Matt Hancock is currently a contestant on this year’s ‘I’m a Celebrity …… Get Me Out of Here’. To accept such an offer as a sitting MP suggests a brain the size of a pea (a split one) at any time but under current circumstances, it’s difficult to find the words although I shall try. I’m sure the good people of West Suffolk won’t begrudge their MP the chance of consuming marsupial genitalia and duelling with slithering reptiles. Who knows how well he will do although as a denizen of Westminster, he should be well equipped for the latter. I suspect Mr Hancock’s real motive for entering the jungle reflects the Prime Minister’s obviously wise decision not to give him a job. On a wider level, it illustrates, once again, that all too often supposedly intelligent people take leave of their senses once entering SW1A. If Hancock cannot see he’s going in there as a cross between the court jester and a pantomime villain, he’s even more dumb than I already believe him to be.
Talking of taking leave of one’s senses, I instantly think of Liz Truss and Kwasi Kwarteng. Against a background of central bank inspired inflation, rising interest rates, war and imminent recession, nobody sitting around the table appeared to say something like “hang on a minute, this is cobblers” when they proposed a combination of unfunded spending combined with tax cuts. Even worse, the tax cuts mainly benefited the highest earners. How, by deploying such policies, they ever imagined it was possible to win a General Election in little more than 2 years’ time is beyond me. Yet, as the open goal gaped, the idiocy of the opposition shone brightly. Clearly under instructions from HQ, Starmer’s every utterance now contains the phrase “they’ve crashed the economy”. He appears to be confusing the economy with the government bond market (since largely recovered and exacerbated by crackpot pension fund investing but that’s a story for another day) which isn’t the same thing at all. With just about all economies plagued by the same ills, it is ludicrous to blame Truss and Kwarteng for anything beyond their cack handed mini-budget. Sir Keir won’t tell you (and I’d be surprised if he knew) but U.S. mortgage rates have more than doubled this year, so it’s happening everywhere.
However, it was deputy leader, Angela Rayner who, not for the first time, really captured the zeitgeist of 2022 with her “they broke our economy” comment. Thus proving that both her English language skills and grasp of economics are at a similar level.
The appalling standard of political representation is not just a U.K. phenomenon; it’s everywhere within the developed world. The current U.S. administration is a haven of incompetence. Biden has just accused oil companies of “war profiteering” and is threatening a windfall tax if companies don’t boost domestic production. But, the only ‘war’ here is the one he’s declared on Big Oil. He said he would look to congress if oil companies “don’t begin to invest some of their profits in lowering costs for American consumers”. I don’t know how a company ‘invests’ to ensure it earns less especially when oil is an internationally traded commodity, the price of which producers have no control over. Biden continued “their profits are a windfall of war, a windfall for the brutal conflict ravaging Ukraine and hurting tens of millions of people around the globe” and called for production improvements that would benefit consumers at the pump.
But here’s the thing, Joe, you cannot just switch on an oilfield or refinery. Lead times are lengthy and construction expensive. The U.S. suffers from declining refinery capacity because politicians like you made it increasingly unattractive to invest. Companies will automatically commit capital if it makes sense to do so; they don’t need prompts from people who’ve never run a business in their lives but who’s going to fund a billion dollar refinery with a 30 year life when you want to wind down the production of vehicles powered by internal combustion within the next decade or so? Furthermore, while the war in Ukraine is certainly an aggravating factor for energy prices, it is not the origin of the problem as a little investigation proves. The spot price of Brent crude at the end of December 2019 was $67 per barrel. At the end of 2020, it was $51 per barrel; obviously there are pandemic effects at work here. At the end of 2021, it was $79 per barrel (not long before Putin’s invasion) and as I write, it’s $95 per barrel. You don’t need Holmes and Watson to crack this case.
The response of Mike Sommers, president and CEO of the American Petroleum Institute, pretty much nailed it. “Rather than taking credit for price declines (he means government releases of fuel from the Strategic Petroleum Reserve, currently at a 40 year low and by definition, an artificial and temporary increase in supply) and shifting the blame for price increases, the Biden administration should get serious about addressing the supply and demand imbalance that has caused higher gas prices and created long term energy challenges”. Couldn’t have put it better myself.
The value of investments and any income from them can go down as well as up and you may not get back the amount originally invested.
This material should not be considered as advice or an investment recommendation. Investors should seek advice from an authorised financial adviser prior to making investment decisions.
John Newsome can be contacted on 01423 705123 or john.newsome@williams-im.com. Williams Investment Management LLP is authorised and regulated by the Financial Conduct Authority.
