable manner. For a complete lauding by the City - and me however we would need to see better margins, cash flow and a capping of other liabilities. The plan unveiled pretty much double margins by the end of the decade is a classic extrapolation of the current strategy: invest in price, focus on cost/range and try to get away from the worst excesses of discounting. Yes, Tesco’s can compete with the discounters given its bigger range and distribution network and a 4% margin is not madness or unobtainable at all. To get there of course is all about execution in a still competitive market place but as ‘Tesco Dave’, ‘Morrisons Dave’, ‘Sainsbury’s Mike’ and ‘the new guy at Asda’ know there is no point in killing each other. That bout of inflation that is coming our way courtesy of the dumping Pound and a rise in oil prices versus a year ago provides some nice cover for all. Cash flow follows to some extent from the above. Tesco did generate a bit of free cash (2% odd equivalent annualised free cash flow yield) but despite the benefit of disposals reducing the headline net debt the overall liability side got uglier due to the

pension deficit bad boy. Whichever way you cut it an ‘IAS pension deficit up £3.2 billion to £5.9 billion due to lower bond yields’ will please the actuaries but is not pretty. Is it a killer for the company? Not really today given the longer-term liability nature but it does have the scope to hinder proper free cash flow generation - hence the importance placed on the operational turnaround plan. A couple of numbers. If it hits 4% margins you are talking about £2 billion of profits. Of course this is still, even on its own numbers, a few years off. With £4 billion of retail-level debt this means the future prospective EV/ebit at today’s share price (and £17 billion market cap) is a little over x10. That means today and for the next couple of years you are paying a recovery premium. Not a disaster but not super cheap - no surprises given this was apparent a few months ago when the shares were lurking at 150p. And then of course there are the other liabilities influenced by bond yields and store perception / valuation which will impact the lease obligations. You know that old jibe about Rolls Royce (RR.) regarding it being a ‘hedge fund with an industrial business attached’ due to its pension liability, would not be too mean to make a similar observation about Tesco. No wonder there are a few rumblings about shareholder actions and the like in the press concerning the deficit. Don’t get too excited re a future dividend sooner rather than later. Pulling it all together Tesco reminds me of the Brexit debate: the real meat of the argument is about to come up in the next couple of years. We’ve had the ‘phoney war’ re Brexit and the low hanging fruit stabilisation at Tesco. Now on both fronts it gets a bit tougher...but that does not mean you cannot be a believer (or a leaver).

Chris Bailey is the editor of UK Investor Magazine — 5 — October 2016

I’m forever blowing bubbles - the next ones to go pop are... Writes Tom Winnifrith


iving through an economic bubble is incredibly exciting. All around you, one sees signs of madness, or behaviour that is clearly utterly irrational of market exuberance. If you are lucky you spot this and avoid losing your shirt but when you are inside a bubble it is all to easy to join in the madness of crowds and rartionalise investment decisions that are patently absurd. When a bubble bursts it is also terribly exciting. Even if you are doing your conkers there is a thrill in just seeing everything collapse and the mighty humbled and vanquished. My great grandfather was hit by the stockmarket bubble that burst in 1929. He had a few shares but his business was hit hard and having just leveraged up to buy a large house in 1929 he took a bath on property. And I lived through the dotcom bubble working in a dotcom hothouse in Glasshouse Street. I lived the excess but then saw it all collapse. It was ... an experience. Invariably it is the policy responses of the central banks and Governments to the collapse of one bubble or to some great financial crisis that creates the conditions required for the creation of a new, even bigger bubble. And so, since 2008 we have seen zero interest rates and QE on a massive scale. Loose money par excellence, what better nursery could one want for new bubbles? You never know when a bubble will pop. But they always pop they do not just deflate. However they can continue to expand for far longer than seems believable. The more they expand the greater the burst. It is a when not an if. So where are the big bubbles right now? In no particular order here are six set to go pop. 1. Loss making tech stocks. Let’s party like its 1999 all over again in hip Shoreditch or Silicon

Valley. It is all very well running loss making businesses but when sentiment turns and the funding dries up tech bubbles go pop. There are clear signs of this bubble starting to burst already. 2. Auto markets and sub prime auto loans on the US and to a lesser extent UK. 3. Real Estate in the big global cities of the West. This is a global asset class so all will fall in unison. Valuations in terms of normal metrics are at record levels and in North America the cracks are already appearing with rents and prices starting to fall. Vancouver — boosted by hot Chinese money — could be the biggest burst of all. 4. Student accommodation plays. The growth in University take-up in both the UK and US is now starting to translate into a growing problem with student loan defaults. In time as that system cracks universities will be scaled back and that will see property plays in this asset class collapse. 5. Fitness bands. There were a fad, the fad is fading and the market has far too many places and chronic oversupply. 6. And of course there is China. The expansion of bank debt in the PRC since 2008 has dwarfed anything else seen anywhere else in history. Capital mis-allocation has been enormous. The stockmarket wobbles of the past year have been a sign of things to come but view that as the appetizer, the main course awaits. That list is far from exhaustive. Easy money creates bubbles and since 2008 we have had easy money on an unprecedented scale. After the party there is always a hangover.

UK Investor Magazine — 6 — October 2016

The Mainstream Media will be the big losers from Trump vs Clinton as the big lies are exposed

Writes Tom Winnifrith


n the BBC the other day liberal media establishment poseur Andrew Marr stated that Donald Trump is what everyone is talking about. By that he meant Trump and “pussygate” and by everyone he meant the mainstream press. But is that what most folks are talking about and is that what the mainstream press should be talking about. The narrative from the liberal media is that it is all about pussygate and that as a result Trump is crashing in the polls with even most Republicans hating him. The more scandal that emerges the more Republicans will hate him and pretty soon we might see civil war in the GOP. The only problem is that none of this is true. Very recent polls show that c75% of registered Republicans will vote Trump. And that 76% of registered Dems will vote for crooked Hillary Clinton. The truth is that both candidates are not wildly loved by the party faithful. We knew that. Certain GOP leaders like Paul Ryan have moved to distance themselves from Trump. I am not sure that their cowardice will be respected by the electorate come November 8. If i was Paul Ryan I’d be awfully worried that a lot of Trump diehards will vote Dem and against him just to punish the spineless creep. I would. But the polls that matter are the National polls. Watching ITV news last week i was being told that Trump was being squashed in the polls. But the two most recent nationals out that day showed Trump & Clinton tied (LA Times) and Trump 2 points ahead (Rasmussen). All polls show Trump gaining last week. The idea that Trump is being beaten out of sight really just does not stand up to any scrutiny. But it fits in with the wider attempt of the media to tell that tale, something we saw writ large with the truly awful Emily Maitlis poll lies on Newsnight three weeks ago, which I “Fisked” HERE. The media is also running a new pussygate story almost every day. Some of the more recent ones are barely credible and others just media storms about nothing of import. Yet that is what Marr and his

colleagues want to talk about although the actual opinion polls - as opposed to the made up ones the media talk about show that pussygate is now wearing off. The voters cannot be shocked any more. They are pussygated up to the limit and new stories really just play to the narrative of an unhappy electorate who do worry about a stitch up between big business and the political and media elites desperate to preserve a status quo which is not helping ordinary Americans one iota. It is not just the Trump bashing that is striking but also the way that the British liberal media and the mainstream American press is failing to tackle really very serious allegations and leaks concerning crooked Hillary. Her campaign manager saying that she views ordinary Americans with contempt, her role in covering up Bill’s alleged rapes, affairs and the abortions he organised, what she said to the Goldman Sachs banksters in $250,000 Wall Street speeches about conning the electorate with bogus promises, $1 million donations from organisations linked to terror to the Clinton Foundation, Bill’s illegitimate black son, the list goes on and on and on. But has the BBC reported on even one of these news items of the past ten days? Nope. Not a squeak. And the mainstream US media is also playing its part in a cover up. These matters are at least worth of investigation are they not? But there are enough non mainstream TV and online channels who won’t play ball and who are covering these stories. So Americans not only know about them but are angry with a liberal establishment that is closing ranks to protect one of its own, that is to say crooked Hillary. It is rather like the way that the BBC showed clear bias in the run up to Brexit. It was just so obviously one sides that many folks not only opted to ignore it but opted to say “fuck you” and vote for Brexit. When Andrew Marr says “it is all about Trump” he exposes himself again as a pampered and overpaid member of a privileged club. We did not buy the lies of folks like that ahead of Brexit. Don’t bet the ranch that Americans will buy the lies on November 8 either.

This article first appeared on UK Investor Magazine — 7 — October 2016

Enquest shares look cheap compared to those of its peers Suggests Gary Newman


il has been enjoying a good run over the past couple of months and many producers have seen that rise reflected in the share price of those companies. Some though which you would expect to be pretty much leveraged plays on the price of oil have lagged though, and one in particular which I keep a close eye on is North Sea producer Enquest (ENQ).

A higher oil price would certainly help on that front, and the company has been expanding production at a good rate, averaging over 42,000boepd in H1 2016 as compared to 29,000boepd for the same period in 2015. Alma Galia and Tanjong Baram coming online certainly helped, along with extra production from existing producing fields as well.

Traditionally this has always tracked the oil price quite closely and although it has risen in recent weeks, it has failed to perform as well as I would expect it to. I suspect that is largely down to concerns over the financial health of the company and the very large amounts of debt that it has on its balance sheet currently – the last financials up to the end of June showed that had increased to $1.68 billion, from $1.55 billion six months previously, although that was as a result of investment in its assets.

That alongside other cost savings helped get the unit operating cost down to $23 per barrel, which is half what it was in 2014 and ahead of target. Production will also be boosted in H1 2017 by the Kracken field coming online, with the FPSO nearing completion and subsea work completed and ready for hook-up. This project isn’t cheap though, and even with the cost savings already made on it, will cost $2.6 billion in total, and helps explain why the company is forecasting total capital expenditure during 2016 of $670-720 million.

The big concern here has been the breach of covenants relating to its debt facilities, although it has so far managed to find some headroom by negotiating with its lenders, but it will need to continue doing so if it isn’t to find itself in serious financial trouble. Currently there is an outstanding bond of $861 million, although only $11 million is due before the end of June 2017, and the $956 million revolving credit facility matures in October 2017 – with the company only having $163 million in the bank as at the last accounts. There is no doubt that it is going to have to renegotiate these facilities as it will have no way of servicing this debt as and when it becomes due, and the big risk is that the lenders will put the company into default. However, I see that as unlikely and I would expect to see the debt refinanced, especially if the company is in a healthier position operationally at that point in time.

Kracken has the potential to be a game changer here with peak flows expected to be as high as 50,000bopd, but Enquest really needs oil to at least stay around the $50 area, and preferably much higher. It had also been hoping to farm-out 20% of Kracken to Delek in order to reduce the financial burden, but a deal couldn’t be reached. The company does also still have some hedging in place, with 5.5 million barrels remaining at the start of July at a price of $68, plus it won’t be paying tax for some time to come due to accumulated losses of some $2.7 billion. If you have a bullish view on where oil is going then I can definitely see value here from the current market cap of around £230 million, and I think it offers better value than many of its peers. The big risk to the shares is the high levels of debt and what effect prolonged low oil prices would have, but then the same is true of many of these producers with large levels of debt.

UK Investor Magazine — 8 — October 2016


Could there ever be another ASOS in terms of share price gain? And if so what?

5 Ideas

s I noted in a recent bearcast I remember my old pal Mark Watson Mitchell tipping ASOS (ASC) at 7p. The shares hit a high of c£70 so that was a 1000 bagger for anyone who got their timing spot on and held. I doubt anyone did. But could there be another ASOS lurking out there on the London Stockmarket and if so what is it? Personally I’d suspect that there is no 1000 bagger out there today. Or if there is it will be a high risk play where you are 99% certain to lose all your dosh. But perhaps there is a potential hundred bagger? We asked some of our writers on ShareProphets for their suggestions and so here goes

1 GARY NEWMAN WRITES: I would have to go for a resource stock, and one that already has assets that have large potential upside. For me Genel Energy (GENL) has that, and has previously traded at more than 12 times the current share price, and could go a lot higher if oil recovers.

2 NIGEL SOMERVILLE WRITES: Yikes another ASOS! Don’t laugh: I had some at around 5p, sold for a few %. I’m going for AIM-listed Scancell (SCLP) despite looking foolish for nearly two years on it. It is working on two platforms (each triggering differing immune responses), adaptable to attack different cancers. We await the phase I/II clinical trial report on its first product (for skin cancer) shortly. A decent big pharma deal is needed to prove the business model. Meanwhile it is cashburn on research and clinical work. High risk, high reward.

By Tom Winnifrith & The ShareProphets Team

3 MALCOLM STACEY: WRITES: This is a tough task as there seems little value

UK Investor Magazine — 9 — October 2016

out there these days. But out of my current bag of shares, I would like to suggest Avacta (AVCT). Anyone who has a pet will know how astronomical vets’ charges are these days, and animal drugs are lapped up ( so to speak) by owners who’ll pay more to keep their pets healthy than their own grannies. But apart from doing drugs for pets, Avacta is also researching thingies called affimers, which are a substitute for antibodies., If this interesting line of attack becomes really effective and popular, the shares should rocket.

might just do that IF ( and it is an IF) it get its microbes that make you thinner, cut cholesterol, etc into a range of household goods so earning tiny unit royalties but on staggering volumes. We know a un-named multinational (widely reported to be P&G) is trialling Optibiotix IP, it could just happen. I should say that we own shed loads of these shares.


STEVE MOORE WRITES: Shares in Berkeley Energia (BKY) recently rose to more than 55p as the company has continued to enhance and bring towards production its Salamanca uranium project in Spain. The share price advance has led to some profit-taking (including a small bit myself), but longer-term potential for resource and uranium price progress mean there still look exciting upside possibilities from the current just below 50p (sub £100 million market cap).

TOM WINNIFRITH WRITES: Rather predictably I go for Optibiotix (OPTI) which - at 69p-72p is already well ahead of its 8p RTO price ( at which we both invested and first tipped the stock). The market cap is £55 million. Could it eventually hit 800p and a c£600 million market cap? Yes. It


Tom Winnifrith’s

5 model portfolios: Growth Income Gold Recovery Penny Shares

Subscribe today UK Investor Magazine — 10 — October 2016

company profile

LoopUp Group

Shares to loop up further or down following August AIM IPO? By Steve Moore


oopUp Group (LOOP) IPO’d on AIM in August, raising gross proceeds of £8.5 million at 100p per share and with Co-CEO, Steve Flavell, stating “our focus will continue to be on delivering an exceptional product and service to our customers around the world, supported by the funds we’ve raised and emboldened by the faith our new shareholders have placed in us”. The following profiles with the company having just announced half-year results and the shares at 120p… The group was founded by current co-CEOs, Flavell and Michael Hughes, in 2003 (as Ring2 Communications) and whilst working on an initial product they spotted a market opportunity in conferencing. This is with remote meetings growing to become part of daily business, but they seeing common frustrations with its delivery; “issues with tracking down dial-in numbers and access codes; not knowing who has joined the meeting and who is speaking; distracting background noise; and difficulties sharing documents and presentations”. It is added “LoopUp is designed to address these frustrations… The group delivers the Softwareas-a-Service solution from four data centres in London, Chicago, Hong Kong and Sydney, and holds three patents for technology elements within the product which the directors believe provide material competitive defensibility”. The recently announced results - for the first half of the 2016 calendar year - showed a swing to an operating profit of £0.52 million on revenue of £6.38 million (LoopUp product revenue +38% to £6 million). However, there were also £0.45 million of finance costs and £0.67 million of investment expenditure in excess of depreciation+amortisation. As the former suggests, there was a net debt position pre-IPO, with the company noting “£2.7 million of net cash immediately after IPO”. Flavell reckons this “enables us to pursue our growth strategies to expand our proven distribution model, introduce inbound digital marketing, and continue to innovate our product” – i.e. it’s

cost increases ahoy! Against this is growth noted to now see LoopUp help “over 2,000 enterprises worldwide”, with the group having “continued to see strong demand for the LoopUp product from customers during the third quarter”. It’ll be interesting to monitor the income growth versus the “investments in growth” now being made, but with a current market cap of circa £49 million, this is all I’d be prepared to do here at this juncture. I consider, at best for now, the shares for watchlists.

Management Having spent five years in strategy consulting, founder and co-CEO Steve Flavell was part of the founding team and a director of online industrial auctioneering platform, GoIndustry prior to LoopUp. Based in London, he oversees the company’s global commercial activities and is accountable for setting and delivering the financial plan. Having also been a strategy consultant, fellow founder and co-CEO Michael Hughes was a founding member and CEO of VoIP company, Pagoo. Based in San Francisco, he oversees LoopUp’s product development, engineering and network operations.

UK Investor Magazine — 11 — October 2016

Tom Winnifrith begs you: Give Woodlarks a few quid today to transform someone’s Christmas


f you read nothing else in this magazine please read this article. Woodlarks is a charity I have backed for years since its amazing driving force Nick Richards contacted me 15 years ago. It is a totally unfashionable charity not a well funded luvvie endorsed body. We have just donated £250 to transform someone’s Christmas at Woodlarks. Can you spare a few quid? When my daughter was born prematurely at 1lb 4oz we were told there was a high chance she might have cerebral palsy. 15 years later she is top of her year, a top notch swimmer and hockey player and is leading as normal a life as anyone who has to share a house with her mother Big Nose can hope for. 15 years ago Nick introduced me to kids he cared for who were not so lucky. Those who have been reading my work for 15 years will remember the amazing Jamie who sadly passed away a couple of years ago but who raised money for fellow CP teens and almost beat me at chess. Ha Jamie: you could not beat the master! The Woodlarks camp offers holidays to children and adults who are so physically challenged that this is probably the only break they get each year. This is a terribly unfashionable charity but that makes the work that folks like Nick do all the more heroic. At Christmas it puts on a special event. Nick explains: Every Christmas we put on a Santa’s grotto for kids with special needs during the first full week in December, my mates give up a great deal of time to put everything together and all of November is taken up getting ready for it. It really is “over the top productions”. We buy 45 Christmas trees, put up many thousands of Christmas lights, hire 4 snow machines, put up 600 metres of Festoon lighting in the woods and build the grotto (in the picture above). We ask every child to choose a present to the value of £15, they write their request to Santa, care of Woodlarks and then they come here to meet Santa and get their present. Last year we had 151 kids with very complex needs come here during the week, it is great fun for all of us (and at times, extremely emotional!). Even with volunteers working for free it costs a few quid to put on this spectacular. Right now the Mrs and I are discussing how we celebrate Christmas with Joshua and Oakley. We know money is no issue and we are so damn lucky. Others are not and that is something I hope we can all consider for just a minute or two. I am not suggesting that you pony up a big number but even a few quid will help. If you want to make a donation please contact, the man himself, Nick Richards at In advance, I say, thank you Tom Winnifrith

UK Investor Magazine — 12 — October 2016

the house view November 8 makes shares a sell


n case you missed it, 8 November is when Americans have to decide between Donald Trump and Hillary Clinton in the US Presidential election. Few would disagree with the statement that this is a contest between possibly the two weakest main party candidates in history. There are many words penned, as there were with Brexit, as to how this contest will drive sharp stockmarket movements. We shall see. It is no secret that our editorial team leans to Trump. But at this stage the financial markets price in a clear win for Crooked Hillary. It may seem odd to us in the UK that the financial markets want the candidate of the left (Hillary) to win but they do she is the candidate of the establishment. Clinton is heavily bankrolled by Wall Street in a way that Trump is not and so we’d argue that the markets is pricing in “good news” in the form of a Hillary win. Therefore, if indeed the crooked one does win we would not then expect much of a post election surge. In fact all of her election promises make

us convinced that the vast deficits run up under Obama will only get worse under Clinton and that during her Presidency US debt ( now just under 20 trillion dollars) will become a real issue. As some of her spending commitments and hawkish, and dangerous, foreign policy positions become clear we would see that as being markets adverse. If Trump wins, and we do not see that as impossible, we would see that as a long term positive for US Government finances but in the short term we concede that he is something of a wild card and there will be a market sell off. The real issue is that US economic growth is slowing and that this is far from discounted in terms of US equity valuations. PE ratios are at stratospheric levels and the market needs to correct. The election could accelerate that process but a derating is going to happen anyway. It is a when not an if. Remember that when America sneezes we catch a cold.

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