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View the article online at http://citywire.co.uk/wealth-manager/article/a760245

JO Hambro's John Wood: Bonkers!

by Dylan Lobo on Jul 04, 2014 at 11:00

JO Hambro's John Wood: Bonkers!

JO Hambro Capital Management star John Wood believes an iconic tune from rapper turned pop star Dizzee Rascal best sums up current market conditions.

‘It might surprise some readers to know that I don’t draw upon the work of English rapper Dizzee Rascal all that often, but his 2009 hit 'Bonkers' seems to sum up both current stock market conditions,’ Citywire + rated Wood said in an update on his Citywire Selection Johcm UK Opportunities fund.

Things certainly went ‘bonkers’ overnight in the US with the Dow surging over 17,000 for the first time in its history thanks to a forecast-busting jobs report, which revealed unemployment had fallen to a six-year low. The news helped lift the FTSE 100 to its highest level in three weeks.

In Wood’s update, which was released before yesterday’s market rally and covered the month of May, he gave a frank account with his tongue firmly in his cheek, describing his fund’s recent strong run as ‘incongruous’.

‘The fund is top-ranked within the IMA UK All Companies sector over the past three months despite being “wrongly”  positioned: we had the “wrong” cash balance at 18% and the “wrong” beta at around 0.7, yet the fund has come out top over this short period in a rising market.’

Wood continued to see plenty of ‘bonkers’ behaviour elsewhere, with some indicators carrying a nasty suggestion of the pre-crisis years of 2006/07.

‘Debt is cheap and corporates (via mispriced high yield debt) and consumers (often via shadow lenders) are loading up on it.

‘We have economic growth in the UK that still appears to be founded on debt and a London-centric housing market bubble that owes much to a QE-inspired recovery in financial markets and owes very little to improved corporate fundamentals.'  

He added: ‘UK consumers remain horribly over-leveraged but cling on thanks to rock-bottom interest rates. If anything, they appear to be gearing up.

‘What consumer recovery there is appears to be confined to London and the South East; with the benefit of personally not being based in the South East, my sense is that conditions outside London and the South East remain difficult and that consumers remain challenged.’ 

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1 comment so far. Why not have your say?

CoeurDeLion87

Jul 04, 2014 at 15:48

Debt is just part of the problem. ZIRP to NIRP and possibly HIRP* may be the end game but let's NOT forget that the western world has an uncontrollable accountancy fiasco (off balance sheet that despises proper transparency); effectively an unregulated global derivatives market of some $700 trillion with countless black holes in bank and super-national balance sheets; unworkable and uncontrollable state and local debts; high personal debts especially mortgage debts that are often backed by questionable valuations; unfair and irrational tax systems that enable mass manipulation, evasion and avoidance by migrant super-rich across offshore and pseudo offshore (London) trading areas; an obsession with 'wealth' that has become overpowering and creates very little new value; an obsession with REGULATION that enables true and fair independent advice & management to be crushed in return for obtuse and untried doctrines more akin to the soviet era; political & financial organisations and systems that ignore the plight of savers and investors especially pensioners; exchanges that fail to recognise the importance of supporting national interests in the guise of local industries and job creation: and last but not least a society that approves the existence of millions within an apparatchik and bureaucratic elite who create ZERO PRODUCTIVITY (Thatcher would wince at this) and add no value whatsoever to a political, regulatory, financial and social fabric that apportions no blame to themselves but to millions of innocent and hard working bystanders. What progress is there when contrarian analysis suggests government induced statistics are often rigged, faked, abused, made up, miscalculated and where will regulators be when the inevitable #HFT induced correction/panic ensues?

Got the picture? Welcome to the new version of ELITE CAPITALISM that a large % in City & on Wall St endorse. Time and nonsense is running out. A rapid rethink of what Keynes actually said and did combined with some re-education of Mises and Hayak may just save the day but it just looks so out of control everywhere right now. Time to switch off B'berg and CNBC for Bonkers TV . Anyone got the stomach for it?

*HIRP (High Inflation Rate Predicament)

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