I don’t have a big appetite but it’s time that I had a big helping of humble pie. At the beginning of this year I was confident there would be a collapse in the value of equities. FTSE went below 7,000 for a nano-second and I expected a rout. Since then it has been stuck above 7,500 and I have been proved completely wrong.
Well, I’m not making any more forecasts (for now) but I’m sorry to say that we live in interesting times – supposedly a Chinese curse. If like me you are a shareholder in palm oil producer MP Evans you probably glance at the share price occasionally (always around £7.50) and check that the dividends are rolling in – a healthy 3.5%. But there is a bigger picture of which you may be unaware.
First, the price of palm oil has collapsed this year, reflecting a similar fall in soya bean oil, for which it is a substitute. Take a look.
But the share price has held – why? Weak Sterling helps but that’s not the whole story. Malaysian predator KKL is still nibbling – it now holds just over 15% of MP Evan’s shares. Also MPE is now viewed as a dividend stock. So far so simple. Now for the tricky bit. In the US/China trade war there is a 25% import duty on US soya bean oil imported by China. In theory this should depress the US soya bean price (it has) but it should also boost the palm oil price (it hasn’t). Well, we live in interesting times.
One of my many massively unsuccessful investments was in a small chain of wine bars. I wish I’d seen this instructional video before I invested.
You are not far wrong – given the very high levels of government, private and corporate debt in uk, USA and China AND the governments’ excessively relaxed fiscal, QE and interest rate policies AND the banks’ excessively relaxed underwriting policies.
As a result, we are vulnerable BUT who knows what and when the collapse in confidence will hit us with an unexpectedly vicious collapse!