Uneasy Money

“I know what I want,” said Basil. “I want to be one of those people one heard about in 1919; the hard-faced men who did well out of the war.” (Put Out More Flags, Evelyn Waugh)

I didn’t want to be one of those hard-faced men and thought it would be vaguely unpatriotic to trade on the Stock Market. But I have made some tweaks to my savings this month. First I made a firm decision to use my 2020/21 ISA allowance to top up my holding in Personal Assets, an investment trust that has been very resilient. Then I changed my mind. I could not resist buying Legal and General, a FTSE 100 company, yielding 8.5% with a P/E of 6. I paid £1.86 and await events. Yesterday I decided to sell some Index Linked bonds and buy another FTSE 100 stock: investment trust, 3 i Group. It is at a discount of 13% and yields 4.3%.  Hitherto it has traded at a premium of about 25%. Meanwhile my foray into Marks & Spencer is showing a 50% loss and Vietnam is not doing well either.

While we are talking money, the oil market is interesting. Brent and West Texas Intermediate (WTI) are two similar streams of light sweet crude oil. Brent is priced at Sullom Voe in the Shetlands and WTI in Cushing, Oklahoma. In the 20th century the US was a big importer of crude oil to feed its refineries. WTI was almost always more expensive than Brent because it was closer to those refineries with lower transport costs. Today this has changed in a way I wouldn’t have believed ten years ago. As I write Brent is trading at $27.59 and WTI at $20.04. OPEC, Russia and Mexico have agreed to cut their output by some 10 million barrels but that hasn’t perked up prices. Indeed, some Cassandras postulate that oil prices, like interest rates, could go negative until the glut is cleared. This could happen because of lack of availability of storage and the difficulty of shutting down production. Once a well is capped it is expensive to re-start. Shares in Shell are unsurprisingly historically cheap, on a P/E of 6.4 yielding 11.5%. I am not tempted because I am no longer a long term believer in owning a fossil fuel producer.