This will be terribly unfair, but I cannot help but be extremely angry that Tesco's wholly predictable American disaster, Fresh & Easy, has cost shareholders a fortune.
We have all become somewhat anaesthetised by numbers in the aftermath of the banking crises, but we are talking staggering amounts for a British retailer to have lost in another lunatic attempt to do business in the United States.
But the risk, of course, is with shareholders and not management. Management can have a free hand to gamble with shareholders’ money in an attempt to make themselves exceedingly wealthy. This is exactly the same accusation that used to be levelled at hedge fund managers – that they have a licence to go to the casino each day with someone else’s money. If they win they get to keep 20 per cent, if they lose the investors wear all the losses. It is not just that this is not right, it is plain wrong.
Meanwhile, quantitative easing is still having the most extraordinary impact on asset valuations. This flow of money out of central banks has become more or less the only thing that matters these days.
Inflation? Well so long as it’s not too far above target, why should anyone worry? Insolvent banks? Crippling economic policies? Yesterday’s story.
No, what counts is the central banking global juggernaut. Stand in the way of this and you are going to get squidged.
The latest American corporate earnings season has already begun. This will tell us that the States is mixed, but with some very bright spots, European end markets will be terrible and Asia will be in very fine fettle. Earnings and dividends will, on average, be growing more than inflation and that is looking increasingly incompatible with bond yields.
It seems crackers that single digit earnings and dividend growth should equate to a minuscule yield and a stratospheric p/e ratio, but that is the logical result of QE. Uncomfortable? Yes of course it is, but this is the manifestation of inflation that so many have feared: too much money chasing too few assets equals asset price inflation.
What has already been a very good year for investors should become very considerably better yet.
* Jim Wood-Smith is head of investment strategy at Investec Wealth & Investment
* jim.wood-smith@investecwin.co.uk
